Tobacco în România

Tobacco in Romania

Legal Tabacco Industry in Roumania

Cigarettes; Cigars; Smoking tobacco

Executive summary

Romania has a strong, stable tobacco market with minimal yearly fluctuations

According to official statistics, Romanians are heavy smokers, some of the heaviest in the world and in second place in Europe. This situation is not new or transient, but traditional, with a well established pre-revolutionary history. This history is, however, one of market poverty and domination by the national manufacturer. At the beginning of the 1990s, Romania's opening to foreign investments brought it within reach of the most important international tobacco product manufacturers, which found here a tobacco market that was already strong, yet far from saturation and with huge potential. This opening, supported by poor tobacco-related legislation, brought about a "tobacco frenzy" at the beginning of the 1990s. Romanians were fascinated by the array of cigarettes and brands on offer, which were in turn promoted by aggressive advertising. Romanians fast turned towards the new brands as a result.

Apart from having emancipated the Romanian consumers' taste as far as tobacco is concerned, this situation had a secondary effect that remained neglected for years  advertising tobacco (cigarettes) through all media and without boundaries raised the curiosity of many non-smokers, especially underage ones. At the beginning and even in the mid-1990s, elementary school children were seen in the streets with cigarettes in their hands and high school students became "smokers" to be fashionable. This increase in smokers did not influence general tobacco consumption, however, as this smoking population was not genuine, and their smoking habits had not yet become stable. Only a few of those 'fair-weather' smokers still smoke now, but that period remains something of a turning point.

Romanian smokers trading quantity for quality.

While at the beginning of the review period, economy and mid-priced brands had practically sliced cigarette sales into two halves, the present situation is quite different, considering the aspirational tendency of consumer preferences. Premium products already account for 10% of cigarette sales in Romania, while economy products have decreased to less than one third of sales, and that in terms of volume. As for mid-priced products, due to their wide diversity and availability, they keep a lion's share of almost 60% of volume sales. The area of mid-priced products has gone through some transformations itself  considering the wide range of brands it includes, this can be segmented into upper (Pall Mall, Winston, Lucky Strike) and lower mid-priced brands (Viceroy, L&M, Monte-Carlo, Winchester). While during the review period, especially at its beginning, most popular mid-priced brands were the lower ones, now the highest sales are made by the upper mid-priced brands, especially in their mid tar versions.

As a response to the growing awareness of the Romanian consumer, both because of improvements in lifestyle and public campaigns against smoking, cigarette manufacturers have launched new, "healthier" varieties of their products.

Effect of Taxes

Due to heavier excises, prices for tobacco products are rising faster.

The value of excises for tobacco products varies from one type of product to another, but with one common aspect  values are continually rising, in order for excises to reach a level suitable for the EU. The most recent example is the excise increase of 1 July 2004, when excises for cigarettes were driven up from EUR4.47 per 1,000 pieces plus 32% from the highest declared retail price to EUR5.73 per 1,000 pieces plus 31% of the retail price. Excises for cigars rose by EUR1.00, from EUR8.00 per 1,000 pieces to EUR9.00 per 1,000 pieces. As for smoking tobacco, excises raised the price to EUR17.00 per kg, compared to the former value of EUR11.00 per kg.

National manufacturer SNTR has almost reached the end of its long privatisation process.

The two main parties involved in the Societatea Nationala Tutunul Romanesc (SNTR) privatisation, the Romanian Authority for Privatisation and InterAgro consortium, have been fighting over the company's situation for more than three years. This fight is now reaching its end, albeit a tempestuous one. Both managements went public with their decisions: the President of InterAgro, Ioan Niculae, declared he made a huge mistake by participating in the company's privatisation, because huge gaps in company revenue of about US$120 million had been brought to light, gaps he would be obliged to cover. He affirmed that he was not aware, at the moment he assumed responsibility for the company's privatisation, of the problems within the company.

Another example is the fact that in 1997-1998 the company made futile investments in modern technology (purchased at twice the market price and never set to work). Because of the Presidency's refusal to cover these company debts, the situation turned around. The Ministry decided, at the end of 2003, to withdraw the company's licence to function, for owing more than Lei3,000 billion, so SNTR was obliged to stop its production activity.

Consequently, the main company shareholder, InterAgro, decided to sell. Ioan Niculae demanded a sum of US$9.5 million, which would represent the value of his initial investment plus interest of 7-8%. This sum of money is six times higher than the one the Ministry would receive from selling its share of just over 56% of SNTR from Tobacco 2003/UE Corporation. This consortium, to which CTS SRL (Italy) and Galaxy

offer to purchase SNTR. On the other hand, Niculae declares that this is exclusively a government issue, since he knows nothing about the aforementioned corporation and that, moreover, he had already sold 20% of the stake package he had to an investor whose identity he does not want to reveal. There were some rumours that Niculae himself was behind the mysterious investor company, but he categorically denied those rumours.

Euromonitor International's Tobacco in Romania report.

There are three forces on the roumanian market and in the same time in smookers population mind: Philip Morris, British American Tabacco and JTI Roumania.