Ukrainian cigarette market to complete 2020 with 15% fall - CEO of Philip Morris Ukraine
By the end of 2020, the Ukrainian cigarette market will shrink by 15%, CEO of Philip Morris Ukraine Kostas Salvaras has said.
"In nine months, the Ukrainian cigarette market fell by 9.7%. The annual decline, according to our forecasts, will be 15%. Shipments of cigarettes from Philip Morris Ukraine fell by 16% over the same period. Next year we forecast another 15% drop in the cigarette market," he said in an exclusive interview with Interfax-Ukraine.
Salvaras, referring to the company's data, indicated that today the illegal cigarette market is 9%. This includes smuggling, counterfeiting and cigarettes with counterfeit excise stamps. One in 10 cigarettes sold is illegal. For comparison: in 2016, the share of illegal cigarettes was 1%.
"After raising the excise tax on tobacco for heating by 4.2 times, there will be another, even more profitable, commodity for illegal import. We predict that the legal market for tobacco for heating will decrease by 50%. In fact, all this will be smuggled. And smuggling means direct budget losses from unpaid taxes," he said.
According to the director general of Philip Morris Ukraine, in the event of a 320% increase in excise duty, the cost of a pack of sticks in neighboring countries - Belarus, Moldova and Russia - will be much lower than in Ukraine.
"We have already made calculations: it does not matter from which of these countries the product will enter Ukraine illegally - a smuggler will earn at least $500 on one box of heated tobacco (which is 500 packs). And in terms of the volume of transportation, this box will take exactly half the space that a box of cigarettes would have," he said.
PJSC Philip Morris Ukraine jointly with LLC Philip Morris Sales and Distribution are affiliated companies of Philip Morris International (PMI), one of the world's largest manufacturers of tobacco products.
The company has been operating in Ukraine for over 20 years. It produces products at a factory in Kharkiv region.
In 2016, Ukraine became the seventh market in which Philip Morris launched IQOS, based on tobacco heating technology. Both affiliated companies employ over 1,300 people.