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RJR Nabisco, Philip Morris and BAT all plan to boost cigarette output

March 16, 1998

NEW YORK (CNNfn) - Three of the world's biggest tobacco companies are stepping up cigarette production in Russia.

In separate announcements Monday, Philip Morris Co. Inc., BAT Industries PLC and RJR Nabisco all said they will spend millions of dollars there to produce more cigarettes.

In the largest deal, Philip Morris Management Service B.V. will invest up to $300 million to build a factory near St. Petersburg to produce about 25 billion cigarettes a year, the company said.

Philip Morris, the maker of top-selling Marlboros, first entered Russia in September 1992. The expansion plans are part of a long-laid strategy at Philip Morris, according to the company.

Philip Morris already has cigarette factories in St. Petersburg and Krasnodar in southern Russia, Kharkov in Ukraine, Klaipeda in Lithuania and Almaty in Kazakhstan.

R.J. Reynolds, the tobacco unit of RJR Nabisco Holdings Corp., said it plans to invest $120 million in Russia over the next two years to produce cigarettes.

R.J. Reynolds makes Camel, Winston and Salem cigarettes and has a 20 percent market share in Russia. Its investment is intended to improve production at its St. Petersburg plant, the company said.

B.A.T., which recently spent $150 million to upgrade plants in Moscow and Saratov, said it will spend another $60 million in Russia to boost production.

The expansions come amid a flurry of criticism of cigarette makers in the U.S. from politicians and consumer groups.

Goldman Sachs consumer products analyst Marc Cohen said the tobacco companies are jockeying for market share, not seeking a safe haven amid the political outcry in the U.S.

"Irrespective of whether they have pressure in the U.S., if [Russia is] attractive economically" they will look to tap the market, he said.


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