Importing cigarettes from Poland is 10% cheaper than producing them in Ukraine - PMI
For Philip Morris International it is 10% cheaper to import cigarettes from Poland than to produce them in Ukraine, said Deputy General Director for Corporate Relations of Philip Morris Ukraine Mykhailo Poliakov during NV dialogues on the future "Business and War".
He recalled that Philip Morris International opened a new factory in Lviv region in May 2024. The company recently compared the costs of manufacturing products at factories in Lviv and Krakow (Poland).
"We are currently working in a cluster where Poland is the main market. It is more expensive to produce in Lviv for Ukraine than to produce in Krakow and bring them to Ukraine," Poliakov said.
According to him, the reason for this situation is the presence of an additional reserve of employees in Poland. The risk of a male employee not showing up for work in Krakow is significantly lower. In addition, during an air raid, the lines at the tobacco factory in Lviv do not work. The issue of electricity supply remains relevant in Ukraine.
"In the summer, this issue (of electricity supply) was very relevant. Many enterprises were relocated to Lviv region. The electricity supply system was not designed for such a number of enterprises," the representative of the tobacco corporation noted.
Poliakov also focused on the curfew, which employees are not ready to violate even with special passes. He added that Philip Morris Ukraine does not have this privilege at all.
"All this imposes additional costs. Therefore, it is 10% cheaper for us to produce cigarettes in Poland and bring them to Ukraine," the expert summarized.
Philip Morris was separated from Altria in 2008 and is one of the world's largest tobacco manufacturers. The company's revenue for 2023 increased by 10.7% compared to 2022, to $35.2 billion, and for the first quarter of this year, by 9.7%, to $8.79 billion. Ukraine accounts for approximately 2% of total sales in kind and 1% in monetary terms.
PMI has been operating in the Ukrainian market since 1994, and during this time, its declared investments have exceeded $700 million. Since February 24, 2022, the company suspended operations at its factory in Kharkiv region due to Russian aggression and was forced to switch to importing products from eight PMI factories outside the country and a temporary partnership with another international manufacturer in Ukraine.
In 2022, due to the war, PMI reduced shipments to the Ukrainian market by 30.1% to 11.07 billion cigarettes and tobacco sticks, but in 2023, it managed to increase shipments of finished products by 8.4%, including 14.9% in the fourth quarter. In October last year, the company reported the restoration of its share in the Ukrainian market to 24% after falling to 14% from 28.5% in the first months after the Russian invasion.
Philip Morris International opened a new factory in Lviv region, in which it invested $30 million. The factory will have five production lines. The first of them was launched in May, four more will be put into operation by the end of 2024, which will bring the factory's production capacity to 10 billion cigarettes per year.