Rus News Journal

Business - tobacco

Three years ago the Rostov enterprise “ the Don tobacco “ has opened in Novosibirsk the tobacco factory first in a city “ Donnovosibtabak “. Having got of support of the local administration which has given to new manufacture tax privileges, “ the Don tobacco “ intended to carry out release of quite competitive production. Soon, however, it has appeared what to create the new enterprise in the conditions of overproduction in Russia tobacco production it was inexpedient, and entirely to count on cooperation with the authorities and at all done not cost.

the tobacco and metal Union
Factory “ Donnovosibtabak “ has been open in the summer of 1999. Its shareholders of a steel of joint-stock company “ the Don tobacco “ (75 % in an authorised capital stock) and the enterprise “ novosibmetall “ (25 %). The Rostov joint-stock company as the payment has put the equipment on $1,1 million, and “ novosibmetall “ Has transferred a premise the area of 2,5 thousand in sq. m. Designed capacity of Novosibirsk factory it was estimated in 4 mlrd cigarettes in a year, from them of 60 % it was necessary on “ the Tonic “ without the filter, and the rest - on cigarettes with the filter “ Ermak “ “ Novosibirsk “ “ Capital of Siberia “ and “ Fatherland “. At the enterprise 120 persons worked.

According to the general director of joint-stock company “ the Don tobacco “ Ivan Savvidi, as a result of the marketing researches spent by experts of factory, it has been established that in Siberia and the next regions cigarettes of so-called east type use great demand. Unlike more expensive tobacco products of a class american blend taste in them is reached at the expense of mixing various tabakov the Asian origin without use of sauces and aromatizatorov. Ivan Savvidi: “We have developed business - the plan of creation of tobacco manufacture. At the first stage it was supposed to deliver a tobacco mix and materials to Novosibirsk and already on a place to carry out so-called assemblage of cigarettes. On the second we were going to construct in Novosibirsk shop after processing of tobacco and raw materials for it to deliver any more from Rostov located for 6 thousand of kilometres, and from closer countries of the Central Asia. At the expense of it it was planned to increase volume let out on “ Donnovosibtabake “ production six times. However further the first stage it was not possible to promote”.

not Come true hopes
As are told by the director “ Donnovosibtabaka “ Vladimir Babanakov, problems on manufacture have begun that “ Dontabak “ has established too high quotations on raw materials. As a result the price of let out cigarettes has appeared on 25 - 30 % above cost of similar production of competitors. Ivan Savvidi: “We could not give to Novosibirsk the processed raw materials below cost, but understood that it leads to a rise in price of finished goods and, as consequence, loss of its competitiveness. Therefore we have found such way out of a current situation - have agreed with administration of the Novosibirsk region about reception of privileges under the profit tax until on “ Donnovosibtabake “ own tobacco shop will not be constructed. We should create it during two and a half years”.

the creation Project in Novosibirsk tobacco manufacture was supported by the former head of area Vitaly Muha. After start of factory the governor has signed the law “ About tax privileges to the investors realising projects, passed competitive selection “. According to this document, in 2000 “ Donnovosibtabak “ for 2,5 years received a delay of payments at a rate of 32,4 million roubles ($1,3 million). However, to prove the right to privileges, the factory should gain in the first year of work from sale of cigarettes of 423,3 million roubles ($15 million) and to receive net profit of 85,6 million roubles (about $3,4 million), from which it was required to direct a part on manufacture development. Tax privileges “ to the Don tobacco “ was to receive not vpervoj. Some years ago under approximately same scheme the Rostov factory worked with the Don authorities that has allowed the enterprise to carry out reconstruction and to increase productivity.

With support of the governor Ivan Savvidi hoped to create in Novosibirsk not only tobacco manufacture, but also the centre on sale of cigarettes in the markets of Siberia, Ural Mountains and the Far East. Under the recommendation of administration of the region a number of trading firms of a city have signed with new factory of the agreement on sale of its production. In particular, “ New tobacco “ and “ Trinit “ Should sell annually on 250 million packs of cigarettes, “ Atoniks “ - 100 million, “ novosibirskgorresurs “ and “ Vinap “ - on 75 million However these figures and remained on a paper as the situation with tax privileges began to develop under the unexpected scenario.

In the end of 1999 Vitaly Muha has lost on elections, and the armchair of the governor was occupied with its political opponent the mayor of Novosibirsk Victor Tolokonsky. The new head of area has regarded creation of tobacco factory exclusively as a pre-election step of the predecessor. As a result “ Donnovosibtabak “ has not received the promised privileges, and the factory management has been compelled to release production taking into account cost of the put raw materials and all taxes. Trading firms began to refuse the big purchases of cigarettes from Novosibirsk that is quite explainable: wholesale price local “ Tonics “ Made 1,75 roubles for a pack whereas factories from Kursk and Yaroslavl sold similar production on 1,3 - 1,4 roubles. Soon the enterprise warehouse has appeared is hammered by not shipped production. Vladimir Babanakov has made decision to sell the stale goods at reduced prices. In one of the local trading companies have told that “ Donnovosibtabak “ has sold it about 2,5 million packs of cigarettes, having dumped 50 % of cost.

For one and a half year of work “ Donnovosibtabak “ not only did not leave on profitableness, but also has suffered losses (about $100 thousand) And owners of the enterprise have decided that it is better for closing, than to let out obviously unprofitable goods. According to Vladimir Babanakova, in October, 2002 last nail to the grave Novosibirsk " has been driven; tabachki “ - officially declared factory closing, industrial lines dismantled and have combined in territory “ novosibmetalla “. Ivan Savvidi a little on - to another estimates a present condition of factory:“ It is a lie that lines are dismantled. They on the move also are capable to let out the qualitative goods. Though now press the button and work! Simply we have preserved factory as to us it is already uninteresting as time is missed. Crisis of overproduction of cigarettes in Russia last year has exceeded 30 %. So here is already unprofitable to build new tobacco factories ”.

the Small chest simply opened
According to tobacco manufacturers, creation of the new enterprise in the given segment of the market from outside “ Dontabaka “ was the big error. The matter is that in 1999 in our country crisis of overproduction of tobacco products already was observed - has been let out more than 330 mlrd pieces of cigarettes, whereas market capacity did not exceed 290 billion For this reason to raise competitiveness of the production, many “ tabachniki “ Then tried to use more effectively available capacities and to reduce industrial expenses, instead of to expand manufacture. The general director of joint-stock company “ the Balkan star “ (Yaroslavl) Vladimir Galagaev: “Siberia is for a long time for us a traditional commodity market. Here we have own warehouses, interests of the company represent a little enough strong dealers. We deliver in this region about 15 % from volume of the tobacco products let out at factory (3,5 - 4 mlrd pieces. - Council of Federation) also we supervise almost 10 % of the local market. “ the Balkan star “ never planned to open in this region own manufacture, and was guided by development of already created system of sales. In my opinion, today it is optimum strategy”.

On “ the Don tobacco “ have drawn conclusions from the bitter experience. “ We have understood that now in the remote regions it is more favourable to work by a principle of a distribution warehouse, - Ivan Savvidi speaks. - we already have a company - the distributor which sells our cigarettes in the Central Russia, Siberia and in Ural Mountains. In Novosibirsk we have constructed warehouse which allow us to deliver in due time cigarettes to our trading partners and to supervise approximately 7 % of the Siberian market. Such warehouse is and in Ekaterinburg where our share in the market makes 10 %. In the long term our distribution warehouses will appear in Krasnoyarsk and in the Far East. Besides, having faced a rigid competition in Russia, we began to master the markets of near and far abroad. For example, we already have an experience of delivery of production in the Baltic States and Israel. It is assured that development of the foreign markets is even more perspective direction, than opening of distribution warehouses in the remote regions of the country “.