British American Tobacco (BAT), the world's most international tobacco group, in the presence of members of the Romanian Government including Vice PM Viorel Stefan, Finance Minister Eugen Teodorovici, Minister for Business Environment, Commerce and Entrepreneurship, Radu Oprea, inaugurated this week one of the largest foreign direct investments in Romania.
The company announced it will invest €800 million ( $942 million) by 2022 in its factory in Ploiesti, one of the country's most important industrial cities and the centre of Romania's oil production.
The investment, which will generate 200 new jobs in Romania, will allow BAT to expand its flagship tobacco heating product -called glo –in countries across Europe during the second half of 2018. The company will build a new 7,000-sqm manufacturing hall, where it will produce Neosticks, the specially designed tobacco sticks which work with the glo device.
Once completed, the Romanian production plant will be the sole supplier of glo Neostiks across the European continent. The investment will also enhance the cigarette-making capabilities within the factory, which is already one of the most technologically advanced production units of the group at international level and has over 800 employees.
“The significant investment in our factory in Romania is testament to our commitment to offer smokers a wider range of tobacco and nicotine products - with a particular focus on potentially reduced-risk alternatives to smoking - in an increasing amount of countries." Tadeu Marroco, Regional Director - Europe and North Africa, at British American Tobacco, said.
Since 1995, BAT has invested some € 310 million in the Ploiesti factory with over 60 million euro in 2017 alone. The new investment will turn the Romanian plant into one of the five most important BAT manufacturing units in the world. Overall, BAT has over 2.500 employees in Romania, with another 25.000 jobs created indirectly through the company’s supply and distribution chain.
The tobacco industry is one the biggest contributor to the state budget. In 2017 alone, BAT has contributed with more than 1.7 billion EUR to the state budget, as excise and other taxes.
“The € 800 million that will be invested in Ploiesti in the next five years is a proof of our commitment to Romania. Currently, 60% of the products made in Romania are exported in 45 other countries and this share will increase to 70% due to the new investments. We want to continue investing in Romania and hope the government will offer the necessary predictability that is essential for doing so,” Ram Addanki, BAT Area Director for Central and Southern Europe said.
BAT has a market share of 55 percent in Romania. The main competitors are Japan Trading International, with a market share around 25 percent and U.S. tobacco company Philip Morris with 15 percent. In July 2017, Philip Morris, which also started producing tobacco consumables for heating devices in Romania, announced a €490 million ($577 million) investment at its factory in Otopeni, some 15 km north of Bucharest.
BAT has a strong presence in the region. In April 2017, the company announced the acquisition of a number of Bulgarian cigarette brands from Bulgartabac for more than €100 million.
Controversy over harmfulness of HTPs
According to the World Health Organisation, currently there is no evidence to demonstrate that Heated tobacco products (HTPs) are less harmful than conventional tobacco products. Some tobacco industry-funded studies have claimed that there are significant reductions in the formation of and exposure to harmful and potentially harmful constituents relative to standard cigarettes.
However, there is currently no evidence to suggest that reduced exposure to these chemicals translates to reduced risk in humans. Therefore, additional independent studies will be required to substantiate claims of reduced risk/harm, the Geneva-based organisation says.
BAT at a glance
BAT was founded in 1902 and is headquartered in London. It is the largest publicly traded tobacco company in the world, having a market-leading position in over 50 countries and operations in around 180 countries. BAT has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It has a secondary listing on the Johannesburg Stock Exchange, on the Nairobi Securities Exchange and the Zimbabwe Stock Exchange.
In 2017 BAT's revenues outside of the US from e-cigarettes and tobacco heating products quadrupled to £397 million (€450 mln). The company aims to generate over £1 billion revenue from NGPs by the end of 2018 and increase this figure to over £5 billion (€5.67 billion) by 2022.