Marlboro Cowboy Settled in Ryazan

By Maya Kvaskova

Cigarette brands with large advertising budgets are counterfeited in Russia most frequently. Law enforcement officers are destroying the largest batch of tobacco products in recent years at an industrial landfill in the Ryazan region today. While the criminals are being held behind bars during the ongoing investigation, officers of the Head Directorate for Economic Crimes of the Federal Service for Economic and Tax Crimes of the RF Ministry of Internal Affairs are calculating the profit the criminals were deprived of. Estimates put it at about $5 million. Industry specialists, however, remain optimistic and say that the number of counterfeit cigarettes in Russia has dropped.

The illicit production of fake brand-name cigarettes was set up at the Shilovo Tobacco Factory in the Ryazan region, which has a capacity of 20-25 million packs per year, according to the press service of the Head Directorate for Economic Crimes. Among the brands produced at the factory are Marlboro, Camel, West and many others. "This is the largest production detected by police in recent years," said the press service officials. According to them, the quality of counterfeit cigarettes was far inferior to that of the original products.

International corporations such as British American Tobacco (Lucky Strike, Kent, Dunhill and Pall Mall), Philip Morris Products Inc (Marlboro) and Imperial Tobacco (R1) currently occupy the majority of the Russian tobacco market. Representatives of almost all of these companies declined to comment on how the illegal production of tobacco products affects their business.

Industry specialists claim that it is actually impossible to get rid of illegal tobacco products without checking every basement and every bag. According to analysts, products that are actively advertised will be counterfeited since many smokers prefer those brands. Only traditional Russian brands, such as Stuardessa, are protected from counterfeiting. "It is simply unprofitable for illegal producers to counterfeit downscale products, because the profit margin will be low and the production costs will be high," said Soyuzkontrakt-Tabak Sales Manager Tatiana Manoilova. Advertising specialists agree with her. "Cigarette advertising re-distributes smokers' preferences from one brand to another. It influences the consumer with the image: if you smoke, smoke our cigarettes," Vladimir Evstafiev, president of the Russian Association of Communications Agencies, told RBC daily. According to him, people think about what they smoke only when they see an advertisement, and it influences their consciousness. That is why consumers of domestic trademark cigarettes need not think that they might be smoking counterfeit cigarettes.

There are, however, other opinions. According to Ian Schier, general director of the Advinter marketing agency, the number of counterfeit cigarettes has noticeably decreased in Russia compared with the perestroika period. "Today these products remain mainly in outdoor markets and in the regions. The number of such products has been decreasing in the capitol and major cities, mostly thanks to tightened control by enforcement agencies," he told RBC. According to him, the current problem is the illegal import of cigarettes rather than their sale.

There are no exact figures for the illegal production of cigarettes in Russia, nor are there figures on their consumption. According to Sergei Katov, head of the department for client and public relations at the Biznes-Analitika research firm, it is safe to say that the manufacture of tobacco products in this country significantly outnumbers the consumption of these products. Surpluses are exported to the CIS countries and settle in the retail sector — in warehouses and stores. According various estimates by industry specialists, tax authorities and the Ministry of Health, if international manufacturers account for 80 percent to 90 percent of the Russian tobacco market, then the "shadow" tobacco market in Russia makes up 20 percent to 45 percent of all sales and is comprised of both illegal imports and products made in Russia. Around 250-300 billion cigarettes are consumed in Russian annually, which amounts to about 15-18 cigarettes per capita per day. According to the Ministry of Health, around 40 percent of the Russian population smokes.

Ian Schier of Adviner thinks that not only cigarette production is profitable for illegal manufacturers. Earlier this year counterfeit high-end cigars were found in a number of the capitol's largest tobacco stores. The press service of the Head Directorate for Economic Crimes of the Federal Service for Economic and Tax Crimes of the RF Ministry of Internal Affairs said that police seized around 4,000 counterfeit cigars bearing well-known Cuban trademarks, such as Cohiba, Partagas and Romeo y Julieta, worth 3 million rubles. According to the press service, cigars were available for sale not only in specialized stores but also in high-end clubs and casinos. Prosecutors initiated a lawsuit in accordance with Article 171 of the Criminal Code of the Russian Federation (illegal entrepreneurship) and article 238 of the Criminal Code of the Russian Federation (production or sale of products that do not meet safety requirements). The seized cigars were indeed produced in Cuba, but were highly harmful for smokers' health since they were made from fresh green tobacco leaves in order to lower their cost — they were not processed at a factory, which would have decreased the amount of poisonous substances in the products. "An examination revealed that the products contained extremely harmful toxic compounds, which could cause serious poisoning to a smoker through their interaction with the human mucous membrane on the molecular level," Yuri Sinyutin, a representative of the press service of the Head Directorate for Economic Crimes, told RBC daily.

Economy department
Background information:

According to the H1 2004 data provided by the Komkon research company, the main consumers of tobacco products in Russia are 16 years old or older. Consumers prefer the following brands: L&M (19.3%), Winston (16.8%), Bond (13.7%), Yava Zolotaya (11.4%), Parliament (11%), LD (10.9%), Kent (10.3%) and downscale cigarettes, such as Pyotr I (10.3%), Prima (10.2%) and Yava (9.9%).