Cigarettes In Belarus: What's Available And Legal?

The largest cigarette producer in Belarus is the Grodno tobacco factory Neman, which has an estimated 72% market share. The factory produces both its own brands, such as FEST, NZ, Minsk, Portal, and VIP, as well as licensed production for British American Tobacco, including brands like Kent, Pall Mall, and Lucky Strike. In addition to these modern filtered cigarettes, some smokers in Belarus are interested in old-style papirosa cigarettes like Kazbek and Belomorkanal. However, these are no longer produced in Belarus and are instead sourced from markets in Russia or Ukraine.

Cigarette brands in Belarus include NZ, Minsk and Fest

The history of the Grodno tobacco factory dates back to 1861 when it was established by merchants Leyba Shereshevsky and Abram Gordon. Over the years, it became one of the largest factories in the Russian Empire and continued production in Poland and the Soviet Union. In the 1990s and early 2000s, the factory primarily produced cheap, low-end cigarettes. However, evolving consumer preferences and rising salaries in the 2000s led the factory to invest in new equipment and start producing average-class cigarettes.

In recent years, the factory has faced scrutiny for its role in cigarette smuggling to neighbouring countries like Russia, and European Union members such as Lithuania, and the United Kingdom. Despite the illicit trade, the factory remains a significant player in the domestic market, with 83.2% of its produced cigarettes sold within Belarus in 2016.

The cigarette market in Belarus is highly regulated, with manufacturers and importers having the right to set maximum retail prices. Prices have been rising almost monthly, with an average increase of 45.2% from January to September of one recent year. These price hikes are driven by increases in the selling price of cigarettes and the excise duty levied on tobacco products.

Cigarette prices in Belarus are rising almost monthly

Cigarette prices in Belarus have been increasing at an alarming rate, with prices rising almost every month. From January to September 2023, the cost of cigarettes increased by an average of 45.2%. This trend is expected to continue, with further price hikes anticipated in the coming months. The rising prices are a result of increasing excise duties and selling prices, with tobacco companies and importers adjusting their rates to match the changing market conditions.

Factors Affecting Cigarette Prices in Belarus

The primary factors contributing to the monthly increase in cigarette prices in Belarus are the rise in selling prices and the increase in excise duties. Tobacco manufacturers and importers have the right to set the maximum retail price, and the minimum retail price is typically set at 85% of the maximum price. This information is submitted monthly to the Ministry of Taxes and Levies and is made public.

The maximum retail price is determined by considering the selling price, production costs, manufacturer or importer profits, various trade mark-ups, excise duties, and value-added taxes. As these factors fluctuate, the retail price of cigarettes also undergoes adjustments.

Impact of Rising Cigarette Prices

The frequent increases in cigarette prices have had a significant impact on consumers and the tobacco market in Belarus. Smokers in the country are facing higher costs for their habit, and some may struggle to afford their preferred brands. This situation could lead to a decrease in consumption or a shift towards alternative tobacco products.

Additionally, the rising prices have created a complex dynamic within the tobacco industry. Manufacturers and importers are navigating the challenge of setting competitive prices while ensuring compliance with the minimum and maximum price requirements. The dynamic pricing landscape has also led to concerns about the potential for illicit trade and smuggling of cigarettes, as individuals seek to circumvent the rising costs.

Addressing Tobacco Epidemic in Belarus

The rising cigarette prices in Belarus are occurring amidst a broader context of tobacco control efforts. With an adult smoking prevalence of 36%, the country is grappling with the negative health and economic repercussions associated with tobacco use. The tobacco industry's aggressive marketing to lower-income populations and youth further exacerbates the issue.

To combat the tobacco epidemic, Belarus has implemented designated smoke-free areas, restricted tobacco advertising and promotion, mandated health warnings on packaging, and regulated the contents of cigarettes. These measures aim to reduce tobacco consumption and improve public health outcomes.

Outlook for the Cigarette Market in Belarus

Despite the efforts to curb smoking rates, Belarus continues to have a high demand for cigarettes, with a significant portion of the population remaining loyal to traditional tobacco products. The cigarette market in Belarus is projected to witness a revenue of €0.8 billion in 2024, with an expected annual growth rate of 5.60% from 2024 to 2028.

The volume of cigarettes sold in Belarus is also expected to increase, reaching 26.5 billion pieces by 2028. These forecasts highlight the ongoing demand for cigarettes in the country, despite the rising prices and tobacco control measures.

Cigarette packets can be bought in Belarus for the equivalent of 40p

The extremely low price of cigarettes in Belarus has led to a booming illegal cigarette trade, with packets being smuggled out of the country and sold for much higher prices in other markets. In the UK, for example, cigarettes are sold for as much as £3 per packet, making the illegal trade highly lucrative.

The cigarettes involved in this trade are produced in Belarus and are made only for the domestic market. They cannot be legally sold in the UK because no tax is paid on them. This has resulted in a significant loss of tax revenue for the UK government, with recent figures from HMRC putting the amount of tax lost to the Treasury from the sale of illegal cigarettes at £1.6 billion last year.

The ease of purchasing large quantities of cigarettes in Belarus, as well as the significant price difference between the source and destination countries, has made it a prime location for cigarette smuggling. This has led to increased efforts by countries on the edge of the EU, such as Lithuania, to step up their border controls and try to prevent the illegal trade.

While the low price of cigarettes in Belarus has contributed to a thriving black market, it also reflects a larger issue of tobacco control in the country. With an adult smoking prevalence of 36%, Belarus has one of the highest smoking rates in the world. The tobacco industry aggressively markets its products to lower-income populations and youth, and smoking is a major risk factor for non-communicable diseases such as cancer, heart disease, respiratory diseases, and diabetes.

Cigarette smuggling is a lucrative business in Belarus

In Belarus, a packet of cigarettes can be bought for as little as 40p, while in the UK, the same packet can be sold for up to £3. This price difference creates a significant profit margin for smugglers, making the illegal trade highly lucrative. The "Neman" cigarette factory in Grodno, Belarus, produces more than 20 billion cigarettes per year, and it is estimated that a third of these cigarettes are smuggled into the EU.

The proximity of Belarus to EU countries such as Lithuania, Poland, and Latvia makes it relatively easy for smugglers to transport cigarettes across borders. Cigarettes can be hidden in personal luggage, clothing, or vehicles, and smugglers often use creative methods to conceal their contraband. Smugglers range from individuals crossing the border with a few packs of cigarettes to international gangs with the resources to organise large shipments.

The cigarette smuggling business has significant economic and political consequences for both Belarus and the EU countries involved. For Belarus, the illegal export of cigarettes generates large profits for the country's tobacco factories and provides the state with substantial funding through excise duties. On the other hand, the EU countries lose billions of euros in tax revenue each year due to the illegal trade.

While Belarusian law categorises cigarette smuggling as a minor infringement, the EU countries are stepping up their efforts to combat the trade. Lithuanian border guards, for example, have two main priorities: stopping illegal immigrants and preventing cigarette smuggling. They have employed various tactics, including the use of drones and GPS-tracked rafts, to detect and intercept smuggled cigarettes.

The largest cigarette producer in Belarus is the Grodno tobacco factory

The factory is located in Grodno (Hrodna) and has a long history, operating in Poland and the Soviet Union after its initial establishment. In 2007, it was organised as a joint-stock company, but it remains state-owned. Over the years, the Grodno tobacco factory has adapted to changing consumer preferences and technological advancements. Initially producing cheap, low-end cigarettes, the factory later invested in new equipment to manufacture average-class cigarettes.

Grodno tobacco factory produces a range of cigarette brands, including its own labels such as FEST, NZ, Minsk, Portal, VIP, and Magnat. Additionally, they undertake licensed production for British American Tobacco, manufacturing well-known brands like Kent, Pall Mall, Lucky Strike, Vogue, Capri, Alliance, and Viceroy.

The factory's cigarettes are primarily sold on the domestic market, with 83.2% of their production being consumed within Belarus in 2016. However, a significant portion of their output is also smuggled to neighbouring countries like Russia, Lithuania, and the European Union, including the United Kingdom. This illegal trade occurs due to the price difference, as cigarettes are more expensive in these destinations than in Belarus.

In recent years, the Grodno tobacco factory has faced opposition protests and international sanctions following the 2020 Belarusian presidential election. Activists targeted British American Tobacco, one of the factory's main partners, with protests outside their London office. Additionally, over a hundred factory employees joined the call for new elections and an end to violence against protesters. As a result of these events, the factory has been included in sanction lists of several countries, including the United States, Canada, the European Union, and Switzerland.

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