Gallaher rolls out revamped Reemtsma cigarette factory
Foreign investors are showing renewed interest in Ukraine’s tobacco industry, with six of the nation’s 11 cigarette plants involved in joint ventures that include multinationals.
The most recent transaction involved the sale late last year of Reemtsma’s factory in Cherkasy. Britain’s Gallaher Group has started to modernize the plant, for which it paid an undisclosed sum, and reopened it on May 16.
Gallaher subsidiary Liggett‑Ducat Ukraine will operate the plant. The company owns a 99.23 percent interest in the factory.
“Gallaher is confident that it paid fair value for the shares [it bought from Reemstma],” said Jason Konken, Liggett‑Ducat Ukraine’s general director.
Konken said that since the sale, the company has done some major remodeling and has installed high‑speed machinery needed to manufacture filtered cigarettes. Konken said that additional renovations were planned and would progress as sales increase.
Liggett‑Dukat is just the latest in a succession of foreign investments in the nation’s tobacco industry.
Employees of the Priluky factory, who bought their plant shortly before the collapse of the Soviet Union, later sold a 65 percent stake in the business to British‑American Tobacco. BAT injected $25 million into the factory over a five‑year period.
In 1992, R.J. Reynolds began negotiating to purchase a 70 percent share in both the Lviv and Kremenchuk tobacco factories. The following year it invested $9.6 million in the Lviv plant and $7.3 million in the Kremenchuk factory.
Japan Tobacco International presently owns 92 percent of the Kremenchuk factory.
In 1993, Germany’s Reemtsma family entered Ukraine and purchased a 65 percent interest in the Cherkasy and Kyiv cigarette factories. By 1996, Reemtsma had broken ground for a manufacturing plant designed to replace the older Kyiv plant. The new factory, capable of rolling out 30 billion cigarettes a year, was completed in 1998.
In 1994, Philip Morris paid $6 million for a 51 percent share in the Kharkiv cigarette factory. It invested an additional $10 million in 1995, bumping up its stake to 75 percent in the process. The company has since acquired most of the remaining shares.
If the number of cigarette producers competing for the attention of Ukrainian smokers bothers Konken, he doesn’t let it show.
“Liggett‑Ducat Ukraine’s concept is to win over consumers by providing innovative products that are superior in quality,” he said.
The company’s flagship brands are LD, LD Gold and LD Platinum cigarettes. LD Gold and LD Platinum cigarettes are sold in distinctive round‑cornered packs.
The company sells unfiltered cigarettes for about 50 kopeks a pack and charge Hr 7 for high‑quality filter cigarettes.
Konken said the company was exploring the possibility of further expansion into the mid‑priced and premium‑priced cigarette markets.
