advantage for some manufacturers in the earlier European 15 countries that they would find expanding markets for cigarettes in the new EU 12 has turned out different from earlier expectations. A kind of surprise emerged in 2007 when the value for cigarette exports from the 12 new EU countries nearly doubled, reaching $1.44 bn. That was far above the $1.06 bn for combined cigarette imports by the new EU 12. Since a large share of Poland’s expanding exports went to the Middle East, there was still room for further expansion of German cigarette exports to the EU 12, but Austria’s once booming exports declined in 2007.
Poland’s cigarette exports moved up so sharply that some observers wondered how it happened. The theme has been to expand exports and provide more quality products at a reasonable price for Poland’s overall exports. Gains by Poland in 2007 tended to slow down the earlier boom for German and Austrian cigarette exports to the 12 new EU members. During 2007, cigarette output was up in Poland and Romania, while dwindling in Slovakia and Slovenia and remaining steady in some other EU 12 countries.
Ten countries joined the EU in 2004, and their cigarette trade had some dynamic changes during 2004–07. Romania and Bulgaria joined the EU on January 1, 2007. Romania’s cigarette trade shifted from annual imports in the range of 10-12 bn pieces to a net export position in 2007. Bulgaria had a sharp hike in the value of cigarette exports in 2007, and the transit trade through Bulgaria for the movement of Greek cigarettes to Mideast markets continues.
Preparation for joining the EU tended to create a favorable setting for investments by multinationals in some East European countries. Before the ten new members came into the EU during 2004, investments by multinationals and a shift to more quality blended brands was underway. Bulgaria was one of the places where the shift from state trading and the good jobs with Bulgartabac to multinationals did not appear very welcome.
The strong gains for German cigarette exports to East Europe of quality blended brands provided more focus for a change to the type of cigarettes smokers preferred. Instead of further gains to East Europe for cigarettes from some of the EU 15 countries a surprising reverse flow of cigarette trade emerged in 2007. This was because of the surge in exports of cigarettes from Poland. Gains for Polish cigarette exports to Germany, France, UK, Italy, and some other EU countries were tremendous in 2007.
Some Economic Factors Favor Expansion Of Cigarette Exports From East Europe: Exporters of cigarettes from some of the new EU 12 have the advantage of lower production and distribution costs. This helps them to generally have lower export prices than those found in most countries of the earlier EU 15. However, the average price for cigarettes from some EU 12 countries advanced in 2007. Changes in currency values may be part of the reason. Eleven of the 27 EU countries have the euro as their official currency. More use of the euro as a backup currency and the one used for international trade is occurring in other EU countries where the euro is not yet the official currency. By May 2008, the exchange rate for the euro was in the range of $1.55 to $1.60 compared with 82 cents when its use began in 2002. This means that prices for cigarettes in the EU are higher in US dollar equivalents, and that imported US leaf tobacco is less costly in terms of euros.
Poland Moved Into Fourth Place Among World Cigarette Exporters In 2007: Exports of cigarettes from Poland rose to 56.7 billion pieces in 2007. That placed Poland in fourth place among world cigarette exporters. Germany was in the lead with the export of 159.2 bn pieces, followed by steady Dutch exports of 111 bn pieces. US cigarette exports declined 17.8% to 90.9 bn pieces in 2007. If the activity for 2007 continues, it appears than Poland may move ahead of the United States for the quantity of cigarettes exported in the future.
Poland has a number of advantages for expanding cigarette output and exports. The new facilities recently installed by multinationals provide efficient output of quality blended brands. Lower labor and distribution costs enhance export potential. About a third of the tobacco used in cigarette factories was grown by Polish farmers in the past, but the share is declining as greater output occurs to meet rising export demand. The short distance from modern ports to cigarette factories helps to minimize the cost of delivery for imported tobacco. The average price for cigarette exports from Poland rose from 19.1 cents per pack of 20 in 2006 to 22.5 cents per pack of 20 in 2007. Poland’s cigarette exports in 2007 were 41.8% above the 40 bn exported in 2006, and the value moved up 67.2% to $637.8 mn in 2007, compared with $381.5 mn in 2006 and just $188.6 mn in 2005. The way Poland’s cigarette exports tripled in two years is astonishing.
Poland had market gains for cigarette exports to other EU countries in 2007. Shipments to Czech Republic reached 6.5 bn pieces in 2007. A leading market in 2007 was Hungary with the delivery of 8.6 bn pieces from Poland. Poland exported 1.79 bn cigarettes to Bulgaria in 2007, accounting for about half of total Bulgarian cigarette imports. Germany is the leading world cigarette exporter, but a different flow from earlier years occurred in 2007, with the shipment of 2.89 bn pieces from Poland to Germany. Poland’s reported imports of cigarettes from Germany were 600 mn pieces in 2007.
Poland exported 2.45 bn cigarettes to the Netherlands in 2007. Italy is the second major world cigarette importer, and shipments from Poland to Italy rose to 2.185 bn pieces in 2007. Poland exported nearly 1.9 bn pieces of cigarettes to France in 2007. While some earlier plans had arranged to have Belgium send more cigarettes to some EU countries, Poland exported 872 mn cigarettes to Belgium in 2007. Poland exported 1.29 bn cigarettes to Denmark in 2007, assisted partly by output of House of Prince brands in Poland. Use of boats to transport cigarettes from Poland to ports of other countries with ports on the Baltic Sea contributed to increasing exports. Poland exported 1.467 bn cigarettes to Finland in 2007, accounting for over a third of Finland’s total cigarette imports. Poland exported 2 bn cigarettes to Greece in 2007, accounting for over a fifth of all Greek cigarette imports. Estonia was a market for 546 mn cigarettes from Poland in 2007. Poland’s cigarette exports to neighboring Lithuania reached 796 bn pieces in 2007. Latvia was a customer for 472 mn cigarettes from Poland in 2007.
Poland Exporting More Cigarettes To Middle East: In addition to dramatic gains for shipments to other EU members, Poland had interesting hikes for cigarette exports to some Middle East countries in 2007. Direct shipments of 2.45 bn pieces to Iraq were supplemented by exports of over 3 bn pieces to free trade zones in Turkey, where much of the cargo was in transit on its way to Iraq. Problems with getting cargo through Iraq’s port of Umm Qasr on the Gulf tended to cause greater shipment of cigarettes through ports of Turkey, Syria, Lebanon, and Egypt on the Mediterranean. Poland exported 966 mn cigarettes to Egypt in 2007. Lebanon was the destination for Polish exports of 720 mn cigarettes in 2007.
Czech Republic Cigarette Exports Rebounded In 2007: Exports of cigarettes from Czech Republic declined by nearly half to 7.6 bn pieces in 2006, and then rebounded by about 51% to 11.5 bn pieces valued at $220.9 mn in 2007. The leading destination for Czech cigarette exports in 2007 was Slovakia with shipments of 6.4 bn pieces. Finland was a market for 1.28 bn Czech cigarettes in 2007. The large market in Italy received delivery of about 1.22 bn cigarettes from Czech Republic in 2007. Poland was the destination for Czech exports of 28 mn Czech cigarettes in 2007.
Czech Republic Shows Gains For Cigarette Imports Mostly From Exogenous Demand: Demand for imported cigarettes increased in 2007, but a major factor was purchases by non-Czech smokers, and the way the EU has made crossing borders so much easier. The free trade setting has made it easier for Czech smokers to buy a wide range of imported brands at the same time that tourists and shoppers for a day came to buy less costly cigarettes in the area between Prague and the German border. The situation for marketing cigarettes manufactured in Czech Republic has gone through different stages in the last two decades. For a while Czech cigarette exports were important to Russia, but that trade dwindled after multinationals provided an array for quality American blended brands from new Russian factories. By 2007, the scene had changed with few Czech cigarette exports beyond the EU. Yet, the attractive price for cigarettes in Czech Republic tended to attract many smokers and shoppers from Germany and Austria. That may help to explain how imports of cigarettes reported by Czech Republic rose to 26.9 bn pieces in 2007 for a value of $215 mn.
German cigarette exports to the Czech Republic reached 5.3 bn pieces in 2007, compared with the delivery of 6.5 bn pieces from Poland. Dutch cigarette exports to Czech Republic in 2007 were 1.2 bn pieces. Hungary exported 1.8 bn cigarettes to Czech Republic in 2007. The recent gains for Czech cigarette exports stemmed from useful contacts with traders in the other new EU markets and the Middle East. Tobacco is not grown commercially in Czech Republic and the recent focus on producing more quality brands has resulted in greater purchases of US leaf tobacco. The modern factory operated by Philip Morris east of Prague has provided most of the cigarettes exported from Czech Republic.
Hungary Reported Larger Imports And Exports In 2007: Imports of cigarettes into Hungary increased about 11% in 2007 to 11.4 bn pieces, valued at $125.6 mn. Poland provided about three-fourths of Hungarian cigarette imports in 2007. Germany and Austria each delivered over 500 mn pieces in 2007. Exports of cigarettes from Hungary increased 80% in 2007 to 3.85 bn pieces, valued at $32 mn. Slovenia and other countries of former Yugoslavia were significant markets.
Slovenia’s Cigarette Exports Have Nearly Blinked Out, While Imports Remain Strong: The competitive scene for EU cigarette trade has a casualty among exporters. That can be found with the situation where Slovenia’s cigarette exports declined from 2 bn pieces valued at 12.3 mn in 2006 to only 48 mn pieces for $600, in 2007. Slovenia has difficulty sending cigarettes north to other EU countries. Competition from cigarette exporters in Croatia and Serbia make it difficult for Slovenia to export more cigarettes to Balkan countries outside the EU. Imports of cigarettes into Slovenia were steady at 4.7 bn pieces in 2007, but higher prices meant a 15% increase in value to $74.6 mn.
Lithuania’s Cigarette Exports Peaked In 2006 Before Declining In 2007: The average export price of about 33.9 cents per pack of cigarettes exported from Lithuania is 2007 was about 50% above the average export price from Poland. That may have contributed to the 11.5% decline for Lithuania’s cigarette exports to about 12.3 bn pieces in 2007, compared with peak shipments of 13.86 bn pieces in 2006. Modernization of cigarette factories and increased contacts with foreign buyers helped Lithuania to increase cigarette exports through 2006. Two major export markets for Lithuanian cigarettes in 2007 were Latvia and Germany, with each receiving over 5 bn pieces.
Lithuania has had dramatic gains in exports of some other commodities in recent years, including cheese. A combination of location and providing quality products has enhanced Lithuania’s export gains. Output of cigarettes in Lithuania increased in recent years as exports increased.
Lithuania’s cigarette imports increased 37.6% to 4.5 bn pieces in 2007, with Poland providing about 18% of the arrivals. Opening of the Lithuanian market to other EU exporters resulted in larger cigarette imports from Germany, despite efforts by Russian exporters to expand sales there. Germany exported 338 mn cigarettes to Lithuania in 2007.
Latvia’s Cigarette Trade Increased In 2007, Especially With Bordering EU Members: Exports of cigarettes from Latvia nearly tripled in 2007 rising to 6.7 bn pieces valued at about $85 mn. Shipments of cigarettes from Latvia to Estonia increased to 2.3 bn pieces, as demand from the booming Estonian tourist trade accelerated. Denmark and Germany were also important markets for Latvia’s cigarette exports in 2007. Riga cigarette manufacturers sought to improve quality and expand exports about a decade before Latvia joined the EU in 2004. For a while, Latvia had promising cigarette exports to the United States in the 1990s, but the last delivery of 87 mn pieces was in 2003.
Imports of cigarettes into Latvia increased 30% in 2007 to 7.45 bn pieces, a level double the 2005 arrivals. Lithuania sent about 5.3 bn cigarettes to Latvia in 2007, accounting for about 71% of total Latvian cigarette imports. Latvia was the destination for over 450 mn cigarettes in 2007 from each of three suppliers, including Germany, Netherlands, and Poland.
Estonia’s Cigarette Marketing Influenced By Tourist Boom: Imports of cigarettes reported by Estonia increased 42% in 2007 to 3.5 bn pieces, as the value rose to $54.3 mn. Neighboring Latvia provided about two-thirds of the imports. Swedish investments in small cigarette manufacturing facilities in Estonia resulted in closing down the factory and use of the land for other activities. Many ships bring tourists from Finland and Sweden to Estonia daily. Tallinn has become a favorite place for many day shoppers from Finland to visit. A round trip boat ride from Helsinki to Tallinn cost only about $25. This helps some shoppers to more than pay for the boat trip with savings from purchases of cigarettes. Rather than paying about $6 per pack for cigarettes purchased in Finnish stores, the shoppers can find prices about half that much in Estonia. An increase in taxes placed on cigarettes sold in Estonia contributed to a sharp rise in retail prices recently.
Wholesale traders in Finland bought more cigarettes from manufacturers in Germany and Poland in the last three years. Much of their business related to the business in Estonia or sales to shoppers on their travel to Tallinn. Finnish shoppers visiting Estonia found much lower prices for consumer goods in Tallinn before 2004. Recently, much of the increase in tourism has come from other countries, including visitors from North America and CIS countries. Tourists may account for about half the cigarettes sold in Estonia.
Dramatic Changes Underway For Cigarette Business In Romania: Foreign investment in cigarette manufacturing and marketing In Romania increased sharply in the last two years. Romania’s reported cigarette imports declined from 12.4 bn pieces in 2006 to only 302 mn pieces by 2007. Romania’s cigarette imports averaged over 9 bn pieces during 2003–05. Loss of Romania as a customer for EU cigarette exporters added to the competition. Some firms in Romania have strived to use the best quality of tobacco to manufacture premium cigarettes. A policy of import substitution and sharply reducing cigarette imports has left some previous suppliers searching for alternative markets.
This appears to have pushed some exporters in places like Bulgaria to seek more exports to countries outside the EU. Like Switzerland, more European cigarette exporters are seeking extra sales in the Middle East. Investors with headquarters in British Virgin Islands have provided modern manufacturing facilities and increased use of US tobacco in premium brands has occurred.
Romania reported cigarette exports valued at $182 mn in 2007. This may have included the prepayment of cigarette taxes. Most countries allow cigarette exports without the payment of domestic taxes. The value for Imports of cigarettes into Romania declined from $234.7 mn in 2006 to $46.4 mn in 2007. Some of the cigarettes from Czech Republic delivered to Romania in 2007 may have been for transit traders moving cargo to Iraq.
Romania’s cigarette consumption averaged about 43 bn pieces annually during 2002–05, when imports accounted for about a fourth of the supply. The average retail price of about $1 per pack of 20 contributed to greater affordability for many smokers. The share for imports of cigarette sales in Romania declined to less than a tenth in 2007. The situation is changing as modern investments from the company with headquarters in British Virgin Islands have an impact.
Bulgaria’s Cigarette Exports Rebounded In 2007: Bulgaria’s cigarette exports increased 80% in 2007 to 3.85 bn pieces and the value doubled, reaching $44.6 mn, compared with $21.8 mn in 2006 when 2.14 bn pieces were shipped. Markets outside the EU have been important for Bulgarian exporters recently, where earlier trade contacts became useful. Albania was the destination for exports of about 1 bn cigarettes from Bulgaria in 2007. Bulgaria exported 677 mn cigarettes to Iraq and 74 mn to Lebanon in 2007. Bulgaria kept substantial cigarette exports after loss of markets in CIS countries where multinationals brought great changes with improved quality and little need for imports from outside the area. More costly premium brands from Bulgaria held up better in exports than the brands with a lower price made predominately from oriental tobacco.
Bulgaria became a busy transit point for cigarettes from Greece and some other countries with cargo on the way to markets in the Middle East. Reported imports of cigarettes into Bulgaria tripled in 2007, rising to 3.8 bn pieces, valued at $125.6 mn. Poland moved into the lead among suppliers of imports with the delivery of 1.8 bn pieces in 2007. Germany exported 1.03 bn cigarettes to Bulgaria and Greece shipped 860 mn pieces to this market. Dutch shipments of cigarettes to Bulgaria in 2007 were 614 mn pieces.
Cigarettes From Cyprus Rebounding While Imports Hold Steady: Cigarette exports from Cyprus (area governed from Nicosia) increased 75% in 2007 to 907 mn pieces, valued at $9.8 mn. A reduction in the average export price from 34.5 cents to 21.6 cents per pack of 20 apparently contributed to the rise. Cyprus was an important transit center for US cigarettes on their way to Middle East markets before 2004.
Imports of cigarettes into Cyprus increased 5.8% to 1.9 bn pieces valued at $46.6 mn in 2007. Greece has been a leading source of imported cigarettes in Cyprus since the steep decline for US deliveries from 512 mn pieces in 2003 to 84 mn pieces in 2007. US cigarette shipments to Cyprus rebounded to 166 mn pieces in 2007. Bulgaria delivered 18 bn cigarettes to Cyprus in 2007.
Malta Finds An Expanding Market For Cigarette Exports In Libya: Exports of cigarettes from Malta rose sharply in 2007 with most of the reported exports going to Libya. This appears to not include the purchases by tourists and visitors from ships stopping at port facilities in Malta. Imports of cigarettes into Malta declined about a sixth to 523 mn pieces valued at $13.5 mn in 2007. Poland shipped 193 mn cigarettes to Malta in 2007, and Greece provided 5 mn pieces.