Jump to full article: The Wall Street Journal Interactive Edition, 2003-02-12
Author: ERIN WHITE Staff Reporter of THE WALL STREET JOURNAL
Intro: Tobacco companies are scrambling to build their brands in Russia, while they still can.
As tobacco restrictions gain traction around the world, tobacco advertisers are focusing their efforts on markets with fewer barriers. Russia is one of the most appealing markets, though it may not be open to tobacco advertising much longer.
Russia is expected to ban tobacco ads in 2004. Once a ban goes into effect, it becomes harder to build the image of a brand, especially one sold on prestige rather than price. It's hard to convince customers that a new cigarette label is glamorous without some sort of advertising. So tobacco ad-spending often rises sharply just before a ban is instituted; analysts expect that to happen this year in Russia.
For the moment, Russia still allows tobacco ads in posters and print, and its smokers are acquiring a taste for pricier cigarettes. . .
In mature tobacco markets, such as the U.S. and many countries of the European Union, cigarette sales volumes are declining. And while the U.S. market is big, at about 390 billion individual cigarettes sold annually, tobacco companies -- hamstrung by advertising restrictions -- are increasingly forced to compete on price there. The discounts eat into profits.
That leaves the companies to concentrate their advertising in countries like Russia, where analysts estimate volume is growing at about 2% annually, with about 280 billion individual cigarettes sold last year. Greece is another place cigarette makers can still pitch their product
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