(Bloomberg) — British American Tobacco Plc said it will pull out of Russia, joining an exodus of major U.S. and European consumer brands following the invasion of Ukraine.
The maker of Pall Mall and Lucky Strike cigarettes announced two days ago that it would suspend capital investment in Russia. Now, in circumstances the company described as “complex, exceptionally fast-moving and volatile,” it has decided to exit the country.
“BAT’s ownership of the business in Russia is no longer sustainable in the current environment,” the London-based firm said Friday. “We have initiated the process to rapidly transfer our Russian business in full compliance with international and local laws.”
The tobacco giant will look at the possibility of transferring the business to Russian partners and try to complete that as soon as possible, Chief Marketing Officer Kingsley Wheaton said, pointing to three options the Russian government has drafted for companies, including the threat of nationalization.
Potential partners could, for example, include current distributors in the country, though it depends on whether those parties are interested and capable. In the meantime, the company will continue to pay its 2,500 employees there.
‘Best Path’
“We think it’s the best path forward, given the context and circumstances,” Wheaton said by phone. “We’ve been in Russia for 30 years. It’s an incredibly hard decision.”
Ukraine and Russia accounted for 3% of revenue and a slightly lower proportion of adjusted profit from operations last year, the company said. As a result of the planned pullout, BAT trimmed its 2022 forecast for revenue growth at constant exchange rates to between 2% and 4% from a previous estimate of 3% to 5%, and lowered its guidance for growth in a key profit measure.
BAT is joining a stampede of companies, from energy to consumer goods and electronics, suspending or exiting operations in Russia two weeks after Vladimir Putin launched the assault on Ukraine. BAT’s move goes beyond steps rival cigarette makers have taken in the country, which has been a strong market for tobacco companies.
Philip Morris International Inc. the maker of Marlboro cigarettes, said Wednesday it will suspend planned investments in the country, including all new product launches. It also said it will “scale down” production there amid supply chain disruptions, without providing further details. Imperial Brands Plc has said it will halt operations in Russia, suspend production at its Volgograd factory and stop sales and marketing in the country.
(Updates with comments from BAT executive starting in fourth paragraph)
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