A new episode in the #25×25 Interview Series powered by Schoenherr si Asociatii SCA, a special editorial project featuring 25 companies that have been in business in Romania for 25 years, sees us talking to Ram Addanki, Central Europe South Area Director at British American Tobacco, as we try to discover the secrets to the company’s remarkable success and longevity in the Romanian market.
Business Review: Starting with a bit of historical background, what can you tell us about your company’s entry into Romania back in 1996 and about your industry as a whole back then?
Ram Addanki: We started in 1996, when the first brick was laid at our factory in Ploiesti with a small group of very enthusiastic people. Now, 25 years later and following an investment of over 500 million euro, our factory in Ploiești is now BAT’s second largest production facility in Europe and among the top 5 in the world, with around 1,000 employees. Romania is also the first country in the European Union to produce Neo, the tobacco consumables for glo, the company’s most innovative device that heats tobacco without burning it.
In just a few years after completing the factory, BAT gained the first place of the Romanian tobacco market and managed to preserve its top position, by putting all its resources in the products’ quality, high-standards equipment, and highly talented and skilled people. We are proud to say that almost half of BAT’s employees have been with the company for at least 10 years. The number of our people has been constantly on the rise, by an average of 10% a year in the 25 years of presence so far in Romania. Now we have over 3,000 well-paid jobs and generate another 30,000 jobs indirectly, along the distribution and supply chain.
BR: How did your company navigate during all these years in Romania in terms of goals, achievements, challenges, and opportunities?
RA: BAT has three entities operating in Romania: BAT Investment – the production facility in Ploiești, BAT Trading – the national-distribution company, and Global Business Services (GBS) – an integrated-service centre. We developed our business based on clear principles and we were able to ensure a sustainable growth for our business, our employees, and our commercial partners as well. We invested highly in the latest available technology, the continuous professional training of our people and in business strategies adapted to the Romanian market and our consumers’ expectations.
Yet, the challenges did not pass us by. Romania has approximately 2,300 km of borders with non-EU countries and cigarettes’ contraband has always been a major challenge for the state budget and the communities’ safety. Early on, we committed to support the authorities in their fight against illicit trade through knowledge and expertise and long-term partnerships, as well as awareness campaigns that reflect the black market’s threat to society and economy. We are proud to say that BAT’s stopcontrabanda.ro platform is the first integrator of illegal cigarettes seizures in Romania and we have developed a strong partnership with the Romanian Police, the Romanian Border Police, the National Authority for Fiscal Administration and the General Customs Directorate.
We have also invested in the partnership with our commercial partners, by developing easy-to-access trading platforms, adapting to their commercial needs and providing annual trainings and awareness campaigns related to youth access prevention to nicotine products and the legal provisions in this regard. We are happy to say we have a solid partnership with the National Agency for Consumers’ Protection, to inform the retailers and the public about the regulation that forbids the sale of nicotine products for people under 18.
Romania has now a strong economy and a very clear and comprehensive legal framework, especially regarding tobacco products, being the most restrictive country in the European Union in terms of tobacco legislation, according to the 2021 Nanny State Index Report issued by Epicenter and the Institute of Economic Affairs. While delivering with integrity in our business, we have always remained open to dialogue with the authorities to support a predictable and stable business environment. Our investments and commitment in Romania prove we are here to stay and work towards a better tomorrow for everyone.
BR: What is the proudest moment for your company in its 25-year history?
RA: Our sustained investment in products and people development pays off every time, especially in the form of proud moments. We succeeded in meeting our consumers’ expectations with a diverse, high quality portfolio of innovative products, that made us the first choice in the tobacco market for quite some time now.
We have clearly committed to the journey of transforming tobacco, with significant investments in research and technology. Referring specifically to digitalization, we took innovation one step further, in the company’s business model relating to retail. Starting with 2019, BAT Romania became the first player in the industry to launch an online ordering platform for retailers, enhancing the data flow between the company and its commercial partners. Also, in 2019, BAT developed a large infrastructure for selective cigarettes’ stubs collection in Romania, that are used in an energy recovery process, with over 1,7 tons collected so far. In 2021, BAT became the first company to recycle its old versions of the glo electronic device, through over 250 collection points nationwide.
2020 forced us to completely shift our strategies and focus on people’s safety and wellbeing. We took all the safety measures imposed by the authorities and our internal policies, we provided the adequate digital support to maintain the work flow and connectivity and we successfully managed to ensure the business continuity and adapt to the new context, with no major disruption or risk to people’s safety. At the end of the day, we enjoy working and thriving together. Our results make us proud every day.
BR: Moving into the present, how would you describe your company’s role in the current social and economic context?
RA: Tobacco has always been an important contributor to the state budget, and our presence in Romania has a big impact on its economy. BAT was Romania’s biggest contributor to the state budget in 2020, with a total contribution of nearly 2 billion euro (9,65 billion RON) in excise and taxes and the largest player on the tobacco market, with a market share over 50%.
BAT exports 60% of the cigarettes produced in Ploiești to other markets worldwide and so we are one of the greatest exporters of processed agricultural products in Romania. According to data published by the National Institute of Statistics in March 2021, the total value of exports of processed tobacco products, ie cigarettes and heated tobacco products, in 2020 was €1.37 billion, 45% more than the previous year. The data provided by NIS show that in 2020 tobacco products accounted for more than half (53%) of total exports of food, beverages, and tobacco.
We focus a lot on our people: many of our colleagues gained an international exposure by working in different BAT markets and came back to continue their career development in Romania. In our head office in Romania, there are around 20 different nationalities. We value this kind of diversity because it encourages innovation, creativity, and different ways of thinking. In January 2021, BAT was recognised as a Global Top Employer for a fourth consecutive year by the Top Employers Institute. We were one of just one of 16 companies to receive Global Top Employer status for 2021, acknowledging our commitment to creating a diverse, inclusive, and innovative working environment that our employees enjoy being a part of.
BR: No one has a crystal ball, so we won’t ask about the next 25 years. But looking into the future, how do you see the road to 2030 for both your company and the industry you represent?
RA: Well, BAT has been around for quite some time now, 1902 to be more specific. We are a leading FTSE company with truly international credentials. Few consumer goods companies can claim over 150 million consumer interactions every day and distribution to over 11 million points of sale across more than 180 markets and over 55,000 BAT people worldwide.
However, the world is changing, and our business is on a transformation journey as well. We have evolved our strategy to put a sharper focus on our New Categories of products, fuelled by investment from the continued delivery of our traditional tobacco business. We are dedicated to the development and commercialisation of alternative tobacco and nicotine products that don’t burn tobacco to deliver nicotine to the user and offer adult smokers an enjoyable, reduced risk alternative*.
Just as we are committed to making a step change in our New Categories performance, we are also committed to making a step change in our sustainability ambition. Recently, we have announced several stretching targets that we are confident will accelerate our purpose to deliver A Better Tomorrow™ for all our stakeholders, including:
- Increasing our consumers of non-combustible products to 50 million by 2030
- Achieving carbon neutrality for our business activities and for our value chain by 2050
- Accelerating our existing environmental targets to 2025
- Eliminating unnecessary single-use plastic and making all plastic packaging reusable, recyclable or compostable by 2025
- 100% renewable electricity in operations sites by 2030.
Romania remains one of the most important countries for us and we will continue our investments and business growth here. For the next 25 years, we will enrich our journey by giving more back to society: putting more focus on the new categories products, as reduced risk alternatives to smoking, developing our environmental protection and community support initiatives, and continuing to invest in the professional and personal development of our people, whose diverse backgrounds, skills and positive attitude are our most valuable asset.
* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.