Cigarette producer Philip Morris will temporarily close down its factory in Otopeni, close to Bucharest, putting its 450 employees in technical unemployment, the company has announced. The tobacco firm has seen cigarette sales drop recently, while the consumption of smuggled cigarettes has risen. The increase in tobacco excises from EUR 50 to EUR 74 per 1,000 cigarettes in January this year has also affected sales.
“This was a difficult decision. Despite the major efforts we made to avoid this measure, the market reality hasn’t offered us any alternative. According to our internal current estimations, one in four cigarette packs are sold illegally, and the Romanian state doesn’t receive any taxes for this,” said Andrei Vasilescu, the firm’s corporate affairs director for Romania and Bulgaria.
Philip Morris has commented that its employees are not the only ones affected by this situation. Black market cigarettes have caused a fall in sales and the loss of jobs for distribution companies and retailers as well, said Vasilescu. “Consumers end up buying cigarettes which in many cases are of dubious quality. On a large scale, this translates into major losses to the state budget,” added the director.
The 450 employees will be paid 75 percent of their salaries during the temporary shutdown. The Otopeni factory was opened in 2001 following EUR 100 million of investments. Philip Morris competes with JT International and British American Tobacco on the local cigarette market.