[Intl-tobacco] Russia's Prima Cigarette holds it own

[Robert Weissman]

POEM FOR PRIMA / Foreign competition has made Russia=92s most popular cigar=
ette=20
only stronger.

by Maya Mitreva
Source: Tobacco Reporter, Sunday, 7/30/00

The phenomenon Prima could have been born only in Russia. Its rich history
is marked by the country=92s historical and economic changes, and flavored
by the Russian character. To many Russians, Prima is a small part of their
national treasure.

Even today, Prima remains Russia=92s most popular cigarette brand by far.
After the 1998 financial crisis, its share jumped from 19 percent to
almost 40 percent, while the number of the factories producing the brand
almost doubled.  Of 270 billion cigarettes produced last year, about 100
billion were Prima. The cigarette has been growing without the aid of
advertising budgets, ad campaigns and other promotional stunts such as
lotteries with prizes. Its strongest selling point=97price. There are no
less-expensive cigarettes in Russia.

UPS AND DOWNS. Prima=92s roots can be traced to tsarist times, when smoking
became fashionable under Emperor Peter The Great. Its real =93boom=94 start=
ed
during the 1950s, when it became the =93people=92s=94 cigarette. =93Prima w=
as the
most popular cigarette during the Soviet era, when there wasn=92t such a
variety of brands like there is now,=94 says Roman Timofeev of Eurotabak.
=93During the period of shortages, it was the only national brand within th=
e
means of many smokers.  No wonder that so many people remain devoted to
the brand.=94

When the Russian market opened to foreign competition in the early 1990s,
Prima was =93ousted=94 by a flood of beautifully packed and premium-quality
imported cigarettes. Nevertheless, a considerable part of the population
remained faithful to the brand. At the end of 1997, Russian enterprises
such as Bernson S, Idigov Products, Stolichnaya Tobacco Factory and
Kaliningrad BT started producing filter versions of the cigarette with a
better quality blend and at a reasonable price. Beyond doubt, Prima
reached its zenith after the 1998 August crisis. As consumers saw their
disposable incomes dwindle and imports shrank, sales of the inexpensive
smoke skyrocketed.

Even today, Prima remains an affordable smoke. Registered as a fifth-grade
non-filter trademark, the oval variety sells for between rbl1.40 (us$0.05)
and rbl1.70 per pack. Its filter versions change hands for between rbl3
and rbl3.50, while the most expensive Ukrainian Prima Lux costs rbl11.20.

=93Now everyone who feels like working, produces Prima,=94 concludes Alexan=
der
Skvortsov of Universal Tabak CIS. Prima accounts for approximately 50
percent of the production of Russia=92s biggest domestic manufacturer, Don
Tobacco. The so-called garage workshops=97the illegal factories=97often
produce nothing but Prima.

CREATIVITY. True, many Western brands boast high sales figures, too. But
it would be a mistake to compare Prima to Marlboro, Lucky Strike or any
other =93conventional=94 cigarettes. For starters, Prima has no fixed blend=
=2E
While in the past, Prima producers had to stick to the requirements of
state agencies such as GOST/The State Standard, today every manufacturer
produces its own version of Prima.

Some Primas feature the so-called =93accountant=92s blend,=94 which is
determined completely by the price of its ingredients. Other Prima blends
are the result of serious work on flavor and quality. Reemtsma, for
example, claims it has succeeded in reducing its Prima=92s tar content to 1=
5
mg. The quality of the Samara Prima is consistently improving and the
cigarette makers in Volgograd put between 10 and 15 different types of
tobacco in their Prima.

Many Prima manufacturers are also using better-quality non-tobacco
materials.  In addition to the classical red-box-white-letters version,
the brand now comes in cardboard and soft pack. You can buy plain, oval
Prima and filter Prima, and opt for an active filter or even a recessed
filter. Reemtsma is developing a whole family. Besides full-flavor and
light Prima, there is now even a menthol version available!

Because the name Prima alone doesn=92t tell the consumer what blend to
expect, manufacturers in Russia print their logo and factory location on
the pack. For example, Prima Novosibirskaya is produced at Don Tabak in
Novosibirsks. Prima Nizhegorodskaya, of course, is manufactured in the
Nizhegorsk region. The name Prima Stolichnaya refers to both Moscow and
Stolichnaya Tobacco factory, as Stolichnaya means =93from the capital=94 in
Russian?

But the drive to differentiation doesn=92t end there. The =93Russian bards=
=94
come in and work their magic. The name Prima Classic is fairly
straightforward. Nevo Tabak is eager to point out that its Prima Extra has
the respective extra qualities. But does that also mean that Prima Export
is designated for export only? And what is the difference between Prima
Unusual and Prima Unusuals?

And what to think about JTI=92s Nasha Prima (=93Our Prima=94), which was
launched in May 1999? It=92s a bold claim, but JTI has history on its side.
The company is a successor of the famous Laferm factory, which is
generally acknowledged to be the =93inventor=94 of Prima.

Then there are numerous =93theme=94 Primas. Some, such as Commander=92s Pri=
ma
and Officer=92s Prima, are geared toward certain professions. Others cater
to nostalgia for the Soviet Union. To commemorate Victory Day, the Pogar
factory last year launched two versions of Prima Nostalgia=97one with
Stalin=92s portrait and the other with Lenin=92s portrait. Prima Zastoinaya=
,
bearing Breznev=92s image, appeared to remind people of the =93period of
stagnation.=94

Exploiting communist relics turned out to make good capitalist business
sense for the Pogar factory. In no time, sales jumped from 20 million
sticks per month to between 300 million and 400 million sticks per month.

After the breakup of the Soviet Union, Liggett-Ducat, a Russian company
with majority American participation, acquired the Prima trademark, along
with that of 16 other famous Soviet brands. Not surprisingly, this
development provoked some indignation in Russia. The tobacco association
Tabakprom, for example, argued that Prima had never been associated with
one producer in particular.  The legal battle that ensued ended last year
when both Tabakprom and Liggett-Ducat were granted rights to Prima. Under
the new rules, Prima can be manufactured only by factories that are
members of Tabakprom. The decision is expected to reduce the production of
poor-quality Prima.

The Prima argument is only one of many about the former Soviet Union=92s
=93all-branch=94 brands. =93Our patent laws are not perfect, and we are wor=
king
hard on this,=94 says Skvortsov. =93Similar arguments exist in our food and
drinks industry.=94 In neighboring Ukraine, meanwhile, the Prima rights wer=
e
assigned to Reemtsma.

Trademark disputes are decided by Rospatent. This patent agency can grant
rights on trademarks to all juridical persons, if the application has been
filed appropriately. The owner of a trademark has the exclusive right to
dispose of it and to forbid its usage. Tabakprom=92s rights to Prima will b=
e
in effect for 10 years.

SWAN SONG. So where does Prima go from here? Was the post-August period
its swan song? It depends on who you ask. Some believe that the present
boom is only an ad hoc phenomenon. As small producers and low-quality
cigarettes are in retreat, Prima will slowly wither away. They contend
that the transition from non-filter to filter cigarettes will be =93the
sound of bells=94 heralding the end of this brand.

However, it=92s too early to dismiss this Russian powerhouse. Consider this=
,
for example: When Tabakprom acquired the exclusive rights to Prima, JTI
and Reemtsma immediately joined the association so that they could
continue to manufacture this popular brand. The companies=92 initial
resistance to the increased $500,000 entrance fee melted away quickly
after they calculated the costs of not producing Prima.

When the facts speak, the gods are silent. The transition to high-quality
cigarettes will take time, considering Russia=92s continuing economic
difficulties. Despite many improvements, non-filter cigarettes still
account for more than 50 percent of the market.

What=92s more, international companies have enthusiastically embraced the
cigarette. Whether it=92s Liggett-Ducat, the first to enter the Russian
market;  British American Tobacco, whose international strategy relies on
developing local brands; or JTI, which has developed a whole array of
=93Russian=94 brands=97they all cleverly decided to act as if they were Rus=
sian.

There is, of course, one exception to the rule=97Philip Morris. A rumor in
Russian tobacco circles has it that even this conservative company, which
traditionally relies on the power of its international brands to enter
markets, is now developing =93something Russian.=94 Wouldn=92t that be a pr=
emium
cigarette, Primaboro?