In Ex-Soviet Markets, U.S. Brands Took On Role of Capitalist Liberator
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In the summer of 1990, the Soviet Union’s terminal economic crisis descended upon the product that many Russians considered their most irreplaceable: cigarettes. Faced with mass shortages of Soviet-made brands, angry smokers in Moscow, Leningrad, Kiev and other Soviet cities staged the protests that became known as the tobacco rebellion. A desperate President Mikhail Gorbachev fired the minister in charge of the industry and pleaded with the West for help. To the rescue rode Philip Morris and R.J. Reynolds. In return for cash and barter goods, the American tobacco giants agreed to deliver 34 billion cigarettes — the single biggest export order in their history. The crisis abated, and Gorbachev and the old order helped buy themselves an extra year in power. And the companies achieved an important foothold in a vast market that for decades had kept them tightly restricted or had shut them out altogether. Since then, the American companies and their European counterparts have swept across Eastern Europe and the republics of the shattered Soviet Union, buying up failing state-owned enterprises and ancient factories, launching mass advertising campaigns and asserting broad influence over new governments and political leaders. In the process, they have laid the foundation for a Western-owned tobacco industry in a vast market that may someday surpass the shrinking markets of the United States and Western Europe. Big Tobacco’s entry into Ukraine, one of the largest former communist markets, is in many ways typical. While other Western industries hung back, scared off by Ukraine’s formidable bureaucracy, chaotic laws and unstable currency, Philip Morris Inc., R.J. Reynolds Tobacco Co. and Reemtsma, the giant German tobacco conglomerate, moved in quickly, buying up shares in the new nation’s five largest cigarette factories and capturing 75 percent of its manufacturing capacity. Their billboards became a regular feature of Kiev’s urban landscape, and they launched advertising campaigns that provided much of the revenue that kept the state-run broadcast industry afloat. And when the country’s small but active anti-smoking movement persuaded parliament to pass a ban on tobacco ads, the industry responded with a well-financed lobbying campaign that recently overturned the ban. The results are visible throughout Ukraine: Billboards for the Marlboro Man and the rugged Lucky Strike motorcyclist are back; ads for American brands again dominate the country’s coffee shops and trolley cars, and the brands’ brightly painted logos adorn posters, T-shirts and shopping bags. And while the companies have yet to see the kind of profits that would justify their vast investment in Ukraine, they have great hopes for the future. “It’s risky . . . but the potential is huge,” said Ronnie Lindquist, general director of Reynolds in Ukraine. |