Papastratos sales double in H1

Papastratos Romania in H1 this year made twice the turnover registered in the same period last year and nearly entire the 2000’s turnover, when it sold some 170bn lei’s worth.

Although the financial results are good, one may not say that the market trend – namely an increase in consumption and implicitly in cigarette sales, will maintain, because the Romanian market is extremely volatile, Michailis Alexandrakis, Papastratos Romania general manager, told Ziarul Financiar.

“Romania is like a “beautiful little trap” for foreign investors: it is well positioned, has a large population, which provides an attractive potential, it is interested in investors and everybody says (actually has been saying for many years now) things will be better soon.

Therefore, we all say to ourselves: We must be in Romania. But consumers are very volatile in their behaviour, and are not brand or company-loyal in general. The conditions on the market may very well change overnight and if you go to bed one night thinking your business is OK, you may wake up the next morning and find that it isn’t at all,” Alexandrakis says.

For instance, the cigarette consumption volume did not drop following the rise in the cigarette prices, prompted by an increase in excises, but went up instead, so that consumption in June was 4.9% higher than in April, according to a survey of MEMRB Romania, a market research company.

The data provided by the same source show that the consumption of inexpensive cigarettes is going up, while the consumption of other cigarette types is going down. The “low” (inexpensive) segment, which includes brands such as President, Derby, Callatis, More, Red&White, Snagov, Coloana and Jet Set is the only one whose market share actually increased by some 7% in June, compared with April.

At the same time, the “premium” cigarettes (deluxe ones like Kent, Rothmans, Camel and Marlboro) lost some 0.8% of the 6.2% they had previously accounted for. The “high” category (that is expensive cigarettes: Papastratos Special, Lucky Strike, Gauloises and BF) lost only a little bit of its market share, that is 0.3% of the 1.6% they registered in April.

Also a hardly noticeable decrease, that is 0.1% out of 14.5% market share was registered by the “upper medium” category, comprised of brands such as Pall Mall, Winston, L&M, Assos International and Hollywood. “Lower medium” cigarettes lost 4.3% of their 37.9% market share.

Lower sales were also registered for the very cheap cigarette segment (filterless Carpati and Jet Set), which lost 1.5% of their market share, dropping to 16.2%, according to the data provided by MEMRB. The increase in the “low” category consumption made the large international companies engage in a competition for this segment.

Although selling such cigarettes means making zero profit, it is the position on the market that counts, though.

The companies well positioned on the “low” segment, even before the accentuation of this trend, were Societatea Nationala Tutunul Romanesc (Romanian Tobacco National Company – SNTR) with Coloana and Snagov brands, Papastratos with President and Philip Morris with three products: Derby, Callatis and Red&White. JT International launched the More brand two months ago, while British American Tobacco is not operating on this segment yet.