Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Marlboro Man Rides in Izhorsk

IZHORSK, Western Russia -- Seven years after setting up shop in Russia, cigarette maker Philip Morris has begun domestic production of its leading brand, Marlboro, at its Izhorsk factory.

By giving Russia its first locally made "premium brand" from an international tobacco corporation, Philip Morris hopes the launch will improve the brand's weak local sales performance.

In the United States and Germany, the Marlboro brand accounts for 70 percent to 80 percent of the corporation's cigarette sales. However, in Russia, Marlboro - despite ubiquitous billboards and a high brand recognition - brings in only 10 percent of Philip Morris sales.

Marlboro's Russia production began officially Tuesday in Izhorsk, a town about 30 kilometers west of St. Petersburg. The final bill for the Izhorsk project is expected to cost Philip Morris $330 million. The company has already spent $200 million of that.

"With the launch of Marlboro's local production, we hope that, over time, the brand's market share will become as large as in other countries. But the first stage of its success will depend on whether Russians are ready to pay 20 rubles a pack," said Guy Gouffers, general director of Philip Morris-Izhora.

The abundance of counterfeits has deterred many Russians from buying Marlboro. To fight the problem, each pack produced in Izhorsk will carry a removable nine-millimeter ribbon bearing a holographic image of a cowboy, the brand's symbol.

Philip Morris plans to begin selling its domestically produced Marlboros in Russia's stores March 1, after inventories of the imported version sell out. The Philip Morris-Leo Burnett/Moradpour ad agency is preparing an advertising campaign to promote the launch.

As part of that campaign, magazine ads will appear in 60 Russian cities, and focus on the Marlboro "Adventure Team" contest. More than 3 million Marlboro customers will receive special invitations to participate in the contest, which will award more than 14,000 prizes, including a Jeep Wrangler.

The company hopes to sell at least 4 billion of its Marlboro cigarettes by the end of the year.

Last year, Philip Morris sold more than 40 billion cigarettes in Russia.

"That's approximately 16 percent of the entire Russian market," said Vasily Terevtsov, president of Tabakprom, a Russian tobacco industry association of more than 20 domestic and international tobacco companies.

Gouffers reported that the new cigarette plant will be Europe's third largest. The company's two largest factories - in the Dutch city of Bergen Op Zoom and in Berlin - produce 100 billion and 60 billion cigarettes a year, respectively.

In its first year, Russian Marlboro will be produced exclusively from imported materials.

Mark Duerst, Philip Morris' general director in Russia, said Russian components will not be introduced into the production process until 2001, and that these will most likely be the cigarette's cardboard packaging and paper.

Philip Morris is considering the Nizhny Novgorod company Anchor to supply the packaging.

"If we're satisfied with the quality of the materials made in Nizhny, we'll buy them," he said.

Attending Marlboro's opening ceremony, Leningrad region Governor Valery Serdukov called Philip Morris the oblast's largest foreign investor. Serdukov said the company has put more than $500 million into the oblast.