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. Last Updated: 07/27/2016

Are Cigarette Companies Padding Their Numbers?

The tobacco industry has displayed a paradoxical tendency over the first half of the year — while production has grown, consumption has remained the same.

The State Statistics Committee this week reported cigarette production grew 15.2 percent in January-June to 173 billion, while data released by the Biznes-Analitika research agency show consumption was just 137 billion cigarettes, roughly the same as last year.

The easy explanation for this discrepancy is Russian cigarette factories are exporting more of their production, as some market players insist. But Biznes-Analitika has a different explanation: The tobacco companies are padding their numbers.

Biznes-Analitika general director Andrei Sterlin claims domestic cigarette manufacturers fudged their production volumes last year and are fudging them again this year. He said that last year, for example, about 310 billion cigarettes were produced rather than the 340 billion that manufacturers reported. The agency made this conclusion after researching the volume of deliveries of raw tobacco to Russia in 2000 — about 305,000 tons. Either a significant portion of cigarettes in Russia are produced using nontobacco substitutes, or the statistics are wrong, according to Biznes-Analitika.

However, Sergei Shelekhov, head of the Grand-Tabak trade association that unites 33 of the main distributors of tobacco products, insists that the numbers can be explained by an increase in exports to countries in the Commonwealth of Independent States. He said Russian tobacco companies have a considerable share of the market in Ukraine, Belarus and Kazakhstan. Liggett Ducat, which makes the brands Prima, LD and City, signed a major export contract to supply Belarus and Ukraine late last year, he added.

Oleg Smirnov, the head of SNS, a major distributor, also disputed Biznes-Analitika's claim. Before the start of the year, the difference in Russian and Ukrainian customs tariffs resulted in a large volume of domestically made cigarettes being exported illegally. But now that the legislation has changed and rates harmonized, Smirnov said, Russian companies have simply increased legal exports to the former Soviet republics.