SERVING THE CONSUMER

Kazakhstan 2015 | INDUSTRY | B2B

Kazakhstan is vibrant market for tobacco sales, and TBY spoke with two senior executives on the specifics of the industry.

André Joubert
ANDRÉ JOUBERT
Area Director for Central Asia and the Caucasus
British American Tobacco
Richard Parratt
RICHARD PARRATT
General Manager Central Asia
Imperial Tobacco

What is the importance of Kazakhstan for your company?

ANDRÉ JOUBERT As an emerging market with the largest economy in the Central Asia and the Caucasus region, Kazakhstan presents a solid opportunity for growth for us. We established the Kazakhstan office in 2003 and since then, we have achieved solid growth that I fully anticipate will continue.

RICHARD PARRATT For the region, Kazakhstan is a sizeable tobacco market, but from a global perspective, it is not the biggest. Imperial Tobacco is represented in about 160 different countries. Kazakhstan is a growing market for us. We recently reached a record market share of 9.3%, and have been growing for the last three years.

What challenges does your business face here in Kazakhstan?

RP The challenges that we face are no different from those in any other country. I have worked in Spain, Russia, Belarus, Macedonia, Kosovo, Albania, the UK, and more. FMCG is all the same—you make a product, sell a product, get it to a consumer point of sale, and the consumer buys it. We are a tobacco company, so there are challenges inherent to our sector to which we strictly adhere. As a company, we find where the opportunity lies within the legal framework, and we make that our focus.

AJ Similar to the EU, Kazakhstan has a ban on tobacco advertising and promotion. It was also one of the first countries in the CIS to introduce on-pack graphic health warnings. We support evidence-based and balanced tobacco regulation that helps governments to achieve their public health aims. We agree that all tobacco product packaging should feature appropriate health warnings, which are bold, easily legible, and ensure clarity of message—however, there is still no credible evidence that graphic health warnings reduce the rates of smoking prevalence. As a legitimate business operating in a highly regulated industry offering a legal product to informed adults, we also believe in the right to communicate in a responsible way with our adult consumers.

What is your strategy for growth, and how do you shape your competitive advantage?

AJ Like many FMCG brands, we understand what our consumers want—our focus is to offer them the right high quality product at the right price. We tailor our products to the specific markets and in Kazakhstan we offer a smaller, slimmer format that we know our Kazakh consumers want. In addition to the product format, getting our distribution strategy right has also been important. Last year, we selected a new distribution partner, a local Kazakh business, and have invested time training their staff and ours—in total over 400 people.

RP Tobacco consumers are very similar no matter where you go in the world. A consumer buys a pack of cigarettes, smokes it, and then goes back to the store and buys another one. But there are differences as well. In Kazakhstan, around 86% of smokers consume reduced-strength products. In Western Europe and other places, a lot of people smoke full-flavor products. Also, the Kazakhstani culture is different; people like to dress well, especially women. There is a bit of a showoff culture and people like to show what they're doing. This tendency relates to every FMCG company because consumption is a statement here. People put their car keys on the table next to their bags, and so on. These things are noticed, and they send a message. I try to build my organization around understanding how adult consumers make their choices. We don't do anything to encourage non-smokers to start smoking or to prevent smokers from quitting. As a business we compete to ensure that adult smokers choose our brands over those of the competition.

What are your goals for 2015?

AJ Our goal at British American Tobacco is to be the world's best at satisfying consumer moments in tobacco and beyond. We aim to achieve this through a number of different means: through further developing our diverse portfolio of brands around the world, through continued innovation of our products, by investing in our people, and by continuing to listen to our customers to provide them with what they want.