ZAGREB, 21 Jan 2022 - The Croatian tobacco processing company Hrvatski Duhani (HD), a member of the British American Tobacco Group, has begun negotiations on the new production season, the company said on Friday.

The new season is the continuation of the successful purchase of tobacco in 2021 when a total of HRK 81.6 million was paid out to tobacco producers, which is as much as HRK 6 million more than in 2020, HD said.

This is the largest volume and value of production in the last four harvests despite major challenges last year when inclement weather, including draught, hail, and frost, affected the quality and yield of tobacco. Given that HD had ensured the most favorable insurance terms, producers were paid more than HRK 16 million, the company said.

The company said that last year it had invested over HRK 18 million in machine harvesting and that about 50 percent of tobacco had been harvested mechanically. New technology helped reduce costs and increase yields while at the same time helping producers to overcome the problem of labor shortage.

HD said its goal was to continue to increase the quality and yield of tobacco and the profitability of producers in 2022.

(€1 = HRK 7.5)

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ZAGREB, 12 May, 2021 - During a visit on Wednesday by Prime Minister Andrej Plenković to the British American Tobacco (BAT) factory in Kanfanar, BAT revealed an investment of HRK 200 million in the production of a new category of heated tobacco products (HTP), underlining the importance of the new logistics centre in Rijeka.

"By expanding production in Kanfanar and opening a hub in Rijeka, we are continuing with BAT's significant investments in Croatia. With the introduction of production lines for new product categories, Croatia is additionally strengthening its position on the global map of production sites in the tobacco industry. We are continuing to expand our selection for consumers in Croatia," BAT Adria director Zvonko Kolobara said in a statement to the press.

He added that the increased capacity in Kanfanar would help BAT meet growing demands for HTP in Europe and northern Africa.

Kolobara thanked the government and Prime Minister Plenković for their efforts in creating an investment climate that stimulates further investments.

Plenković expressed satisfaction that BAT is continuing with its investments in Kanfanar and ensuring jobs. BAT's announcement of the investment comes after its announcement that it could leave Croatia due to unfavourable business conditions.

Plenković underlined that the new investment was an example of a good business climate and that BAT did not exert any pressure on the government to meet its demands to continue doing business in Croatia.

"The new, HRK 200 million investment in new products means a new impetus, enthusiasm and a new generator of business and with that, a contribution to Croatia's economy. The company employs 1,600 people and another 800 cooperate closely with BAT and make a living that way. The investment plans have been coordinated with their headquarters in London and all the employees at the factory will be satisfied while the entire economy of Istria County will benefit from BAT's operations," said Plenković.

He noted that the government was open to large global investors.

"It is excellent that BAT has established a hub in Rijeka for products from China that are distributed throughout Europe. That is additional confirmation of Rijeka's attractiveness as an exceptionally important transport and commercial port in the country. As far as BAT's staying is concerned, the government took account of the Croatian economy and creating conditions for all foreign companies doing business in Croatia and investors to have the same treatment. It is obvious that BAT has decided that the Kanfanar factory is important and that it wants to invest and that Croatia is important to it. There was never any pressure," said Plenković.

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ZAGREB, 17 March, 2021 - Representatives of the PPDIV agriculture union on Wednesday met with Rovinj Mayor Marko Paliaga, saying afterwards that the story of the future of the Rovinj Tobacco Factory (TDR) "ended well and British American Tobacco (BAT) stays in Croatia."

Paliaga thanked the unionists for fighting for TDR workers, the City of Rovinj said in a press release.

The Kanfanar-based TDR is owned by British American Tobacco.

The unionists thanked the mayor for the cooperation and support in negotiations with BAT on keeping the plant in Kanfanar, following announcements last year that it might be shut down.

The workers need not fear for their future any longer because TDR is staying in Kanfanar, the press release said.

PPDIV president Denis Paradiš said TDR's staying in Croatia was important for Rovinj, Istria County as well as for the Slavonia region and tobacco growers. "It's important for all of Croatia."

BAT took over TDR from Adris Group in September 2015 for €505 million. Under the contract, BAT was to keep production in Kanfanar for at least five years.

Last year media reported that BAT was considering to leave Croatia due to deteriorated business conditions. In December, Prime Minister Andrej Plenković said the government's negotiations with BAT were going well and that he would do everything for BAT to keep production in Istria.

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ZAGREB, Sept 29, 2020 - British American Tobacco (BAT) has been the biggest foreign investor in Croatia in the past five years, shows a study by Oxford Economics on  BAT's influence on Croatia's economy.

After investing almost HRK 4.2 billion in taking over the TDR tobacco company, over the past five years BAT has invested an additional HRK 490 million and continued to increase production, employment and exports.

A total of HRK 4.7 billion in investments means that in the period between 2015 and 2019, BAT generated about 20% of the total foreign investments in Croatia, the analysis notes.

Oxford Economic notes that BAT has supported a series of domestic sectors, directly through its factories in Kanfanar and Virovitica and through its iNovine retail chain and also has indirect impact through its distribution network, buying up tobacco from farmers, transport, and in the financial and utility sectors as well as other service sectors. 

The analysis notes that BAT's total contribution to Croatia's GDP at the end of 2019 amounted to HRK 455 million which is a 52% greater increase than TDR had in 2015.

Of that, direct contributions in 2019 amounted to HRK 212 million and more than three-quarters of that amount was generated by the factory in Kanfanar.

A further HRK 158 million in contributions to GDP was generated through BAT's supply chain, HRK 96 million of which relates to buying up tobacco from local farmers in Virovitica-Podravina and Pozega-Slavonia counties.

The remaining HRK 85 million is the result of consumption by BAT workers and suppliers.

Oxford Economics notes that in the past five years BAT increased the number of its employees by almost 800 people or 48% and in 2019 it had more than 2,400 jobs.

In 2019 18.8 billion equivalent cigarettes were produced in the Kanfanar factory, which is 125% more than in 2015. Almost 87% of its total production valued at HRK 1.2 billion was exported to other EU countries last year which is 214% more than in 2015, the study notes.

BAT also generates significant budget revenue. Excise taxes on locally produced cigarettes amounted to HRK 2.2 billion paid into the state budget in 2019.

That is 1.3% of all budget revenue and is almost HRK 500 million more than in 2015.

In addition to excise taxes BAT paid an additional HRK 171 million in other taxes, the analysis says.

Finance Minister Maric: Dialogue with TDR continuing 

Finance Minister Zdravko Maric said last week that talks with TDR were continuing  related to announcements by BAT that it was considering its withdrawal from Croatia.

After the government adopted its budget guidelines for the next three years reporters asked Maric what the negative risks to the budget could be apart from the Covid-19 epidemic and macroeconomic forecasts in the context of TDR's future.

"With all due respect, every job is exceptionally important. However, TDR and the factory in Kanfanar and everything that is related to it and its suppliers is not that significant as far as effects to macroeconomic forecasts are concerned, for it to either be placed in negative or positive risks," Maric said then.

(€1 = HRK 7.545637

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As Darko Bicak/Poslovni Dnevnik writes on the 13th of September, 2020, the announcement of the closure of the British American Tobacco (BAT) factory in Kanfanar and the departure of the aforementioned company from Croatia could harm as many as 400 Croatian producers.

BAT's decision to shut up shop has been surrounded by many rumours. The closure comes due to, as has been speculated, unfavourable business conditions, primarily the excise policy, and the absence of government moves promised by Prime Minister Andrej Plenkovic after a meeting with the company's management back in late June.

The consequences of the company's departure and the cessation of tobacco production in Istria's Kanfanar would be felt primarily by their workers, about 500 of them, but also by the local and regional self-government units there due to the absence of taxes and other benefits. However, nervousness is also growing among Croatian producers of tobacco, of which there are about 400, and 350 of them are BAT subcontractors organised through the subsidiary Hrvatski duhani. Croatian tobacco makes up more than 80 percent of the total tobacco production in Croatia, with a total annual value of around 100 million kuna.

Tobacco is an agricultural crop with extremely high added value, and the continuity of production could be seriously disrupted by the closure of the tobacco factory and the withdrawal of the global tobacco giant from Croatia.

Slaven Krapac, a Croatian producer from Turnasica near Pitomaca, who cultivates nineteen hectares of tobacco along with his family, pointed out that he is currently satisfied with his position on the market and his cooperation with BAT, ie Croatian Tobacco.

"I've been dealing with tobacco for 25 years and all sorts has happened on the market. The worst period was 2011-2015. when fuel and gas prices were at a record high, and tobacco purchase prices were low - going for only 8.2 kuna. Last year, our purchase price was 14 kuna, which is the highest so far. In addition, since I've been associated with Croatian tobacco for the last ten years, I'm satisfied with the relationship we have - the purchase price becomes known in February, they buy up all of the production, they co-finance the purchase of the machines, which is especially important today when there is no labour, and they generally give us a business security framework,'' Krapac explained.

“Croatian tobacco financed my production and mechanisation. They've invested a lot in us Croatian producers and it would certainly not be good for them to leave,'' concluded Krapac. Every year, Croatian tobacco invests two thirds of its production value, around 66 million kuna, into supporting Croatian producers in procuring the necessary raw materials for tobacco production, financing energy costs, human labour, insurance policies and other necessary costs.

This was also confirmed by Mihael Colak from Balkic near Slatina, who grows tobacco on his family farm which stretches across 26 hectares. "I need 500 to 700 thousand kuna to prepare for the season, for which I'm now credited with by Croatian tobacco, who are guaranteed to buy the entire production. A large part of the producers wouldn't be able to finance the production without that help,'' said Colak.

He added that he doesn't care when he hears speculations that the factory in Kanfanar is closing and that BAT is leaving Croatia.

In addition, the purchase price of tobacco at Croatian Tobacco is continuously growing. Last year, they paid a record average purchase price for Virginia-type tobacco of almost 14 kuna per kilogram, paying Croatian producers a total of 3.5 million kuna more than the year before. The average price for Virginia tobacco has risen by nine percent in the last three years alone, and by more than 20 percent in the last five, which, as producers claim, is a rarity in domestic agricultural production.

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As Poslovni Dnevnik/Darko Bicak writes on the 22nd of September, 2019, Helio Moura is the tobacco development manager for British American Tobacco Corporation (BAT) and the owner of Croatia's TDR in Kanfanar.

Tobacco is an important crop for Croatian agriculture with stable production conditions and constant growth in terms of value, and tobacco worth a massive 124 million kuna is produced annually in Croatian fields.

Statistics show that a mere 400 tobacco farmers account for as much as 62 percent of the total value of Croatian potato production, as well as fruits, with it accounting for as much as 55 percent of the value of grapes and 48 percent of the value of Croatian olive oil production.

Most domestic tobacco production is concentrated through the system of the company Hrvatske duhani, which is within the system of the British American Tobacco Corporation (BAT), which took over the domestic TDR a year ago. Poslovni Dnevnik sat down and spoke with Helio Moura, BAT's tobacco development manager, about the trends in tobacco production and what Croatian farmers can expect in the coming period.

How important is Croatian tobacco production in the context of its total production in Europe, of course for BAT?

Tobacco production exists in many European countries, but as far as BAT is concerned, Croatia is the only country in Europe where we're developing our tobacco production. Production in Croatia is very important to us in this context, because from here we deal with our supply from the factory in Kanfanar, as well as our other factories in Europe.

How much does your factory in Kanfanar satisfy the tobacco raw material needs from domestic sources, ie from Croatian tobacco?

Tobacco from Croatia is used not only in the factory in Kanfanar but in many of our other factories in Europe. It is important to know that tobacco products consist of special blends of tobacco, a blend of various types of tobacco that give the characteristic aroma of the product.

This means that different tobacco from many countries is mixed to produce the final product. As regards the use of tobacco produced in Croatia at the Kanfanar plant, it is estimated that between one third and 40 percent of local tobacco is processed in Kanfanar and the rest is exported.

To how many European countries does BAT export its raw material from Croatia?

Tobacco from Croatia is exported to six of our factories in Europe.

If you use about 40 percent of your home-made tobacco in your Croatian factory, how many countries, or how many other types of tobacco do you supply in Kanfanar?

We want to give all our consumers the same quality, the same taste so that all of our final products are blends of tobacco from a number of sources but standard quality. In the blends, as a rule, we use European tobacco, but just as we do with Brazilian and Oriental. There are almost no finished products which are made from only one type of tobacco.

How profitable is tobacco leaf production for farmers?

Tobacco is one of, if not the most profitable, agricultural crops in Croatia as well as in any other country in the world.

I can say with certainty that growing tobacco is at least three or four times, and somewhere around five or six times, is a more profitable agricultural crop than any other. However, it is our rule that we ask the farmers we cooperate with to engage in other crops, with the aim of optimising their overall agricultural production, with tobacco being just a kind of ''cash flow'' to their total agricultural business.

How many farmers do you have under contract in Croatia and what is your cooperation with them?

We have more than 400 subcontractors in Virovitica-Podravina County and the area around Kutjevo. Tobacco cultivation takes place on approximately 3,000 hectares of agricultural land.

Does the popularisation of new smoking technologies, such as e-cigarettes, threaten agricultural tobacco production?

The fact is that the use of such ''new generation'' products globally reduces the use of classic tobacco products. However, these new products are focused on the elimination of tar and most other harmful substances generated by the burning process, but many of them still use nicotine. And nicotine is obtained from the tobacco leaf. So we don't really expect production to fall in that part.

What are your specific plans for tobacco production in the future in Croatia?

We plan further investments in tobacco production in Croatia. Tobacco production is one of the best organised [types of production] in Croatian agriculture, and we support our subcontractors financially, also through the continued support of our agronomists, but also by transferring a lot of know-how and practices that we have in our global centres of excellence.

Croatian Tobacco financing subcontractors finance more than two-thirds of the total value of production each year in advance, amounting to more than 60 million kuna, they grant favourable long-term loans for investments in various equipment and irrigation systems, and last year, they opened new long-term credit lines for the procurement of mechanical pickers.

29 tobacco harvesting machines have already been invested in, and the plan is to continue at the same time pace in the forthcoming period. Machine harvesting will certainly help our subcontractors to address the problem of labour shortages, which have been the biggest impediments to increasing tobacco production.

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Companies competing for this prestigious global recognition go through a very rigorous assessment process that includes a comprehensive overview of employers' practices in several categories. British American Tobacco, which operates here in Croatia, has come a cut above the rest yet again.

As Poslovni Dnevnik writes on the 7th of March, 2019, British American Tobacco (BAT), otherwise one of the largest private investors in the Republic of Croatia, was nominated for the second consecutive year as the best global employer (Global Top Employer). The award is given by the Top Employers Institute, an independent organisation that studies the working conditions of the largest global employers.

Companies competing for this prestigious global recognition go through a very rigorous assessment process that includes a comprehensive overview of employers' practices in several categories: from education and employee development through to business culture and salaries. The Global Top Employer's prestigious award was received by only fourteen companies this year.

BAT employs more than 50,000 people in more than fifty countries and provides very high quality working conditions on all markets where it operates. Business culture, social engagement and innovation is also developing right here in Croatia

BAT is rightfully recognised as a quality employer in the Republic of Croatia. Employment with BAT offers career development in a quality international environment that provides opportunities for acquiring new knowledge and progress within not only Croatian organisations, but also on regional and global levels. In addition to employment, BAT has readily signed cooperation agreements with many faculties and universities across Croatia to provide students with the opportunity to gain experience in a dynamic and challenging corporate environment.

"We see the best global employer certification as a confirmation of our efforts across the entire BAT group to provide a quality work environment for our employees. We encourage employees at all levels to develop their careers to fully achieve their ambitions and expectations,'' said Vera Čubranić Bocak, Human Resources Director of the BAT Adria region.

Last year, BAT employed more than 200 people in Croatia, and the acquisition of TDR increased the total number of employees in all parts of the business by seven percent.

Today, in the Croatian part of the BAT Adria cluster, more than 1,700 people are employed, of which 80 new employees have become part of the global product development team which works on procuding potentially less harmful products. Last year, on the Croatian market, a glowing, combustion-free tobacco heating system was introduced, making Croatia one of the first countries in the world in which BAT introduced its innovative product.

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As Darko Bicak/Poslovni Dnevnik writes on the 29th of October, 2018, in neighbouring Bosnia and Herzegovina, more than 40 percent of tobacco products end up being exported outside of the legal trade framework, and the main culprit for such a situation is poverty and disproportionately high yields on cigarettes and tobacco products. Could a potential move of production to Croatia provide a welcome economic boost for the country?

Even though British American Tobacco (BAT) have denied media speculation that they already started with the move of the production of their cigarettes from Bosnia and Herzegovina to their plants in both Croatia and in Serbia, they haven't gone as far as to totally exclude such a possibility in the forthcoming period.

Namely, the media in Bosnia and Herzegovina have announced that BAT's management board has decided that Aurora, Code and Diva cigarettes will be moved away from production in Sarajevo to neighbouring countries.

BAT, on the other hand, told Poslovni Dnevnik that producion at the Sarajevo Tobacco Factory (FDS) hasn't stopped.

"As BAT has bought FDS's brands, it is following the policy of producing and selling according to the smokers' preferences and in accordance with market conditions,'' they stated from the company.

Unfortunately, due to the large disturbances on Bosnia and Herzegovina's market caused by an increase in excise duties and the concerning collapse of the legal market by more than 35 percent in just three years alone, the sale and distribution of FDS former brands are not compromised, but all of BAT's other brands and other competitors on the market have been, and they therefore continue to face numerous unwanted challenges in this regard.

''On the illegal market itself, more than 80 illegally produced brands have appeared. Because of all of this, the future of production, the former brands of FDS, and of all the other legally produced brands on the Bosnian market is questionable,'' BAT explained.

They added that the black tobacco market is a major problem for this whole region, especially Bosnia and Herzegovina, where it exceeds a worrying 40 percent of the total market value. The main reason for this is the high tax burden because Bosnia and Herzegovina has the highest cigarette retail selling taxes in Europe, with the total costs representing 91 percent of the price of the cigarettes themselves.

Because of this, people in Bosnia and Herzegovina pay by far the most for cigarettes compared to the general standard of living in the rest of Europe, naturally leading them into a very tight corner, and then onto the illegal market, meaning that the economic repercussions of Bosnia's black market problems are dire, to say the very least.

BAT has estimated that Bosnia and Herzegovina's budget loses more than 230 million KM (about 115 million euro) per capita each year due the strong presence of the country's illicit tobacco market.

While Serbia, a non-EU country has been mentioned, could the safety of a European Union member state like Croatia be of some comfort to BAT and provide jobs and a possible economic boost to the domestic market if production was to be moved here?

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Click here for the original article by Darko Bicak for Poslovni Dnevnik

ZAGREB, September 6, 2018 - Since entering the Croatian market three years ago with the takeover of the TDR company, British American Tobacco (BAT) will have invested 45 million euro by the end of this year, BAT told a press conference during a presentation of glo, the apparatus for heating tobacco.

ZAGREB, May 17, 2018 - British American Tobacco (BAT) said on Thursday it would employ 100 experts in Croatia who will become part of a global team for technologically innovative new generations of tobacco products.