ZAGREB, 8 April (2022) - BAT Group is continuing its investment cycle in the Kanfanar factory with an additional HRK 400 million (€53 million) to be invested in new categories of tobacco products, which confirms its status of a leading private foreign investor in Croatia, company officials said on Friday.

BAT Adria director-general Zvonko Kolobara said the new investment built on last year's HRK 200 million (€27 million) investment in new production lines for heated tobacco products.

Kolobara said the new investment would require new hiring but he could not specify how many new workers would be employed.

Speaking of the black market, he said it was still rather big but that it had been on the decline in the past two years owing to the efforts by the customs service and border police.

Kolobara said that BAT executives had met with Prime Minister Andrej Plenković on Thursday to inform him and the government of the company's investment plans.

Asked about the issue of increasing excise taxes, of which the company had warned, Kolobara said that excise taxes were within the remit of the government but that they would prefer if there existed an excise tax calendar to enable better business predictability and sustainability.

Speaking of inflation, he said that it would definitely have a negative impact on the company's results.

BAT South Europe Director Roberta Palazzetti said that the total investment of HRK 600 million in new production lines had additionally strengthened Croatia's position on BAT's global production map, with the Kanfanar factory being one of the few in the world to produce, apart from cigarettes, heated tobacco products, which have the potential of significant risk reduction for adult smokers.

BAT acquired the cigarette factory Kanfanar, Istria, in 2015 when it took over local tobacco producer Tvornica Duhana Rovinj (TDR).

In the coming years BAT plans to increase the production of heated tobacco products in Croatia in light of growing demand.

BAT said that since the 2015 acquisition it had invested nearly HRK 1.1 billion (€135 million) and continued to increase production, employment and exports.

BAT pays HRK 3.5 billion in taxes and contributions annually and employs 1,500 workers in Croatia. Every year the company contributes more than HRK 1.4 billion in added value to GDP, and the biggest increase in contributions to GDP has been generated by the Kanfanar factory, which has continually increased production and exports, BAT said.

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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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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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