How JTI Romania controls spending?

Even if the tobacco market in Romania fell under the recession-proof industries category, manufacturers have taken steps to reduce spending. In view of the financial crisis, JTI Romania, the country’s third largest tobacco company has put in place measures to improve efficiency and contain costs.
“The industry performed well throughout 2008. But this year will be more difficult, as we expect our business to continue returning profit this year, however modest that may be. Turnover is also expected to increase”, said Gilda Lazar (photo), director Corporate Affairs, JTI Romania.

As for the cigarette maker’s cost-containment measures, Gilda Lazar said JTI hadn’t suspended its investments aimed at improving its manufacturing capacity, and sought other ways to reduce spending. “If an employee was receiving 2 cigarette cartons a month, now he receives only one. If the top management employees were traveling on business class, now they travel on economic class”, said Lazar.

On the other hand, the company has raised salaries and invested large amounts of money in staff training. Furthermore, JTI Romania did not operate any layoff nor it plans to in the near future. The company’s headcount currently stands at 1,000.

Another measure introduced by JTI was the elimination of non-productive brands, such as Saint George and Smart. “We are monitoring the performance of the market, and we may consider further elimination of products accordingly”, said Gilda Lazar.

JTI Manufacturing aims at investing €30 mln in increasing the manufacturing capacity and in the use of computer-based software tools in the production process.

JTI Manufacturing was the first company in Romania to receive the “5S Best in Class” certification after an audit conducted by Kaizen institute.

If 20% of the local production output is exported, the company aims at increasing share to 25% by end-2011. JTI Romania exports to 11 markets and plans to extend coverage to 35 by 2011. In Romania, JTI has a market share of 25%.

Romanian tobacco industry stood at 15 billion cigarettes in the first half, and was evaluated at €1.12bln, according to AC Nielsen data.

According to JTI Romania’s estimates, tobacco smuggling accounts for over 20% of the market, which could result in a €500 mln loss for state budget in 2009.

Another worrisome aspect for the evolution of the local tobacco market was the sharp increase of excises, which may have a larger impact over the industry than the economic crisis itself. “For the time being, excises and VAT make up for 80% of the total price of a cigarette pack”.

JTI Romania paid a total €400 million in taxes in 2008. For July 2008, the cigarette maker paid excises worth a total €90 mln, twice the size of last year’s profit.

JTI Romania is fully-owned subsidiary of Geneva-based JTI. The tobacco company has 23,000 employees and runs operations in over 120 countries. In Romania, JTI produces Prestige brands Sobraine, Premium brands Camel, Glamour, Salem and Benson & Hedge, Mid brands Winston, and Base and Value brands Winchester, More, Monte Carlo and Ronson.

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