British American Tobacco Closure Threatens Croatian Producers

Lauren Simmonds

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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