Russia: Cigarette Ban Likely to Harm Small Business

Source from:  Expert magazine 10/17/2012

A law slated to go before the Russian State Duma this fall will be the most stringent anti-tobacco bill ever adopted in the country. If it is approved, starting in 2013, smoking will be banned in all public areas and it will be forbidden to sell cigarettes in kiosks, which line the streets, particularly outside metro stations.

Kiosk owners, who make up to 70 percent of their revenue from sales of cigarettes and beer, will be hardest hit. Officials and industry analysts warn that the lack of sales could result in the unemployment of 300,000-500,000 people. Sergei Velmyaikin, deputy healthcare minister, said that kiosk owners and workers should take the next few months to prepare for the changes, as the bill has already been approved by the Ministry of Economic Development, the Ministry of Finance and the Ministry of Culture. "There are still some rough edges with the Ministry of Industry and Trade, but we expect them to be settled in the nearest future," Velmyaikin said. Even trade industry representatives support the bill. Vadim Zhelnin, the director of the Tabakprom association of tobacco manufacturers said that such a ban was needed. "The need for such a ban is ripe due to the fact that stalls – more often than big retail stores – sell cigarettes to the underage," Zhelnin said. He added that his organization did not believe the ban will result in an overall decline in sales. "At first there may be a short-term effect, till manufacturers switch over to work with big retail chains,"Zhelnin said. "Inveterate smokers who ensure the sales will still ensure the same sales volumes. The main threat for the industry is in the fact that people will have to waste more time on the purchase of cigarettes – lines in big stores, way to the store and back, etc. – in these conditions the illegal trade will begin to prosper." Zhelnin added that the ban on the sale of cigarettes in kiosks may even cause a reverse effect: "When a man has some stock, he smokes more," he said. Irina Voinova, the head of the Nizhny Novgorod regional subdivision of small business association Opora Russia said that the transition period was too short for small entrepreneurs. In her opinion, it should have taken five years to give entrepreneurs time to deal with the situation. Other small business experts have recommended that kiosk owners immediately consider staking out a specialization, such as milk products or vegetables in order to survive. Enditem