SOTIRIS KOSTOUROS, General manager of BAT for Serbia and Montenegro: Consumers are in the Centre of our Strategy

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British American Tobacco is celebrating its 15 years anniversary and the company is the pioneer of foreign investment in Serbia. Our company has so far invested more than 270 million euros, out of which more than 120
million in the modernisation of the factory in Vranje. Our global goal as a company is to lead the transformation
of the tobacco industry, and it is estimated that by 2050. We are absolutely focused on the further development of our activities in Serbia, and the investment and expanding of our business, said Sotiris Kostouros, general manager
of BAT for Serbia and Montenegro.

How does it look to be a foreign investor for 15 years in Serbia and to participate in the writing of a new page in the history of the tobacco industry?

— BAT is present in Serbia since 1996 and with the privatisation of the Vranje tobacco industry in 2003 we have become the pioneers of foreign investment in Serbia, and till this day have remained the biggest British investor. We are thankful to the Serbian state for enabling us to conduct and develop our business in a stable environment. In return we are continuously investing, increasing productivity and hiring new employees. We are very proud of our business in Serbia and these days we are celebrating our 15 years anniversary in the country.

How much has BAT invested in Serbia since 2003. and how much has it’s production capacity and business increased in general?

— Our company has so far invested more than 270 million euros, out of which more than 120 million in the modernisation of the factory in Vranje, whose production also covers the markets of Albania, Bosnia and Herzegovina, Montenegro and Macedonia. We are proud to be a part of the lives of more than 500 families, and that we are confident that we will have the opportunity to further increase this number. During the last decade and a half, BAT has contributed to the Serbian budget with more than two billion euros through taxes and excise, while
during the last year this contribution was more than 280 million euros. During all these years we have continuously developed our business, enhanced our products and have placed the consumer in the centre of our strategy. All those
efforts are paying off and we are partuculary proud that Pall Mall is the number one selling brand today in Serbia recognised for its quality by the thousands of our adult consumer smokers. Moreover we have also embarked on a tobacco industry transformation journey, that we intend to lead, by bringing glo, our latest innovation in the market, a device that offers an experience similar to smoking but with great harm reduction potential.

BAT’s factory in Vranje has became the production center for CEFTA agreement counties. What would it mean for you if this would become a unified economic area with unified rules? What would you first remove regarding obstacles?

— We are absolutely focused on the further development of our activities in Serbia, and the investment and
expanding of our business. The best proof for this are our investments in Vranje during the recent years, and the result of this is the increase of export from the modest three percent to the current 30 percent annnual rate, with an uninterrupted growth tendency. As a company that does business in the whole world, on more than 200 markets,
we know well how difficult it is to conduct business in an environment of uncertainty and frequent changes of regulations. Because of this, CEFTA is a good example of countries from this region that are preparing to do business by EU standards. The biggest problem and obstacle is the complex bureoucracy and procedures at the borders, which causes serious delays in the delivery of goods, and increases the cost of conducting business.

How much has the market in Serbia changed in the meantime? Are you satisfied with the reduction of grey economy? How much are regular taxpayers today, such as BAT protected from unloyal competition?

— More than a billion euros just from the tobacco industry is contributed to the budget annually. Estimates are that around 20 percent of the whole market is in the grey zone, so it isn’t hard to calculate that the state loses around 200 million euros just because of black market tobacco trading, not to mention further losses due to rising unemployment and other contributions. The state is poorer for the amount of money that goes into the grey zone,
it strengthens crime, develops unloyal competition and strengthens the black market. Unfortunately, the grey economy cannot be eradicated by ad hoc measures, as well as the black market. It is necessary to create a strategy that includes coordinated efforts of state institutions with the responsible, legal economy, that has resources, knowledge and experience from other markets. Consumer education is also very important, because the increase of
the conscience of the necessity to eradicate grey economy strengthens „economic morality“ and has a positive impact.

The fifteenth anniversary of BAT’s business in Serbia has been marked earlier by the introduction of a tobacco heating device – Glo. How much is it possible to be innovative in the Tobacco industry and in which direction are you’re innovations directed?

— Apart from Japan, Canada, Italy and South Korea, Serbia is amongst the first countries in the world where glo, an innovative device that heats tobacco on the temperature of 240 degrees Celsius, without combustion, has officially been introduced. This is another confirmation of the great results that have thus far been accomplished on the market, and also of the opennes of consumers towards innovation. This is a product that offers an experience,
similar to smoking, but without combustion, smoke and ash. Also, there is no unpleasant odour on the skin, hair and clothes. Glo is the best example of innovation in our industry. The needs of our consumers and the technological advance – the miniaturisation, lithium-ion battery, electronics – have enabled us to create this revolutionary device. Our global goal as a company is to lead the transformation of the tobacco industry, and it is estimated that by 2050. half of all consumers will use new generation products with risk reduction potential compared to
classic cigarettes.

Also, you have recently celebrated another jubilee – five years of being work incident free. How much is work safety and employee well-being important to your company?

— Appart from marking the 15 year jubilee of conducting successful business in Serbia, we are proud of one more small jubilee – five years without workplace accidents which shows that our employees and their safety is a leading priority for the company. The factory in Vranje is the only one among our factories in Europe with such great results. Our next goal is 10 years without workplace accidents and injuries.

CONTRIBUTIONS

In the past 15 years, how much has BAT contributed to the community, both nationally and locally?

— During all these years we have invested several million euros in socially responsible projects in Serbia. Because of this, we rightfully ranked among the carriers of corporte social responsibility in Serbia. Last year, as an example, we have invested considerable resources in the complete rennovation of the city swimming pool in Vranje, while these days there will be a very valuable donation of computer equipment to the City of Vranje, which will distribute it among the institutions that need it the most.

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