Analysis - Scandinavian Tobacco

SIA Scandinavian Tobacco (Scandinavian Tobacco Ltd.) is the major manufacturer of tobacco products in Latvia and belongs to the Scandinavian Tobacco, which not only produces, but also distributes, markets and sells its tobacco products and is the official distributor of British-American Tobacco brands1, such as Kent, Dunhill and Pall Mall – available for sale in Latvia2. As stated on the official website of the company, it employs around 360 people and makes a major contribution to the Latvian economy3. While the business is steady due to relatively inflexible demand for tobacco products, the company is constantly affected by its changing environment. These changes mostly involve economic, legal and political areas and their main reasons are government policy against smoking and economic development of the country.

Even in a market economy, tobacco distribution is still controlled severely by the government. In the case of Latvia, politicians have a negative impact on the industry and cause changes in production. As population health and wellbeing areas are among those that show the results of politicians’ decisions best, many decisions regarding treatment of citizens’ addictions are made and announced, especially in the last year – before parliament elections. For example, changes to the law On Restrictions regarding Sale, Advertising and Use of Tobacco Products4 are made approximately two times a year, excise tax changes are announced as demonstration of political action, changes in the Cabinet decree on marking alcoholic drinks and tobacco products for excise tax5 are changed on a regular basis. While the government imposes excise tax to cover extra medical service expenses that grow due to the growing number of diseases caused by use of tobacco, Delfi reports that the country also budgets half a million Latvian Lats a year (equal to about 480 000 British Pounds) for smoking control and restriction activities planning to decrease the number of smokers by 20 per cent in 5 years6. The government makes regular announcements about new measures taken to fight smoking that include comparisons with other countries. Latvia is attractive to tobacco producers due to several reasons, one of them is a high percentage of smokers among the population.…