Reporter: How would you describe the domestic tobacco market?
Gilda Lazăr: The local market is extremely competitive. It can be characterized as a "microcosm of tobacco". Winning in Romania is like playing on major international stage. Thus, any victory becomes very important. All the major cigarette brands are present in Romania, and they are fighting over a segment of consumers who are increasingly demanding, a segment of the global market.
Reporter: What obstacles are you facing in your activity?
Gilda Lazăr: Ever since the time of the monopolies, the tobacco industry has been a guaranteed source of money for the state. As a result, those working in this sector are a sort of tax collectors, whose first responsibility is to collect the taxes from consumers and to pay them to the state budget. Excises and VAT make up around 80% of the price of a pack of cigarettes. The remaining 20% cover the raw materials, packaging, the cost of production, shipping, distribution margin, the wages of employees and the profit, if there is any.
In 2009, for instance, there were two unplanned raises of the excise, in April and September, as opposed to just one in July, like it had been initially set. On top of that, we had the raise of the excise of January 2010. Thus, in just nine months, from 50 Euros, the total excise went to 74 Euros. The schedule of the excise raise was set together with the European Union, but in Romania, the deadline for raising excises was advanced. Due to the raise of excises, we were forced to raise our prices. Three tax raises and the adjustment of the Euro/leu exchange rate led to price increases of more than just 50% (the largest of all the products) in just a year, far above the purchasing power, which resulted in an accelerated drop of the volume of legal sales.
The main result of the increase in prices was contraband. Co
