british american tobacco p.l.c. annual report 2008 - Europe (2 of 2)

In Russia, a strong performance by the premium brands, Kent, Dunhill and Vogue, continued to improve the product mix and, with higher prices, profit increased significantly. Volumes were lower as a result of the decline in low price and local brands following price increases that were not immediately followed by competitors.

Profit in Romania increased significantly, benefiting from higher volumes, price increases and the improved product mix, partially offset by higher marketing investment. The strong growth of volumes, driven by the continued success of the Global Drive Brands led to increased market share.

The tobacco market in the Czech Republic was heavily impacted during 2008 by the effect of the trade buying at the end of 2007 in anticipation of an excise increase, resulting in lower profit and volumes.

The accelerated decline of industry shipments in Poland was the result of significant excise-driven price increases during the last 2 years. Competitive market conditions continued and with the increase in illicit trade, profitability was adversely impacted. Volumes increased as a result of the inclusion of the ST businesses.

In Hungary, volumes were slightly down although Dunhill and Pall Mall performed well despite price competition. This, coupled with higher marketing investment, led to lower profit.

In Ukraine, volume and market share decreased slightly due to the decline of low-priced local brands, largely offset by the excellent performance of Kent. Results improved significantly with the improved mix, price increases and cost control, despite the volume decline and higher marketing spend.

The impressive performance of Kent in Kazakhstan and Pall Mall in Uzbekistan led to increased volumes and, with higher prices and better cost control, resulted in higher profit.