Last week’s announcement of the deal for the sale of 75 percent of Greece’s biggest cigarette maker, Papastratos, for 371 million euros to Philip Morris, feels like a watershed in a sector that dominated the country’s industrial scene for many decades. Even today, in the face of declining prospects for the industry worldwide, Greek tobacco manufacturing remains one of the biggest investors in the country. According to a study conducted by business consultants’ firm KPMG on behalf of the Association of Hellenic Tobacco Manufacturers (SEK), tobacco factories employ more than 6,250 permanent and about 9,000 seasonal workers; this, in relation to total employment in Greek industry, is five times the average in the European Union and three times that of Belgium, which is in second place. Greece has the highest consumption of cigarettes per head in the European Union. But Greek cigarette manufacturers’ biggest problem is that the price-competitive advantage of domestic brands vis-a-vis foreign brands is increasingly proving inadequate to stem declining market shares. The sale of Papastratos leaves just four Greek-controlled firms; Karelia, Keranis, SEKAP and Georgiadis. They are now called upon to adopt crucial decisions about their future, as it is evident they cannot restrict themselves to their traditional activity when the other global tobacco giants are diversifying in order to maintain turnover and profitability. Fortunately for them, Greek firms have not to date received any of the mammoth fines as a result of consumers’ suits claiming compensation for damage to their health. In 2002, foreign brands continued to have the lion’s share of the Greek market and efforts to launch new Greek brands have not yielded the desired results. Papastratos’s partnership with Philip Morris began in 1975, when it undertook to produce and distribute Marlboro brands in Greece. The contract was renewed in 1998 for 12 years, and included the distribution of all Philip Morris’s imported brands. Papastratos is among a small number of listed Greek firms whose share continues to be watched by domestic and foreign institutional investors at a difficult time for the stock market. In recent years, the company has displayed satisfactory growth rates, rising profitability, excellent cash flows, good dividends and a low price/earnings (P/E) ratio. Karelia’s share, on the other hand, has almost zero marketability as it is concentrated among the basic family shareholders, with minimal dispersal. Keranis’s both common and preferred stock – listed in the holdings category – has been placed under supervision in view of serious problems. The company has ceded its distribution network in northern Greece to Xanthi-based SEKAP, a cooperative industry. According to initial 2002 first-quarter data, Marlboro brands top Greek market shares with 23.6 percent, followed by the Assos «family» (Papastratos) with 11.6 percent, Peter Stuyvesant (BAT) with 10.3 percent, Camel (JTI) with 9.1 percent, Karelia with 6.2 percent and Silk Cut (Gallaher) with 3.9 percent. Karelia Despite losing the rights to the Camel brand in Greece last year, Kalamata-based Karelia managed to post a 34 percent growth in sales to 86 million euros, mainly through duty-free sales. Andreas Karelias, managing director, told a press conference recently that exports grew 62.7 percent in 2002 to account for 64 percent of total sales in 57 countries. The company made a major export push, entering markets such as Serbia, Bosnia, Kuwait, Kazakhstan, Uzbekistan, Hungary and Korea and launched its Karelia Slims in the UK with encouraging results. Furthermore, it boosted duty-free sales to embassies and won a tender to supply the Greek army’s force in Kosovo. In Greece, sales volume grew 1.86 percent, but market share declined slightly. The firm says it plans to establish a subsidiary in London and launch an extensive investment program this year.