BAT and PMI are joining forces in Europe, manufacturing each other’s cigarette brands at selected factories in Poland, Croatia, and Portugal.
Philip Morris International (PMI) and British American Tobacco (BAT) are preparing an unprecedented joint production venture in Europe, according to a report by Lebensmittel Zeitung published in late September. The two companies, traditionally fierce competitors, plan to manufacture each other’s cigarette brands at selected factories in Poland, Croatia, and Portugal in a bid to optimize capacity as cigarette consumption in Europe continues to decline.
Earlier in September, PMI’s Swiss-based Philip Morris Products SA and BAT Exports Limited in London notified Germany’s Federal Cartel Office (Bundeskartellamt) of their intention to form the partnership. The move is highly unusual in an industry where leading manufacturers have long maintained strictly separate production, branding, and distribution networks.
The agreement would allow PMI to produce in BAT’s factories in Poland and Croatia, while BAT would in turn manufacture in PMI’s facilities in Poland and Portugal. Both companies said the plan is designed to improve efficiency across their European operations, adding that no job cuts or factory closures are currently foreseen.
PMI described the move as part of its ongoing strategy to adjust to changing market conditions. “As we make great strides towards our goal of a smoke-free future, we are continually exploring ways to optimize our manufacturing landscape,” the company said in a statement.
The cooperation comes at a time of sustained contraction in the European cigarette market. According to EU and industry data, cigarette sales volumes have fallen steadily for more than a decade, dropping by roughly a quarter between 2012 and 2022. The decline has been driven by tightening tobacco regulations, higher excise taxes, and a growing shift among adult consumers toward reduced-risk products such as heated tobacco, vapor devices, and oral nicotine pouches.
This long-term downturn has prompted manufacturers to reassess their production structures. Both BAT and PMI have been consolidating capacity across Europe, closing older plants and moving output to more efficient sites in lower-cost markets. BAT ended cigarette production in Germany in late 2017 in its Bayreuth factory, while PMI followed suit this year, shutting down its final cigarette plant in Dresden and ceasing the production of expanded tobacco in Berlin-Neukölln. The company now produces mainly in the Czech Republic and Poland.
The notification to the German Federal Cartel Office was required because both companies conduct substantial business in Germany, even though neither now manufactures there. Under German competition law, joint ventures that exceed certain turnover thresholds or could affect the domestic market must be reported to the Bundeskartellamt. The authority will review the agreement to ensure it does not distort competition, restrict market access, or facilitate coordination between the two firms.
The cross-production initiative represents a pragmatic response to structural pressures in the European tobacco market — and a striking departure from past rivalry. If approved, it would mark the first time two of the world’s largest tobacco manufacturers have entered into reciprocal cigarette production in Europe, highlighting how even the most entrenched competitors are being forced to rethink traditional boundaries in an era of declining demand.