Cigarettes are seen during the manufacturing process in the British American Tobacco Cigarette Factory (BAT) in Bayreuth, southern Germany.

Japan Tobacco International has bought an Iranian cigarette maker in an attempt to reinforce its position as the market leader in a country which hopes to open up to western companies once international sanctions over its nuclear programme are removed.

The company said JTI Pars, its Iranian subsidiary, had recently acquired the privately owned Arian Tobacco Industry (ATI) for an undisclosed amount.

“A growing number of major companies from various countries are now investing or reinvesting in Iran,” JTI said. “Our Iranian subsidiary just finalised the acquisition, so clearly this is very recent but we are confident that it will enhance our business in Iran from next year onwards.

A person with knowledge of the country’s tobacco market said the purchase was likely a response to expectations that Philip Morris, maker of Marlboro cigarettes, was expected to enter the market.

“This acquisition will double JTI’s market share and helps to maintain its competitive advantage — thanks to JTI Pars’ presence in Iran since 2002 — before Marlboro steps into this market,” the person said.

The other foreign tobacco companies operating in Iran are British American Tobacco, through its subsidiary BAT Pars, and KT&G of Korea.

Iran is a tough environment for international tobacco companies. The industry is not permitted to market cigarettes through advertising and heavy taxes translate into higher prices on tobacco products.

Porous borders mean smuggling is also prevalent. About 40 per cent of cigarettes smoked in the country enter the market illegally, according to Iran’s ministry of industry, mine and trade.

The major brands produced at the JTI Pars factory in the northern Gilan province are Winston, Magna and Monte Carlo.

The ATI acquisition means more production will take place in Zanjan, about 300km north-west of Tehran, said people familiar with the deal. The companies jointly employ about 1,000 people.

“ATI has some strong brands in the growing value segment, the largest in volume, and a state-of-the-art local production facility, very similar to JTI standards,” JTI said.

Asked how sanctions have affected its business, the company added: “We have always believed in Iran’s economic future and look forward to consolidating our presence, even more so with the business climate improving.”

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