Philip Morris, an international company manufacturing tobacco, announced on Wednesday that it is stopping its operation in Moorabbin plant by the end of 2014.
The company had been operating for nearly 60 years and the announcement posed risk for its 180 workers in the rabbin plant who will be left jobless by the culmination of 2014.
Philip Morris announced that it is shifting its production to South Korea.
The closure was a result of the decline in demand from the local market in the span of 10 years.
The company was able to overcome the challenge of the introduction of plain packaging and illicit trade. But, the biggest factor that motivated the company to close down is Australia's restrictions for locally made cigarettes to follow regulations that reduced fire risks.
"Despite the introduction of plain packaging, and the continued growth in illicit trade, PML's volumes were stable in 2013. However, with any significant export opportunity restricted by Australian Government regulations, our Moorabbin factory is significantly underutilised, operating at less than half of its currently installed capacity. Regrettably, factors beyond our control prevent us from fully utilising the facility, and accordingly it's been identified for closure," said the managing director of Philip Morris for Australia, John Gledhill.
Australia became the very first country in the world to introduce "plain packs" for cigarettes in 2012.
Plain packaging involved disallowing logos and colours to be printed on packages. Instead, design for cigarettes packages should feature a graphic health warning.
Philip Morris also announced that it is maintaining its corporate operations in Australia and has plans of hiring 550 people.
As for those who will be left jobless, the company assured that they will be provided with "extensive support," including redeployment, counseling, career shift and financial advice.
Meanwhile, the Australian Worker's Union Victorian secretary, Ben Davis, told ABC News that it has plans of helping the workers affected by the closure.
"We'll obviously be meeting with the company and from here on in to work out what, if anything, we can do to make sure our workers have the best possible exit from the business," he said.