Philip Morris Philippines Manufacturing Inc and Fortune Tobacco Corp.
Philip Morris Fortune Tobacco (PMFTC) declared it had a reduction in the sales of its cigarette brands in the beginning of the year after the excise tax on cigarettes was increased in January. PMFTC became the largest company in the Philippine cigarette market after the merger of Philip Morris Philippines Manufacturing Inc and Fortune Tobacco Corp. in 2010, and currently holds almost 90 percent of the domestic market.
Chris Nelson, chairman of PMFTC, declared the industry might face problems in surpassing record sales reported in 2010 due to the hike in excise tax on cigarettes and other tobacco products. Nelson admitted the growing political crisis in many Middle East countries, where the majority of Philippine workers go to find a decent work, might as well be a reason for a decrease in the cigarette sales. “In 2010, we had higher sale volumes and very solid demand, however, this year, political crisis in the region could affect sales,” the PMFTC chairman admitted, refusing to reveal figures. “In addition, the major reason for falling demand, is the tax increase implemented in January, since higher prices always impact on demand,” Nelson added.
The market will be growing, as the adult population of the country is growing thanks to favorable demographic policy, according to Nelson, who also said the industry performance has always been associated with the population, which has been growing by approximately 1.5 percent annually. Since 2006 the industry has shown a growth by about 2 percent every year. “Local cigarette market is very sensitive to the price changes, as it is related to the consumer’s available income. Therefore, any significant, instant tax rise would affect the market,” Nelson stated. “It would be evident to expect the market would be affected, however, in general, the industry prospect, excluding 2011, is stable and favorable. The only need is that the correct excise tax system should be established,” he mentioned.
The leading cigarette company has been seeking to convince the government to extend the present excise tax system, which is valid until 2013. “Collection of taxes on tobacco products has grown significantly to P31.6 billion in 2010, surpassing the government’s objective of P25 billion. The latter proves the system is effective, and should not be amended in the future,” Nelson declared.
According to the Republic Act 9334, excise taxes on tobacco products and alcohol shall be growing every two years, beginning from 2005 to 2011. The system divides all tobacco and alcohol products in four groups with ranging tax rates. “There are not many legislation in other countries that are so efficient as that law, which helped the local government to generate more taxes, but allowed the industry to make up plans. It is an amazing success, so it should not be changed,” Nelson stated.
Philip Morris Fortune Tobacco (PMFTC) markets more than 40 tobacco brands in Philippine cigarette market, including the flagship Marlboro, Philip Morris brand, Sampoerna, DJ Sam Soe and other brands.
Related tags: big tobacco | philip morris | cigarettes markets | marlboro | cigarette brands