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Philip Morris says PH cigarette market stable

Tobacco giant sees slower sales of cheaper brands
By: - Reporter / @bendeveraINQ
/ 12:20 AM April 18, 2015

Global tobacco giant Philip Morris International (PMI) reported that the cigarette market in the Philippines remained “stable” even as the prices of its cheapest brands rose during the first quarter, resulting in dented sales.

In a presentation last April 16 of the company’s first quarter results, PMI said that cigarette “consumption remains resilient” in the Philippines. It cited third-party data, which showed that the adult smoking prevalence rate in the country slightly went down to 50.1 percent during the January-March period from 50.2 percent in the first three months of last year.

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Also, the average daily cigarette consumption among Filipino adults dropped to 12.2 sticks a day during the first quarter from 13.2 cigarette sticks a day that was seen a year ago.

“The reduction in average daily consumption has been due mainly to adult smokers of brands at the low end of the market. We attribute the decrease in large part to ‘sticker shock’ following price increases for low price brands of approximately 27 percent, on average, since October,” PMI said.

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But the tobacco giant said it expected cigarette consumption of Filipinos “to largely recover as the year unfolds, and adult smokers adjust to new price levels.”

The price of the premium brand Marlboro remained at P3 per stick, while brands at the lower end of the market rose to P1.75 to P2 during the first quarter of 2015 from P1.25 to P1.50 in the first three months of 2014. The narrower price gaps resulted in “improved, positive unit margins” and drove Marlboro’s share growth, according to the tobacco giant’s local subsidiary PMFTC Inc.

The market share of Marlboro went up to 21.8 percent in the first quarter of 2015, from 19.4 percent in the first three months of last year. The market shares of lower priced Fortune, Jackpot and Champion, however, all declined in the first quarter of this year, bringing the total market share of PMFTC to 83.9 percent, from 86.2 percent seen in the first quarter of last year.

Because of the slower sales of cheaper brands, PMI’s shipment volume to the Philippines decreased by 1.6 percent to 15.9 billion units, it said.

Meanwhile, PMI said the implementation of tax stamps on cigarettes resulted in an “improving, competitive environment.”

“In the Philippines, the estimated total tax-paid industry cigarette volume increased by 1 percent to 18.9 billion units, primarily reflecting higher estimated duty-paid volume by PMI’s principal domestic competitor,” the company noted.

The Bureau of Internal Revenue has already implemented the Internal Revenue Stamps Integrated System, under which all cigarettes must bear tax stamps to facilitate monitoring of excise and “sin” taxes.

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TAGS: Business, cigarette manufacturing, Philip Morris, Philippines
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