Philip Morris eyes selling cheaper Marlboro cigarettes

ABS-CBN News

Posted at Dec 12 2013 04:05 PM | Updated as of Dec 13 2013 12:05 AM

MANILA, Philippines – Tobacco giant Philip Morris is planning to introduce low-priced Marlboro cigarettes in the domestic market, in an effort to stem its declining market share.

The Lucio Tan-controlled Philip Morris Fortune Tobacco Corporation (PMFTC) wrote a letter to the Bureau of Internal Revenue (BIR), seeking a permit to register Marlboro Original, Marlboro Gold Lights, Marlboro Menthol, and Marlboro Black Menthol in the low-price category.

If the BIR grants the permit, Marlboro cigarettes will be sold cheaper and will compete against Champion, Fortune and Jackpot, other low-priced brands also owned by PMFTC.

PMFTC president Paul Riley said PMFTC will still maintain original Marlboro products in the premium category and its flagship brand, Philip Morris, will not be produced in the low-price category.

The new excise tax law states that the BIR should implement low and premium tax rates for cigarettes from 2013 to 2016.

By 2017, a single rate of P30 per pack will be implemented.

Riley said PMFTC’s production volume dropped from 92 billion sticks in 2012 to 68 billion in 2013. By 2014, volume may go down further at 48 billion sticks.

“This is why we need to do something to reverse the current trend. What is more worrying, we expect the down-trading to continue, with the Marlboro volume further decreasing to 7.9 billion sticks in 2014,” Riley said.

Riley said the decrease in production and sales was due to the shift to lower-priced cigarettes.

The implementation of the Sin Tax Law has allowed Filipino-owned brand Mighty Corp. and British American Tobacco to gain momentum as cigarette consumption shifted to the cheaper brands.

Industry estimates showed that 25 percent of premium and sub-premium smokers have switched to the P1 per stick brands since the law took effect in 2012.

“To prevent this dire development, the company is willing to significantly cut its margins by introducing new Marlboro products with Net Retail Selling Prices (NRSPs) of below P11.50/pack,” Riley said.

“The company is hoping to get an additional volume of 8.9 billion sticks in 2014 which, in turn, can help the BIR collect more revenues from cigarettes,” he added.

The BIR, meanwhile, is looking into reports of under-declaration by Mighty Corp. following complaints from other cigarette industry players.