Philip Morris Looks to New Products for Growth

Source from:  AP 05/06/2009

At its first shareholder meeting since the spinoff from Altria Group Inc., Philip Morris International Inc. said new products in its key brands like Marlboro will help grow cigarette sales overseas, its core market. Chief Executive Louis C. Camilleri told investors at the annual meeting in New York that the company is seeing growing consumer interest for new and innovative products. Philip Morris International's product development has focused on lighter-tasting, smoother and slimmer cigarettes, Camilleri said, adding that there is an increasing demand for menthol cigarettes in some markets. The company said its Marlboro Filter Plus cigarettes, also sold as Marlboro Flavor Plus, held 2.5 percent of the market in Romania in the first quarter this year. The cigarettes, first introduced in Korea, contain tobacco inside their filters to add flavor and are sold in a new style of slide-open package. "Marlboro remains by far the best-selling international cigarette brand in the world," Camilleri said. "But we have also successfully developed a broad portfolio of other brands across all price categories." Camilleri said Philip Morris International improved its profitability by raising prices, "even in a recessionary time." Its first-quarter revenue from increased prices was its highest ever, he said. Like most tobacco companies, Philip Morris International is pursuing sales of smokeless tobacco products to replace the revenue they are losing as cigarette demand falls. Camilleri said its joint venture with Swedish Match to make and sell smokeless products like snus - teabag-like pouches that users stick between their cheek and gum - is in its "early days." "We believe that together snus can grow and we also believe that snus is a reduced-harm product," he said, noting that there are some who oppose the product and others who support the idea of tobacco alternatives with lower health risks. The majority of the question-and-answer session at the meeting consisted of remarks from anti-tobacco and corporate accountability groups targeting the company's marketing efforts and dealings in government regulation. A speaker from the Campaign for Tobacco-Free Kids said the World Health Organization estimates that 5.4 million people will die this year from tobacco use and requested that Camilleri have a moment of silence, to which he agreed. One shareholder asked about the company's long-term outlook and profitability. Camilleri said he's "extremely bullish on the prospects of this company," saying Philip Morris International controls about 16 percent of the market for cigarettes outside the U.S., and the company's pricing power puts it in a better position than others. "Yes, we have our issues but I think we are more than up to the challenge," Camilleri said. Shareholders elected nine directors and approved criteria and award limits for its performance incentive plan. Philip Morris International, with offices in New York and Lausanne, Switzerland, was spun off from Richmond, Va.-based Altria, the seller of Marlboro and other Philip Morris brands in the U.S., in March 2008. It is the world's largest non-governmental cigarette seller, smaller only than state-controlled China National Tobacco Corp. Philip Morris International's annual net income rose 14 percent to $6.89 billion in 2008 from $6.04 billion in 2007. Revenue rose 15 percent to $63.64 billion in its first year as an independent company. Enditem