PMI Admits Losing Market Share in Philippines

Source from:  Manila Bulletin 12/20/2013

Cigarette manufacturing giant Philip Morris International Incorporated (PMI) said that Philippines' tobacco industry's output dropped in the first nine-months of the year after the enactment of the new excise tax law.

In its January to September financial performance report, the New York-based PMI, maker of Marlboro cigarettes, said the country's total industry volume of 23 billion units was estimated to have decreased by 6.7 percent.

PMI, the foreign partner of Lucio Tan-owned Fortune Tobacco in PMFTC Incorporated, disclosed that the company's own production volume of 17.8 billion units in the Philippines dropped by a hefty 20.7 percent.

"[This] primarily reflecting the unfavorable impact of the disruptive excise tax increase in January 2013," PMIC said, noting also the "prevalence of non-duty paid domestic product."

President Aquino earlier signed into law the Republic Act 10351 or the Sin Tax Reform Act of 2012, which sets higher levies on the so-called "sin" products starting January 1, this year.

"PMI's market share in the [third] quarter decreased by 13.6 points to 77.2 percent primarily due to downtrading to competitors' brands," the tobacco company added.

In particular, PMI noted that market share of its premium brand Marlboro fell by 5.9 points to 15.3 percent, while share of low-priced Fortune decreased by 22.6 points to 27.5 percent.

The decline in market shares of those brands, however, was partly offset by gains from PMFTC's other low-priced brands, PMI said.

The Department of Finance (DOF) earlier reported that the government's excise tax revenues from sin products grew by 64 percent in the first three quarters to P63.6 billion from P38.8 billion in the same period last year.

The DOF said that of the total excise tax collections at end-September, P34 billion comes from the incremental revenues from the recently enacted Sin Tax Law despite a significant decline in cigarette production. Internal Revenue Commissioner Kim S. Jacinto-Henares earlier said that she was confident that the government's main tax agency will surpass its P93.18 billion excise tax collection target on tobacco products and alcoholic beverages. Enditem