Philippines: PMFTC Floods Mindanao with Low-priced Marlboro Variant

Source from:  Manila Bulletin  01/24/2014

Cigarette giant Philip Morris Fortune Tobacco Corporation (PMFTC), still hurting from the sales surge of rival Mighty cigarettes, is flooding Mindanao with low-priced variant of Marlboro to regain its market share in this category, it was learned yesterday.

Bureau of Internal Revenue (BIR) insiders said the latest marketing strategy was employed after the bureau permanently shelved the petition of PMFTC to manufacture and sell at low prices four variants of Marlboro to recover huge sales losses incurred when the sin tax law was imposed.

BIR rejected the request because existing regulations prohibits the downgrading of Marlboro and other premium brands.

PMFTC made the request to avail of the lower excise tax rates to cut retail prices of selected Marlboro brands which will ultimately push out of the market Mighty Corporations (MC) and other manufacturers of low-priced cigarettes.

BIR Commissioner Kim S. Jacinto-Henares said she will not object to PMFTC's marketing strategy so long as the firm pay correct taxes.

Under the sin tax law, low priced brands produced by MC are taxed at the lower rate of P17 per pack of 20 sticks and P27 for Marlboro and other premium brands also pack in 20s.

Excise tax officials who declined to be named said the tax schedule compelled many low-income smokers to shift to low-priced brands shying away from the premium brands of PMFTC.

As a result, PMFTC admitted of losing some grounds reducing its sales by more than 40 percent last year to rivals particularly to MC.

To reverse the situation, PMFTC introduced its low-priced Marlboro Flavor Code cigarette in Mindanao.

Excise tax officials said PMFTC was able to retail this brand at low cost despite the high tax rate because it allegedly sourced most of the raw materials in the manufacture of this brand in the local market instead of importing them from its parent company in the US.

Revenue officials noted that MC operations prospered not because of trade malpractices as alleged by PMFTC but because of the sin tax law which leveled the playing field and triggered a consumer shift from expensive premium brands produced by PMFTC to the lower brands such as those manufactured by MC.

Anticipating the shift and because of its excellent marketing strategy, MC's market share shot up as evidenced by its excise tax payments of P8.2 billion in 2013 as compared to its P500-million total remittances the previous year. Enditem