Philip Morris expects strong growth this year

Tobacco giant Philip Morris International (PMI) expects a strong growth in the Philippines this year amid the improving competitive environment in the local cigarette industry.

Jacek Olczak, PMI chief financial officer, said the company is increasingly optimistic that its local unit Philip Morris Fortune Tobacco Corp. (PMFTC) will perform better this year due to improved price gaps.

Olczak noted that PMFTC’s premium brand Marlboro saw 2.4 percentage points increase in market share during the first-half of the year to 21.1 percent from 18.7 percent in the same period in 2014.

“As a result of the improved competitive environment and the excellent performance of Marlboro, we are increasingly optimistic about the OCI [operating company income] outlook for the Philippines and are expecting strong growth this year, excluding currency,” Olczak said.

The PMI official attributed the improved competitive environment on Bureau of Internal Revenue’s (BIR) introduction of tax stamps.

Olczak, however, noted that there was a decline in average daily cigarette consumption in the country due to higher retail prices.

“Smoking prevalence remained stable in the [second] quarter. However, average daily consumption declined due to higher retail prices, although it did not deteriorate on a sequential basis compared to the first quarter,” Olczak said.

“This indicates that adult smokers have largely adjusted to higher prices at the bottom of the market,” he added.

PMI estimated that the country’s total tax-paid cigarette industry stood at 39.8 billion sticks in the first six-months of the year, higher by 2.7 percent from 38.8 billion in the same months a year ago.

However, PMFTC’s shipments during the period fell 2.3 percent to 32.63 billion, while its market share dropped 4.2 percentage points to 82 percent.

“Our market share declined due to higher estimated duty-paid volume by our principal local competitor,” Olczak said.

Based on PMI data, PMFTC’s Fortune brand cornered 32.5 percent of the local cigarette market, while Jackpot has around 15.2 percent and other brands with 13.2 percent in January to June this year.

Last month, Paul Riley, PMFTC president, said the company’s market share in the entire tobacco industry— including untaxed cigarettes—had been steady at 72 percent over the past five quarters.

PMFTC is a joint venture entity between PMI and Lucio Tan Group’s Fortune Tobacco Corp.