Philip Morris Eyes Pakistan Smokers

Philip Morris International, the international unit of the US tobacco giant Philip Morris often described as a merchant of death, is building a new massive cigarette plant in Pakistan.
Philip Morris is expected to spin off PMI as an independent company to be unconstrained by the U.S. tobacco regulations and out of reach of American litigators. Importantly, its practices would no longer be limited by American public opinion, paving the way for trying out new products.

As the smoking rates in developed countries have slowly declined, they have risen dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%), according to the Wall Street Journal.

The World Health Organization's Framework Convention on Tobacco Control, an international public-health treaty, has 152 participating countries, including China, Brazil and Pakistan. While it has led to greater regulation in many of the world's markets, countries such as Indonesia and Russia haven't signed on. It should be noted that Pakistan was derisively named as "The Winner of Marlboro Man of The Year Award" by anti-tobacco activists for stalling these negotiations but ultimately signed the treaty.

In addition to targeting Pakistan, India, Brazil and Russia, one of PMI's immediate goals is to harness the huge potential of China's smoking population, as well as some of that country's own brands, reports the Wall Street Journal.

After negotiating for three years, PMI is expected this year to begin marketing three Chinese brands. The smokes -- selected from hundreds of varieties produced by state-run China National Tobacco Corp. -- will be sold in Central Europe, Eastern Europe and Latin America, according to PMI.

The launch is planned for sometime in the next six months. It is part of a December 2005 deal in which Philip Morris agreed to market Chinese brands internationally in exchange for the right to produce its own Marlboro brand at state-owned factories. At the moment, Philip Morris is limited to importing its cigarettes for sale in China and is restricted by stringent quotas.

While Philip Morris investments in Pakistan, Brazil, Russia, India and China are expected to bring in much-needed capital and create thousands of new jobs, the proven health risks posed by smoking will also cause widespread disease and death in future years. This does not appear to be a good bargain for these emerging economies with young populations.

Comments

Mike said…
Nice blog !!!!! .I am interest to post comment in this blog about my china trip last year .me and my family member enjoyed lot . Hukou Waterfalls (Kettle Spout Falls) is very beautiful waterfall in china .
The Yellow River is the mother river of the Chinese nation. In its basin, there is a tourist attraction that visitors should not miss. That is Hukou Waterfalls, a glistening pearl in the middle reaches of the Yellow River. It is located in Yichuan County in Yan'an City, Shaanxi Province. It is the only magnificent yellow waterfall in the world and the second biggest waterfall in China after Huangguoshu Waterfall .
When the mighty Yellow River flows through mountains and gorges to Hukou, the billowy water streams narrow suddenly, falling 30 meters (33 yards) into a deep riverbed like a herd of galloping horses, transforming the quiet river into a turbulent one. The thundering sound can be heard from quite a distance. The tremendous mass of water strikes the rocks, creating piles of foam and huge water poles. It is an amazing view with mist all around. The riverbed here is like an enormous teapot absorbing all the rushing water, so the waterfall is named Hukou Waterfalls (Kettle Spout Falls). No matter its rumbling sound, its grand vigor or its marvelous scenery can make you exclaim that the nature is really incredible.
The power of the yellow water of Hukou Waterfalls is tremendous when falling down to the pond, so it is hard for you to get close to the main waterfall. Looking from a distance, you still can enjoy the vast and gorgeous yellow ocean of mist-covered water. The big waves and foam, like angry beasts, are running and roaring. The beauty and vigor of the waterfalls are indeed beyond words. You cannot know unless you visit it in person.
There are many wonders at Hukou Waterfalls, such as smoke from the river, boats on land, rainbows in the sunshine, and so on. In Hukou the water falls to the deep pond from a relatively high place, stirring the mist which rises high into the air like surging heavy smoke coming out of the river. You can see various shapes of rainbows formed by the rising mist, refracted by the sunshine from different angles. Sometimes rainbows are arched, cutting into the river from the sky like a dragon playing with water; sometimes they are colored ribbons lying across the river; sometimes they become colorful masses which change second by second. The water in Hukou is very much torrential, so all the boats from the upper reaches must be pulled out of the river onto to the bank when they arrive. These boats will have to detour around this section, carried by a group of boatmen or shipped by truck before they can be put in the river again.
The view of Hukou Waterfalls changes according to the seasons. In spring the frozen ground thaws and the stalactites of snow fall into the pond like the mountains collapsing and the earth cracking up. In summer and autumn there is much rainfall. With the rains, the river rushes and the yellow waves seem to reach the sky. In winter Hukou Waterfalls gives the visitors another new look. On the surface of the silvery ice waterfalls, cool water flows down. Little silver icicles hang on the cliffs around the waterfalls. It presents you a distinctive natural landscape of the northern region of China.
The Hukou Waterfalls has for years attracted visitors from all over the world. You can have a better understanding of natural wonder if you come here in person. The Hukou Waterfalls will give you a warm welcome with its thrilling sound, rolling golden waves, changing scenery and majestic vigor.
Transportation: You can take number 4, 6, 16, or 19 bus to the bus station in Yanan City and then taking the regular buses to Hukou Waterfalls. The buses to Hukou Waterfalls will be delivered every 30 minutes and the whole journey will take you about four hours.
Sania Ehsan said…
ILLEGAL ADVERTISEMENT OF MARLBORO BY PHILIPS MORRIS PAKISTAN

Philip Morris Pakistan has started an advertisement campaign in the print media for its cigarette brand Marlboro. This advertisement campaign is clear violation of government rules, regulations and guidelines as confirmed by Dr. Asad Hafeez, Director General Health Services Academy. .

The Government of Pakistan since 2003 had outlawed such open advertisement of cigarettes through print and electronic media. The law states that “tobacco advertising is prohibited in publications intended for young people and tobacco Ads in the press will not be more than one square inch (with 20% of this covered with a health warning).” In short, the law practically prohibits any advertisement of cigarettes through print media of any sort.

Tobacco Control Cell, Government of Pakistan has decided to take action against illegal advertisement of Marlboro brand of Philip Morris.
Riaz Haq said…
Here's a Business Recorder report on Philip Morris in Pakistan:

Amongst the two multinational tobacco companies in Pakistan, Philip Morris Pakistan Limited (formerly known as Lakson Tobacco) stands at number two to Pakistan Tobacco Company.

Philip Morris Pakistan Limited is a public listed company on the Karachi and Lahore Stock Exchanges and is an affiliate of Philip Morris International Inc (PMI).

The company is involved in the manufacture and sale of cigarettes for Pakistan's domestic market.

It currently operates three cigarette factories with primary and secondary facilities and one tobacco leaf threshing plant, all located in various parts of the country.

It also runs an extensive tobacco leaf agronomy program in the tobacco growing areas of Khyber Pakhtoonkhwa.

The company is also involved in CSR where it is engaged in undertaking various initiatives in the education, environmental sustainability and disaster relief sectors to give back to the community it operates in.

Brand Portfolio Philip Morris Pakistan has a portfolio of ten brands for the domestic market.

Of the main ones, it markets and sells both international brands like Marlboro and Red & White, and locally owned brands like Morven Gold, Diplomat, K2.

Highlights 2011 has been a challenging year for Philip Morris so far like the rest of the FMCGs due to the weakening economic situation fuelled by power crisis and rising inflation.

Moreover, the performance of the company is highly affected by the illicit cigarette market that accounts for almost a 20 to 25 percent market share.

The detrimental impact of the non-tax paid industry extends to not only the company but to the legitimate industry as a whole and also the government as it reduces government revenue.

Being a cigarette manufacturer and importer, the company has high taxes and duties expenditure.

The company's sales tax and excise duty as a percentage of its gross turnover for the 9MCY11 stood at a little above 61 percent as compared to 60 percent same period CY10.

The company saw weaker sales of 2,847 million cigarettes mainly attributed to the adverse impact of the non-tax paid tobacco industry.

Overall, compared to 9MCY10, the nine months ending September CY11 has shown declined profitability.

Its contribution to the national exchequer went down from 16,330 for 9MCY10 to 16,178 million for 9MCY11.

The company faces tough competition from not only the unaccounted for sector but also its peer and the biggest rival in the industry, Pakistan Tobacco Company, an associate of British American Tobacco Company

Profitability Gross turnover experienced a decline of 3.9 percent from Rs 25.7 billion for 9MCY10 to Rs 24.7 billion in 9MCY11.

The decline in gross revenue is not only due to the tough economic environment, high government taxes and illicit trade but also due to the successful launch by PTC of its brand, Capstan which alone has a market share of 14 percent.

Though the sales tax and excise duty were considerably less for the nine months CY11, the gross profit was seriously injured by a surge in the cost of sales by 9.8 percent for the 9MCY11 compared to the same period CY10.

This is mainly because of rising energy costs, security related expenses and high inflation.

GP margins had a steep decline to 23.7 percent for the 9 months of 2011 compared to 35.5 percent for same period CY10.

As if to compensate to some extent, the distribution and marketing expenses demonstrated a fall of approximately 12 percent for periods in comparison.

The company recorded a loss after tax of Rs 284 million with an NP margin of -2.8 percent compared to the profit after tax Rs 767 million for the same period in 2010.

This was primarily due to an increase in the finance costs by approximately 270 percent.....


http://www.brecorder.com/component/news/single/592/0/1260461/
Riaz Haq said…
Philip Morris is getting squeezed in Pakistan, reports Express Tribune:

Philip Morris Pakistan is beginning to feel a financial pinch, and is already reducing the scale and scope of some of its manufacturing operations inside the country.

In a statement released to the press on Saturday, the company announced that it will be reducing the operations in its smallest factory, located in Mandra, near Rawalpindi. The company cited “difficult economic conditions” including high taxes and low consumer purchasing power as a primary reason for the decision. The decision was described by Philip Morris as “difficult, but necessary.”

Among the key factors that specifically affected Mandra was a government regulation known as SRO 863(I), a 2010 law that effectively bans the marketing and sales of the smaller 10-cigarette packs, which were the mainstay of the company’s operations near Rawalpindi. Given the fact that Mandra is the company’s smallest factory, and that its main product is now illegal, the operational costs per cigarette at the plant would effectively become too high to be sustainable.

“The main activity of the factory has become obsolete,” said the company in its statement. It, however, declined to say whether the factory would be completely shut down.

Philip Morris did not disclose how many of its 2,363 employees in Pakistan work in Mandra and how many of them would be laid off. The company did, however, state that it would be paying the laid off workers a severance package that would exceed the legal minimum requirements.

“We are committed to ensuring that all retrenched employees are treated fairly and with dignity, and genuinely appreciate the contributions that each and every employee has made over the years,” said Arpad Konye, the managing director at Philip Morris Pakistan, in the statement released to the press.

The troubles at the Mandra facility are the latest in Philip Morris’ woes in Pakistan. The company had been operating as a joint venture with the Lakson Group (the parent company of Century Publications, the publisher of The Express Tribune) until 2007. In that year, the global company bought out its local partner’s share to retain well over 97% of the Pakistani subsidiary. (The remainder is listed on the Karachi Stock Exchange).

The acquisition, however, does not appear to have turned out well. Profits have gone from Rs1.5 billion in 2007 to Rs573 million in 2010, a nearly 62% drop. The year 2011 appears to have gone even worse, with the company earning a net loss of Rs284 million for the first three quarters of the year, ending September 30, 2011.

Philip Morris Pakistan has perennially been the number two player in the Pakistani tobacco industry, outshone by the Pakistan Tobacco Company, the local subsidiary of British American Tobacco. Industry insiders say that Pakistan Tobacco has better market penetration with its higher-end brands than Philip Morris. “Philip Morris got into a cut-through price war with Pakistan Tobacco over the lower-end brands,” said one person familiar with the matter. “And Pakistan Tobacco has an unassailable advantage on the higher-end segment of the market because of their Benson & Hedges and Gold Leaf brands.”

Philip Morris appears to have come out the worst of that price war, with revenues declining by 3.9% to Rs24.7 billion during the first nine months of 2011. By contrast, Pakistan Tobacco’s revenues went up by 12.3% to Rs49.9 billion during the same period.


http://tribune.com.pk/story/345156/tobacco-industry-philip-morris-feeling-the-squeeze-in-pakistan/
Riaz Haq said…
Nielsen report on illicit #cigarette trade in #Pakistan launched: Over 80 billion sticks sold each year. #tobacco http://www.pakistantoday.com.pk/?p=449709

A recent report published by Nielsen Pakistan and titled “The challenge of Illicit Trade in Cigarettes: Impact and Solutions for Pakistan” was launched at a seminar on” illicit trade in Pakistan” held on Thursday in Lahore.

Speaking at the event, the Nielsen representative shared the findings of the report with a wide range of participants including high ranking officials from Federal Board of Revenue, Police, Punjab Government as well as industry and civil society representatives.

According to the report nearly 1 out of every 4 cigarettes in Pakistan is illegal. The share of the illegal cigarettes in the total market is estimated to be 23.7% which means that around 19.5 billion sticks sold per annum are illegal.

The report discloses that the illicit cigarette sector has witnessed a growth of 43.5% over the last 6 years and all this has been at the expense of the tax compliant industry. This phenomenal growth has also caused a huge dent in the national exchequer in the form of loss of duties and taxes. The report estimates this loss to be above Rs. 24 billion per annum.


http://www.who.int/tobacco/en/atlas8.pdf
Riaz Haq said…
#Pakistan #tobacco #tax rise hits BAT cigarette biz. Sales drop 5.6% worldwide, down 2.5% excluding Pak https://www.ft.com/content/2915081a-ac8d-35e0-b4ca-cada589cda53 … via @FT


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https://www.ft.com/content/2915081a-ac8d-35e0-b4ca-cada589cda53

British American Tobacco, which this week completed its merger with its US peer Reynolds, sold 5.6 per cent fewer cigarettes in the first half of this year mainly because of a tax rise in Pakistan that led to a big increase in illicit sales.

Reporting half-year results, BAT said volumes excluding Pakistan were down 2.6 per cent, a milder decline than in the industry as a whole. It said its market share in its main markets grew by 0.3 percentage points.

Revenues rose 15.7 per cent or 3.5 per cent at constant currencies to £7.7bn. Operating profits rose 16 per cent to £2.6bn.

Chairman Richard Burrows said “the combustible business continued to perform well, against the backdrop of a strong volume comparator”.

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