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.
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
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.
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/
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
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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”.
https://www.dawn.com/news/1449578
After continued lobbying by civil society, Minister for National Health Services (NHS) Aamer Mehmood Kiani announced on Tuesday that soon a ‘sin tax’ will be imposed on cigarettes and sugary beverages.
Speaking at a public health conference at the Health Services Academy, Mr Kiani said that the PTI government was committed to increasing the health budget by five per cent of GDP.
“Various routes will be used to increase the health budget,” he maintained, “and one of them is imposing a sin tax on tobacco products and sugary beverages. That sum will be diverted to the health budget.”
Currently, the government spends a mere 0.6pc of GDP on health. It has been suggested several times in the past that sin taxes be imposed on products that cause health-related issues as a result of which the state pays heavy penalties in the shape of healthcare spending and lowered human productivity.
Talking to Dawn, the director general of the NHS Ministry, Dr Asad Hafeez, said that tax on tobacco and sugary beverages was being charged in some 45 countries.
“A sin tax is an internationally recognised term and is specifically levied on certain goods deemed harmful to society, for example tobacco, candies, soft drinks, fast foods, coffee and sugar,” he said.
“The United States charges about $1.5 (approximately Rs200) per pack of cigarettes, while the UK charges 40 pence (around Rs100) per litre of sugary beverages as sin tax. Thailand, as well as a number of other countries, has similar taxes that are earmarked for healthcare services.”
Replying to a question, Dr Hafeez explained that India imposes a sin tax on gutka and paan masala, and the sums thus collected are spent on the healthcare sector since these products cause illnesses that become a burden on the public exchequer.
“We have not yet decided on the exact amount for a sin tax [in Pakistan],” he clarified, “but it will certainly be a handsome sum. Because of the new tax, the price of cigarettes will increase, making it more difficult for young people to buy them. Some 1,500 youngsters start smoking in Pakistan every day, and we want to reduce that number.”
The general secretary of the Pakistan National Heart Association (PANAH), Sanaullah Ghumman, told Dawn that his association had for many years been demanding the imposition of a sin tax.
“Recently, during a meeting with President Dr Arif Alvi, we again raised the issue of such a tax,” he elaborated. “The minister for health was also present at the meeting, and the president assured us that he would do what was possible. The proposal was floated during the tenure of the former government as well, but was unfortunately not implemented. And even now, I fear for its fate since it is difficult to take such a decision in the face of an influential tobacco industry.”
To contextualise, according to a report of the NHS Ministry that was published a few years ago, tobacco is the single largest cause of preventable illness and death. In Pakistan, it causes some 108,800 fatalities every year, ie 298 per day. The report emphasises that the consumption of tobacco will continually increase the country’s healthcare expenses, in addition to imposing huge costs in terms of human resource.