Philip Morris International is Expecting a Drop in Demand for its Tobacco Products

Chris Nelson, representative of the PMI, stated the tobacco industry may have problems in surpassing last year’s record sales due to the increase in the excise duties, which affected cigarette products. Nelson also stated that the increasing political crisis in the Middle East, which is the main destination for Filipino workers, might also be a reason of the slump in the demand for cigarettes.

Philip Morris International Drop in cigarette sales

“Last year, it was the case with significant volumes and a great demand. But this year our sales might suffer, tacking into account current situation in the Middle East,” the representative stated without giving any details.

“We shouldn’t forget about the increase in excise duties in January and higher prices would clearly influence demand,” Nelson declared.

But the market would proceed to develop because of propitious demographic like the country’s growing adult population.

“The industry’s growth has always been associated with the country’s population, which has been increasing by 1.7 % to 1.8% annually. Since 2005 the industry has increased by about 2%.

“The market is rather price sensitive since it is an indicator of the consumer’s expendable income. Any sudden tax increase would weaken the market. It would be judiciously to admit that the demand would be influenced but overall, the industry prospect, not peculiar to 2011, is favorable. The only warning is that the right excise duty system should be in place,” Nelson stated.

The cigarette producer has been forcing for the prolongation of the present excise duty system, which is expiring in 2013.

“Excise duties collection on tobacco products have raised significantly to P31.6 billion last year, surpassing the government’s objective of P25 billion. This proves one more time, that the system works and there is no motive for it to be changed,” Nelson said.

The Act Increasing the Excise Duties Rates Imposed on Alcohol and Tobacco Products, stipulates for increases every two years from 2005 to 2001. The scheme settles that alcohol and cigarettes are placed in four categories with changing duty rates.

“There are few laws in many countries which produced such an effect as the RA 9334 that permitted government to levy more taxes and at the same time. It is an evident success, which works very well,” Nelson said.

Starting from January 1, all cigarettes packed by machine with the net retail prices of less than P5 (0.11 USD) per package would be levied P2.72 (0.06 USD).

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