Tag Archives: Philip Morris
Currently many cigarette smokers are getting more interested in trying various tobacco products besides cigarettes, than previous generations of smokers, and Altria Group Inc, parent company of the largest cigarette maker, Philip Morris USA, is looking on their recently-launched products to lure customers who are open to new products, according to the company.
The corporation, best-known for marketing the iconic Marlboro cigarettes, as well supported its profit forecast, published in January.
Altria, which also markets Copehnagen and Scoal smoke-free tobacco products and Black & Mild cigars, has witnessed a change in tobacco consumption patterns in the USA. Whereas the rate of cigar and cigarette smokers has been virtually unchanged, the consumption of smokeless tobacco has been growing.
Nevertheless, Marlboro – with roughly 42 percent share of the U.S. cigarette market – remains the leading brand in the group’s portfolio.
At the same time, many smokers have admitted to be trying new “reduced-risk” tobacco products, like snus and other smoke-free tobacco, due to health growing concerns and social stigma.
Today the leading cigarette manufacturer Philip Morris started a legal suit against the Australian government, which plans to remove company logos from cigarette packages and substitute them with horrible images depicting the consequences of smoking.
The government supposes that these images featuring blinded eyes, cancerous mouths and many other awful things will make the cigarette package less attractive to smokers.
Australian government authorities also think that the new regulations will make the country the world’s rigorous place on tobacco advertising.
But several enraged cigarette producers have since threatened lawsuits, declaring that the move illegally decreases the value of their trademarks. Philip Morris is one of those companies to lay an action for compensation.
“We would expect that the compensation would constitute billions,” said Philip Morris representative Anna Edwards.
The legislation, which will be revised by the Parliament, would prohibit cigarette manufacturers from placing their logos and various attractive images on cigarette packages. Brand names will instead be printed in a quite small font and depict large graphic warnings and grisly colored images of the consequences of smoking. The law would be gradual, starting in January 2012.
Hong Kong-based Philip Morris Asia Limited, laid an action on Monday declaring that the legislation infringes a bilateral investment treaty between Australia and Hong Kong. The tobacco enterprise states that the treaty defends the companies’ property, such as trademarks. The plain packaging plan strictly decreases the value of the company’s trademark, according to Anna Edwards.
“Our cigarette brands are the one and the most indisputable key valuable assets that we possess as a company – it is what allows us compete and moreover it’s what empowers us to differentiate our products. This move would significantly mean the confiscation of our brand in Australia,” Edwards stated.
Authorities are also eager to move forward the message that smoking affects your children.
The government disclaims that the given plan infringes any laws and declared that it would not stop.
“Our authorities are resolute more than ever to undertake everything they can in order to decrease the hazard caused by smoking,” Health Minister Nicola Roxon stated.
“We won’t permit be frightened by various tobacco companies, which take legal actions,” said Prime Minister Julia Gillard.
She also ignored Philip Morris’ threats stating that they are not going to allow tobacco producers to implement their skilful tactics.
The legal action laid on Monday starts a three-moth period of collaborations the two parties.
Philip Morris declared if a positive outcome is not achieved by the end of this period, it will require arbitration. The U.S. Food and Drug Administration (FDA) introduced similar graphic warnings for cigarette packaging last week.
Philip Morris International Inc. last week disclosed the results of its latest demonstrating that illegal sales of contraband and fake tobacco products across European Union reached record level in 2010 since the company began studying the market in 2006.
The research, performed by KPMG, assessed that yearly consumption of illegal cigarettes grew by 3.1 billion sticks in 2010 as compared to 2009 to an aggregate of 64.2 billion units, representing nearly 10% of overall cigarette consumption across European Union. According to the information provided by European Anti-Fraud Office, the EU and national economies missed 10 billion Euros in taxes in 2010 due to the growth in illegal sales.
KPMG has carried out similar researches annually as part of the landmark collaboration convention between Philip Morris International, The EU member-nations and the European Commission. The analysis and its main conclusions will be taken into consideration by European Anti-Fraud Office and national governments.
Speaking about the results of the study, Timothy Lindon, Chief Compliance Officer for the PMI, declared that whereas it has been evident that law enforcement authorities across the EU have been doing their best to eliminate the issue, the study shows that illegal cigarette trade has been on the rise and presents a great challenge for the EU member-states.
“The illegal cigarette trade throughout the EU is currently bigger than legitimate combined cigarette markets of France, Switzerland and Finland, and contributes to growing criminality in EU member nations, since revenues from illegal tobacco trade are regularly allocated to fund other illicit activities, such drug trafficking, human smuggling and terrorist attacks. In many EU member states, there are currently two different tobacco markets, one legitimate market which is decreasing, and an illicit unregulated cigarette market which is increasing.”
Philip Morris International is strongly against the illegal cigarette trade and has performed a wide series of actions to eliminate this rising issue, including introduction of a worldwide tracing system, all-round know-your-customer measures, customer education and cooperation with national governments. The solution to this problem is the cooperation on both national and international levels, among multiple parties, such as enforcement bodies, governments, cigarette companies, wholesales and retailers, as well as strict and globally-enforced convention on illegal cigarette markets that combats all forms of smuggling and counterfeiting of tobacco products.
Philip Morris International is the number one international tobacco corporation, which manufactures seven of the world’s best-selling 15 global cigarette brands, including Marlboro, the top-selling cigarette brand in the world. PMI’s brands are available in almost 180 markets. In 2010, the tobacco giant accounted for approximately 16.0% share of the entire global cigarette market, excluding the United States, and 27.6% excepting the U.S. and China.
The leading privately-owned cigarette maker said last week it has purchased the rights for an aerosol nicotine-delivery technology created by Jed Rose, head of the Duke University Center for Nicotine and Smoking Cessation. The school was not part of the agreement with tobacco Company and won’t get any payment. Terms of agreement are not revealed.
“By removing the process of burning, developing a way of delivering nicotine through inhalation but without the hazardous chemicals, we might decrease the health complications and deaths related to smoking,” admitted Rose, who headed the initial tests in the 1980s which allowed to paving the way for development and commercial usage of nicotine patches as smoking cessation therapy.
“We hope that we created a technology that will help to leave tobacco burning in the past.”
Rose added that Philip Morris International, based in New York and Switzerland, will now focus on developing commercial products applying this technology. The nicotine-delivery system developed by Rose is different from the medical nicotine inhalers selling currently as cessation treatments since it delivers nicotine faster imitating nicotine delivery given by cigarettes.
“The other systems of nicotine delivery are not able to the satisfaction smokers they need,” Rose noted.
The agreement is an essential “step in the efforts to develop nicotine-delivery products that can potentially decrease the risk of smoking-related health complications,” Peter Nixon, Philip Morris International’s spokesman declared.
Nixon added that it might take up to five years to create a commercial nicotine product which could be used as an alternative to cigarette smoking.
The company’s shares gained more than 1 percent, totaling $70.42 after the agreement was revealed.
PMI move is the latest in the recent series of decisions by major tobacco groups to enter the market of smokeless tobacco products and innovative nicotine-delivery products while tax hikes, anti-smoking policies and social stigma contribute to falling demand for cigarettes.
In April, PMI’s main rival, British American Tobacco established a division named Nicoventures which will concentrate on alternative nicotine products. In 2009, Reynolds American, second-biggest tobacco group in the U.S. acquired purchased Sweden-based company Niconovum that manufactures nicotine pouches, gums and sprays helping smokers to quit.
“It’s a fact that people smoke to get nicotine fix and die from tobacco smoke,” states David Sweanor, a Canadian law professor who works with tobacco industry. The major question is, “Could you offer them nicotine without the tobacco smoke in a way that could be consumer acceptable.”
The U.S. Food and Drug Administration is working to make up recommendations for companies interested in creating what the organization names modified-risk nicotine products.
“Changing regulations are contributing to an environment where competition would move this market category considerably,” the scientist added.
Philip Morris International, the leading private tobacco company in the world, yielding only to China National Tobacco Corporation, controlled by the government, spun off from Altria Group, owner of Philip Morris USA, which markets Marlboro, Parliament and other brands.
When asked what it the most popular cigarette brand in the world, the majority of adult smokers would probably name one of the iconic brands, such as Marlboro, Winston or Lucky Strike, produced by the world’s largest tobacco companies, Philip Morris International,Japan Tobacco International andBritish American Tobacco.
Nevertheless, if considering only the slim cigarette market segment, it seems that those legendary brands were bypassed by a newcomer, named ESSE and manufactured by South Korean KT&G, which has been steadily growing and capturing international market share.
The Seoul-based tobacco maker reported a two-fold growth in exports, selling 20.8 billion ESSE cigarettes on the international market, up from 11.2 billion in 2009, to outstrip its major competitors, Philip Morris’s Virginia Slims and British American Tobacco’s Vogue.
According to Euromonitor International, a UK consulting agency, KT&G sold 29.2 billion ESSE cigarettes in 2009, while PMI sold 17 billion Virginia Slim cigarettes and BAT sold 11 billion Vogue cigarettes.
“Since its launch in 1996, we have developed Esse cigarette brand as our global flagship brand. This premium brand is currently selling in more than 40 markets across the world including Middle East countries and Russia,” admitted Huh Up, director of global businesses for KT&G.
“It should be mentioned that ESE is currently the best-selling brand in super-slim segment of cigarette market in Iran, Indonesia and Uzbekistan. In Russia, ESSE holds more than 10 percent share of the super-slim segment.”
Mr. Huh mentioned that KT&G, former state-owned cigarette maker, entered the global cigarette market a decade ago, after the domestic market demonstrated saturation.
Trying to promote ESSE and make it a world-famous tobacco product, KT&G showed its potential at organizing various marketing events.
At present, the company is an overwhelming leader of the Korean cigarette market, with 85 percents of the domestic super-slim market.
When one of the styles of ESSE, was launched in the domestic market, it took about a week to reach milestone sales of 10 million packs, becoming the shortest ever period for the company.
“While exporting ESSE brand to other markets, we have opened several manufacturing units in major markets to keep up with growing sales”, Huh admitted. In addition, the company is set to promote its other brands and acquire competitive brands in order to become a solid player on the international tobacco market.
KT&G invested nearly $100 million to establish a production line in Kaluga Region, Russian Federation, in order to supply Eastern Europe region with ESSE cigarettes.
In addition, the company as well: opened manufacturing units in Turkey and Iran to work with Middle East and Asian markets.
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.
“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).
Last year Armenian government approved several regulations to control local tobacco market and major tobacco companies. Regional senior manager of Philip Morris International, the leading tobacco group in Armenia, Sargis Tsaghikyan stated that the tobacco giant is set to show another great performance capturing more market share in 2011.
Mr. Tsaghikyan said that Philip Morris Armenia offers solid and balanced brand portfolio in the local market, and is presented in all price categories, keeping in touch with all adult costumers’ needs. This makes the company believe that its business performance will be successful and the market share will continue to grow.
According to PMI Armenia is an emerging and very competitive market. And the Marlboro-maker has a 19.5 percent share of that market, the biggest among its major rivals.
In 2010 Philip Morris International offered the following brands to the Armenian smokers: Marlboro, L&M, Parliament, Chesterfield, Virginia Slims, Bond Street, Muratti Ambassador, Red&White and Assos Slims. L&M is the best-selling brand among PMI brands.
Last October, Armenian president signed into law amended Excise Tax Law and Tobacco Products Tax Law under which the tax rate difference among imported and locally manufactured tobacco products will be gradually reduced starting from Jan 1st 2011, therefore introducing equal approach to local and imported cigarettes. Philip Morris International welcomed these tax code amendments, as they are implemented in established time and prompt Armenian Tobacco Products Taxation equaling with World Trade Organization requirements.
Armenia adopted a universal and thorough legislative base to regulate tobacco industry and according to Philip Morris Armenia senior manager, the company is willing to cooperate with the government and public health authorities to establish norms and regulations for the domestic tobacco industry. The company believes it is vital that regulatory base is comprehensive, justified by evidence and covering all tobacco companies and products and that enforcement is adequate and even. These regulations could allow the authorities reach the public health objectives.
Philip Morris International is the largest international tobacco group in the world, selling its products in more than 160 markets. In 2009 the company had an approximately 15.4 percent share of global cigarette market excluding the United States, or 26 percent, excluding China and the USA.
On its official website, PMI states that smoking can cause addiction and severe health complications and recognizes that there is no safe form of tobacco consumption. The company supports strict and effective measure to regulate tobacco, and agrees that cessation should be the major aim of public health policies. At the same time Philip Morris International doesn’t target non-smokers and minors, and their marketing strategies are intended to adult smokers and set to encourage them top prefer PMI’s brands in favor of competitors’ products.
Altria, the owner of leading tobacco maker Philip Morris is sponsoring an offensive advertisement campaign targeting the Indian Tribal smoke shops and calling on the NY State to tax tobacco sold in reservations.
Indian tribal leaders complain the campaign is another move to oblige them to levy taxes on their products, demolishing their business – a plan that would strengthen Philip Morris’ leadership in nationwide tobacco market.
The ads funded by the tobacco giant appeared in all major newspapers across the New York State in the beginning of April.
“Albany Lets Billions Slip through Its Fingers. Tax Dollars We Need for Vital Services Go Uncollected,” one of the adverts states, ignoring the fact that Indians pay federal taxes, as well as other U.S citizens.
The campaign plays on the concerns of NYS residents regarding the unbelievable $9.2 billion deficit in the budget.
James Ransom, St. Regis Mohawk Indian Nation co-chairman, states that the ad campaign is not an act of altruism from Philip Morris, but a pure hypocrisy, as they are eager to destroy competition from Indian tribes and increase their own cigarette sales.
The same Philip Morris that did their best to encourage and promote sales of their products by signing contracts and giving discounts to Indian smoke shops, has now attempting to eliminate Indian retailers from the fading U.S tobacco market, said Ransom.
“Now Philip Morris demonstrates shocking disregard for Indian retailers who assisted them in creating the market dominance they achieved today, so they don’t need us anymore, and thus, they are willing to eliminate us and boost their presence in the market even more,” stated Mr. Ransom.
The aggressive advertisements have made Indian retailers raging with anger.
“If I could, I would stop selling Marlboros in my shop. I can’t stand people, attempting to crack down our business,” admitted Patti Snow, an owner of smoke shop in Seneca Nation reservation.
According to Snow, Philip Morris was evidently trying to put an end to the loss of market share to low-cost Indian-made cigarettes, hugely popular among adult smokers.
Indian-made cigarette are selling for much less than the tobacco products made by Philip Morris products. For instance, a carton of Marlboros is selling $65 whereas Native American Niagara cigarettes are selling for $32 per carton.
The Native American tobacco industry that pays millions of dollars annual directly to the general economy or through opening industry-related jobs, is currently in huge jeopardy.
On April 1st, President Barack Obama signed into law the Prevent All Cigarette Trafficking (PACT) Act that prohibits the U.S. Postal Services to ship cigarettes purchased thorough the Internet, a niche occupied by Indian Nations and especially popular among American smokers since the 1990s.
“The Representatives of Philip Morris ensured us they would be neutral in the issue concerning the taxation of Indian-made cigarettes. Then two weeks ago, totally unexpectedly and even without notifying us about their potential attack, they publish these atrocious ads, literally naming us as criminals, despite namely Philip Morris helped us to establish our business,” Ransom said.
Cigarette maker Philip Morris International says its third-quarter profit fell nearly 14 percent as the stronger dollar shrunk profit earned in other currencies.
The seller of Marlboro and other brands overseas sold fewer cigarettes because of higher prices and the weak global economy.
The company says it earned $1.79 billion, or 93 cents per share, in the three months that ended in September.
Revenue excluding tobacco taxes fell 5.3 percent to $6.58 billion.
Analysts expected profit of 89 cents per share on revenue of $6.71 billion.
Philip Morris International is the world’s second-biggest cigarette maker after the state-controlled China National Tobacco Corp.
Entering a common smoke shop, you will never ever see habitual blue packages with Pall Mall Lights written on them; but you don’t have to be worried, they were not phased out from products, but simply renamed to Pall Mall Blues. Another popular Reynolds American brand Salem Lights, earlier selling in green packages, are currently packed in white and pastel colors and the name merged to Salem Gold Box.
With the modifications in the names of the brands which awake associations with peace and safety, the leading cigarette makers headed by Reynolds have turned their heads to traditional strategies of color-use marketing, after the strictest restrictions in the history of US tobacco market were approved back in July.
The strategy is rather simple – such terms like lights and ultra lights that would be banned next year should be changed to colors in order to trigger associative thinking relating colors to the strength of cigarettes.
However, anti-smoking advocates criticize the use of colors and nicknames, arguing that cigarette makers are simply trying to avoid certain provisions of Tobacco Control Act approved by the Congress in summer and giving the Food and Drug Administration the authority to regulate tobacco products, including the ban on marketing certain cigarettes as safer ones, which enters into effect on June 22, 2010.
RJ Reynolds, maker of Pall Mall, Camel, Salem and a dozen of other brands denies any accusations in attempting to infringe the regulation, and states that change in brands’ names is explained by the need to help their customers to locate their favorite cigarettes among other ones.
But public health experts say that similar changes have already been applied by cigarette industry in the countries with the most severe tobacco regulations. Studies fulfilled in Canada and UK, where the restrictions are a way more rigorous in comparison with the United States, demonstrated that smokers thought that names like “white”, “silver” were safer for health and less addictive than regular cigarettes.
The FDA spokesperson said that agency is aware about the color use and added that the labeling provision would be reviewed and colors could as well be banned when the restrictions comes into effect next summer.
RJ Reynolds spokesman David Howard said that such sudden and immediate change is conditioned by both federal restriction and a ruling currently pending in federal court.
Reynolds analysts surveyed smokers to compile their preferences of the possible designs for the top brands. The Camel-maker made use of surveys and polls to develop new designs for the brands. The new packs are of principal brands like Salem and Pall Mall already selling in the stores, while modified Camels and Winstons will arrive next month.
Philip Morris USA, Reynolds American principal rival and the largest US cigarette maker refused to reveal plans of possible color use, but said that they are planning to change packs in 2010.
Prof. Ben Brown, head of College of Business at the University of Delaware said that usage of colors in names of particular products have been the most efficient strategy in keeping customers with a particular brand, when there would be no lights and ultra lights on the shelves.