Tag Archives: Philip Morris USA
Major rivals likely to follow PM USA steps shortly
Philip Morris USA, the leading cigarette maker in the USA, owned by Altria Group, is set to complete a six cent price increase per pack of all of its cigarette brands, the second time the tobacco giant has raised its price list this year, reported Dow Jones.
New York City has no authority to oblige sellers of tobacco products to post anti-tobacco warnings, showing diseased lungs, dead corpse and decayed gums and tooth, a U.S. court of appeals decided this week.
The ruling delivered by the 2nd Circuit Court of Appeals, comprised of three judges, was a defeat for New York health authorities, who were encouraged by Mayor Michael Bloomberg, have turned anti-smoking campaigns into a crusade.
Major tobacco groups, led by Philip Morris USA, Reynolds American and Lorillard, together with two largest trade associations and two store chains, have submitted the lawsuit in June 2010, complaining the graphic labels will infringe their commercial rights. New York City agreed to put a temporary delay in enforcement of the pictures due to the litigation.
Judges Denny Chin, Peter Hall and Gerard Lynch declared that although “the intention of the City to increase the level of consumers’ education in this field is quite understandable,” but only federal legislation may “oblige retailers to display warning signs closer to cigarette displays.”
An attorney for Philip Morris USA declared in a statement that “this litigation has always been aimed at providing understanding over the authority to regulate the sizes and text in tobacco warnings.”
On the threshold of the annual financial report, presented by Altria Group, owner of Philip Morris USA, leading industry analysts forecast its performance during the fourth quarter of the year, basing on its Q3 results.
Since adult Americans reduce their expenses on tobacco products, due to growing taxes, and increasing social stigma on smoking, the largest cigarette maker in the United States reported drop in shipping volumes, but confirmed it still managed to obtain revenue growth through increase of organic cigarette prices during its earning conference pre-call.
Industry experts predicted that the company’s leading brand, Marlboro could retain its market share, thanks to the recently introduced Marlboro Leadership Price, though the brand has lost 1% of market share in the previous quarter, totaling 41.7% of the US cigarette market. In addition, the market share of its other key brands, including Parliament and Virginia Slims, went down as well.
The drops in Marlboro market share affected the overall number of cigarettes sold by the company during the quarter, which dropped by 9% to equal 33.3 billion cigarettes versus the same period a year before. Yet, Philip Morris USA’s discount cigarette brands, including L&M were up by 9.5%.
Philip Morris USA, Reynolds American and Lorillard are set to increase prices on their cigarette brands.
After Altria, the parent company of Philip Morris announced its cigarette price increase two weeks ago, its main rivals, Reynolds American and Lorillard admitted to follow the trend, approving five-cent price hike.
David Howard, senior communications manager at Reynolds American, said that the price hike would affect the company’s flagship brands, Pall Mall and Camel, and the support brands, including Winston, Kool, Salem and others. The price increase took into force last week.
He mentioned that the latest price change is a list-price rise intended to the cigarette-maker wholesale customers. Howard admitted that the company does not comment on retail prices, as they are set by the wholesalers.
The largest cigarette producers could compensate $2 billion under an advised deal with attorney general of the State in order to settle a prolonged dispute over payments required by the landmark 1998 tobacco settlement.
Negotiators for Altria Group Inc.’s Philip Morris USA and other cigarette enterprises have achieved a provisional deal with officials representing the 46states that signed the 1998 Settlement Agreement.
Native American cigarette brands, as for instance Seneca, account for more than 4% of U.S. volume.
The given agreement would permit leading tobacco companies to keep part of the funds they have kept from states or disputed under the 1998 pact, in accordance to which they agreed to pay about $200 billion in order to help states charge the costs of curing sick smokers.
In concordance with the new deal, moneyless states would obtain several billion of the contested dollars. The deals also would review the rules to how states charge fees and taxes from smaller enterprises that haven’t joined the 1998 agreement.
If the deal will be introduced, the main loser could be Native American tobacco companies, which have become powerful competitors with their cheap brands. The deal would require states to introduce rules demanding these enterprises to start paying sate excise duties and fees for sales on tribal lands, which could oblige them to raise prices. Advocates representing Indian cigarette interests are currently threatening legal challenges.
“What the states and companies are doing is not right. All states under the present deal would be disputing tribal economies in order to protect largest tobacco companies’ market shares,” stated Lance Morgan, chief manager of the Ho-Chunk Inc., which distributes tobacco products on tribal lands.
Native American brands as King Mountain, Mohawk and Seneca account for approximately 4% of the U.S. cigarette volumes, according to Morgan Stanley findings.
Altria, Reynolds American Inc. and Lorillard Inc. refused to comment on the issue.
Several states have adopted laws requiring the nonparticipating enterprises to put money aside in escrow accounts. In 2010, the U.S. market share of nonparticipating enterprises increased to 6.5%, the highest figure since 2004, when it remained at 8.27%.
In order to decrease their annual payment, the largest tobacco companies should demonstrate that their market-share loss is mostly due to the agreement. They successively have observed the condition, according to enactments by independent consultants.
An arbitration committee has started examining the issue in determining how to proceed with about $1.1 billion in disputed 2003 payments.
How much the enterprises would gain through the new agreement depends mostly on how many states participate in it. In case all states and U.S. territories in the 1998 agreement sign on, the tobacco enterprises would gain nearly $2 billion.
A research carried by U.S. Centers for Disease Control and Prevention (CDC) revealed that cigarette brands produced by U.S. tobacco companies in comparison with cigarettes brands produced in other countries, possess higher levels of toxic chemicals that provoke cancer.
As concluded the CDC research team, the USA tobacco mixture comprises more cancer-causing substances than cigarettes manufactured in Australia, Canada, and the United Kingdom.
In the course of research scientists examined 126 smokers from Australia, Canada, and the United Kingdom. The examined smokers were aged 18-55 years and smoked daily around 15 cigarettes for the last 12 months.
The examined participants were devoted to “American Blend” cigarette brand for more than 3 months. The CDC team hasn’t specified what kind of U.S. brand was used, only stating that it as a popular “American blend”.
Among the brands that appeared in research were Players in Canada produced by Imperial Tobacco, Lorillard’s Newport, Marlboro produced by Philip Morris USA, UK’s Benson & Hedges and Winfield in Australia produced by British American Tobacco.
More than 2000 cigarettes butts were examined by the research team.
After examining cigarettes made in Canada, USA, Australia, and the United Kingdom, the scientists found out that tobacco products from United States identifying as ‘American Blend’ contain high levels of tobacco-specific nitrosamines and cancer-causing chemicals that favor the development of malignant tumors.
Whereas cigarettes made in other countries contained other types of tobacco that have shown lower levels of carcinogens.
In order to calculate the levels of TSNA, the researches measured the quantity of these substances in cigarettes butts, in saliva and urine of those smokers who participate in the research. They came to conclusion that smokers of cigarettes made in USA were exposed to three-time higher levels of carcinogens than smokers who prefer cigarettes brand from other countries.
“It is obvious that cigarette brands that are produced in different countries differ in methods of fags’ production and also in applied ingredients”, said Dr. James Pirkle, vice manager for science at CDC’s National Center for Environmental Health. “All of those tested tobacco products demonstrate high amount of cancer-causing substances, although, the study shows that the levels of tobacco-specific nitrosamines differ from nation to nation, and cigs made in U.S. contain the highest levels of this substances” the scientist concluded.
The obtained data are published in the latest ‘Cancer Epidemiology, Biomarkers & Prevention’ Journal.
The present research is one more proof showing the severe consequences of tobacco usage,
that is the major cause of preventable deaths all around the world, tacking the lives of more than
5 million people per year.
According to the recent report presented by the World Health Organization, more than 8 million of people will die till 2030 if tobacco usage is not reduced.
As more and more eating and drinking venues prohibited smoking inside at their own will, the latest Virginia Anti-smoking policy would not trigger much opposition in the state which is home to the most ancient traces of tobacco consumption originated in the Jamestown settlement more than four centuries ago.
Thus, beginning from December 1, Virginia became the 27th state to outlaw lighting up in restaurants and bars. The only exemptions make up those places where smoking sections are physically separated from non-smoking areas and having specialized ventilation system.
The ban is especially landmark for tobacco-loving Virginia, where tobacco plant is the most spread crop on source of huge revenue for the state coffins. The primary role of tobacco crop can be vividly demonstrated by seeing the roof of Virginia State Capitol located in Richmond, which is decorated by frescoes with golden tobacco leaves.
Moreover, the Capitol building is situated several blocks away from the largest manufacturing plant of Philip Morris USA, the maker of legendary Marlboros.
However, the proximity to cigarette industry did not stop City Councils of Richmond and North Carolina’s Raleigh, where leading tobacco companies, Philip Morris and Reynolds American reside, from implementing their own citywide bans on smoking in eateries.
For instance, North Carolina, the second largest tobacco state behind Virginia, also banned indoor smoking on January 2, 2010. The NC legislation permits smoking in cigar clubs, tobacco shops and patios, similar to Virginia law. However, in contrast to Virginian ban, NC legislation would not exempt any eatery, no matter whether it provides smoking section or not.
Thomas Hoselton, spokesman for Virginia Restaurateurs Coalition said that uniform legislation with no exemptions would be more beneficial for restaurant owners, because they would not have to spend thousands dollars on designating a smokers’ section.
Owners of several venues like Richmond-based Jazz Café opted for making his place smoke-free long before the statewide ordinance entered into effect. However, for other like Hisham Arazi the smoking ban appears to be an unfair jeopardy for his small hookah lounge in Richmond. The Palestinian immigrant has to spend huge sums of money to build a separate section and install expensive ventilation system there in order to allow his customers smoke hookah a traditional Arabian after lunch pastime that became very popular across the nation recently.
Arazi said that even upon making required changes he would not be sure his business would survive, as anti-smoking advocates are eager to convince the legislature to cancel all exemptions.
The American Heart Foundation reported that 27 states and the District of Columbia have already adopted legislations to prohibit smoking in restaurants, and few of them provided exemptions for hookah bars.
Economists state that a partial ban on smoking like that in Virginia is not good for restaurant industry as it provides competitive disadvantages for small venues that are not able to build separate sections and have to become completely smoke-free, while their larger rivals would establish such smoker-friendly sections and attract more customers. They admit that comprehensive ban on smoking in restaurants would be more fair.
The Sharps, a farmer family from North Carolina has become famous for the high-quality tobacco they have been growing on their farms for many decades. However, when the federal excise tax on tobacco products was increased by 150 per cents, the Sharp family became frustrated by finding themselves somewhere near bankruptcy.
Peter Sharp, who has been growing tobacco from his early childhood and crops more than million pounds of tobacco on 500 acres every year, admitted that their customers reduced their orders on the threshold of inevitable sales declines. Mr. Sharp also said that they and other farmers would have to fire up to a half of their workers in order to cope with losses.
Following public smoking bans that were imposed in every state across the United States, state cigarette tax increases and constant influence of anti-smoking groups, the sales of cigarettes and other tobacco products were supposed to decline by almost 5 per cent in 2009.
Yet, with the new federal tax on cigarettes that jumped from 39 cents to $1.01 a pack on Wednesday, April 1, industry experts predict up to 10 per cent decline in the sales of cigarettes. Other tobacco products would also suffer.
Sharp said tobacco retailers have cut their orders by one third, and industry tycoons Philip Morris USA and Reynolds American reduced their orders for his tobacco by 5 percent when the bill regarding federal excise tax increase was signed into law. Growers admitted that the tobacco consumption cutbacks would definitely trigger a kind of a domino effect because farmers would have no money to pay salaries, to buy fuel and equipment. Therefore, that would have a huge and very grievous impact on the entire community, affecting many people.
Farmers who had been raising tobacco were always firmly protected by local authorities for many decades, like lawmakers from Michigan and New York rigorously defend their automobile industry and Wall Street, since tobacco growing still is a hugely profitable business. According to the reports, only in the state of North Carolina the tobacco harvest was worth almost $700 million last year.
However, politicians do not take care of ‘Golden Leaf’ anymore. Several years ago Congress abolished the price support and quotas for tobacco, the system that was established during Depression. Last week the Washington lawmakers went even further by providing the Food and Drug Administration with the powers to regulate tobacco products.
North Carolina Assembly members are now debating over increasing the state taxes on cigarettes and tobacco products to unimaginable and incredible $1 per pack. Just four years ago the state cigarette tax was only a nickel.
Kay Hagan, a Democrat Senator from North Carolina was initially against the federal tax hike, stating that her native state would lose almost $40 million in revenue and 3,000 work places. However, she then changed her mind, and voted for the corresponding bill, saying that she decided to support the health of future generations, an excuse, local farmers like the Sharp family simply does not understand.
Jeff Thompson, Sharps’ neighbor railed at the Congress decision, saying that those programs that would benefit many children across the nation should not be paid by a small group of tobacco consumers and growers only. He added that it would be fair if all the tax payers would have paid for that program.
Thus, the tax increase became another huge hit for the farmers who have just recovered from 25 percent sales decline in 2005 when tobacco quotas were abolished. Since 2005, farmers have turned their head to exports and new tobacco-containing products created by tobacco industry moguls.
During these four years tobacco industry has invented new marketing strategies, launching such products as snus, chewing tobacco and other products to the cigarette market. These products were supposed to become cheaper alternatives for cigarettes, but the federal tax hike affected them as well.
Tobacco growers also began selling their harvest to China and other countries, however farmers complain that cheap tobacco from Brazil and African countries restricts the volumes ordered from overseas and therefore could not help them to overcome losses.