Cigarette makers bullish despite odds

DAVAO CITY – The country’s cigarette industry looks promising despite the odds it is facing, including restrictions on advertising and marketing of the product.

“In spite of everything, things still look very positive for the cigarette industry,” said Chris Nelson, managing director of Philip Morris Philippines Manufacturing, Inc.

Nelson said the Philippines continues to be a lucrative market even if it is considerably a ‘stick market’. “There are challenges ahead even with that type of market alone,” Nelson said.

For those in the cigarette industry, the Philippines is considered to be largely a ‘stick market’, meaning, consumers buy by sticks sold retail in the thousands of ‘sari-sari’ stores and by cigarette vendors all over the country.

“At least 70 percent of the cigarettes consumed in the Philippines last year were bought by sticks,” Nelson said.

Nelson arrived here recently for the announcement of winners for Mindanao of the Philippine Art Awards.

And Nelson said Filipino adult smokers puff away an average of 12 to 15 sticks a day.

Since only 30 percent can afford to buy by packs, an official of the National Anti-Poverty Commission, said it shows that the bulk of the smokers comes from the low-income group.

“It is the same with the use of mobile phones. The sales of auto-load and e-load of the telecommunication companies are high and it shows that such a market is too lucrative for these firms to give up. There is big income in the retail system,” said NAPC Assistant Secretary Maya Santos.

Santos said the situation is also because Filipinos are more exposed to sari-sari stores and to cigarette vendors that are found in almost every nook and cranny in the country.

“You compare it in other countries where there are no sari-sari stores, so people have to buy by packs,” Santos told The STAR.

Nelson said the expected production of cigarettes in the country this year is 82 to 84 billion sticks.

Last year alone, Phillip Morris produced 32 billion cigarette sticks with 24 billion sticks for local consumption and the balance of eight billion sticks were exported to Thailand. Phillip Morris also exports cut fillers to Korea while it also eyes other potential markets abroad for its various products, including Marlborro cigarettes.

There have reportedly been no significant plunge in the sales of cigarettes despite the odds faced with the implementation of the Tobacco Regulation Act of 2003 and the Alcohol and Cigarette Excise Tax of 2005.

Interestingly, in places like Davao City, where the smoking ban in public places has strongly and strictly been imposed, cigarette sales have reportedly gone up.

And in spite of the obstacles that come the way of the cigarette industry, Nelson pointed out everything still looks ‘very positive’.

“The challenge ahead is very real and very difficult. But Phillip Morris continues to grow,” Nelson said as he recalled the growth of PMPI from only 500 employees when he assumed as managing director for the Philippines in 2003 to over 1,000 employees this year.

Nelson said cigarette companies have no other recourse but to resort to more creative and innovative marketing and sales mechanisms especially since television and radio advertisements for cigarettes have been banned for a few years now and print ad placements shall end by June next year.