MANILA, Philippines - Global tobacco giant Philip Morris International suffered a sharp decline in cigarette shipment volume in the Philippines in the second quarter, hurt by intensifying price competition.
In a statement, PMI chief executive officer Andre Calantzopoulos said shipments to the Philippines fell by 9.8 percent to 17.2 billion units in April to June this year.
Despite lower shipments, the market share of PMI’s flagship Marlboro brand rose by 3.4 points to 18 percent as consumption levels remained resilient. Its Fortune brand likewise saw an increase in its market share by 3.3 points to 35.9 percent.
PMI reported that total estimated tax-paid industry cigarette volumes decreased by 13.4 percent to 20.1 billion units. It attributed the decline to lower declaration of volume for excise tax purposes by the company’s main rival, Mighty Corp.
“The drop in tax-paid industry volume reflects the fact that Mighty Corporation’s tax- paid volume was down by around 40 percent. In contrast, we estimate that its total sales volume, both tax-paid and non-tax-paid, increased by about 20 percent,” PMI said.
On a year-to-date basis, excluding the impact of inventory movements, the total tax-paid industry cigarette volume declined by an estimated 1.2 percent.
PMI noted that its share of the tax-paid market went up 3.4 points to 85.9 percent, driven mainly by Marlboro and Fortune.
The company believes that Bulacan-based cigarette firm Mighty is underdeclaring its production, which is allowing it to sell at extremely low prices.
From a mere five percent in 2012, Mighty’s market share surged to 20 percent last year as it benefited from downtrading of consumers to low-end brands.
PMI is urging the government to step up its investigation into Mighty to ensure it is paying the right taxes.
The company is also hopeful that the introduction of tax stickers in August, will reduce Mighty’s ability to avoid paying excise taxes and VAT.
Mighty, however, maintained that it complies with the country’s Tax Code and that its books are open for inspection to government regulators.
The Philippines has become one of PMI’s most challenging markets in Asia. PMI suffered a 13-percent drop in its market share last year after the company raised taxes and Mighty undercut its prices.
PMI is a leading international tobacco company with its products sold in more than 180 countries worldwide. Until its spin-off in March 2008, it was an operating company of Altria Group on the Forbes Global 2000 List. Excluding the US and China, the company holds more than 28 percent of the global cigarette market.