Philip Morris cuts 30% of its Marikina workforce

MANILA, Philippines - Struggling with slow sales, cigarette giant Philip Morris Fortune Tobacco Corp. (PMFTC) slashed more than 30 percent of its workforce in its manufacturing plant in Marikina as part of a restructuring plan to improve its overall operating efficiency and cost structure.

In a statement, PMFTC, a joint venture between global giant Philip Morris and billionaire Lucio Tan’s Fortune Tobacco Corp., said it let go of around 640 workers in its Marikina plant, which saw production volumes dwindle in the past two years.

PMFTC has rapidly lost its once commanding share of the Philippine tobacco market as consumer spending shifted toward the low-cost brands following price adjustments made by cigarette firms to cope with a higher excise tax.

From a high of 90 percent, PMFTC’s market share fell to 72 percent as of the end of 2013.

It lost out to homegrown cigarette maker Mighty Corp., which undercut its prices.

Paul Riley, president of PMFTC, said the job cuts were difficult but were necessary to align human resources to meet business needs and stay competitive.

“This was a very difficult decision to make but in order to maintain a viable operation and to safeguard the future of our business in Marikina, it was necessary to take this step,” Riley said.

Riley noted that PMFTC provided generous severance packages to the affected employees to help them through this difficult transition.

“We always treat our employees with the utmost respect, and all affected employees were given very generous separation packages, well in excess of legal requirements,” Riley said.

With this decision, PMFTC’s workforce in the Marikina plant is now down to a little over 1,000.

The job reductions involved retirements, voluntary programs and other options.

The Marikina plant produces more than 70 billion sticks of low-priced cigarette brands Fortune, Champion and Hope per year.

Nevertheless, Riley said the company would continue to offer highly competitive salary and conditions for all its employees, as a committed long term investor, employer and major taxpayer in the Philippines.

In 2013, PMFTC paid more than P73 billion in taxes and duties to the government.

PMFTC contracts over 50,000 farmers and last year purchased over 16 million kilos of Philippine tobacco. It works with more than 1,000 local suppliers and continues to support community programs such as livelihood cooperatives, environmental protection and disaster relief.

Despite its cost-cutting measures, the company is beefing up its investments in MIndanao with the planned infusion of about $50 million to expand its Virginia tobacco leaf production.

The farm is located on a 10-hectare property in Claveria, MIsamis Oriental.

Virginia tobacco, also known as Brightleaf tobacco, is the most widely-grown type of tobacco in the country, comprising 58 percent of the tobacco cultivation areas. This export-oriented tobacco variety is also the most common type of flue-cured tobacco used for making cigarettes.