Tobacco firm still optimistic, mulls additional investments

MANILA, Philippines - Japan Tobacco International Philippines Inc. (JTIP), maker of Winston, Camel and Mevius (formerly Mild Seven) cigarette brands, said it remains committed to the Philippine tobacco market and that it would stick to the premium market segment despite the influx of cheaper choices and substandard competing brands.

Manos Koukourakis, JTIP general manager, said the company is staying in the Philippines for the long haul and will continue to provide employment opportunities to Filipinos.

He said that while the company might see a decline in sales volume from last year, it was still optimistic it would meet its financial targets for the year.

 â€œOne thing that is certain is our company is here to stay. The Philippines is a lucrative market,” Koukourakis said, noting that annual revenues from the local tobacco industry amount to P100 billion.

 â€œWe want to grow our business here and we want profitability for our company and stakeholders. But it makes us happy also to increase the number of people working for this company.  Growing it means we will probably invest more than we invest today,” Koukourakis added.

JTIP currently has 200 direct employees and hundreds of distributor partners and sales persons, he said.

According to Koukourakis, JTIP is currently hitting above the target  even with the implementation of the sin tax law that effectively raised taxes on the so-called sin products such as cigarettes and alcohol.

He, however, noted that the company set a conservative revenue goal given the passage of the sin tax bill.  “When we set our targets last year, we were very cautious, careful. The volume wont be better, it will be above our plan, because our projection is lower, but not better than last year,” he said.

Nevertheless, Koukourakis expects JTIP to maintain its market share of about three percent.

With some smokers switching to cheaper cigarette brands, Koukourakis said the company remains unfazed by  the intense price competition brought about by smaller players that can afford to sell their goods at P1 per stick or P20 per pack.

He said the company has decided not to join the price war because this would result in huge losses.

 â€œOur company decided consciously not to participate in this. First of all, it generates loses. The reason we believe that is that if today you sell a cigarette at P17, and you pay P12 in tax and P2 in VAT, you end up with P3.  You pay P4 to P5 to retail, you end up with -P2 and  you have another -P5 to -P6 for production and end up with -P8 to -P10, best case scenario.

He likewise cited the marketing and office costs that need to be shouldered by the company.

“At this price point, you make no money. Can you sustain a business model like that? For a period of time they can afford it but in the long run, I find it hard to believe that because taxes are increasing.

JTI, a leading international tobacco manufacturer, also markets world-renowned brands Benson & Hedges, Silk Cut, Sobranie, Glamour and LD. With headquarters in Geneva, Switzerland, and about 27,000 employees worldwide, JTI has operations in more than 120 countries.

The group’s core revenues stood at $11.8 billion last year.