Philip Morris Names Threats to Cigarette Market
Philip Morris International Tobacco Companyis more concerned about the influence on tobacco sales of Russia’s recent acceptance into the WTO than it is about the warning labels the company is required to put on its cigarette packs and about anti-tobacco campaigns.
Philip Morris Izhora, one of the company’s two full cigarette production plants in Russia, decreased production by 2 percent last year — to 70 billion cigarettes per year — while still managing to increase its share of the market by 0.8 percent to 26.2 percent.
“The number of cigarettes produced by the plants won’t go up soon, it is decreasing all over the world,” said Alexei Kim, director of corporate issues for Philip Morris International affiliated companies in Russia and Belarus.
“Russia has the second biggest tobacco market in the world and its market volume decreased by 2 percent last year, totaling 375 billion cigarettes.”
Reasons for the decrease are the growing struggle between tobacco companies and global anti-smoking campaigns.
Philip Morris International owns two of the strongest segments and most popular brands — Parliament and L&M. This explains why the decrease in tobacco production hasn’t influenced its share of the market. What might influence it in the future, are legal measures now being discussed in the State Duma.
One of the legal measures under discussion is the obligatory placement of graphic images on cigarette packs. The project’s authors base their argument on the experience of other countries such as Thailand.
“After six years of using photo testimonials to the harm of smoking on cigarette packs, the number of smokers in Thailand has decreased by 20 percent,” Rossiyskaya Gazeta newspaper quoted from the explanatory note to the bill Thursday.
Excise tax on cigarettes is also to increase at the beginning of this July.
“Philip Morris Izhora is one of the biggest taxpayers already; in 2011 alone we paid 45 billion rubles ($1.5 billion) in taxes and customs payments to all different types of budget and non-budget funds in Russia,” said Kim.
The Philip Morris Izhora plant produces cigarettes under more than 50 names of international brands such as Marlboro, Parliament and Virginia. The plant’s cigarettes are distributed in Russia and former Soviet republics and also exported to other countries. The Izhora plant also exports other tobacco-related products such as filters.
“The product we offer is very ambiguous and we try our best to inform our adult consumers about what risks they are taking [when they use it],” said Maria Kulakhmetova, corporate communication and public relations manager at Philip Morris Sales and Marketing in Moscow.
“Our company was the first to put warning labels on cigarette packs. In 2003, we started putting leaflets about the dangers of smoking inside the packs. Also, everyone can read about the risks of smoking on our web site.”
“Concerning the graphic images and warning labels, they won’t influence demand,” said Kim.
“When the warning labels first came out, people were curious and asked questions, but then just started to ignore them. The risks we have identified are connected with Russia joining the WTO and its relationship with the countries in the Customs Union,” he added. “Nevertheless, we are confident in our own brands and their quality.”
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