Tobacco giant mulls farm investments

Tobacco Field

GLOBAL CIGARETTE giant British American Tobacco Plc. (BAT) plans to invest in plantations in the Philippines as soon as excise tax reforms on cigarettes push through, an official said on Friday.

“The first phase is to get the government to change the excise tax. Once that’s finished, the second phase is to complete investments in farm, factories and distribution,” BAT General Manager James Lafferty told BusinessWorld at the sidelines of the company’s launch.

Tobacco Field

Tobacco filed in Philippines

“We are working on a long-term vision in near-term business cycles, so we’ll work on the timelines and figures when we get to that point,” he continued.

The company, which handles Lucky Strike, Dunhill and Vogue cigarettes, already spent P1 billion to re-establish its presence in the local market while advocating for the Finance department-backed House Bill (HB) 5727 which abolishes the multi-tiered tax system in favor of a unitary model.

Under the current system, cigarette brands that have been around the local market since 1996 or earlier are slapped with tax rates based on retail prices for that year, while brands that arrived thereafter are charged based on current retail prices which have risen significantly due to inflation.

Consequently, brands pegged at 1996 prices are only taxed P12, while newer entrants pegged at recent, higher prices are taxed P28.30.

The uneven playing field created by the 1996 tax structure thus led to the pullout of BAT cigarettes in 2009.

“We are subsidizing the price of our cigarettes right now until the new excise tax system is in place,” Mr. Lafferty said.

But such a dire measure to keep their cigarettes affordable is only meant to keep the firm in the country long enough to fight for a more leveled out playing field.

“We don’t know whether we’ll stay in the Philippines or not. There are 40 possible scenarios on the excise tax reform, and we haven’t planned for each of them,” the executive explained.

In the meantime, the firm is focused on standard strategies for marketing the three BAT cigarette brands through point-of-purchase interactions with smokers in bars, clubs and convenience stores.

“We are willing to work within the confines of the law,” Mr Lafferty added, commenting on the advertising restrictions placed on cigarette manufacturers in the Philippines.

“We acknowledge that the product poses health risks. It’s part of the game,” he said.

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