Tuesday, January 29, 2008

Merchant of Death Eyes Pakistan Market

Philip Morris International, the international unit of the US tobacco giant Philip Morris often described as a merchant of death, is building a new massive cigarette plant in Pakistan.
Philip Morris is expected to spin off PMI as an independent company to be unconstrained by the U.S. tobacco regulations and out of reach of American litigators. Importantly, its practices would no longer be limited by American public opinion, paving the way for trying out new products.

As the smoking rates in developed countries have slowly declined, they have risen dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%), according to the Wall Street Journal.

The World Health Organization's Framework Convention on Tobacco Control, an international public-health treaty, has 152 participating countries, including China, Brazil and Pakistan. While it has led to greater regulation in many of the world's markets, countries such as Indonesia and Russia haven't signed on. It should be noted that Pakistan was derisively named as "The Winner of Marlboro Man of The Year Award" by anti-tobacco activists for stalling these negotiations but ultimately signed the treaty.

In addition to targeting Pakistan, India, Brazil and Russia, one of PMI's immediate goals is to harness the huge potential of China's smoking population, as well as some of that country's own brands, reports the Wall Street Journal.

After negotiating for three years, PMI is expected this year to begin marketing three Chinese brands. The smokes -- selected from hundreds of varieties produced by state-run China National Tobacco Corp. -- will be sold in Central Europe, Eastern Europe and Latin America, according to PMI.

The launch is planned for sometime in the next six months. It is part of a December 2005 deal in which Philip Morris agreed to market Chinese brands internationally in exchange for the right to produce its own Marlboro brand at state-owned factories. At the moment, Philip Morris is limited to importing its cigarettes for sale in China and is restricted by stringent quotas.

While Philip Morris investments in Pakistan, Brazil, Russia, India and China are expected to bring in much-needed capital and create thousands of new jobs, the proven health risks posed by smoking will also cause widespread disease and death in future years. This does not appear to be a good bargain for these emerging economies with young populations.


Anonymous said...

people are going to black heart and heart damage. marlboro cigarette is bad things

pakistan people are going to death in these day and population are going to down


Anonymous said...

I heard that tobacco is haram. If so, how come some Muslim clergyman doesn't declare a fatwah against Philip Morris?

Riaz Haq said...

I just heard US Billionaires Bill Gates and Michael Bloomberg are providing $375m to launch a campaign for anti-smoking projects in the developing world. This is welcome news, given how the predatory tobacco giants have been targeting the developing nations to enhance their profits. Kudos to Gates and Bloomberg.

Riaz Haq said...

The News is reporting on the lack of progress in fight against smoking in Pakistan.

The Coalition for Tobacco Control (CTC-Pakistan) has termed 2008 as the worst year for tobacco control in Pakistan.

Talking to ‘The News’ here on Thursday, the Coordinator of CTC Pakistan, Khurram Hashmi said, “The only success story we have had during 2008 is a raise in tobacco taxes — that too nominal. The tobacco industry, on the other hand, is fiercely engaged in organising campaigns in the name of public health, the latest examples being the holding of a blood donation camp in collaboration with the Pakistan Red Crescent Society right in the heart of the capital city and a one-day free medical camp in district Swabi, which was praised by NWFP’s minister for social welfare and women development.”

Khurram said, the civil society has feasted their eyes on new year with high hopes for a better response from the government in tobacco control “but there has been little development in implementing the tobacco control ordinance,” he regretted. “So far, we have not only delayed the introduction of a new set of rotational health warnings from January 2009 to June 2009, but have also allowed designated smoking areas in the country.” Khurram said.

The CTC coordinator emphasised that Pakistan is a high priority country when it comes to tobacco control, and with the rest of the countries in its region introducing new mediums to contain the tobacco epidemic, “it is about time we should consider where we stand” in relation to implementation of the guidelines adopted by the Conference of the Parties (COP) to the WHO Framework Convention on Tobacco Control (FCTC), which held its third session (COP-3) in Durban, South Africa, in November 2008.


Riaz Haq said...

Here's a Nations newspaper story about rise in smoking deaths in Pakistan:

KARACHI - Chest specialists strongly criticised the government on its failure to take effective measures for the control of tobacco use in the country. They demanded that the “Prohibition of Smoking and Protection of non-smoker Ordinance of 2002” be strictly enforced in order to protect the public health from tobacco, the single largest preventable cause of death in Pakistan.
Shahzad Alam from WHO said that 5.4 million people died last year as a result of tobacco and unless some urgent actions are taken by 2030 more than 8 million people will be dying every year from tobacco.
He said that in Pakistan about 100,000 people die every year as a result of tobacco. Lung cancer is a vital cause of cancer deaths in males followed by mouth cancer. Both these cancers are tobacco related and can be prevented if this powerful addictive substance is avoided. Tobacco use is also a major risk factor for heart attacks, stroke, pneumonia, Chronic Obstructive Lung Disease (COPD) as well as 20 other serious diseases, he added.
Quoting a research conducted by the Agha Khan University (AKU), Prof Javaid Khan, Chair National Alliance for Tobacco Control, said that 24 per cent of male and 16 per cent of female college students were regular smokers in Karachi.
The prevalence of smoking in the youth of Islamabad is even higher at 28 per cent, adding that tobacco use is on the increase in the Pakistani youth because of aggressive marketing by the tobacco companies. He said that government of Pakistan was a signatory to Framework Convention on Tobacco control and according to this United Nation’s treaty our government was bound to take strong anti-tobacco measures in the country, but sadly our government was failing in its obligation.
Prof Khan regretted the recent decision of the ministry to allow designated smoking areas at indoor public places. He demanded that in order to protect its citizen from the hazards of passive smoking, government must ensure that all indoor public places are completely tobacco smoke free.
Dr Muhammad Irfan, Consultant Chest Physician at AKU, urged public to give up tobacco ‘use’ immediately, as most people when they are young do not think about quitting this habit and by the time they decide to give up this addiction it is often too late and permanent damage to health had already been done. By citing an example, he said that if one continues to smoke he is bound to lose 3 months/year of his life after the age of 40 every year. He informed that nicotine withdrawal symptoms only last for couple of weeks which requires strong will power, and by using certain medicines quitting smoking is now much easier than ever before.

Riaz Haq said...

Here's a Business Recorder report on Philip Morris in Pakistan:

Amongst the two multinational tobacco companies in Pakistan, Philip Morris Pakistan Limited (formerly known as Lakson Tobacco) stands at number two to Pakistan Tobacco Company.

Philip Morris Pakistan Limited is a public listed company on the Karachi and Lahore Stock Exchanges and is an affiliate of Philip Morris International Inc (PMI).

The company is involved in the manufacture and sale of cigarettes for Pakistan's domestic market.

It currently operates three cigarette factories with primary and secondary facilities and one tobacco leaf threshing plant, all located in various parts of the country.

It also runs an extensive tobacco leaf agronomy program in the tobacco growing areas of Khyber Pakhtoonkhwa.

The company is also involved in CSR where it is engaged in undertaking various initiatives in the education, environmental sustainability and disaster relief sectors to give back to the community it operates in.

Brand Portfolio Philip Morris Pakistan has a portfolio of ten brands for the domestic market.

Of the main ones, it markets and sells both international brands like Marlboro and Red & White, and locally owned brands like Morven Gold, Diplomat, K2.

Highlights 2011 has been a challenging year for Philip Morris so far like the rest of the FMCGs due to the weakening economic situation fuelled by power crisis and rising inflation.

Moreover, the performance of the company is highly affected by the illicit cigarette market that accounts for almost a 20 to 25 percent market share.

The detrimental impact of the non-tax paid industry extends to not only the company but to the legitimate industry as a whole and also the government as it reduces government revenue.

Being a cigarette manufacturer and importer, the company has high taxes and duties expenditure.

The company's sales tax and excise duty as a percentage of its gross turnover for the 9MCY11 stood at a little above 61 percent as compared to 60 percent same period CY10.

The company saw weaker sales of 2,847 million cigarettes mainly attributed to the adverse impact of the non-tax paid tobacco industry.

Overall, compared to 9MCY10, the nine months ending September CY11 has shown declined profitability.

Its contribution to the national exchequer went down from 16,330 for 9MCY10 to 16,178 million for 9MCY11.

The company faces tough competition from not only the unaccounted for sector but also its peer and the biggest rival in the industry, Pakistan Tobacco Company, an associate of British American Tobacco Company

Profitability Gross turnover experienced a decline of 3.9 percent from Rs 25.7 billion for 9MCY10 to Rs 24.7 billion in 9MCY11.

The decline in gross revenue is not only due to the tough economic environment, high government taxes and illicit trade but also due to the successful launch by PTC of its brand, Capstan which alone has a market share of 14 percent.

Though the sales tax and excise duty were considerably less for the nine months CY11, the gross profit was seriously injured by a surge in the cost of sales by 9.8 percent for the 9MCY11 compared to the same period CY10.

This is mainly because of rising energy costs, security related expenses and high inflation.

GP margins had a steep decline to 23.7 percent for the 9 months of 2011 compared to 35.5 percent for same period CY10.

As if to compensate to some extent, the distribution and marketing expenses demonstrated a fall of approximately 12 percent for periods in comparison.

The company recorded a loss after tax of Rs 284 million with an NP margin of -2.8 percent compared to the profit after tax Rs 767 million for the same period in 2010.

This was primarily due to an increase in the finance costs by approximately 270 percent.....


Riaz Haq said...

Here's an ET report on exploding tobacco profits in Pakistan:


Pakistan Tobacco Company has announced its profits for the year ended December 31, 201, declaring a net profit of Rs1.73 billion rupees, compared to only Rs363.79 million in the previous year. This translates into a growth in profitability of a staggering 375% over the preceding year.

The entire growth of the company can be attributed to the growth in its top-line, with gross profits growing from Rs6.24 billion to reach Rs8.45 billion. Breaking that up, the company’s gross turnover for the year stood at Rs75.53 billion (12% higher than the previous year), out of which it paid a whopping Rs39 billion in excise duties (Rs35 billion in the previous year) and an additional Rs11 billion in sales taxes (Rs10 billion in the previous year).

Meanwhile, its selling and distribution expenses increased only 12% and administrative expenses by 4.5%; while its other operating expenses declined by 23% and other operating income increased by 67%. This effectively meant that almost all the increase in the company’s top-line went directly towards its net profits, as it also cut its net finance costs in the same period by 28%.

The company’s earnings per share clocks in at Rs6.77 per share, and it has announced a final dividend of Rs3.25 per share in addition to two interim dividends (already paid) at Rs3.05 per share.

Pakistan Tobacco Company is part of British American Tobacco, “the world’s most international tobacco group,” according to its website, with its brands sold in 180 markets around the world. Their operations began in Pakistan in 1947, making the company one of Pakistan’s first foreign investments.

The company is involved in every aspect of cigarette production, from cultivation to packaging. Its brands include Dunhill, Benson & Hedges, John Player Gold Leaf (the largest urban consumer goods brand in Pakistan), Capstan by Pall Mall, Gold Flake and Embassy.

Pakistan Tobacco is the single-largest taxpaying unit in Pakistan. The company pays more taxes than all salaried individuals in the country combined.


Riaz Haq said...

Nielsen report on illicit #cigarette trade in #Pakistan launched: Over 80 billion sticks sold each year. #tobacco http://www.pakistantoday.com.pk/?p=449709

A recent report published by Nielsen Pakistan and titled “The challenge of Illicit Trade in Cigarettes: Impact and Solutions for Pakistan” was launched at a seminar on” illicit trade in Pakistan” held on Thursday in Lahore.

Speaking at the event, the Nielsen representative shared the findings of the report with a wide range of participants including high ranking officials from Federal Board of Revenue, Police, Punjab Government as well as industry and civil society representatives.

According to the report nearly 1 out of every 4 cigarettes in Pakistan is illegal. The share of the illegal cigarettes in the total market is estimated to be 23.7% which means that around 19.5 billion sticks sold per annum are illegal.

The report discloses that the illicit cigarette sector has witnessed a growth of 43.5% over the last 6 years and all this has been at the expense of the tax compliant industry. This phenomenal growth has also caused a huge dent in the national exchequer in the form of loss of duties and taxes. The report estimates this loss to be above Rs. 24 billion per annum.


Riaz Haq said...

#Pakistan #tobacco #tax rise hits BAT cigarette biz. Sales drop 5.6% worldwide, down 2.5% excluding Pak https://www.ft.com/content/2915081a-ac8d-35e0-b4ca-cada589cda53 … via @FT

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British American Tobacco, which this week completed its merger with its US peer Reynolds, sold 5.6 per cent fewer cigarettes in the first half of this year mainly because of a tax rise in Pakistan that led to a big increase in illicit sales.

Reporting half-year results, BAT said volumes excluding Pakistan were down 2.6 per cent, a milder decline than in the industry as a whole. It said its market share in its main markets grew by 0.3 percentage points.

Revenues rose 15.7 per cent or 3.5 per cent at constant currencies to £7.7bn. Operating profits rose 16 per cent to £2.6bn.

Chairman Richard Burrows said “the combustible business continued to perform well, against the backdrop of a strong volume comparator”.

Riaz Haq said...

#Pakistan to impose ‘sin tax’ on #cigarettes, sugary #beverages. #Tax revenue to be used to boost #health budget.

After continued lobbying by civil society, Minister for National Health Services (NHS) Aamer Mehmood Kiani announced on Tuesday that soon a ‘sin tax’ will be imposed on cigarettes and sugary beverages.

Speaking at a public health conference at the Health Services Academy, Mr Kiani said that the PTI government was committed to increasing the health budget by five per cent of GDP.

“Various routes will be used to increase the health budget,” he maintained, “and one of them is imposing a sin tax on tobacco products and sugary beverages. That sum will be diverted to the health budget.”

Currently, the government spends a mere 0.6pc of GDP on health. It has been suggested several times in the past that sin taxes be imposed on products that cause health-related issues as a result of which the state pays heavy penalties in the shape of healthcare spending and lowered human productivity.

Talking to Dawn, the director general of the NHS Ministry, Dr Asad Hafeez, said that tax on tobacco and sugary beverages was being charged in some 45 countries.

“A sin tax is an internationally recognised term and is specifically levied on certain goods deemed harmful to society, for example tobacco, candies, soft drinks, fast foods, coffee and sugar,” he said.

“The United States charges about $1.5 (approximately Rs200) per pack of cigarettes, while the UK charges 40 pence (around Rs100) per litre of sugary beverages as sin tax. Thailand, as well as a number of other countries, has similar taxes that are earmarked for healthcare services.”

Replying to a question, Dr Hafeez explained that India imposes a sin tax on gutka and paan masala, and the sums thus collected are spent on the healthcare sector since these products cause illnesses that become a burden on the public exchequer.

“We have not yet decided on the exact amount for a sin tax [in Pakistan],” he clarified, “but it will certainly be a handsome sum. Because of the new tax, the price of cigarettes will increase, making it more difficult for young people to buy them. Some 1,500 youngsters start smoking in Pakistan every day, and we want to reduce that number.”

The general secretary of the Pakistan National Heart Association (PANAH), Sanaullah Ghumman, told Dawn that his association had for many years been demanding the imposition of a sin tax.

“Recently, during a meeting with President Dr Arif Alvi, we again raised the issue of such a tax,” he elaborated. “The minister for health was also present at the meeting, and the president assured us that he would do what was possible. The proposal was floated during the tenure of the former government as well, but was unfortunately not implemented. And even now, I fear for its fate since it is difficult to take such a decision in the face of an influential tobacco industry.”

To contextualise, according to a report of the NHS Ministry that was published a few years ago, tobacco is the single largest cause of preventable illness and death. In Pakistan, it causes some 108,800 fatalities every year, ie 298 per day. The report emphasises that the consumption of tobacco will continually increase the country’s healthcare expenses, in addition to imposing huge costs in terms of human resource.