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WTO puts off Thailand-Philippines cigarette tax row verdict 

The World Trade Organization pushed back its verdict on the cigarette tax row between the Thailand and the Philippines.

Trade assistant secretary Jose Antonio Buencamino told reporters on Monday said the panel formed by the WTO has sought a one-month extension on the release of its report on the issue. The verdict is now expected to be released by end-April.

Buencamino said the panel sought for an extension to give it time to review the facts presented on the case. "It's a fact-intensive case," said Buencamino. . . .

The case stemmed from Bangkok's decision to slap a bond on imports from Philip Morris Philippines Manufacturing Inc

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Ruling on RP-Thai row moved to end of April 

THE WORLD TRADE Organization (WTO) panel in charge of settling a long-standing cigarette tax dispute between the Philippines and Thailand has postponed the release of its preliminary ruling by a month, a Trade official yesterday said.

The interim report will be issued by end-April instead of end-March as the panel needs more time to go over the arguments, Trade Assistant Secretary Jose Antonio S. Buencamino said.

In the meantime, exporters -- particularly Philip Morris Philippines Manufacturing, Inc. (PMPMI) -- will have to bear with Thailand's allegedly unfair tax treatment of foreign-made cigarettes.

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DTI probes naming of Batangas street after cigarette brand  

The Department of Trade and Industry (DTI) has ordered an investigation into the decision of the Tanauan City council in Batangas to name a local street after the US cigarette brand Philip Morris.

Zenaida Maglaya, DTI undersecretary for consumer welfare and trade regulation, asked the Southern Tagalog office of the Department of Health-attached Center for Health Development (CHD) to look into the complaint of the Framework Convention on Tobacco Control Alliance Philippines (FCAP) against the Tanauan City council.

In her letter to CHD, Maglaya said the FCAP complaint against Mayor Sonia Torres-Aquino and other Tanauan City officials was "consistent with (a provision) of the Monitoring and Enforcement Guidelines of Republic Act no. 9211 (otherwise known as the Tobacco Regulation Act of 2007) and its implementing rules and regulations."

The alleged violation by the Tanauan City council "related to Section 22 of RA 9211, which is within the Department of Health's administrative responsibility," noted Maglaya.

The law prohibits all forms of advertisement of a cigarette brand.

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DOH to push picture-based warnings on cigarette packs  

GOOD news for anti-smoking advocates, but bad news for the tobacco industry in general.

The Department of Health will push for the printing of "picture-based warnings" against tobacco use on cigarette packs being sold to the public.

Stressing the need to intensify the government's campaign against the ill-effects of cigarette smoking, Health Secretary Esperanza Cabral told a news conference on Friday that she favored the strategy.

The DOH would implement as soon as possible a "draft administrative order" covering such warnings, Cabral told anti-smoking advocates like the Philippine College of Chest Physicians (PCCP) and the Framework Convention on Tobacco Control Alliance-Philippines (FCAP).

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• Tobacco Tax Control Project In Five Southeast Asian Countries 

The Southeast Asia Tobacco Control Alliance (SEATCA) will provide Southeast Asian policymakers with research-based evidence on improving tax systems for tobacco control in five targeted countries.

The research will be funded by a five-year US$7 million (RM23.7 million) grant from the Bill & Melinda Gates Foundation and will focus on tobacco tax control in Cambodia, Indonesia, Laos, the Philippines and Vietnam.

Director of the Bangkok-based SEATCA, Bungon Ritthiphakdee said higher taxes on tobacco led to higher prices for tobacco products, which immediately discouraged non-smokers from starting and current smokers from continuing with their harmful habit.

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New tobacco giant may lay off workers 

Homegrown cigarette maker Fortune Tobacco Corp. will now share nearly all its operations with the Philippine unit of Philip Morris International under a new company in which both firms have equal stakes, executives said in a press briefing yesterday.

The merged firm dubbed PMFTC, Inc. will absorb operations of the two firms which are geared towards the domestic market, as well as Fortune Tobacco's export business, the officials said.

Both firms will maintain separate operations in the meantime but are studying the possibility of sharing factories and slashing redundant jobs, Philip Morris Philippines Manufacturing, Inc. managing director Chris J. Nelson said.

"This is not a merger where one company disappears and another remains," Mr. Nelson said.

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The bashful bride (and groom)  

IT was billed as a marriage of partners but taipan Lucio Tan of Fortune Tobacco and Philip Morris International Asia-Pacific president Matteo Pellegrini both disappeared after signing the joint-venture papers at the Makati Shangri-La Thursday.

Left to fend off questions from the nosy press were Tan's brother, Harry, who was uncharacteristically clad in an investment banker's black suit instead of the usual barong; Fortune Tobacco chief executive Salvador Mison; and Philip Morris country head Chris Nelson, who, incidentally, is married to a Bicolana.

Despite the new company, tentatively named PMFTC Inc., controlling the production, marketing, distribution and export of Philip Morris and Fortune products, the union could still not be classified as a merger since the two underlying tobacco companies will still maintain their corporate identities, said Nelson.

Nelson, who had been designated president and chief executive of PMFTC, was also tight-lipped as to which assets and liabilities had been assigned by both partners to their joint venture or its capitalization.

A check with the Securities and Exchange Commission showed that no incorporation papers of PMFTC were on file as of Thursday.

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• Group hits city officials for naming street after cigarette brand 

BATANGAS, Philippines - An alliance of health organizations has threatened to sue officials of Tanauan City in Batangas province for naming a street in the city after a cigarette brand.

Framework Convention on Tobacco Control Alliance Philippines (FCAP), has threatened to sue Tanauan City Mayor Sonia Torres-Aquino and the members of the Sangguniang Bayan for naming a street "Philip Morris Street" after a cigarette brand.

Dr. Maricar Limpin, FCAP Executive Director said that the city officials approved through a Sangguniang Panglunsod (City Council) resolution the naming of a street in Barangay Pantay Bata with "Philip Morris Street." . . .

The group said that under the Tobacco Regulation Act or Republic Act 9211, a street sign falls under the category of "advertising", specifically "outdoor advertising" because it is a visual message or a "sign" intended for the public which gives publicity by words or images about or on a particular product, in this case, Philip Morris.

Section 22 of the law prohibits all forms of outdoor advertising of tobacco products starting July 1, 2007, Limpin reiterated.

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Tan changes his style for cigarette deal 

It is not difficult to see the business sense behind Thursday�s agreement between Philip Morris International and Filipino businessman Lucio Tan to combine their cigarette businesses in the Philippines.

Between them the two companies will hold 90 per cent of the local tobacco market � a business that was last year worth about 78.9bn pesos ($1.7bn). Philip Morris is strong in the premium end of the market with brands such as Marlboro, while Mr Tan�s Fortune Tobacco dominates the low and mid-priced segments.

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PM, Fortune merger a 'kiss of death' --critics  

Tobacco control advocates on Thursday called the merger of leading cigarette companies Fortune Tobacco and Philip Morris Philippines a "kiss of death blown to many Filipinos."

Health Justice, a non-government organization that aims to bridge the gaps between health science and law, said it expects the 2 cigarette manufacturers to also combine their resources in lobbying to weaken tobacco control measures.

"The government can expect more tobacco-industry backed leaders or policy makers, more organized lobbying techniques, more corruption, more smuggling, less tax collection, and less compliance with tobacco control laws," said lawyer Deborah Sy, executive director of Health Justice.

She specifically reacted to news reports that, "When asked which group (Philip Morris or Fortune) initiated the [merger] talks, PM Chris Nelson said: 'We kissed at the same time.'"

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We kissed at the same time.
Chris Nelson, president of Philip Morris Philippines, which company initiated the PMI/Fortune Tobacco merger.

The government can expect more tobacco-industry backed leaders or policy makers, more organized lobbying techniques, more corruption, more smuggling, less tax collection, and less compliance with tobacco control laws.
Lawyer Deborah Sy, executive director of Health Justice, on the PMI/Fortune Tobacco merger.

RP's 2 biggest tobacco firms agree to merge  

According to an Inquirer source, Philip Morris Philippines Manufacturing Inc. (PMPMI) will merge with Fortune Tobacco Corp. to create a firm called Philip Morris-Fortune Tobacco Co. (PMFTC).

"This will be a merger of equals since both sides recognize the strengths of the other in their respective market segments," according to the source, who was familiar with the details of the deal.

PMPMI is the local unit of Philip Morris International, one of the largest tobacco manufacturers in the world. While it controls the upper-tier market with its Philip Morris and Marlboro brands, PMPMI has struggled against Lucio Tan-owned Fortune Tobacco, which dominates the lower-end segments with its flagship Hope brand, among others. . . .

Meanwhile, a separate industry source said that Fortune Tobacco's market capitalization before the merger stood at around P3 billion.

"A merger of equals, if that's what it is, may result in the new firm being valued at close to P6 billion," the source pointed out.

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Philip Morris and its Philippine saga  

The joint venture deal between Philip Morris and Fortune Tobacco Corp does not only seal the end of the local firm's monopoly days, it also culminates an almost 55-year-long presence in one of the world's biggest cigarette markets. . . .

Filipinos were introduced to Marlboro cigarettes way back in 1955, around the same time that this Philip Morris-made brand was emerging as Americans' favorite.

At the time, Philip Morris Incorporated entered into its exclusive licensing agreement with Filipino-owned La Suerte Cigar and Cigarette Factory. The agreement was Philip Morris' first outside the US.

La Suerte produced and sold what was then considered an up-and-coming filter-tipped cigarette. For 40 years, local cigarette makers rolled, marketed and distributed Marlboro, and eventually another brand, Philip Morris 100's, in the Philippines.

By 1995, Philip Morris Philippines Inc (PMPH) was set up to provide marketing support to its brands and to start organizing leaf-buying activities for its operations in the region. . . .

As Philip Morris International, PMPMI's parent, consolidated its operations in Asia, it bought Indonesian cigarette company, Sampoerna, in 2003. In essence, Philip Morris International (PMI) was capturing market share in Indonesia, and Sampoerna's distribution system in a country where over 50 million people smoke.

The strategy was replicated in the Philippines where Sampoerna's trademark brands were being manufactured and sold by local firm Sterling Tobacco Corp..

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Philip Morris International Inc. (PMI) Announces New Business Transaction in the Philippines 

Philip Morris International Inc. (NYSE / Euronext Paris: PM) today announced that Philip Morris Philippines Manufacturing Inc. (PMPMI), an affiliate of PMI, and Fortune Tobacco Corporation (FTC), have signed an agreement to unite their respective business activities by transferring selected assets and liabilities of PMPMI and FTC to a new company to be called PMFTC, with each party holding an equal economic interest. The Chairman of PMFTC will be Mr. Lucio Tan, currently Chairman of FTC. PMI will manage the day-to-day operations of PMFTC.

PMFTC is poised to benefit from the complementary nature of each shareholder's brand portfolio and the cost synergies derived from the integration of manufacturing, procurement and distribution. Both companies have contributed their trademarks to PMFTC which will also manufacture Marlboro and Philip Morris under long-term license agreements.

"This transaction is a tremendous strategic fit for our business that will cement our leadership in South East Asia," said Matteo Pellegrini, President of PMI's Asia Region.

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This transaction is a tremendous strategic fit for our business that will cement our leadership in South East Asia.
Matteo Pellegrini, President of PMI's Asia Region, on the PMI/Fortune Tobacco merger.

UPDATE 1-Philip Morris teams with Fortune in Philippines  

The Philippine unit of Philip Morris International (PM.N) and unlisted Fortune Tobacco Corp (FTC) will combine their core businesses in a new company which will have 90 percent of the local cigarette market.

"Philip Morris and Fortune Tobacco concluded an agreement to form a new company called PMFTC," Chris Nelson, president of Philip Morris Philippines, told reporters.

"It's 50-50, it's an equal marriage. We are not going to divulge the financial details," Nelson said.

When asked which group initiated the talks, Nelson said: "We kissed at the same time."

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• How the sin tax policy created a duopoly  

The cigarette industry in the country has long been a showcase of how political economy works in the Philippines. While businessman Lucio Tan has been generally perceived to have perfected the art of influencing regulation and tax schemes to favor his Fortune Tobaco Corp., the expansion efforts of multinational player Philip Morris in the Philippines has changed the playing field.

As Philip Morris announced on Thursday a deal that involved the acquisition of majority stakes in Fortune Tobacco, the shifts in the local playing field on cigarette products is sealed.

The shift--from monopoly to a duopoly--has been gradual. The road to the February 25 announcement of the deal took a little over 8 years.

When Philip Morris set its eyes on the Philippine market as one of its growth areas in Asia in 2002, it quickly learned how the game is played.

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