Philip Morris International ties up with Filipino Tycoon

Philip Morris International (N.PM) yesterday announced a J-V in the Philippines that ties it up with Fortune Tobacco, a local cigarette maker owned by tycoon Lucio Tan, forming a company that will control 90% of the domestic cigarette market.

The newly formed PMFTC is expected to build on the two companies positions in various dominant elements of the Philippine cigarette market, with a estimated volume of 85B cigs last year, making it the world’s 12th largest.

Tobacco consumption in the Philippines is estimated to be valued at US$1.7B in Y 2009, according to the government’s statistics agency.

The tie-up comes as other western tobacco groups seek to boost their presence in emerging markets, in order to counter a fall in smoker numbers in the more developed markets as a result of tighter regulation, smoking bans and health concerns.

Last year British American Tobacco bought a majority stake in Bentoel Internasional Investama, Indonesia’s 4th largest cigarette maker, for US$499M. Philip Morris already has a big presence in Indonesia, mainly through its Sampoerna unit, which it bought for US$5B in Y 2005.

The joint-venture between the Philip Morris and Fortune operations give the two almost total control of the local market, and will also boost their ability to lobby against moves to increase taxes on cigarettes and adopt tougher rules on tobacco marketing and advertising. The Philippines imposes one of the lowest taxes on cigarettes in Asia and has yet to adopt any tough tobacco control laws.

Philip Morris’s Philippines unit, now has a market share of 30%, and dominates the high-end segment of the market with brands such as Marlboro and Morris.—Paul A. Ebeling, Jnr. www.livetradingnews.com

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