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Big Tobacco dependent on cigarettes for profits

24 May 2024

 

About 5 trillion cigarettes are smoked every year globally. Despite major tobacco companies acknowledging smoking is harmful and making statements about shifting away from combustibles (cigarettes), every company continues to aggressively market cigarettes, which comprise more than 90% of the global sales of tobacco products.

CEO of the world’s top tobacco company, Philip Morris International (PMI)’s stated, “cigarettes belong in museums” but this May he reassured shareholders that their cigarette business is the “leading international portfolio by market share and by brand strength. This gives us a formidable platform to accelerate the growth of our smoke-free business …” PMI told its shareholders “resilience of our combustible business” and “robust combustible pricing” as two thirds (63.5%) of PMI’s net revenue comes from cigarette sales (US$22.3 billion).

PMI sold more than 600 billion sticks of cigarettes globally (Figure 1); Indonesia (83 billion sticks) and the Philippines (23.8 billion sticks) are among its top markets.

Figure 1: PMI’s Key Market Data

 

 

 

 

 

 

 

 

 

 



With the Philippines registering a decline in cigarette sales from 32 billion sticks in 2022 to 23.8 billion sticks in 2023, PMI has relaunched Marlboro, its top selling brand, contrary to the rhetoric of shifting away from cigarettes. Small sari-sari stores that sell Marlboro are now painted bright red and white (Figure 2) to roll back the decline in cigarette sales. PMI does not want Filipino smokers to quit. Worse, children will see the Marlboro advertisements. 

Figure 2: Philippines – Marlboro cigarettes relaunched

March 2024: Marlboro cigarettes relaunched with whole sari-sari stores painted in the brand’s red and white. Photo: HealthJustice and the Metro Manila Development Authority

Elsewhere, PMI’s profits were boosted in Turkey and Egypt where both countries sold more cigarettes in 2023: Turkey shows 69 billion sticks in 2023 compared to 56 billion sticks in 2022, while Egypt shows 23 billion sticks vs 20 billion in 2022. PMI has just announced its acquisition of 14.7 percent of Egypt’s largest tobacco manufacturer, Eastern Co which also sells cigars and pipe tobacco and other tobacco products.

Most smokers want to quit their addiction altogether, but PMI’s sales pitch is that “Adult consumers are seeking better alternatives to smoking” so it can justify marketing a broad range of new tobacco products. Although PMI’s sales of heated tobacco products in the Philippines shows no change between 2022 and 2023, and it provides no data for Indonesia, while claiming Manila, Jakarta and Kuala Lumpur are promising markets for its HTPs.

The world’s second largest tobacco company BAT’s tagline is “creating a Better Tomorrow” but it appears its cigarettes sales will not end tomorrow. Currently, about 86% of its revenue is from cigarette sales. BAT is projecting that in 2035, 50% of its revenue will still be from cigarettes. BAT Malaysia has clearly stated that it will “continue growing its revenue through combustibles. This will enable us to allocate sufficient investments to develop New Category products …” 

Despite the big talk about reduced risk products in Malaysia, BATM relaunched its cheap cigarette brand, Luckies Red and Luckies Blue, in 2023. BATM even boasted that the “brand has received positive consumer feedback regarding its taste, competitive pricing and overall brand imagery.” Its cheap cigarette brands are bolstering its profits. While pushing back government attempts to increase tobacco tax (no tax increase since 2215) claiming it will worsen smuggling, BATM increased prices for its key cigarette brands denying the government of much needed tax revenue.

The Philippines is an important market for Japan Tobacco International (JTI). Total market share grew an estimated 3.9ppt to 42.4%, driven by Camel cigarettes. JTI is the second largest tobacco company in the Philippines controlling 37% of cigarette market share with 38 sales branches. In October 2023, JTI moved to its new office in Taguig City. The ribbon cutting ceremony was attended by the Japanese Ambassador to the Philippines, Koshikawa Kazuhiko, and Director General Tereso Panga of the Philippine Economic Zone Authority (PEZA). Director General Panga was representing the Trade Secretary in the ceremony. This is a violation of the DOH-CSC Joint Memorandum Circular which limits public officials’ interaction with the tobacco industry to only that is strictly necessary.

 

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