Winston maker says reduction in tobacco use way below expectations

Higher excise tax rates may have fueled an increase in government revenues, but tobacco consumption fell at a pace much slower than what Philippine officials were hoping for, according to the Japanese maker of the Winston and Camel brands of cigarettes.

In a press briefing last week, Japan Tobacco International (JTI) Philippines general manager Manos Koukourakis said the Aquino administration can exceed its P51.6-billion excise tax collection target for cigarettes this year. "From a government perspective, this is a successful legislative measure, because at the end of the day, it will achieve the target it has. The government in that respect did a good job," Koukourakis said. In the first six months, excise taxes slapped on cigarettes reached P22.4 billion, or 53 percent more than the P14.6 billion raised in the same period last year. The tax take from alcohol products hit P16.2 billion in the first half, or 37 percent more than the P11.8 billion a year ago. Taxes raised from both "sin" products climbed 46 percent from P26.4 billion last year to P38.5 billion this year. But while tax collections improved, cigarette use -- another policy objective of the law hiking sin taxes -- fell in the low double-digits, or way below the government's forecast of halving tobacco consumption. "If we go back one year ago, other companies in the market said that the introduction of excise tax will reduce the consumption of cigarettes by 50 percent. Our company was a little more optimistic, we were thinking about 40 percent," Koukourakis said. At the height of the policy debates over excise taxes, the government cited a University of the Philippines study showing that higher rates would cut tobacco consumption by at least 51 percent. Philip Morris Fortune Tobacco Corp (PMFTC), which accounts for at least eight out of every 10 sticks of cigarette sold in the Philippines, made the same forecast in raising concern about the potential job loss of an increase in taxes. "What happened is that we were all mistaken. The reality is that the total market consumption fell by around eight to 12 percent, or more or less 10 percent, and not by 50 percent," Koukourakis said. He said the less sharp drop in cigarette use can be traced to the entry of cigarette brands that sold for P1 a stick or P17 a pack. "Before the 'sin' tax enactment, you had less than 10. Now you have more than 30 products. That means that consumers have cheaper choices than they had before," Koukourakis said. Despite the influx of these cheaper brands, JTI expects to maintain its 3.2 percent share of the local market. "Our company decided consciously not to participate in this. JTI Philippines will have no brands at P1 per stick, or at below P20 per pack. We could never be in a position to do it," Koukourakis said, adding that competing with cheaper brands would result in losses of P8-10 a pack for the company. "We are doing okay, slightly better than our targets. Even with the sin tax, we expect that we will meet our targets," he said. "The Philippine market is a lucrative market. One thing that is certain is our company is here to stay," he added. Apart from Winston and Camel, JTI also manufactures and distributes the Mevius brand (formerly Mild Seven). JTI used to outsource production of its cigarettes to Fortune Tobacco Corp. Source: http://www.interaksyon.com/business/68920/after-sin-tax-hike--winston-maker-says-reduction-in-tobacco-use-way-below-expectations