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Philippines to audit Mighty Corp.

| June 27, 2014

The Philippine Bureau of Internal Revenue (BIR) has started an audit on the tax payments of cigarette manufacturer Mighty Corp., reports ABS-CBN News.

BIR personnel have been assigned to Mighty’s manufacturing facilities to ensure they are complying with tax payments.

The investigation follows allegations that the company has been underdeclaring its production volume, resulting in billions of pesos in foregone revenues for the government.

Mighty produces the Mighty Menthol and Mighty Filter brands. In February, it defended its pricing as a “marketing” strategy and noted that the company pays no royalties to foreign parents, giving it a cost advantage.

 

 

PMI buys Nicocigs

| June 27, 2014

Philip Morris International has purchased Nicocigs, a leading U.K.-based vapor company whose principal brand is Nicolites. The transaction is not subject to regulatory approval and is not material to PMI’s 2014 consolidated financial position.

“This acquisition is complementary to our previously announced agreement for the license and distribution of Altria Group’s e-vapor products,” said Drago Azinovic, PMI’s president, European Union region.

“In addition, it provides PMI with immediate access to, and a significant presence in, the growing e-vapor category in the U.K. market, as well as a strong retail presence, which further complements the current restructuring of our distribution arrangements in the U.K.”

Nicocigs was founded in 2008 and is headquartered in Birmingham, U.K. The company employs a field force of approximately 40 sales representatives, and its products are distributed to more than 20,000 points of sale within the U.K.

Nicocigs 2014 April year-to-date retail share was 27.3 percent according to Nielsen.

Low compliance with health warnings requirement

| June 27, 2014

The majority of cigarette packs in Indonesia do not comply with the country’s new graphic health warning requirements, according to a report in The Jakarta Post.

The Drug and Food Monitoring Agency (DFMA) said only 13.44 percent of cigarette packages circulating in the market bear the pictorial warnings that became mandatory on June 24.

Under a presidential regulation on tobacco control issued last year, cigarette makers must allocate 40 percent of cigarette packaging for text and pictorial warnings about the health effects of smoking.

The DFMA and regional food and drug offices in 31 regions monitored the implementation of the new tobacco-control rules during the two days following their enactment.

Of the 2,270 cigarette packages monitored, only 305 or had pictorial warnings. There are 3,363 cigarette brands, produced by 672 companies, registered with Indonesia’s Customs and Excise Directorate.

Health Minister Nafsiah Mboi said that cigarette makers should recall all products that did not display the pictorial warnings.

The ministry said that there would be penalties for companies that failed to comply with the new policy, ranging from written warnings and reprimands to the revocation of their business licenses.

Nafsiah said companies that missed the deadline would be issued warnings, and those that failed to comply could eventually be fined up to $42,000. Their executives could face up to five years in prison.

The country’s biggest cigarette producer, Philip Morris-owned Sampoerna, said it began distributing products with the new warnings on June 23, but it needed more time to clear out existing stock.

A national survey in 2012 found that 67 percent of all Indonesian males over age 15 smoked—the world’s highest rate—while 35 percent of the total population lit up; a figure surpassed only by Russia.

 

Savanna to set up factory in Mozambique

| June 25, 2014

Savanna Tobacco of Zimbabwe plans to set up a factory in Mozambique, reports Newsday. According to Chairman Adam Molai, the company will invest at least $2 million in equipment and marketing.

“We have been exporting a lot of finished cigarettes into Mozambique,” said Molai. “We are seeing opportunities to pack our cigarettes in that market.” Savanna exports 85 percent of its products.

Molai expected that by year’s end company volumes would be up 40 percent compared with 2013. He said the company has the capacity of producing 4.5 billion sticks of cigarettes, but currently it was utilizing 72 percent of that capacity.

The chairman said the company had increased the value it got from products by 10 times since it began operations in 2002.

 

 

EU’s illegal cigarette trade fell in 2013

| June 25, 2014

One in every 10 cigarettes consumed in the EU during 2013 was illicit, according to a new KPMG study carried out on behalf of British American Tobacco, Imperial Tobacco, Japan Tobacco International and Philip Morris International.

Thirty-three percent of these illicit cigarettes comprised “illicit whites,” an emerging type of branded cigarette manufactured for the sole purpose of being smuggled, according to an Imperial press note quoting the study, which was published yesterday. Given this level of illicit trade, EU governments were said to have “lost” about €10.9 billion to the illegal trade.

KPMG found that while the number of “illicit whites” consumed increased by 15 percent compared with the number consumed in 2012, overall, the illegal trade of cigarettes in the EU declined slightly from a record high of 11.1 percent in 2012 to 10.5 percent in 2013.

This decline was said to have been due to a significant decrease in contraband cigarettes (otherwise licit cigarettes typically smuggled from low tax countries to high tax countries) as the tobacco industry, governments and law enforcement agencies increased efforts to curtail this activity.

KPMG found that the highest proportions of illegal trade during 2013 occurred in Latvia (28.8 percent), Lithuania (27.1 percent), Ireland (21.1 percent), Estonia (18.6 percent) and Bulgaria (18.2 percent).

And it found that the highest volumes of illicit cigarettes were consumed in Germany and France, with 11.3 billion and 9.6 billion, respectively, and Poland and Greece, where “illicit whites” accounted for 9.1 percent and 12.2 percent of consumption, respectively.

Other key findings of the study included:

* Overall, 58.6 billion illicit cigarettes were consumed in the EU in 2013; the equivalent of the total licit cigarette markets of Spain and Portugal combined.

* The prevalence of contraband, which excludes “illicit whites” and counterfeit products, dropped by 26.7 percent to 35.6 billion cigarettes.

* The consumption of illicit whites reached a record high of 19.6 billion cigarettes in 2013, from virtually zero in 2006.

* The highest illicit white volumes in 2013 were measured in Poland (4 billion), Greece (2.8 billion), Spain (2.5 billion), Bulgaria (1.6 billion) and Germany (1.4 billion).

“Despite the overall decline in the illegal market in 2013, the EU’s black market for tobacco remains a significant source of revenue loss for governments and a resilient competitor to the legitimate manufacturers and trade,” said the Imperial note. “This illegal activity not only comes at a financial cost, but it fosters criminality in local communities.

“British American Tobacco PLC (BAT), Imperial Tobacco Group PLC (Imperial), Japan Tobacco International (JTI) and Philip Morris International Inc. (PMI) continue to devote significant resources to combat this problem—above the requirements set out in their Cooperation Agreements with the European Commission—underpinned by the conviction that effective solutions require solid cooperation between governments, law enforcement agencies, manufacturers and retailers.”

For the first time since its inception in 2006, KPMG’s study was commissioned by all four major tobacco manufacturers operating in the EU, which provided KPMG with access to a wider set of data sources, allowing it to further refine and improve the completeness of the analysis.

Prior to 2013, the study was commissioned by PMI as part of the company’s commitments under its Cooperation Agreement with the European Commission.

The 2013 KPMG study on illicit cigarette consumption in the EU is available on KPMG’s website: http://www.kpmg.com/uk/projectsun2014.

Capsules delivering multiple flavors

| June 25, 2014

KT&G has launched on the South Korean market a capsule-filter cigarette that delivers two flavors, according to a story in The Korea Herald quoting a company announcement on Monday.

Raison Sun Presso is the latest edition to KT&G’s Raison Presso brand launched in 2012.

Each cigarette contains a capsule in the filter that when popped releases two flavors.

The new package contains an image of waves under the burning sun on the front side and a photo of a capsule popping on the back.

The new cigarette is available for WON2,500 a pack.

Meanwhile, JTI Korea launched on June 18 a new capsule-filter cigarette that provides for the delivery of more than one flavor, according to another story in the Herald and quoting a company announcement yesterday.

Each package of Mevius Option2 contains 15 cigarettes with what are referred to as “cooling pop” menthol capsules embedded in the filter, and another five cigarettes with “double capsules” that add a tangy flavor.

JTI Korea said the new product was designed to allow consumers to experience up to four different flavors: straight tobacco, tobacco with menthol, tobacco with the tangy flavor or tobacco with menthol and the tangy flavor.

Mevius Option2 delivers 6 mg of tar and 0.5 mg of nicotine and is priced at WON2,700 won a pack.

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