Thursday, February 7, 2008

Big Tobacco goes global

Increasingly shut out of developed country markets by regulation, litigation and public opinion, Big Tobacco is taking its act on the road.

Altria Group is the US's largest tobacco manufacturer with about $9 billion in annual sales. In August 2007, Altria announced plans to spin off its Philip Morris International (PMI) unit from its domestic counterpart, Philip Morris USA. Analysts interpreted this as a sign that the company was looking to dodge an onerous US regulatory environment. Altria's board officially approved the spin-off plan on January 30th.

"Honesty, integrity and social responsibility are just as important to the way we measure ourselves [as profitability]," PMI boasts on its website. Yet, the government of Nigeria is suing the company for $44 billion, claiming that PMI has made deliberate attempts to market its products to underage Nigerians and sought to influence lawmakers to block regulation of tobacco sales. British American Tobacco (BAT) is also named in the suit.

A recent page one article in the The Wall Street Journal outlined PMI's plans for an "aggressive blitz" of new products outside the US.

By as early as March, PMI could be operating as an independent company -- the third most profitable consumer goods concern in the world after Procter & Gamble Co. and Nestlé SA. The move will make it easier for the tobacco behemoth to market an array of new smoking concepts, each targeted to different foreign populations, who, collectively are expected to smoke 5.2 trillion cigarettes this year.
Among these new concepts are Marlboro Intense, a half-inch cigarette that packs the full punch of a typically-sized one, and the Heatbar, which is simply described as a hand-held smoking device.

To appeal to customers in some emerging markets, the company is making sweet-smelling cigarettes that contain tobacco, cloves and flavoring -- with twice the tar and nicotine levels of a conventional U.S. cigarette.

And as with nearly everything related to global business, the future for companies like PMI looks decidedly Chinese. China has recenlty entered into a partnership with PMI to market 3 domestically produced Chinese cigarettes. And, since China boasts more smokers (350 million) than the total US population, the future looks exceedingly bright for Altria Group.

photo by noamgalai

No comments: