Philip Morris Fortune Tobacco Corp. (PMFTC), part of taipan Lucio Tan’s LT Group Inc., said despite efforts to crack down on illicit trade with the help of authorities, the use of illegal cigarettes continues to rise, driven by their significantly lower prices compared to taxed legal products.
In fact, consumption of illegal tobacco products is projected to reach 21.3 percent of the market this year from 19.9 percent in 2024, LT Group said in its latest annual report to the Philippine Stock Exchange.
“The lower cost of illicit cigarettes, averaging P40/pack compared to the Bureau of Internal Revenue’s mandated floor price of P78.58/pack (inclusive of excise tax), makes them appealing to the youth and low-income consumers, which negatively impacts the consumption of legitimate products,” it added.
Aggressive crackdown
Thanks to partnerships with agencies like the Bureau of Customs (BOC), Bureau of Internal Revenue (BIR), Philippine National Police (PNP), and Armed Forces of the Philippines (AFP), enforcement efforts have delivered tangible results.
At the end of 2024, it said 645 enforcement actions paved the way for the seizure of over 1 billion illicit cigarette sticks, 131 machine components, and the shutdown of nine factories.
PMFTC remains profitable despite challenges
Despite challenges in the industry, Fortune Tobacco, which owns 49.6 percent of PMFTC, saw profit last year jump 12 percent to P12.77 billion.
However, cigarette sales volume dropped 11 percent to 21.1 billion sticks.
“The decrease was attributable to affordability issues, rising illicit trade, and the growing popularity of vaping,” the LT Group noted.
What else is being done?
PMFTC ramped up its fight against illicit cigarettes in 2024, holding 89 training sessions for around 3,000 participants, including law enforcement, sales agents, and retailers.
“These programs focused on identifying counterfeit products, understanding the implications of illicit trade, and fostering vigilance among stakeholders,” the company said.
Even then, LT Group admitted that these efforts may not be enough to curb the steady influx of illegal products.
“Forecasts show that illicit trade will continue to increase annually,” LT Group said in the report.
