Mighty Corporation Makes it Double

Local cigarette manufacturer Mighty Corporation or Mighty Corp said that it will buy 10 million kilograms of tobacco products worth millions of pesos from farmers in Northern Luzon and elsewhere in the country.

Mighty Corp executive vice president Oscar Barrientos said to National Tobacco Administration (NTA) administrator Edgardo Zaragoza that it would buy tobacco from farmers 100% more than the 5 million kilograms his firm bought in 2013.

That means double income for the farmers.

“This is to assure our tobacco farmers of our willingness to help in response to the published report of the market leader in the tobacco industry to lessen production this year,” Barrientos said.

This debunked critics’ allegations that Mighty Corporation has been importing raw materials from foreign countries at low prices and is no longer buying tobacco from local farmers.

Barrientos said that Mighty Corp critics had been resorting to a disinformation campaign using convoluted data in an effort to undermine Mighty Corporation's tremendous increase of the tobacco industry's market shares.

Might Corp's shares surged to almost 20% of the low-priced cigarette brands last year from in 2012, resulting in the payment P8.2 billion in excise taxes.

Barrientos said the company’s market shares shot up after the government effectively implemented Republic Act 10352, or the new Sin Tax Law, that levelled the playing field in the multi-billion peso tobacco industry which was controlled by Philip Morris and Fortune Tobacco.

The new law that took 14 years to pass caused a tremendous migration of smokers from the expensive premium and sub-premium brands to low-priced cigarettes.

It also resulted in some smokers, because of economic reason, to simply quit the vice and thus validated health authorities’ estimate that the sin tax law would result in the decrease of the number of smokers in the country.

BIR stops PMFTC’s cheap cigarette variant

The Bureau of Internal Revenue (BIR) has stopped Philip Morris Fortune Tobacco Inc. (PMFTC) from manufacturing a variant of Marlboro cigarettes called “Marlboro Flavor Code” due to alleged error in the printing of its case, it was learned yesterday.

In revoking the permit it issued last May 3 to PMFTC , the BIR’s Large Taxpayer Service (LTS) said the “aforesaid brand can no longer be manufactured and distributed in the market without securing a prior permit from this office.”

The cancellation stemmed from PMFTC alleged failure to come out with right color printed in the flip-top-box of the cigarette.

“Please be informed that upon verification and comparison of the approved label of the subject brand name against the commercial label being manufactured and distributed in the market, it was found out that the actual color scheme was not in conformity with the approved color scheme for the particular brand,” LTS Chief Alfredo Misajon said.

He said “the color of the approved sample label bears shade of dark gray while the color of the actual commercial label found in the market is black.”

Misajon’s letter added PMFTC blatantly violated the condition of the permit (ELTRD-(T)-011-05-13-87598) it issued to the firm with an explicit prohibition that: “No changes/alteration of the color scheme on the approved commercial label shall be made without prior approval from the Commissioner of Internal Revenue.”

A BIR official who declined to give his name said PMFTC’s permit was revoked because it failed to meet the specifications as stated in its application like the color and other details to be put in the pack, or carton cover.

She said PMFTC has already signified its intention to appeal the adverse decision, adding that the error was due to the kind of paper used which could not meet the color specified in its permit application.

“If an applicant applies for a bright red or blue color he must come out with the right coloration, not a shade of red or blue,” she said.

She said a manufacturer must specifically state the unique and distinct detail of its packaging and color scheme, otherwise the application will be rejected outright.

This way, she said, infringement of patent and unfair competition can be avoided as provided for under Revenue Regulations Nos. 3-2006 and 17-2012.

A manufacturer should not also ride on the popularity of a brand that was previously registered, the same official said.

PMFTC has been trying to employ various schemes to regain its market dominance, including the attempt last January, to sell in Mindanao and elsewhere at P245.00 per ream or P1.23 per stick of the same label with a black shade of color which the BIR subsequently banned, claiming that PMFTC cannot sell low-priced Marlboro because it is classified as premium brand.

In its letter-request to the BIR on Nov. 25, 2013, PMFTC claimed there was a need to introduce new cigarette brands to reverse the current decline in its sales due to stiff competition.

“What is more worrying, we expect the down-trading to continue, with the Marlboro volume further decreasing to 7.9 billion sticks in 2014,” PMFTC President Paul Riley said.

Riley wrote the BIR requesting permission to allow PMFTC to introduce to the market low-priced Marlboro cigarettes at a time when it is already selling at one-peso-per stick three cigarette brands it acquired from Fortune Tobacco Corp. in a joint-venture agreement in 2010, namely Westpoint Filter Kings, Jackpot Menthol 100s and Jackpot Full Flavor.

But these brands of cigarettes did not sell as much, a BIR official who requested anonymity said.

Its request to the BIR to produce Marlboro variants and sold them at lower retail prices to avail of lower excise tax rates was rejected because Marlboro has been classified as premium.

by Jun Ramirez
May 27, 2014-Manila Bulletin