Philip Morris in the EU

Cigarettes

This week Philip Morris will present is report on 2014 first quarter earnings.

How the company’s matters stand in the EU?

Last years Philip Morris operations in European Union were under pressure because of difficult regulatory environment for tobacco products and weak macroeconomic conditions. Higher excise taxes on cigarettes and high rates of unemployment force European smokers turn to cheap cigarettes. Today online cigarettes stores offer wide range of cigarettes at very affordable prices and more people now choose to buy cigarettes via internet. Some smokers turn to alternative smoking products such as e-cigarettes considering them safe and cheap.

The number of tax-paid cigarettes consumed by smokers in the EU has dropped by around 20 percent over the past 5 years while the total cigarette use in the EU has dropped by 17 percent.

Many smokers in the EU are turning towards other tobacco products. In most Europeans countries, excise taxes on tobacco products other than cigarettes (hand-rolling cigarettes, chewing tobacco, cigars, pipe tobacco, cigarillos, snus) are subject to lower excise taxes  in comparison with cigarettes. It makes all these products cheaper than cigarettes and therefore affordable for smokers.

These are major factors which lead to declines in shipment volumes of tobacco companies. Philip Morris` shipment volume in the EU dropped by 6.5% in 2013 despite being able to increase its volume market share by 40 basis points over the same period.

It is expected that this year the company’s shipment volume in the EU to continue to remain under pressure.

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