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Philip Morris Profits Predicted With Sell-Low Cigarette Strategy

Tim Boyer's picture
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A prediction published in the online branch of Forbes Magazine reveals that cigarette giant Philip Morris can expect future profits with a sell-high/sell-low strategy that is expected to also lead to increased numbers of youths turning into cigarette addicted smokers. While a sell-low strategy in foreign markets is not unusual, at one point does it become predatory and indirectly make Americans guilty by association? One example: A pricing disparity that is hard to believe for a single pack of cigarettes.

Tobacco giant Philip Morris has come under a significant amount of scrutiny as the American trend towards health consciousness has steadily increased the past few years. One recent example of such scrutiny is a report by UCSF researchers who found that data from Philip Morris’ Project MIX was misleading and underreported the actual harmful effects of their cigarette additives.

Such scrutiny and increased public awareness of the hazards of smoking has led experts to predict a significant future decline in smoking in the U.S. So much so, that according to a recent news report by Forbes, Philip Morris International is diversifying its strategy dependent upon the region Philip Morris sells its cigarettes.

For example, Forbes explains that when the volume of sales are decreasing—as cigarette sales have in the U.S.— the prices have to go up to remain profitable. However, to recoup the lost profits and expand into international markets, pricing for a pack of cigarettes takes a steep plunge in the opposite direction toward what some refer to as predatory pricing. An example this was given with a comparative pricing disparity where a pack of Marlboro cigarettes costs about $6 in the U.S. but only 79¢ in other countries such as Senegal.

The cheaper pricing as explained by Forbes is to out-compete local cigarette makers in their own countries by offering their citizens a cheaper name-brand cigarette. The aftershock effect of this, however, is that it will undoubtedly lead to increased numbers of youths taking up smoking and becoming addicted to American cigarettes. Forbes states that in Senegal an estimated 33 percent of adults and 20 percent of their youths are already smoking. Which begs the question: Are we responsible?

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There is no doubt that American societal pressure and increased awareness about the harm the tobacco industry has done on American health has led to decreased national sales of cigarettes. Increased regulation leading to changes in how cigarettes are advertised and sold has benefited American health, but in doing so, have we not also passed the burden onto other countries where their populace may not be able to technologically and socially defend themselves from predatory marketing practices by the tobacco industry?

Perhaps we do need to accept some of the responsibility and effect international change as well as national change through regulatory legislation that ensures that not only does the American tobacco industry have to play fair in our local sandbox, but in neighboring sandboxes in Asia and Africa as well.

This does not mean that we would be infringing on a person’s right to choose to smoke, but rather that a person can maintain their free will without undue influence from a smokescreen of clever and predatory marketing practices.

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Image source of cigarettes: Wikipedia

Source: Forbes online, Investing News: “Philip Morris' Twin Strategies Keep It Smokin' Hot



Shared responsibility--I think you are right. But with the difficulty it is fighting big tobacco here, it'll probably be harder elsewhere.
Yeah, that and the resources they have available to them. Who can afford to go to another country and fight this battle?!