Mighty Corp, British American Tobacco in talks of possible partnership

The British American Tobacco (BAT) has signified its willingness to partnering with another cigarette manufacturing company to cement a strong foothold in the country’s lucrative tobacco industry.

Robert Eugenio, BAT Philippines head of corporate and regulatory affairs, said yesterday that the Lucky Strike cigarette-maker is open to any “beneficial” opportunity in the Philippines.

Since BAT’s return to the Philippine market in 2012, the company’s market share grew at a snail’s pace despite a money-losing marketing strategy of selling imported cigarette packets below the economical price.

BAT, which unveiled a $200- million investment plan for the Philippines in 2012, currently has a weak distribution network in the country, and been incurring an additional cost for the importation of its Malaysia-made Lucky Strike and Pall Mall brands.

“In the process of running a business, we would look at whether partnering with another company would make sense than putting up our own manufacturing facility,” Eugenio said. “In the past, we partnered with La Suerte Cigar and Cigarette Factory, but it was terminated when we left in 2009.”

Meanwhile, industry sources said that BAT has already approached the Wongchuking family of Mighty Corp earlier this year to ask if the latter is open to any partnership.

“I’m not aware and involved in such a transaction,” Eugenio said when asked if BAT is in talks with the Bulacan-based cigarette company.

Sources said BAT wants a partnership with Mighty following its success in snatching up a substantial market share of local market leader PMFTC, a joint venture of LT Group’s Fortune Tobacco Company and Switzerland-based Philip Morris International (PMI).

Since the new excise tax regime took effect in 2013, PMFTC fought tooth and nail to protect its market position against Mighty, which has been very aggressive in offering cheaper alternatives to Lucio Tan and PMI’s premium cigarette brands.

The country’s second largest tobacco company, Mighty, known for the P1-a-stick cigarette, managed to raise its market share from a mere 3 percent in 2012 to nearly 35 percent last year.

However, Mighty’s success is hounded by accusations of tax dodging and smuggling.

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Mighty Pays P8 B in Taxes despite Tax Evasion Allegations

The fully integrated Filipino-owned Mighty Corporation has paid P8 billion in excise tax for the calendar year 2013, from its previous P300 million payment for the year before. Mighty Corp. Executive Vice President Oscar Barrientos said that his company’s compliance with tax payment regulations should be enough to put to rest the accusations that they have not been paying its dues to the government.

Retired Regional Trial Court Judge Barrientos explained that the 2013 taxes that the company paid is a reflection of the increase in their market share as well as their fair share on taxes for the sin products during the previous year. He said that despite all the allegations that the company has been bombarded with by members of the social media and even by some members of Congress no cases has actually been formally filed in court—in fact, the Bureau of Customs itself has had the company cleared of any deficiencies in tax payments up until February 2014.

With the implementation of the new sin tax law or technically referred to as the Republic Act 10352, Mighty’s market share skyrocketed, which explains the equally high increase in the taxes that they also had to pay for the current year as opposed to the P300 million they had to pay out in 2012. The same law has effected a synchronization of adjustment on cigarette taxes to make it P30 for every pack for all brands within a five-year period.

Reports from the Bureau of Internal Revenue illustrated that excise taxes both from alcohol and cigarette products reached 81 percent even with the decline in the number of cigarettes marketed. Cigarette taxes comprise 61 percent of sin tax collections for the last 11 months.

While being a minor industry player in the tobacco industry until 2012, Mighty Corporation paid in over P8 billion of taxes, excluding the same tax fees it would have to settle for the same year before the deadline stipulated.

House Group Urged to Take It Slow on Mighty Corp. Case

Government agencies and Congress were asked Monday to take the investigations slowly particularly on the case covering the allegations thrown at an established cigarette manufacturer in the country particularly on the allegedly underdeclaration of its raw materials used for production.

Ako Bicol Party List Representative Rodel Batocabe explained that investigations conducted by the House of Representatives on the “unscrupulous entities” in the country’s tobacco industry should delve into the entire industry and not focus on one company alone.

As a member of the House Committee on Ways and Means, Batocabe said that if they were to investigate, no one company should be singled out so as to eliminate any unnecessary speculations or hidden undertones.

The House Committee member was talking in reference to Mighty Corporation that has been bombarded with allegations of underdeclaration of products. The locally owned cigarette manufacturer sells cigarette brands that sell at P1 per stick, having them included in the low-end tier products incurring the cheapest of sin tax rates.

Batocabe further suggested that the investigation, which is being conducted by the Committee on Ways and Means and spearheaded by Romero Federico Quimbo, Marikina City representative, should look into the issue matter-of-factly to eliminate prejudice and bias. He explained that the probe should be fair and objective and focus on the basic objective of protecting the government.

Kabataan Party List Representative Terry Ridon, on the other hand, warned the Congress to not belittle and underestimate Mighty, a legitimate fully Filipino-owned name in the industry with its solid 68 years of operation.

Established in the 1940s, Mighty is proudly Filipino and has been one of the top distributors of low-priced brands that include Campana Ringing Bell, La Campanilla, Magkaibigan, among others.

Ridon emphasized that they would always be ready to defend national firms especially against foreign companies, in reference to local companies like Mighty who have been strong advocacies of helping the millions of poor Filipinos by providing livelihood programs (aside from paying their dues to the government in terms of paying taxes).

Miguelito Ocampo, Mighty’s legal counsel, earlier denied all the allegations against its client company. He explained that his client company is able to sell one-peso-per stick cigarettes because they do not have any obligations of paying royalty fees as opposed to other companies that need to do so.

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