In recent years, tax hikes, smoking bans, health concerns and social stigma worldwide have made the cigarette business tougher.
The fact that the impact on cigarette demand generally has been less stark outside the U.S. has benefited Philip Morris International Inc., which was spun off from Richmond, Va.-based Altria Group Inc. in 2008. The move made Philip Morris International the world's largest non-governmental cigarette seller, smaller only than state-controlled China National Tobacco Corp.
Still the overseas seller of Marlboro and other tobacco brands faces challenges that are as wide-ranging as its reach.
The company has said regulations, including bans on product displays, ingredients and colorful packaging, have impeded competition and add costs for retailers.
Varying degrees of tax hikes and economic challenges also have encouraged adult smokers to make choices purely on price and have fostered black markets. Philip Morris International has compensated for volume declines — particularly in developed markets like the European Union, Latin America and Canada — by raising prices, cutting costs and focusing on emerging markets in Asia, as well as the Eastern Europe, the Middle East and Africa. Swings in currency markets are also having an effect.
For the full year, Philip Morris International's cigarette shipments were up more than 1 percent to 927 billion cigarettes and it increased its global market share, excluding China and the U.S., to a record 28.8 percent. Its net income rose 2.4 percent to $8.8 billion in 2012 as revenue excluding excise taxes increased about 1 percent to $31.4 billion.
In a conference call with analysts Thursday regarding the company's fourth-quarter and full-year earnings, Chief Executive Officer Louis C. Camilleri discussed his perspective on the global marketplace following its separation from Altria Group.
QUESTION: Is this the most challenging environment that you've operated in since the spinoff?
RESPONSE: "I'm not sure that it's the worst, you know, we've lived with it for a little while. ... The strength of this company is irrespective of what's thrown at us. We have various points of leverage to meet our ambitions and that's what makes this company great. ... Of course I'm concerned about (all the noise that's out there) but I think we can overcome it. A lot of it is noise as opposed to real action."
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