Illicit cigarettes affecting Tan’s tobacco business

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The rise in the trade and manufacture of illicit cigarettes is currently the main concern of LT Group, the holding company for tycoon Lucio Tan’s businesses, in growing its tobacco segment.

LTG President Michael Tan said in an interview with reporters after the company’s annual stockholders meeting that the firm is seeing a further increase in the production of illicit cigarettes.

Illicit cigarettes are those that are smuggled or are manufactured underground for the
purpose of avoiding tax payment.

“We’ve been seeing a rise in illicit cigarettes. It comes in two forms, smuggled from around the region and in a form of cigarettes that are manufactured locally but aren’t tax-paid,” Tan explained.


He said that the government is losing P8 billion in revenues annually from the proliferation of illicit cigarettes

“For year-to-date, we have tracked it down to P3 billion already in terms of what should have been paid, so we are concerned about the rise of these illicit cigarettes,” Tan said.

“We’re working hand-in-hand with the government. Again, it’s a concern and we’d like to reiterate that issue for the government to keep on monitoring this increase in illicit cigarettes,” he added.

Fortune Tobacco is LTG’s arm for its tobacco business.

Amid this issue, LTG is still expecting a recovery in volumes from its beer, liquor and tobacco businesses in the second half of this year, after having been affected by higher excise taxes from the start of the year.

“We expect a recovery [in volumes]but on tobacco, it depends on how we control trades of illicit cigarettes,” Tan further said.

“Tobacco is a big portfolio of our business. We have seen a significant rise in excise taxes beginning January 1. Our volumes have been impacted. We’re down over 40 percent in volumes since the beginning of the year, but we’ve seen sequential improvement month-on-month,” he added.

The group is also looking to put up new facilities around the country as it expands its product portfolio.

For instance, Tan said that the company has partnered with Spanish dairy firm Pascual Group for the importation of a specific pasteurized yogurt brand into the country.

“In the beverage side, we’re importing soya milk and we’re looking to establish a facility here. Also, we have a partnership in Spain for the pasteurized yogurt. These are long life yogurt that you wouldn’t need to put in a refrigerator,” Tan explained.

“We are importing it right now but once we got the critical volume, then we would manufacture,” he added.

Tan said that the general plan of the company involves putting up many facilities so they can start manufacturing some of their products and exported these overseas.

Madelaine B. Miraflor

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