BOWLING GOLD CIGARETTES

Jerome Christopher T. Mapagu

On the 2nd quarter of 2003, Philip Morris Philippines Manufacturing, Inc.

(PMPMI) introduced to the Philippine market, Bowling Gold cigarettes, which
aimed to capture the CDE market in the country. This brand entered the
market head on with their leading competitors Fortune cigarettes, from
Fortune Tobacco Corporation, and Mighty cigarettes, from Mighty
Corporation.
Marlboro Brand, the main product of PMPMI (and Philip Morris
International, in general), was expected to give the leverage for
the success of Bowling Gold cigarettes.
Considering that
Marlboro has a very strong brand equity, PMPMI expected to
easily capture a large market share in the CDE consumers if they
price Bowling Gold cigarettes competitively with Fortune, Mighty,
and its other competitors.
Bowling Gold cigarettes is offered in menthol, filters (fullflavored), and 100s in 20 sticks per pack, the same with the other
brands. They are mostly sold in retail stores and in locations
accessible to the CDE consumers. Priced lower than their
competitors and associated to be along the product line of Philip
Morris that produces the Marlboro brand, the company experiences a lot of
losses from selling BG through wastage because the brand could not
capture at least the minimum of their projected market share.
The Philippine Tobacco Industry
The Philippines, a nation of 7,107 islands (at high tide), has had a long
and fruitful relationship with tobacco since Spanish colonists introduced the
plant centuries ago. Filipinos have long since embraced smoking as an
integral part of their culture, and today tobacco remains an important facet
in the county's economic scenario. Filipino cigars, made from locally
produced tobacco, were a staple export, and, despite intense competition
from other, perhaps better known, origins, Filipino cigars are still much-sought
after by aficionados both domestically and overseas.
The domestic cigarette market remains one of the most vibrant - and
competitive - in the region, with family-owned businesses, such as Mighty
Corporation, prospering alongside domestic and multi-national giants such
as Lucio Tan's Fortune Tobacco and Philip Morris Philippines Manufacturing

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Inc. (PMPMI). Filipino smokers have a strong preference for menthol-flavored

cigarettes more than half prefer them) and the country is a fertile low-end
market.
Republic Act 9211, also known as the Tobacco Regulation Act of 2003, is
regarded as a road map for the future. It phased out TV and radio
advertising as of January 1., 2007, and mandates further restrictions on mass
media advertising, such as billboards, by July, 2007.
However, point of sale advertising, promotions, direct marketing and
internet communication remain in place.
The excise tax law passed at the end of 2004 mandated a tax increase
every two years until 2011.
Cigarette consumption has risen to 75 billion sticks and still growing at
1.0% per annum. Philippines is considered to be the 15th largest market in the
world. These reasons, among others make tobacco a very viable industry in
the country.
Philip Morris Philippines Manufacturing Incorporated (PMPMI)
PMPMI established its largest cigarette factory in Asia in Tanauan City in
Batangas, a 90-minute drive south of Manila.
While opportunities exist to expand production, the plant is now running at
full capacity and is supplying PMPMI products, including the flagship
Marlboro, L&M and Philip Morris 100s and the low-priced Bowling Gold, Stork
and Miller to the Philippine market and Marlboro and L&M variants to
Thailand. The plant also supplies cut filler and blended tobacco to Korea,
and also to Pakistan in limited quantities.
PMPMI took back its domestic manufacturing and distribution from La
Suerte in 2001 after several decades, and believes this was the right move to
make. Prior to the opening of the domestic factory, blue seal (imported)
Marlboro was preferred over the domestically produced variant, despite its
much higher cost.
L&M, the company's number two brand worldwide has not enjoyed so
much success as its big sister Marlboro. It competes head on with Winston,
produced under license by Fortune Tobacco, which has historically been a
very strong brand in the Philippines. Brand positioning and price are key
components in any brand's acceptance in this market, and L&M clearly has

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some way to go before it enjoys the popularity it engenders in some other

America-blend Asian markets.
Philip Morris 100s, the priciest of a plethora of menthol-flavored cigarettes
in this highly menthol-focused market, is the leading premium menthol brand,
but it has a way to go to catch up with the leading menthol brand, Fortune
Tobacco's Hope. Hope is slowly losing market share, and it may take a long
time to catch up.
Clearly, the Filipino sweet tooth leads many smokers to a menthol
cigarette, but some areas prefer menthol cigarettes more than others.
Bacolod and Negros are two regions that are primarily non-menthol markets,
but they are in a clear minority in that respect.
PMPMI has employed variant packaging for its leading brands from time
to time, such as the popular 'County" (cowboy themed) Marlboro packs.
Other innovations, such as lighter packs that open like a zippo-style lighter
have been sold in bars and restaurants.
PMPMI produces different packaging options, our affiliates select the
ones they believe are appropriate for their relevant markets and distribute
them accordingly. These packaging variants are not cheap to produce, and
they will remain limited. They will never replace the main brand' standard
packaging, but they are good for the brands' and the company's image.
Giving something back to the community is something tobacco
manufacturers are keen to do but risk being pilloried for. Nonetheless, PMPMI
seeks to contribute what it can where it can, and has a very active
community outreach philosophy.
PMPMI is very active in community work, particularly in the Batangas and
Tanauan areas [where the manufacturing plant is located] and in tobacco
growing areas in Northern Philippines.
Education, livelihood training., school funding, financial assistance and
disaster relief are typical PMPMI community programs. Largely unsung and
unnoticed outside of the communities themselves, the work undertaken
clearly demonstrates PMPMI's active concern for it constituent communities.
Committed to fight smoking by minors, it has launched a Youth Smoking
Prevention (YSP) campaign. It s educational component is being run through
the University of Asia Pacific.
The mission of PMPMI, in line with its mother company, Philip Morris
International (PMI), is to offer the best smoking experience to every adult
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smoker in the world for today and tomorrow. PMPMI, as well as its
competitors in the country, aims to be the market leader in the tobacco
industry. However, Fortune Tobacco Industry (FTI), still commands a large
share of the market. PMPMIs strategy in their position is to be conscious of
WHERE their cigarettes go know who their buyers are and to know who they
sell their stocks to.
BOWLING GOLD (BG) CIGARETTES
The Product
BG was introduced in the market to target the CDE cigarette smokers.
This is in direct competition with the existing players in the market. PMPMI is
well aware that poverty and unemployment remain the countrys gravest
economic problems. Gross national income is $1020 per capita, and
approximately 28% of people live below the national poverty line. Economic
problems are higher in rural areas where some 55% live in poverty. With this
statistics, there is definitely a large opportunity or market to capture in the
CDE class. FTI and Mighty Corporation (MC) have been dominantly leading
the market in the low- to medium-priced cigarette industry.
BG comes in filter (the red pack above), menthol (the green pack), and
100s (longer sticks in filter and menthol flavors). In packaging, they are
manufactured in soft-pack (the 2 pictures above) which are all the same
with the competitors.
BG is manufactured by PMPMI, also the manufacturer of the Marlboro
cigarette brand. Although trailing a little behind in market share with Fortune
cigarettes, Marlboro is considered to have very strong brand equity in the
country. Globally, it has the biggest brand name which can carry the other
PMI brands and its variants. Using the same logic, PMPMI thought that they
can use this to the advantage of promoting BG. However, BG was not able
to do so and has been struggling to get at least a decent CDE market share.

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Pricing
The pricing of BG with respect to its main competitors is summarized in the
table below:
Compan
y
FTI
Mighty
Corp.
PMPMI

Brand
Fortune Green
Fortune Red (Filter)
Mighty 100's
Mighty Red (Filter)
Bowling Gold 100
Miller 100

Distributor's
Price per
Pack
10.40
9.40
7.30
7.20
9.30
8.80

WHOLESALER
Distributor's
Selling Price
per Pack
10.50
9.50
7.50
7.40
9.40
8.90

Profit
per Pack
0.10
0.10
0.20
0.20
0.10
0.10

SRP
per
Pack
12.00
12.00
9.00
9.00
10.00
10.00

RETAILER
Profit
Profit
in per
in per
Pack
Stick
1.50
3.00
2.50
4.00
1.50
2.50
1.60
2.50
0.60
0.60
1.10
1.00

PMPMI place BG in the middle scale of pricing against its competitors.

The pricing scheme may be competitive in the wholesalers perspective, but
is way out of range for the retailers. On the customers perspective, BG has
the lowest priced cigarettes. However, it has still failed to capture the CDE
market. Priced at around P1 per stick and P10 per pack, it gives the retailers
a P0.60 profit in both cases.
Distribution Strategy
PMPMI

DISTRIBUTOR
VAN SALES

DISTRIBUTORS

DISTRIBUTOR
VAN SALES

WHOLESALERS

RETAILERS
A/B RETAILERS

PMPMI has a distribution structure as the diagram above. Philip Morris

products are distributed by sales van through wholesalers, large scale
retailers or direct retailers. Retailers can also get their supply directly from the
distributors.

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Bowling Gold cigarettes, due to its purpose to capture CDE market, are
mostly distributed in highly urbanized areas nationwide or more particularly,
in sari-sari stores. They are also available in hypermarkets for wholesales and
only a small quantity in major supermarkets.
Promotions
In 2007, in compliance to RA9211: Tobacco Regulatory Act of 2003 of the
Philippines, PMPMI was restricted from using media venues such as television,
radio, print, and cinema. They can now only employ direct mail and pointof-sale (POS) advertising. The POS materials ensure BG cigarettes visibility.
This involves shelf visibility, product distribution, inventory management, and
out-of-stock (OOS) correction. The usual POS materials are posters in sari-sari
stores with famous personalities or models endorsing the brand.
Raffle prizes are also offered seasonally to promote sales in all PMPMI
products. In the case of BG, raffle prizes such as videoke machines, karaoke,
and other pangkabuhayan showcases are offered to the winners.
Market Share

MARKET SHARE IN CDE MARKET

% Share of Market

25

20

15
11.42

11.25

10
6.29
5

5.85
3.39
0.92
0.03

0
Hope 100

Fortune Red

Fortune Green

Windton Filters

Mighty Green

Mighty Red

Memphis Red

Brand

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Where is Bowling Gold in the picture? BG could not even get a market
share higher than 0.03%. This has been a battle against the already
established giants in the CDE market. It just shows that consumers in that
profile do not really care about the P0.50 or P0.25 difference of prices with its
competitors, FTI and Mighty Corp. Consumers still prefer the brand that they
have been using for many years. Loyalty and brand preference are the key
factors that deter the penetration of BG in the market.

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