Local cigarette sales are down 10 to 15 percent this year over last year caused largely by higher prices due to increased excise tax and lesser disposable income of consumers.

Chris Nelson, managing director of Philip Morris Philippines Manufacturing Inc. (PMPMI), said that the tobacco market has been weak.

“Sales are weak for tobacco industry. I believe the market will be down at least 10 to 15 percent,” Nelson said.

Nelson blamed the drop in sales to the combined factors such as the increased in excise tax as mandated under Republic Act 9334 that correspondingly caused prices to shoot up and lesser disposable income of consumers that led to lower consumption.

That is why Nelson said that moves to change RA 9334 before 2011 is “premature and completely uncalled for” since the existing law has already provided for an increase in the tax rates for cigarettes.

Nelson, however, refused to say how the industry’s poor sales performance has affected their own sales except to say, “We're performing okay, suffering in line with the market to some extent.”

Nelson also said that irrespective of the weak market, “We are committed to stay for the long term.”

PMPMI has invested P1 billion in Subic Bay for a tobacco leaf regional warehouse facility. The company has entered into a 50-year lease agreement with Subic Bay Metropolitan Authority for the lease of 49,279 square meter area in Subic Bay .

The state-of-the-art warehouse has a capacity to hold some 24,000 metric tons of tobacco. At present, the P30-million peso refurbished warehouse can only accommodate 6,100 metric tons.

The new warehouse features include humidity control, fire suppression equipment, and air conditioning to handle the imported tobacco leaves from foreign suppliers, which will then be shipped and processed in cigarette manufacturing facilities in the Philippines , Malaysia and Indonesia .

In 2008, the company also expanded its warehousing facility in its Batangas plant with the construction of a P70 million finished goods warehouse. This has expanded its storage capacity to 1.8 billion sticks of cigarettes from 800 million sticks.