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Tobacco still selling well abroad

Ashley Milne-Tyte Mar 28, 2008


Scott Jagow: The country’s biggest tobacco company is splitting up today. Altria will spin off Phillip Morris International into a separate company. That’s so it can pursue smokers in other countries unfettered by the U.S. market. Ashley Milne-Tyte has our story.

Ashley Milne-Tyte: Cigarette smoking drops by 2 to 3 percent each year in the U.S. as prices go up and more people quit. Abroad, it’s a different matter. Many Europeans still light up, despite increasing bans on smoking in public places.

Greg Warren is an analyst with Morningstar. He says the real growth opportunity for Philip Morris International comes from further afield: countries like Indonesia, India and of course, China.

Greg Warren: It’s a big, untapped market. You look at it from the outside, there’s 350 million smokers in China, most of which are male. And you know, the tobacco companies are salivating, ’cause they’re like, “We gotta get in there.”

He says penetrating a market like China’s means doing deals with state tobacco companies. In other countries, it can mean buying up popular local brands.

Altria isn’t giving up on the U.S. market entirely. It still keeps Philip Morris’s domestic operation. But Warren says it’s the international business that has a glowing future.

I’m Ashley Milne-Tyte for Marketplace.

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