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Philip Morris International: New Study by Roland Berger Finds Tobacco Products Directive Will Cost Jobs and Hit Tax Revenue

  Philip Morris International: New Study by Roland Berger Finds Tobacco
  Products Directive Will Cost Jobs and Hit Tax Revenue across Europe

Business Wire

LAUSANNE, Switzerland -- April 24, 2013

The Tobacco Products Directive (TPD) could adversely affect Europe’s economy,
resulting in up to 175,000 job losses and lost tax revenue of up to EUR 5
billion throughout Europe, according to a new study published by Roland Berger
Strategy Consultants.

The study, commissioned by Philip Morris International Inc. (PMI)
(NYSE/Euronext Paris: PM), and undertaken by Roland Berger, measures the
potential economic impact of several of the proposals under consideration by
the EU including standardizing the packaging and labeling of cigarettes and a
ban on menthol and slim cigarettes. It concludes that these measures have the
potential to reduce prices across the whole tobacco market and to fuel the
illicit trade in tobacco products, resulting in significant job losses and
reduction in tax revenues.

“The introduction of the new Tobacco Products Directive could significantly
affect the European economy, not only the tobacco sector,” said Patrick
Mannsperger, Partner at Roland Berger Strategy Consultants. “The tobacco
sector currently generates more than EUR 100 billion in tax revenue annually,
a reduction in this revenue will require spending cuts or tax rises in other
areas, which could have an adverse effect on the economy and a negative impact
on employment in the EU.”

The report also concludes that:

  *Pack standardization is likely to influence consumer behavior, resulting
    in downtrading to cheaper brands and growth in the illicit trade;
  *The illicit trade, which already represents about 11 percent of cigarette
    consumption in the EU, could grow by 25 to 55 percent under the TPD as a
    result of standardized packaging and the ban on slim and menthol
    cigarettes which would mean these products would only be available on the
    illegal market. This translates to an increase in annual sales of illicit
    cigarettes from 68 billion to 84-106 billion.

Combined these factors could lead to:

  *As many as 175,000 job losses;
  *Up to EUR 5 billion in lost tax revenue in the EU in total;
  *An increase in smoking rates by up to 2 percent as a consequence of price
    competition reducing prices across all tobacco market segments.

The TPD will hit some countries particularly hard. For example, in Poland, the
TPD could cost up to 50,000 jobs and up to EUR 780 million in lost tax
revenue. Bulgaria could lose up to 29,000 jobs, while in Greece annual tax
revenue could decline by up to EUR 220 million.

The implementation of plain packaging, currently under discussion as a
potential amendment of the new TPD, has the potential to further amplify the
effects on tax revenue and jobs described above. Based on a first estimate,
combined these factors could lead to as many as 305,000 job losses and up to
EUR 8.5 billion in lost tax revenue in the EU in total. In addition, the
illicit market could increase by up to 65 percent if the new TPD including
plain packaging is introduced.

PMI’s Vice President, Communications, Julie Soderlund commented, “As this
study confirms, standardizing packaging and banning 10 percent of the EU
cigarette market, without any credible scientific evidence that this will
reduce smoking rates or improve public health, risks fueling the black market,
which already costs Member States EUR 12.5 billion annually. We hope the EU
will reconsider these proposals and replace them with a regulatory framework
that is not politically driven, but science-based and effective in reducing
the harm caused by smoking without imposing unnecessary burdens on the
economy.”

Click here to download the study free of charge:
www.rolandberger.com/pressreleases

To learn more about PMI visit www.pmi.com.

About Roland Berger Strategy Consultants

Roland Berger Strategy Consultants, founded in 1967, is one of the world's
leading strategy consultancies. With 2,700 employees working in 51 offices in
36 countries worldwide, we have successful operations in all major
international markets. The strategy consultancy is an independent partnership
exclusively owned by about 250 Partners.

About Philip Morris International Inc.

Philip Morris International Inc. (PMI) is the leading international tobacco
company, with seven of the world’s top 15 international brands, including
Marlboro, the number one cigarette brand worldwide. PMI’s products are sold in
more than 180 markets. In 2012, the company held an estimated 16.3% share of
the total international cigarette market outside of the U.S., or 28.8%
excluding the People’s Republic of China and the U.S. For more information,
see www.pmi.com.

Contact:

Roland Berger Strategy Consultants
Press Department
Tel.: +49 89 9230-8483
E-mail: press@rolandberger.com
www.rolandberger.com
or
Philip Morris International
PMI Press Office
Phone: +41 (0) 58 242 4500
E-mail: media@pmi.com
www.pmi.com
 
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