[Intl-tobacco] South Africa: Philip Morris boss bullish about SA after one year

[robert weissman]

Philip Morris boss bullish about SA after one year
Business Report
October 7, 2004

By Ren=E9e Bonorchis

Johannesburg - "Of course South Africa carries risk," Armin Aeberhard, the
local head of Philip Morris, said in an interview yesterday. "But we have 4=
2
000 employees and operations in almost every country around the globe and
when you put South Africa in that context we don't believe it carries a hig=
h
risk."

Aeberhard said he did not view anti-smoking legislation as a barrier to
business in South Africa. In other countries the introduction of such
legislation had not hurt the business, as long as it was implemented
properly and enforced.

"The key to smoking is affordability. Inaffordability creates contraband.
Official stats often lie. They show a decline in smoking instead of the
shift to illegal buying of contraband cigarettes which can also be linked
with huge tax losses."

This week marks the first anniversary of Philip Morris' incorporation in
South Africa. The world's biggest cigarette maker had pulled out in 1998. I=
t
has hired 70 people and in May started stocking urban areas with its big
brands, such as Marlboro.

Aeberhard said it was too early to discuss market share and sales, but the
volume of sales had been encouraging. Retailers were mostly keen to stock
Philip Morris cigarettes - but not all shops had a free choice.

However, "the competition commission is taking care of anti-competitive
behaviour", he said, referring to the case Japan Tobacco launched against
British American Tobacco in October last year. The commission has yet to
give its decision.

"Without the 1998 Competition Act, I don't think we could have re-entered
the country. The act is the future of South Africa and will be the
cornerstone of implementing broad-based black economic empowerment."

Aeberhard said Philip Morris had been able to hire for diversity and had
hired only local people. The company believed it was compliant with black
empowerment standards.

Aeberhard said that as soon as the local operations were robust enough,
Philip Morris would start local manufacture.