Philip Morris will begin selling a new Marlboro, MarlboroWide, in Spain.

The new brand will sell for an introductory price of € 2.50 compared to the traditional Marlboro priced at € 2.75. The company has been experiencing declining market share in Spain since the
beginning of the year when the country decided to increase cigarette excise taxes to 55.95 per cent from 54.95 per cent, or € 6.20 per 1,000 sticks from € 4.20 per 1,000 sticks. After a price war ensued which dramatically cut into the government’s tax pool, the Spanish government quickly announced changes in its excise tax structure, including introducing a minimum excise tax of € 1.1 per pack, though the tax was not enough to have a meaningful impact on the price gap. Reportedly, the price of discount brands has moved to around € 1.80, thus the price gap is still hovering around 65 per cent. Analysts believe this has represented a problem for PMI growing Marlboro. "We believe the introduction of the new MarlboroWide brand will have some positive implications for the brand’s market share growth" says Bonnie Herzog of Citigroup. "However, we worry about cannibalisation and the impact to the company’s margins in this region."
Spain remains an important market for PMI. In 2005, it was estimated that Spain represented between ten and twelve per cent of PMI's operating income. Currently, the Spanish market is estimated to represent approximately seven to eight per cent of PMI's operating income. (cg)