Last February, Philip Morris Philippines Manufacturing Inc. (PMPMI) and Fortune Tobacco Corporation (FTC), long bitter rivals in the dynamic Philippine market, joined forces to become Philip Morris Fortune Tobacco Corporation Inc. (PMFTC).

According to the company’s website site, PMPMI and FTC “entered into an agreement to combine their business operations and selected assets in a new company called PMFTC Inc. PMFTC is the market leader in the local cigarette industry with over 90% percent share of the adult cigarette market. 

PMFTC manufactures and distributes the leading mid- and low-price brands such as Champion, Fortune, and Hope as well as established PM international flagship brands led by Marlboro and Philip Morris.”

The synergy behind the merger is clear to see: between them, these two former competitors control a vast majority of market share, and with the introduction of FTC lower-priced brands into its portfolio, Philip Morris has effectively gained potential to many new markets in Asia and beyond with products that could enhance its primary export products (Marlboro and L&M) with an array of brands that slot into price segments in which it currently has no presence.

The reclusive Lucio Tan, usually referred to as a Taipan, has, up until now, always retained an exclusive grip over FTC. In some respects, therefore, there are parallels with Philip Morris’ acquisition of Indonesian kretek maker Sampoerna, another company that was tightly controlled by its former owners.

But Sampoerna’s kretek products are almost exclusively targeted at the Indonesian market: there is very little export potential.

The same cannot be said of PMFTC. With Philip Morris having already invested heavily in manufacturing and regional leaf storage infrastructure in the Philippines and exporting product to neighboring countries, the acquisition of brands such as Hope, a leading menthol brand, Fortune and Champion, may mean Philip Morris is preparing to act decisively against the independent brands that are threatening its (and other MNCs and government-controlled manufacturers’) regional market shares so effectively.

FTC employees outnumbered PMPMPI’s by about 4:1. Presumably there will be job cuts and ‘rationalizations’ imposed that will result in a leaner, meaner marketing and manufacturing machine. But FTC was no slouch when it came to the business of making and marketing competitive cigarette brands either, so there is a great deal of synergy and experience that will presumably be brought to bear on domestic and possibly regional markets in the near future.

The Philippines, which was for centuries a tobacco powerhouse in the region, now seems to be on track to regain much of its former luster in the region, at least so far as the tobacco industry is concerned.

So, can it be much longer before entities such as Thailand’s TTM and even China’s CNTC are made an offer they can’t refuse by one of the majors?