Sunday, 3 May 2015

Tobacco industry profits in Canada exceed $1 billion: PMI

In a recent presentation to investors, Philip Morris International provided a graph of the 40 most profitable tobacco markets.

This graph illustrated three important variables that are sometimes difficult to get hold of: the number of cigarettes sold, the market share of Philip Morris and the total profitability of the industry.

With only 6 million of the world's estimated 1 billion cigarettes, Canada might be thought of as a relatively small market. But in terms of profitability, Canada would appear to be in the top 10 and a more profitable market than much larger countries, like France and the United Kingdom.

Sadly, the data used to create the graph was not released, so comparing profitability requires some physical measurement. Putting the results side-by-side suggests to me that the net revenue (profits) from cigarette sales in Canada are closer to $2 billion than to $1 billion.

On sales of fewer than 30 billion cigarettes, that means the companies on average are clearing almost 7 cents per cigarette, or $1.30 per package.

The entire presentation can be downloaded from Philip Morris International's web-site. The graph can be found on slide 5 of the March 17 2015 presentation to the Consumer Analyst Group of Europe (CAGE) Conference.