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Italiano Who sets the price … in Marlboro country?
Philip Morris reaches profits of 500%.
Wall Street: On the stock market the price is calculated according to the rules of the market
United States smokers think that cigarettes have become expensive because of higher taxes. But according to the World Health Organization, though the price of cigarettes has seen a constant increase in the past years, the percentage of the price that goes to the State has decreased and is today less than half of the value in 1965.
Comparing the manufacturing costs to today's wholesale prices, Philip Morris should be making a profit (of up to 500%) on its Marlboros… almost as much as the tax collector.
Joe Camel and the Marlboro Cowboy, because of their popular appeal, besides increasing the number of smokers of all ages all over the world, have been very useful for the five big cigarette producers to raise prices - prices that are not related to the quality of the product, but are determined by the advertising messages, icons and slogans.
Now the cartel of cigarette manufacturers, after years of constant, systematic war against any competition, which has, consequently, remained relatively insignificant, say they are willing to abolish advertising, including Formula 1. But the prices of the most popular brands, higher than ever thanks to the “mythical” slogans, appear to have no intention to go down in the future. In fact there is no reason to, as there is no competition.
“There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.” - Henry Ford.
The cost of cigarettes for smokers and their families includes money spent on tobacco, which could otherwise be used on food, clothing and shelter, family holidays or a car. Is it, perhaps, forbidden for United States citizens to save money? Having to hand over onès money to a private company, without the possibility to influence its enormous profits is virtual robbery.
Source: World health Organization
A carton for $1.20
It is not difficult to calculate the earnings of cigarette manufacturer. Even without having the recipe, all we need to do is examine a cigarette to determine:
- the tobaccos used,
- the amount of reconstituted tobacco and other materials,
- the paper and filter.
Knowing the labor cost of a country, having market quotes and prices, it is very easy to calculate the costs of production, and then relate these to the sales price. The margin of error is minimum.
Our calculation for the production costs of Marlboros in the United States is $ 1.20 per carton. Considering that this carton is sold to the official representative at $7.00, cigarette manufacturing must be one of the most profitable businesses in the world!
The slow reaction of the Government
The Racketeer-Influenced and Corrupt Organizations Act (RICO) devised to combat organized crime is the lawsuit of the century, aimed directly against the giants of tobacco.
One of RICO's objectives should be to bring a stop to this theft of the citizens' money, when they are forced to pay prices for cigarettes that are not determined by the market. But in fact this lawsuit has no affect on the profit-making mechanisms of Big Tobacco, which have been consolidated in fifty years of compromises with Big Government.
The astronomical sum of 280 billion dollars requested from the five big world producers, which will probably lose some zeros along the way and will be paid in convenient instalments, is based on an estimate of 30 years of profits coming from sales to 33 million “youth addicted smokers”. The figure includes 75 billion dollars of profits and 204 billion in interest.
Smoking and young people is an important issue, but this is not the way to handle the monopolistic control of the market, with which organized crime can increase prices without having to worry about any form of competition.
The scenario that is opening will give the giants even better prospects for making profits from consumers. With the abolition of tobacco advertising they will have one less big expenditure without needing to reduce their prices.
But what is even more important is that with the prohibition of advertising, any hypothetical competitor will not have a chance, because today it is not possible to reach success like Marlboro's without investing in the “mythical” slogans and icons.
So, even more than today, in the future no new producer will ever be in a position to disturb that close group of companies that have divided the world market with their slogans and their brands. In theory… obviously.
In the 18th century, the famous East India Company built up a flourishing contraband business and became the principal supplier of opium to the immense population of China. The drug monopoly, originally of the State, ended up in the hands of the famous company.
But today, when Consumer Protection and information on the world of tobacco is beginning to be fashionable, certain business techniques are becoming more “unpresentable” in modern democracies, and unacceptable for informed consumers.
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