WITCO reports flat profit, illegal competition

He said the company faced a drop in consumption of its products and a decline in profit before taxation to $693.7 million in 2016, about the same as the $693.5 million recorded in the previous year. In addition, it had to contend with an upsurge in illegal cigarettes smuggled into the country. He said these cigarettes are being offered at cheap prices compared to the price of its own premium Du Maurier brand, however an analysis done at the labs of its parent company, the British American Tobacco Company (BAT) found the smuggled cigarettes contained foreign matter such as feathers, insect carcasses, plastic, synthetic material, grit and droppings among other things.

He said to counter the incursions of these smuggled brands, WITCO had brought back onto the market one of its “old favourites”, Mt D’or cigarettes, which it was selling at a price of $17 in order to compete. He said the company was able to regain some of the market share it had lost to the cheaper brands.

Du Coudray noted that consumers across various sectors including food and alcohol were no longer loyal to brands but were looking for the cheapest product to satisfy a particular need.

He said that with the Government battling to increase its revenue, the company had to deal with increases in corporation and excise taxes and the average consumer was looking for value for their money; struggling to pay for their usual brands in all sectors with a reduced disposable income.

He said while the company has seen its revenues reduced it merely means that the market is shifting from WITCO brands to the cheap illegal products because of the economic situation. He said when this happens, WITCO loses, and the government loses because it is not collecting taxes and the consumer is also losing by buying cigarettes without proper standards.

Du Coudray said the Minister of Finance would need to consider whether he has collected taxes from all the players in the market. According to Du Coudray, “The minister did indicate in the 2016/2017 budget speech an acknowledgement of an increase in illegal products in the market and promised strong legislation and enforcement. Unfortunately, we have not seen any major developments in this area.”

Du Coudray said the has company introduced new products, launching the first capsule in regular sized cigarettes in the Caribbean. The smoker flicks or crushes the capsule in the cigarette filter to change its flavour. This new cigarette was put on the market in the last quarter of last year in a bid to increase the satisfaction of its customers. However, he said its attempts to introduce new products are hampered by Government regulations designed to discourage new smokers from taking up the habit.

Another restriction for the company will be the introduction of graphic packaging, showing the effect of smoking on various body parts, also intended to discourage smokers. Du Coudray said the company was awaiting the images and once it receives them it will have eight months to begin using them. However, he said while the graphic images might produce some initial reaction from the consumer, in other markets where they have been introduced, such as Canada and Australia, it has been found that sales rebound.

He said “You don’t need the images to know you are smoking a controversial product. They are just a reminder, so what happens is that after a short period, sales “materialise” back to the normal levels. “The shock and awe factor is gone.”

Questioned about electronic cigarettes, he said there was a potential market in Trinidad and Tobago and while he believed WITCO would have a presence in that market in the next five years, he did not see electronic cigarettes replacing tobacco which he believed will be around for the next 50 years.

In response to a question, Du Coudray said the company does not see any likelihood of staff cutbacks. While it was always looking at ways of making its operations more efficient, he said it does not foresee any cutbacks in the immediate future, adding, “In fact, because of the challenges of the economy and the market we are going through, we may actually bring more people to help us deal with the challenges that we are facing.”