Philip Morris’ decision to close down its plant last October 21, in violation of the collective bargaining agreement and without giving notice to anyone, not only showed how greatly incompetent its managers have been, it was backed by false arguments. And the biggest falsehood has just come to light.

·       When Philip Morris (PM) abruptly closed down its Uruguayan factory, it had an almost 22 percent share of the local market. Almost the same participation that the company Abal Hnos. had in 1979 when it was acquired by PM.

      Before the Tobacco Control Act (Law No. 18,256) came into effect in 2006, PM’s share of the domestic market had remained practically unchanged since the acquisition. According to the study “The Economics of Tobacco Control in Mercosur Countries and Associated States: Uruguay,” conducted in 2003 by the Pan-American Health Organization, PM’s share in the Uruguayan market stood at 21.5 percent. This means that in 32 years, the various managers that headed the company were at best only capable of maintaining the company’s historical share in the market. So the same share that three decades ago justified purchasing the company now serves as a pretext for closing it down.

·        Another inconsistency in the arguments giving for closing the plant was evidenced by Nicolás Echevarría, CEO of Abal Hnos. (the name under which PM continued to operate in Uruguay), when he claimed that the Tobacco Control Act had forced the company to discontinue seven of the 12 products it sold in Uruguay. What this CEO pretended not to know -perhaps hiding behind his Mexican origin and the short time he has been in the country- is that after purchasing Abal Hnos., PM voluntarily withdrew four products from the market, including one of its best-selling brands: Master.

     PM’s strategy -which has now proved ineffective- was clearly to eliminate local brands and concentrate on brands that were known around the world, with the aim of saving on advertising by using its global ads. Some time later, a few brands introduced by PM without success were also pulled from the market. This reveals that its own incompetent marketing strategy led the company to voluntarily discontinue almost the same number of brands it now claims it had to pull from the market, forcing it to close the plant. 

·      To top it all, last week PM announced that its global earnings for 2011 had been 8.6 billion US dollars, up 18.3 percent from 2010. The company also reported that in the last quarter of last year -when Abal Hnos. closed down- its net profit was 1.9 billion US dollars, a 7.6 percent increase with respect to the same period of 2010.

The title, then, says it all.