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Mighty Corporation

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Mighty Corporation
廠煙冠皇
Company typePrivate
IndustryTobacco
Founded1945
FounderWong Chu King
HeadquartersManila, Philippines
Area served
Philippines
Key people
Edilberto Adan, (President)
Oscar Barrientos (Executive Vice President)
ProductsCigarettes
Websitewww.mightycorp.com.ph

Mighty Corporation (also known as Mighty Corp. or Mighty) is the Philippines' oldest all-Filipino-owned cigarette producer and is currently the second largest cigarette firm in terms of market share in the country, albeit far behind PMFTC, Inc.

Mighty increased its market share from 3 percent in 2012 to nearly 20 percent in 2013 as a result of consumer down-trading from premium (Marlboro, Lucky Strike, Winston) to low-end brands (Mighty, Fortune). The company has been enduring accusations by rival PMFTC since the implementation of Republic Act 10351, more commonly known as the "Sin Tax Law".[1]

History

In 1945, the company was established as La Campana Fabrica de Tabacos, Inc. by Wong Chu King and started out with a small cigarette factory in Manila producing native cigarettes known as "matamis".

In 1948, a second factory was built in Pasong Tamo, Makati.

In 1963, a facility for tobacco threshing and redrying was constructed in Malolos, Bulacan where the company's processing plant is nowadays located.[2]

In 1985, the company was renamed Mighty Corp. and bought the trademarks of Alhambra Industries in 1993.

In 2001, Mighty entered into a cigarette manufacturing agreement with Sterling Tobacco to produce the latter’s trademarks.

In 2004, the company entered into a cigarette manufacturing agreement with the Philip Morris Philippines as the latter brought the trademarks of Sterling Tobacco.

In 2014, British American Tobacco (BAT), the smallest player in the Philippine tobacco market, engaged talks with Mighty Corp to explore partnership options.[3]

Senior management

Tobacco trade war

Since the success of the Sin Tax Law, PMFTC Inc. has been accusing Mighty Corp. of various issues yet no formal charges or complaint have been filed while the Bureau of Internal Revenue (BIR) has clarified to maintain a neutral position in the ongoing tobacco trade war. BIR Commissioner Kim Jacinto-Henares officially stated that "the burden of proof rests on PMI and PMFTC, they should prove that Mighty has evaded the government. If they cannot prove their allegation, then they may be liable for libel or slander." She said PMI’s current hurdles in the Philippine market could have been avoided if PMFTC agreed to the government’s original proposal of adopting a unitary tax system, which aimed to remove the tax rate gap between low- and high-priced cigarette brands. The BIR chief explained a unitary rate system on cigarette could have been prevented smokers from down-shifting from high-priced brands, such as Marlboro, Winston and Lucky Strike, to low-priced brands, like Mighty.[4]

A Bureau of Customs (BOC) administrative order issued in January 2014 suspended the firm’s customs bonded warehouse operations to assess and audit raw materials originally intended for export but were subsequently used for domestic production. After the assessment, the company paid a total of P978 million pesos.[5]

In March 2014, Mighty Corp has been placed under investigation by the BIR for purported underpayment and unpaid tax levies. The BIR has opted, for the first time in its history, to field its personnel on a 24/7 basis to closely monitor Mighty Corp's operations. To date, no irregularities have been reported by the tax agency.[6]

In October 2014, acting Senate Minority Leader Vicente Sotto III pointed out in a recent hearing of the Joint Congressional Oversight Committee on the Comprehensive Tax Reform Program, citing the apparent tax leakages, particularly in the tobacco industry.

According to Sotto, Mighty Corp. appears to have questionable figures in the importation of tobacco leaves, and that the company does not declare importation of acetate tow, the material used to make cigarette filters which cannot be locally sourced, for domestic consumption until 2013.

However, BIR Commissioner Kim Henares, who was in the hearing, opposed the Senate Tax Study Research Office (STSRO) data, which includes the discredited information on alleged illicit tobacco trade furnished by multinational research firms AC Nielsen, the International Tax and Investment Center (ITIC) and Oxford Economics, as inaccurate, incomplete and not validated. She also added that the data used as basis for the STSRO report were biased and paid for by Philip Morris International (PMI) and that cannot be a basis against Mighty.[7] Based on ITIC’s website, one of its directors is also a ranking official of Philip Morris.[8]

In early 2015, Main local competitor PMFTC declared it had to restructure its manufacturing operations in the country, cutting close to 700 permanent positions and has blamed it on a "market disturbance" said to be generated by Mighty Corp. over the last two years.[9]

However, BIR Commissioner Kim Jacinto-Henares had already exposed a flaw in PMFTC's arguments regarding their labor problems the year prior that it would not have happened had the tobacco giant agreed from the start to keep the government's original intent of implementing a unitary tax system for the industry. A unitary tax system means that all brands and price points would have a single rate and thus downshifting by consumers would, in theory, be mitigated.[10]

The non-government organization and anti-tobacco advocate group South East Asian Tobacco Control Alliance (SEATCA) has contradicted PMFTC’s claims of cooperation with governments worldwide need to be qualified. "For example, Philip Morris' collaboration with the European Union (EU) is the result of a 2004 legally binding out-of-court settlement by Philip Morris International (PMI) after it was sued by the EU for its involvement in tobacco smuggling," SEATCA pointed out. "As part of this settlement, PMI agreed to pay $1.25 billion over 12 years to the EU to fight illicit tobacco trade. It is unlikely that a corporation would resolve a lawsuit for over US$ 1 billion unless they felt the case against them was strong." SEATCA had also scored a Philip Morris-funded International Tax and Investment Centre and Oxford Economics joint report for using a flawed methodology and coming up with skewed findings that support the tobacco industry.[11]

PMFTC has also resorted to the use of "paid advertisements" to attack Mighty[12] which is a violation of Section 22 of the Republic Act No. 9211 (or the Tobacco Regulation Act of 2003).[13]

Social involvement

Mighty Corp. is engaged in corporate-social responsibility (CSR) work through the Wong Chu King Foundation, Inc. (WCKFI).

As devout Catholics, the Wong Chu King family has been active in various educational and apostolic programs together with local churches in helping communities all over the Philippines since its inception.

In 2014, WCKFI also launched a two-pronged community outreach program geared towards tobacco farmers and their families as an effort to save the local tobacco industry.

The first one is the allocation of a P10-million peso budget to help modernize tobacco farmers that have no access to modern farming and irrigation equipment as well as a college scholarship program to aide 200 sons and daughters of tobacco farmers across two regions.[14]

References

  1. ^ "SABI NA NGA BA: BIR says Philip Morris' labor problem is its own making". Interaksyon.com.
  2. ^ "Mighty Corp: 69 years of quality cigarettes". Mighty Corp.
  3. ^ "British American Tobacco open to beneficial partnership". MB.com.
  4. ^ "B BIR assures fairness on cigarette issue". Manila Bulletin.
  5. ^ "Despite fines, no case filed against Mighty Corp". Philippine Daily Inquirer.
  6. ^ "BIR sets tighter monitoring of cigarette firm". Philippine Daily Inquirer.
  7. ^ "Mighty downplays STSRO report on illicit trade". Manila Bulletin.
  8. ^ "About. Board of Directors". ITICnet.org.
  9. ^ "PMFTC restructures cigarette manufacturing operations in Marikina, Philippines". PMI.com.
  10. ^ "YOSI WARS: Philip Morris HQ tells investors Mighty Corp is dodging taxes". Interaksyon.
  11. ^ "SEATCA scores Philip Morris posturing vs smuggling: 'You're still part of problem, not solution'". Interaksyon.
  12. ^ "PMFTC uses paid ads to 'expose' rival Mighty". ABS-CBN News.
  13. ^ "Republic Act No. 9211". GOV.ph.
  14. ^ "Cigarette firm to assist tobacco farmers". The PHilippine Star.
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