Philip Morris cuts its prices in Spain, sparking uproar

MADRID, Spain — Marlboro cigarettes were always something of a status symbol for smokers in Spain, costing more than top local brands. Suddenly they are cheaper — a gut punch to the rest of the industry and the government's drive to curb smoking.

Last week, the Socialist government raised taxes on cigarette manufacturers in response to what it called a flood of cut-rate brands it says target younger smokers. Spain's top manufacturer, Altadis, responded by raising prices.

But American giant Philip Morris shocked everyone Thursday by lowering prices for Marlboro by around 15 percent and making similar cuts for two other brands in Spain, infuriating consumer groups, doctors and even cigarette vendors fretting over lower revenue.

"We are on strike. People are angry," said Laura Martin, who runs one of Spain's many state-regulated tobacco shops. She said she and many colleagues in Madrid were protesting by refusing to sell Philip Morris products Friday.

As Martin spoke, a customer came in asking for Marlboros and she sent him away saying she was out of the brand, which she insisted was true. "But even if I had it, I would not sell it."

Had Philip Morris simply wanted to pass on the tax increase to consumers, the Marlboro price would have gone up by about 12 cents. Instead, it lowered the price by 50 cents to $2.90, compared to the new, higher price of $3 for Fortuna, the leading Altadis brand and Marlboro's main competitor in Spain. Marlboro is the top-selling cigarette in Spain.

Smoking remains comparatively cheap in Spain. A pack of Marlboros goes for $4.63 in Italy, $6 in France and $9 in Britain. In the United States, in mid-Manhattan, a pack of Marlboros ranges from $6.80 to $7.40 depending on the type.

Consumer groups accused Philip Morris — part of Richmond, Va.-based Altria Group — of encouraging people to smoke and urged the government to raise taxes even more.

"This price decrease is bad news for all consumers, those who smoke and those who do not," the Spanish Consumer Organization said.

The cut is Philip Morris' most aggressive pricing change in Europe in decades, according to Goldman Sachs Global Investment Research.

Philip Morris International spokesman Tommaso Di Giovanni said the firm shares the government's concerns but thinks the recent tax increases will not help stem sales of cheap cigarettes.

The dispute comes against the broader backdrop of a new law that bans smoking in the workplace and restricts it in many bars and restaurants and other public places in one of Europe's most cigarette-crazed countries.

Spain — where the government says 30 percent of the population smokes — has now joined the ranks of other nations where workers huddle outside offices, puffing furiously and looking like outcasts.