SYDNEY – Philip Morris International will close its Australian cigarette plant after six decades and shift production to South Korea, saying government regulations on low fire-risk cigarettes crimped exports.
The closing of the Moorabbin plant in southeast Melbourne will cost 180 jobs, about a quarter of its workforce in the nation, the company said in a statement.
Australia, where Philip Morris established its first overseas outpost in 1954, has seen its domestic cigarette market decline for a decade, and export opportunities haven’t materialized to make up the shortfall, the company said.
Exporters of products as varied as cars and aluminum have announced job cuts and plant closures in Australia this year as the strength of the currency and high production costs rendered local goods uncompetitive internationally.
Australia has the world’s strictest regulations on cigarette packaging, mandating the use of uniform typography and coloring and graphic images including cancer victims and gangrenous limbs.
They’re reading the writing on the wall that smoking in Australia is on the way out, Mike Daube, president of the Australian Council on Smoking and Health, an anti-smoking group, said by phone from Perth.
It’s a tremendous landmark.
Over the past decade, Australia has introduced bans on smoking in workplaces and raised tobacco taxes by about two-thirds, according to the Cancer Council Victoria, a health charity.
Smoking rates have fallen at the same time, to 20 percent of men and 16 percent of women in 2011-12, from 27 percent of men and 21 percent of women in 2001, according to government data.
The plain-packaging law had absolutely no impact on the decision to close the Moorabbin plant, said Clayton Ford, a spokesman for Philip Morris Australia. The strength of the Australian dollar, which has also hurt some local exporters, also didn’t come into the equation, he said.
Rather, the 2010 mandating of reduced fire-risk cigarettes, which burn out if they’re not being smoked, was responsible for the export weakness, Ford said.
Philip Morris has said the plain packaging laws aren’t making a difference. The Australian law hadn’t made smoking among 14- to 17-year-olds decline any faster, according to a study funded by the company last month, and Australian tobacco sales rose marginally in the first full year of plain packaging, according to industry figures.
Meanwhile, global cigarette companies are pushing into emerging markets, where incomes are rising and tobacco regulation weaker, according to Bloomberg Industries research.
Brazil, Russia, India, China and Indonesia accounted for about 56 percent of global tobacco consumption in 2012, according to Bloomberg Industries data.