West In­di­an To­bac­co Com­pa­ny (Wit­co) has ex­pe­ri­enced a sharp fall in rev­enue for 2023 and this de­cline was at­trib­uted to the wide avail­abil­i­ty of il­lic­it cig­a­rettes.

In the com­pa­ny’s unau­dit­ed fi­nan­cial re­port for the nine months end­ed Sep­tem­ber 30, 2023, the com­pa­ny record­ed prof­it be­fore tax of $213.1 mil­lion, which rep­re­sents a de­crease of $91.8 mil­lion or 30 per cent over the cor­re­spond­ing pe­ri­od last year.

The cig­a­rette pro­duc­tion and dis­tri­b­u­tion com­pa­ny’s af­ter-tax prof­it for the nine months was $47.28 mil­lion, which rep­re­sent­ed a de­cline of 15.9 per cent com­pared to the same pe­ri­od in 2022.

Speak­ing to the Busi­ness Guardian on Tues­day, the com­pa­ny’s man­ag­ing di­rec­tor Raoul Glynn said that rel­a­tive to pre­vi­ous years, the sharp in­crease in the avail­abil­i­ty of il­lic­it brands con­tin­ues to have a big im­pact on the le­gal mar­ket.

“Much work is be­ing done by the au­thor­i­ties and we ap­plaud the work of the Min­istry of Na­tion­al Se­cu­ri­ty, along­side the stel­lar work by the Min­istry of Trade, to re­duce this blight on the na­tion’s in­ter­est. They con­tin­ue to find ways to avoid the tax net and flood the mar­ket with sub­stan­dard prod­ucts with­out ba­sic san­i­tary con­di­tion­ing,” Glynn ex­plained.

The sec­ond ma­jor dri­ver of rev­enue re­duc­tion, he said, is the in­creased de­mand for low-priced of­fers in the mar­ket.

While the man­ag­ing di­rec­tor not­ed that over­all con­sump­tion has re­mained sta­ble in T&T over the years, there has been, how­ev­er, a shift in de­mand in cer­tain seg­ments of the mar­ket to­wards low­er-priced of­fers.

“This is very nor­mal in a sat­u­rat­ed mar­ket as it evolves and as con­sumers seek ef­fec­tive ways to bal­ance their bud­get.”

He in­di­cat­ed that dur­ing 2023, the cig­a­rette man­u­fac­tur­ing com­pa­ny has seen strong sta­bil­i­ty in its over­all num­bers with a high­er per­cent­age of its vol­ume now re­sid­ing in the low­er priced seg­ments and as they meet the de­mand of all con­sumers in T&T.

“Al­ways con­sumer-cen­tric and fo­cused on our con­sumers, we can boast we are the on­ly Trinida­di­an com­pa­ny ful­ly fo­cused on meet­ing the needs of our Trinida­di­an con­sumers for 119 years.”

In 2019, Wit­co gen­er­at­ed rev­enue of $935.36 mil­lion; its rev­enue in 2022 de­clined to $724.09 mil­lion which is a 22 per cent fall.

Asked what he would do dif­fer­ent­ly in 2024 to change the com­pa­ny’s de­clin­ing rev­enues, Glynn said the cig­a­rette com­pa­ny would con­tin­ue to en­sure it meets the needs of all con­sumers in the mar­ket­place by en­sur­ing they have ease of ac­cess to qual­i­ty of­fers, at an af­ford­able price.

“This is not just lim­it­ed to con­ven­tion­al cig­a­rettes, as this is one part of the cur­rent nico­tine en­vi­ron­ment.

“We are well ad­vanced in en­sur­ing we pro­vide the best va­p­ing prod­uct avail­able glob­al­ly, to T&T con­sumers in short or­der. Be­ing first to mar­ket does not trans­late in­to be­ing the best in the mar­ket.

“Wit­co ap­pre­ci­ates that the qual­i­ty of of­fers is what con­sumers de­mand and we will not com­pro­mise this in any­thing we do. We con­tin­ue to lead the tra­di­tion­al cig­a­rette mar­ket and will bring the same busi­ness acu­men to lead the emerg­ing mar­kets in­clu­sive of va­p­ing,” Glynn de­tailed.

Asked about the de­cline in Wit­co’s share price in 2023, it is down by 55.88 per cent up to De­cem­ber 8, Glynn de­scribed this year as one of trans­for­ma­tion for the com­pa­ny as it looks for­ward to the mar­ket reap­ing the re­sults.

On whether the de­cline in prof­its con­tributed to the de­crease in div­i­dends, the man­ag­ing di­rec­tor said Wit­co’s div­i­dend method­ol­o­gy is a unique in the lo­cal en­vi­ron­ment as al­most 100 per cent of its prof­its are re­turned to the com­pa­ny’s share­hold­ers.

“This will con­tin­ue. We in­vest­ed in our port­fo­lio and route to mar­ket (dis­tri­b­u­tion sys­tem), which re­quired some re­source al­lo­ca­tion, and with shrewd in­vest­ment, we are see­ing a strong re­turn to the busi­ness in the short-to-medi­um term,” Glynn said.

The de­cline in rev­enue at the man­u­fac­tur­ing to­bac­co com­pa­ny may be a con­cern for some, but the man­ag­ing di­rec­tor said Wit­co has in­creased its work­force and is cur­rent­ly over 220 team mem­bers di­rect­ly and the com­pa­ny in­tends to ex­pand this even fur­ther as it makes the next steps in­to evo­lu­tion.

Re­brand­ing

On the re­brand­ing as­pect from Du Mau­ri­er to Lucky Strike and how it has af­fect­ed busi­ness, Glynn dis­closed: “We took the bold step to merge these na­tion­al icons with this glob­al flag­ship and al­low each to be strength­ened from the oth­er.

“De­spite some teething pains dur­ing the tran­si­tion, this has been ac­com­plished. Lucky Strike White pow­ered by Broad­way, is now the stand­alone mar­ket leader in the mar­ket con­sumed by more than three out of every ten con­sumers in Trinidad.”

High­er cost of pro­duc­tion

Asked whether the prop­er­ty tax is go­ing to have an im­pact on the com­pa­ny, the ex­ec­u­tive said the com­pa­ny con­tin­ues to re­view and run sce­nar­ios based on the po­ten­tial out­come as it seeks to off­set as much of the pos­si­ble im­pact of all in­creased costs from its con­sumers.

“We be­lieve they are al­ready stretched, and we have es­tab­lished, since COVID-19, a mind­set through­out the en­tire or­gan­i­sa­tion to­wards en­sur­ing we dri­ve ef­fi­cien­cies and rein­vest to make the busi­ness more ef­fi­cient. If it is not rel­e­vant to the con­sumer, it should not be im­pact­ing the prod­uct.”

As it per­tains to the pro­posed elec­tric­i­ty rates and how it may af­fect op­er­a­tions, Glynn in­di­cat­ed that the pro­posed in­crease would im­pact on its op­er­a­tions as en­er­gy costs con­sti­tute a sig­nif­i­cant per­cent­age of the com­pa­ny’s to­tal di­rect man­u­fac­tur­ing costs.

“We see the pro­posed mar­gin­al in­crease in elec­tric­i­ty rates, like all oth­er im­pacts to our ex­ter­nal costs. We have learned from our ex­pe­ri­ence with the sup­ply chain hikes which fol­lowed the pan­dem­ic out­break in Asia, and the con­tin­u­ing Ukraine-Rus­sia con­flict.

“It ne­ces­si­tates good cor­po­rate cit­i­zens, like Wit­co, born and bred in this twin-is­land Re­pub­lic, con­tin­u­al­ly seek­ing ways to be as ef­fi­cient as pos­si­ble to shield our al­ready stretched con­sumers from any ad­di­tion­al im­pact,” he re­vealed.

Pressed fur­ther on how the pro­posed price in­crease in in­dus­tri­al elec­tric­i­ty rates would im­pact Wit­co’s op­er­a­tions, Glynn said: “Wit­co is al­ways seek­ing ways to make its op­er­a­tions more ef­fi­cient and ef­fec­tive in the pro­duc­tion of the best qual­i­ty prod­ucts for its con­sumers in Trinidad and To­ba­go and be­yond. As men­tioned, we are al­ready seek­ing ways to off­set this im­pact as part of our ESG ini­tia­tive is the re­duced re­liance on non-re­new­able en­er­gy sources.

“We feel con­fi­dent in our abil­i­ty to off­set this pro­posed cost change and en­sure our con­sumers are shield­ed from any fur­ther im­pact.”

He said the pro­posed in­creas­es would not force the cig­a­rette man­u­fac­tur­ing com­pa­ny to shut its doors.

“Wit­co has been a com­pa­ny born, grown, and bred in Trinidad and To­ba­go. But we op­er­ate like a young com­pa­ny, hun­gry and sharply de­fen­sive for what we have built.

“We are ex­treme­ly proud of our her­itage, and we are even more proud of our con­sumers ap­pre­ci­at­ing our ef­forts and re­main­ing ex­treme­ly loy­al to Wit­co of­fers in good and not-so-good times. We are not go­ing any­where,” Glynn smiled.

Monies col­lect­ed

Asked how much tax rev­enue Wit­co has col­lect­ed for the pe­ri­od 2016 – 2022, he said it has paid more than $2.75 bil­lion in ex­cise du­ties and cor­po­ra­tion tax­es.

Ad­di­tion­al­ly, he said the Gov­ern­ment in­di­rect­ly earned via shares held by the Na­tion­al In­sur­ance Board and the Na­tion­al In­vest­ment Fund Hold­ing Com­pa­ny, div­i­dends of more than $268 mil­lion for the same pe­ri­od.

He added that be­ing man­ag­ing di­rec­tor has been a great jour­ney thus far.

“Oc­cu­py­ing the man­ag­ing di­rec­tor’s of­fice at Wit­co is the cul­mi­na­tion of strong suc­ces­sion plan­ning with­in the or­gan­i­sa­tion. My pre­vi­ous as­sign­ments around the globe have equipped me with tools to help nav­i­gate the jour­ney the or­gan­i­sa­tion is on and achieve the de­sired des­ti­na­tion. All suc­cess is un­der­scored by the sup­port of a ca­pa­ble and pas­sion­ate team who tru­ly dri­ve the busi­ness for­ward.”