The strategy adopted by Philip Morris International (PMI) over the past decade certainly bears closer scrutiny, not least as a case study in how vision and perseverance sometimes pays off in the face of what seemed, at a shallow reading, overwhelming odds. While the company’s line of heated tobacco products, including the IQOS, hasn’t yet replaced conventional tobacco products, the new leadership, helmed by Jacek Olczak who was appointed chief executive officer on May 5, 2021, is determined to maintain its leading position and accelerate the company’s transformation to what it considers to be a less harmful risk-reduced – but not risk-free, it is worth underlining – alternative to traditional tobacco products, and, in his own words, to a “smoke-free future.”
PMI demonstrated how a company can manage through a combination of innovation and responsible commercialization to not only stay in business but also thrive in a highly competitive global market, and a challenging one to boot, where consumption of tobacco products is widely banned in indoor public spaces – as well as in an increasing number of outdoor venues – and access to advertising and sponsorship opportunities is virtually completely sealed off. Over the past decade, PMI has recognized the growing trend of vaping and other alternative smoking products, and has invested heavily in research and development in order to develop a portfolio of reduced-risk products for adult smokers. In an open letter on the occasion of his appointment, Olczak writes, “When I consider how PMI can contribute to this better future, one action stands above all others: Replace cigarettes as soon as possible with better alternatives for women and men who would otherwise continue to smoke.” The company’s ambitions encompass a future where smoke-free products would ultimately replace cigarettes products, improving the health quality of life for adults who would otherwise continue to smoke, society, the company and its shareholders.
Looking at figures, it seems that PMI’s decision to place its bets on smoke-free products, with the introduction of the IQOS in Nagoya, Japan, in 2014, was a judicious one after all. The IQOS has been approved for marketing in the US by the Food and Drug Administration (FDA) as a Modified Risk Tobacco Product (MRTP), finding that an exposure modification order for these products is appropriate to promote the public health. As at March 31, 2021, the geographical coverage of PMI’s smoke-free products, has extended to 66 markets worldwide, accounting for 28 percent of the company’s net revenues. Olczak played a significant role in this short span, leading PMI’s transformation from a primarily business-to-business company to an increasingly business-to-consumer company.
In February 2020, Beirut joined the string of cities in PMI’s expanding markets for smoke-free products when the IQOS was introduced in the country just prior to the COVID-19 pandemic. In a recent press release, Taylan Suer, PMI country manager for Lebanon, said: “Jacek has been driving PMI’s smoke-free transformation internationally, and his skills and expertise portend an exciting new chapter for PMI. In line with this vision, we introduced IQOS in Lebanon in February 2020. After 1 year of the launch, it is encouraging to see adult Lebanese smokers making the step towards leaving smoke behind and embracing a scientifically substantiated better alternative than continued smoking.” Lebanon has arguably long constituted an attractive market, albeit small in size, for various tobacco products in general, a legacy that endures despite rampant hyperinflation and a ban on smoking in indoor public spaces that came into effect in September 2011 – only a short six years after ratifying the Framework Convention on Tobacco Control (FCTC) that came into effect in 2005 – followed a year later by a national ban on all forms of advertising and sponsorship of tobacco products.
While PMI is confident that it is off to a good start and an equally good succession with its new leadership, it is still early to determine whether its ambition to widely commercialize smoke-free reduced-risk products and establish its domination over alternatives to conventional tobacco products is risk-free or certain. It is important to remember that a number of factors should be considered, not least of which are health concerns relating to the use of tobacco and other nicotine-containing products. Another significant risk, by PMI’s own admission and from its viewpoint, is a potentially diminished ability to convert adult smokers to smoke-free products. Narrowing the focus down to the Lebanese market once more, continued hyperinflation could delay more widespread adoption of PMI’s IQOS and smoke-free products, restricting it to a small number of consumers, although this would apply to other alternatives as well, and even consumers of conventional tobacco products – although attachment and addiction to cigarettes and the quasi-ubiquitous nargileh would contribute to preserving the market.
If the past decade or so of product innovation and disruption has taught the discerning observer anything, it is to reserve passing judgment until more user-generated data becomes available – and, in the case of smoking, until extensive medical studies are conducted – that would allow for product improvement and fine-tuning. With this in mind, Olczak writes: “Our greatest task is to always bring new thinking forward. To demonstrate through action, transparency, and verifiable proof points the integrity of our promises. And to work ceaselessly to forge partnerships with those who can accelerate the change we seek.”
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This article is brought to you by Philip Morris Lebanon.
