A new international survey commissioned by Philip Morris International (PMI) and conducted by independent research firm Povaddo reveals a public appetite for a better approach to reducing the societal harm caused by cigarettes. Seven in 10 respondents (71 percent) believe that encouraging those adults who would otherwise continue to smoke to switch to smoke-free alternatives instead can complement other efforts to reduce harm.
Conducted in December 2020 among 22,500-plus adults in 20 countries and territories, the survey explores attitudes regarding the role of smoke-free alternatives in improving public health. The results reveal broad support for novel approaches to accelerating the decline of cigarette smoking. Specifically, the survey found that: 73 percent of adults agree that governments should consider the role alternative products can play in making their country smoke-free; 77 percent agree that adult smokers should have access to and accurate information about smoke-free alternatives that have been scientifically substantiated to be a better choice than continued smoking; and 67 percent of respondents say that if it is possible to end cigarette sales in their country within 10 to 15 years (through smokers quitting tobacco or switching to better, science-based alternatives), their government should dedicate time and resources to making that a reality.
Three in four respondents (76 percent) believe it is important for governments to dedicate time and resources to reducing smoking rates. However, a majority (58 percent) believe that more regulation and taxation of cigarettes will not be enough to achieve a smoke-free future.
Jacek Olczak
“Smoke-free products have already started to play an important role in lowering smoking rates,” said Jacek Olczak, chief operating officer at PMI, in a statement. “With the right regulatory encouragement, support from civil society and the full embrace of science, I believe it is possible for the public’s call to be answered and for cigarette sales to be a thing of the past in many countries within a decade to a decade and a half.”
Most adults surveyed want to see a shift in the societal approach to tobacco harm reduction, including more collaboration between governments and tobacco companies. Moreover, nearly seven in 10 respondents (68 percent) support tobacco companies working with governments, regulators and public health experts to ensure smokers have access to and accurate information about the better, smoke-free alternatives science has made available. Further, eight in 10 respondents believe both governments (88 percent) and businesses (81 percent) have a responsibility to embrace the latest scientific and technological developments.
Philip Morris Korea (PMK) has won a legal battle against South Korea’s tax authority over trademark usage fees, reports The Korea Herald, citing legal sources.
The Seoul Administrative Court on March 1 ruled in favor PMK, ordering Seoul Main Customs to cancel a KRW9.82 billion ($8.7 million) tax.
The ruling comes four years after the Korea Customs Service ordered the company to pay KRW3.4 billion in customs duties, KRW3.7 billion in value added tax and KRW2.6 billion in penalty tax over royalties paid to its headquarters.
PMK appealed the decision.
PMK has been producing tobacco products in Korea with raw materials exported from its headquarters since 2012. The tax authorities moved against the firm, believing the Korean unit had been paying royalties to use the company’s trade secrets.
According to Korea’s Customs Act, companies are subject to a levy when importers pay their business partners a low price and make the rest of the payment in royalties to evade taxation.
The March 1 ruling dismissed the argument by the tax authorities, saying that the royalties paid by PMK include trademark fees as well as tobacco leaves and business secrets and that the tax needs to be recalculated.
Philip Morris International (PMI) wants smokefree products to account for more than half of its revenues by 2025, up from its earlier target range of 38 percent to 42 percent. The new goal was announced during PMI’s 2021 investor day on Feb. 10., a virtual event broadcast from the company’s operation’s center in Lausanne, Switzerland, during which senior management presented PMI’s business strategies and growth outlook.
The company shared its 2021 to 2023 targets, including net revenue and adjusted diluted earnings per share (EPS) compound annual organic growth of more than 5 percent and 9 percent, respectively, and 2023 heated-tobacco unit shipment volume of 140 billion units to 160 billion units.
PMI plans to launch IQOS ILUMA, the next generation of its IQOS heat-not-burn product featuring internal heating based on Smartcore induction technology, in the second half of 2021.
In addition, the company intends to launch IQOS VEEV, its MESH technology vapor product, in more than 20 markets this year. PMI expects to commercialize IQOS in a total of 100 markets by the end of 2025, up from 64 markets at the end of 2020.
Also at the investor day, PMI announced its target of at least $1 billion in net revenues from “beyond nicotine” products in 2025.
With the right regulatory frameworks, dialogue and support from civil society, the company said cigarette sales can end within 10 years to 15 years in many countries.
Andre Calantzopoulos
“In just five years, we have thoroughly transformed our company, building IQOS into a top-5 global nicotine brand—with nearly $7 billion in net revenues and over 17 million users across 64 markets—while maintaining our leadership position in the international cigarette category,” said PMI CEO Andre Calantzopoulos in a statement.
“We are now embarking on our next growth phase, further shifting to a better, more sustainable business by driving the development of the smokefree category and leveraging our leading commercial model, which places the consumer at the core, to switch more adult smokers to our smokefree products.”
“This next growth phase is underpinned by our unmatched portfolio of innovative products. We are very excited to announce the planned launch of IQOS ILUMA—the next generation of our IQOS heat-not-burn product featuring a new internal heating induction technology—during the second half of this year.”
“As outlined today, we are well positioned to deliver excellent top-[line] and bottom-line growth as well as strong shareholder returns. We now aim to be a majority smokefree product company by 2025, an important milestone toward our ambition to deliver a smokefree future, to the benefit of adults who would otherwise continue to smoke, society, the company and our shareholders.”
Philip Morris reaffirmed its full-year 2021 guidance for EPS in the range of $5.90 to $6. For the three-year period between 2021 and 2023, Philip Morris is guiding for net revenue and adjusted EPS compound annual growth of 5 percent to 9 percent. Cigarette volume is expected to decline in that period. Philip Morris stock has fallen 3.5 percent over the last year while the benchmark S&P 500 index SPX, -0.03 percent, is up 16.7 percent for the period.
A transcript and slides of the Investor Day are available at www.pmi.com/2021InvestorDay. An archive of the webcast will be available until 5 pm Eastern Time on March 11, 2021.
Philip Morris International (PMI) has appointed Bonin Bough as a member of its board of directors.
Bough is the founder and chief growth officer of growth accelerator Bonin Ventures. He has been chief growth and marketing officer of Sundial Brands (Unilever); television host of CNBC’s “Cleveland Hustles”; chief media and e-commerce officer of Mondelez International; vice president, global media and consumer engagement of Kraft Foods Group; and chief digital officer of PepsiCo.
“It is with great pleasure that we welcome a member of the new generation of digital-first executives to the Philip Morris International board of directors,” said Lucio Noto, PMI’s interim chairman, in a statement. “As we move forward to ‘unsmoke the world,’ an understanding of how to navigate unprecedented societal and commercial change is vital to our success. Bonin Bough brings us a rich background of driving innovation into and through complex organizations.”
Philip Morris International (PMI) reported operating income of $11.69 billion in 2020, up 10.8 percent over 2019. Net revenues were down 3.7 percent to $28.69 billion for the full year.
PMI sold 628.52 billion cigarettes in 2020, down 11 percent 11.1 percent from 706.71 billion in 2019. The company’s shipments of heated tobacco units (HTU) increased 27.6 percent to 76.11 billion in 2020. Its combined volume of cigarettes and HTUs was 704.63 billion in 2020, 8.1 percent less than in the previous year. Sales of PMI’s flagship Marlboro brand declined by 11.3 percent to 233.16 billion cigarettes.
Andre Calantzopoulos
“In 2020, PMI delivered a robust business performance despite the unprecedented headwinds of the Covid-19 pandemic, with adjusted diluted EPS [earnings per share] organic growth of 7.0 percent, supported by stronger-than-anticipated fourth quarter results,” said André Calantzopoulos, chief executive officer, in a statement.
“IQOS continued to deliver impressive growth in 2020, driving significant increases in our total users, as well as both HTU shipment and in-market sales volumes. During the fourth quarter, we reported record HTU market shares in key IQOS geographies and exited the year with double-digit national shares in ten markets.”
“We enter 2021 with favorable momentum, although certain headwinds remain, notably related to Duty Free, Indonesia and the continued effects of the pandemic. For the full year, we are expecting a significant recovery, with mid-single-digit organic net revenue growth—driven by the growing contribution of IQOS—and further efforts on cost efficiencies driving an acceleration in forecasted adjusted diluted EPS growth to a range of 9 percent to 11 percent on the same basis.”
PMI said it has sufficient access to the inputs for its products and is not facing any significant business continuity issues with respect to key suppliers. All of PMI’s cigarette and heated tobacco unit manufacturing facilities globally are operational, and Covid-related restrictions do not have a significant impact on the availability of PMI’s products to its customers and adult consumers.
PMI will host a live video webcast of presentations and Q&A session by senior management at its 2021 investor day on Feb. 10, 2021. The webcast will be held in a virtual format and provide live video of the entire session beginning on Wednesday, Feb. 10, 2021, at approximately 8:30 a.m. EST and concluding at approximately 1:30 p.m. EST. An archive of the webcast will be available on the company’s website until 5 p.m. EST on March 11, 2021. A copy of the slides and full transcript will be made available on the company website
Philip Morris International has signed a memorandum of understanding (MOU) with the National Intellectual Property Rights Coordination Center at the U.S. Department of Homeland Security (DHS) to assist and support Homeland Security Investigations’ illicit tobacco trade operations and other intellectual property rights investigations.
“We are thrilled to partner with DHS and the IPR Center to combat the illicit tobacco trade,” said PMI’s head of illicit trade prevention for the U.S. Hernan Albamonte in a statement. “This partnership will provide both parties necessary information to thwart terrorist and criminal organizations that profit from the trade of illicit tobacco and jeopardize our national security.”
The MOU is focused on comprehensive strategies and coordinating efforts to disrupt and combat all forms of illicit tobacco trade, as well as to address vital areas of intellectual property, brand protection, and anti-counterfeiting strategies. The agreement will also facilitate knowledge transfer between the center and PMI to share mutually beneficial information and research to combat the illicit tobacco trade and assist in other intellectual property rights investigations.
“The agreement being signed today, is a continuation of a years-long partnership between the IPR Center and PMI to protect the American public by enforcing the nation’s intellectual property rights laws and educating consumers on the dangers of illicitly traded tobacco products,” said Steve Francis, IPR Center director. “The IPR Center will leverage this robust public-private partnership to develop outreach, training efforts and share referral information to open investigations and target these criminal acts.”
J.B. Simko
“PMI is focused on developing smoke-free alternatives that are a better choice for adults than continued smoking,” said PMI’s Vice President Of External Affairs J.B. Simko. “Our goal is that one day these products will replace combustible cigarettes for good. The illicit trade undermines these efforts by making unregulated products more accessible, so we are determined to do our part to fight it.”
Philip Morris International (PMI) has appointed Jorge Insuasty to the position of chief life sciences officer, effective Jan. 15, 2021. Insuasty will report to the company’s CEO, André Calantzopoulos.
“Jorge’s wealth of experience across both the pharmaceutical and consumer healthcare industries makes him the ideal candidate to succeed John O’Mullane, who is retiring,” said Calantzopoulos in a statement. “Jorge is a transformational leader in science and medicine and excels in driving product portfolio development through to market success. Science and a consumer-focused product portfolio are the cornerstones of our ambition to replace cigarettes with products that are a better choice than continued smoking. Jorge’s impressive track record will help ensure we reach our goals and take full advantage of adjacent revenue-generating opportunities.”
Insuasty joins PMI from Sanofi, where most recently he was the global franchise head of immunology, oncology, and neurology for Sanofi Genzyme. During his nine-year tenure at Sanofi he led the company’s product pipeline strategy, from candidate selection through the development and regulatory review processes, with a dozen novel drugs approved. He orchestrated significant transformational change within the R&D and commercial functions to substantially increase speed and efficiency, fostered external collaboration and innovation, and was highly engaged with the investor community. Overall, he played a pivotal role in the turnaround of Sanofi’s R&D efforts.
Prior to Sanofi, Insuasty spent eight years at Novartis International as global head of development, neuroscience, and ophthalmology. Before that, he was vice president, research and development, consumer medicines at Bristol Myers Squibb. Insuasty holds an MD in cardiology from the University of Paris.
“I am very excited to join PMI,” said Insuasty. “The company’s transformation, and smoke-free vision represent a tremendous public health opportunity and a business challenge, both of which I will be thrilled to contribute toward. And I also look forward to developing adjacent future growth drivers.”
This appointment follows the recent announcement that John O’Mullane, PMI’s current chief life sciences officer, will retire.
“We thank John for the enormous contributions he has made these last two years, driving innovation and rigor into our life sciences function, and we wish him well in his retirement,” added Calantzopoulos.
Investors are underestimating Philip Morris International’s (PMI) smoke-free future, according to Jacek Olczak, the company’s chief operating officer and CEO in waiting.
Philip Morris stock has risen just under 1 percent year to date, lagging far behind the S&P 500, a measure of the broader market.
In an interview with Barron’s, Olczak said that IQOS is the most advanced reduced-risk product on the market, with the most rigorous science behind it. He highlighted the company’s valuable first-mover advantage in many markets, which should also help it rebuff competition from smaller rivals.
PMI hopes to sell between 90 billion and 100 billion heated-tobacco units in 2021, a 20 percent to 30 percent increase from this year and a target that the company is closing in on.
Olczak also has high hopes for Veev, a vaping product that has already rolled out in New Zealand. To prevent underage use, the Veev device can be activated only by users who can verify their age. According to Olczak, this extra, built-in layer of protection should give “a level of confidence to regulators in various geographies, that they can offer a solution to adults while [excluding] audiences that shouldn’t have access.”
Olczak said PMI has successfully overcome many of the challenges presented by Covid-19, including supply chain shutdowns. Increased focus on digital sales of IQOS has helped the company build valuable relationships directly with consumers. The resulting shift from a business-to-business to a business-to-consumer model is differentiating PMI from the competition.
As part of a long-planned leadership transition, Olczak will take over for Andre Calantzopoulos in May 2021.
Louis Camilleri has retired as chairman of the board of Philip Morris International (PMI) for personal reasons. PMI has appointed its CEO, André Calantzopoulos, as executive chairman, to take effect immediately prior to the company’s annual meeting of shareholders in May 2021.
Lucio Noto, PMI’s independent presiding director, will serve as interim chairman until the succession of Calantzopoulos in May. PMI’s current chief operating officer, Jacek Olczak, will succeed Calantzopoulos as chief executive officer immediately after the May meeting. It is anticipated that Olczak will also be nominated for election to the board of directors at the meeting. Olczak has served as PMI’s chief operating officer since January 2018 and served as chief financial officer from August 2012 through December 2018.
According to PMI, the planned succession promises a seamless transition and continuity of leadership. Camilleri, Calantzopoulos and Olczak have worked closely together since PMI became an independent company. They share a single strategic vision, and under their combined leadership, PMI has marked significant achievements, including its business transformation and indisputable leadership in the smoke-free product category.
Andre Calantzopoulos
“I am delighted to hand over the chairman of the board role to André following his decision to relinquish his CEO responsibilities,” Camilleri said in a statement. “I am equally delighted to see Jacek named to the helm of the company as of May 2021. He is a worthy successor to André, given his track record with PMI and his leadership qualities. Contemplating my 40-year PMI career, it has been an enormous privilege to serve this wonderful company, its board, its employees, and its shareholders. I want to wholeheartedly thank you all for this amazing journey that has made PMI the leading and most progressive tobacco company in the world. I am stepping down with the firm belief that the company is in great hands to accomplish its smoke-free vision.”
Lucio Noto
“The decisions announced today are the result of a rigorous and well-executed multi-year succession plan and are a clear demonstration of how well our company is governed,” said Noto, speaking on behalf of the board of directors. “The board is assured that under Jacek’s and André’s leadership and guidance, PMI will continue to innovate, prosper, and enhance shareholder value. I know I speak for all of us in expressing my profound gratitude to Louis for his enormous dedication and his tremendous contributions to our company throughout his stellar career. The members of the board will all miss him dearly.”
“It is an honor to follow in the footsteps of our chairman and former CEO, Louis Camilleri,” said Calantzopoulos. “On behalf of the PMI leadership, I would like to express our profound appreciation for his amazing contributions to the success of our company and for his leadership, guidance, devotion, and, above all, humanity. Beyond the unrivaled executive, we will all miss an outstanding person and a friend.”
Calantzopoulos continued: “During my seven years as CEO, we have positioned PMI for the future and created better, science-based options for those adults who would otherwise continue to smoke. We have the world’s leading product portfolio in both combustible and smoke-free products, an outstanding management team, and a high-performing, fast-learning organization across the world. We are perfectly poised for continued success. I am very pleased to hand over the CEO responsibility to Jacek. Having worked closely with Jacek for decades, I know well that his passion for the company and our employees, drive for results, and deep knowledge of our products, systems, values, and investors make him the ideal leader to ensure the continued growth of our business and to deliver shareholder value.
“I want to express my gratitude to our board, senior executives, employees, business partners, and shareholders for their support throughout my executive career. You have been an invaluable source of inspiration and strength, and I feel honored that I had the opportunity to work alongside all of you.”
Jacek Olczak
“I am humbled to have the opportunity to lead PMI,” said Olczak. “Working alongside André on PMI’s transformation, we have built the capabilities to continue delivering the unsmoke vision and beyond. I am committed to continuing to work with André in his new role and with the entire team at PMI to deliver on the enormous business opportunity of a smoke-free future, to the benefit of our consumers, shareholders, and society.”
Olczak, 55 joined the company in 1993 and worked in finance and general management positions across Europe, including as managing director of PMI’s markets in Poland and Germany and as president of the European Union Region before his appointment as chief financial officer of PMI in 2012. He holds a master’s degree in economics from the University of Lodz, Poland.
The board of directors has also nominated a new director, Michel Combes, effective immediately.
A French businessman, Combes is president of SoftBank Group International and oversees several Softbank portfolio companies. He was chief financial officer and then CEO and a member of the board of directors of Sprint, CEO of Vodafone Europe, CEO of Alcatel-Lucent, CEO and chief operating officer of Altice, and chairman and CEO of SFR Group. Prior, he held several positions within French ministries, at France Telecom, and at Télédiffusion de France.
Philip Morris International (PMI) has become one of just 10 companies worldwide to receive CDP’s prestigious “triple-A” score for its efforts in combating climate change, protecting forests, and water security.
It’s the first year PMI has achieved the top result in each of the three categories. CDP is an international non-profit organization that uses data to help decision-makers reduce risk, capitalize on opportunities, and drive action toward achieving the world’s sustainability goals.
“We are proud and humbled to have obtained CDP’s top score for our sustainability efforts. Climate change is one of the most significant crises of our lifetime,” said Massimo Andolina, PMI’s senior vice president of operations, in a statement. “We strongly believe that PMI must play its part in protecting our planet by reducing our environmental impact across our value chain and by defining and executing strategies and initiatives to achieve our long-term targets.”
This marks the seventh year that PMI has ranked on CDP’s A List for Climate Change. For the previous year, PMI also earned a position on the Water Security A List, and an A- for its forest disclosure.
“We would like to thank our teams and our suppliers all over the world for building, day by day, a more resilient and sustainable value chain, and for this fantastic achievement,” said Laurence Ruffieux, PMI’s director of operations sustainability. “We are honored by CDP’s recognition of our efforts, inspiring us to continue to strengthen our strategies to achieve our targets of zero deforestation and carbon neutrality in our direct operations by 2030, and sustainable water stewardship.”
CDP’s annual environmental disclosure and scoring process is widely recognized as the gold standard of corporate environmental transparency. In 2020, more than 515 investors with over $106 trillion in assets and 150-plus major purchasers with $4 trillion in procurement spend requested companies to disclose data on environmental impacts, risks, and opportunities through CDP’s platform. Over 9,600 responded—the highest ever total.
