Philip Morris International - Tobacco Reporter

Ukraine: Activists Decry PMI’s tax privileges

Activists are urging the Ukrainian government to crack down on international companies still operating in Russia following reports on Philip Morris International’s preferential tax treatment, according to Eureporter.

Despite being labeled as an “international sponsor of the war,” PMI continues to enjoy a discounted tax rate in Ukraine.

After Russia invaded Ukraine in February 2022, many international tobacco companies, including PMI, announced they would retreat from Russia or substantially scale down their operations. In early 2023, however, PMI CEO Jacek Olczak told the Financial Times that negotiations had stalled as the company does not want to sell the business on unfavorable terms for its shareholders.

Since the start of the war, Russia has made it exceedingly difficult for foreign investors to exit the market without taking a significant financial hit. Among other provisions, the government reserves the right to dictate the valuation of foreign companies’ Russian assets as well as the new owners’ dividend and access to cash flow.

PMI’s revenue in Russia increased to RUR399.9 billion ($4.33 billion) in 2023 from RUR359.53 billion in 2021, the last fiscal year before the war. The company is among the five largest foreign taxpayers in Russia.

PMI’s continued presence in Russia prompted Ukraine to designate the company as a war sponsor.

Despite such considerations, Ukraine levies an ad valorem tax rate of only 12 percent on PMI products—a level that critics say has caused its cash-strapped government to miss out on some UAH100 billion ($2.55 billion) in tax revenues over the decade that the discount has been in place.

Activists have called on Ukraine to introduce restrictions on tobacco companies that have not left Russia and increase the ad valorem tax rate for the products that these companies sell in Ukraine. They cite the example of Estonia, which in March prohibited the trade of products from international companies still operating in Russia.

March 27, 2024

Harpantidis to Lead PMI External Affairs

Philip Morris International has appointed Christos Harpantidis to the position of senior vice president of external affairs effective May 1, 2024. In his new role, Harpantidis will report to the company’s CEO, Jacek Olczak.

“Christos is an experienced business leader with a proven track record of engaging society on the benefits of tobacco harm reduction and risk-proportionate regulation for smoke-free products,” said Olczak in a statement. “He has been instrumental in building our smoke-free business in Greece and the Southeast Europe area as we evolve away from cigarettes. I’m looking forward to working with Christos and excited to see what opportunities we can unlock as he takes the helm of our external affairs function globally.”

Since joining PMI in 2003, Harpantidis has held several positions, including setting the commercialization strategy for smoke-free products in Lausanne, Switzerland, and serving as chairman and managing director of Papastratos in Greece. Most recently, he served as area vice president of Southeast Europe. Throughout his career at PMI, he has contributed to growing the company’s smoke-free consumer base, expanding its brand portfolio and advocating for regulations consistent with PMI’s smoke-free ambitions. Prior to joining the company, he worked at Coca-Cola Hellenic. Harpantidis holds a degree in physics from the Aristotle University of Thessaloniki, Greece, as well as master’s degrees in economics and business administration from Kent University in the United Kingdom.

“Leading our dynamic external affairs function globally is an enormous honor,” said Harpantidis. “I look forward to building on the remarkable progress already achieved by the team, which is resulting in science-based tobacco harm reduction policies being endorsed by more countries.”

This appointment follows the decision of Gregoire Verdeaux to leave PMI at the end of April to pursue other professional opportunities. During his tenure, Verdeaux expanded the company’s global tobacco harm reduction strategy and, with the team, built compelling policy positions and advocated for regulations consistent with PMI’s smoke-free ambitions.

“Thanks, in large part, to Gregoire’s efforts, tobacco harm reduction policies are now endorsed by a growing number of countries,” said Olczak. “Under Christos’ leadership, I believe that the external affairs function will ensure that this positive momentum is maintained and further amplified.”

March 26, 2024

IQOS Iluma i Debuts in Japan

Philip Morris International has launched IQOS Iluma i, the latest and most innovative addition to its growing portfolio of smoke-free products, in Japan. The launch marks the 10-year anniversary of IQOS, which debuted in Nagoya, Japan, in 2014.

“We leverage science, world leading brands and commercial capabilities to provide better alternatives to our consumers. This anniversary provides an opportunity to renew our smoke-free vision and our ambition for over two-thirds of our total net revenue to come from smoke-free products by 2030,” said PMI CEO Jacek Olczak in a statement.

“IQOS Iluma disrupted the category by introducing induction-heating technology that heats tobacco from within, to provide a consistent taste experience, no tobacco residue, and no need to clean the device. Today, we take IQOS to new heights, with the launch of IQOS Iluma i—the latest innovation in our smoke-free portfolio, offering a range of advanced features for a clean, seamless, and more flexible experience.”

The IQOS Iluma i series offers three devices in Japan: IQOS Iluma i PRIME, IQOS Iluma i and IQOS Iluma i ONE. All three devices bring a range of adaptable new features.

The new touch screen on the device’s holder allows users to see experience-relevant information quickly and easily. To personalize the experience, IQOS Iluma i introduces a new pause mode. By swiping up or down on the touch screen, users can pause and resume their consumption according to their preferences.

The new IQOS Iluma i also includes smart features that help prolong the lifespan of the holder’s battery. Furthermore, the door for IQOS Iluma i is made from aluminum produced with renewable energy and the inner textile layer of IQOS Iluma i’s Prime leather-like wrap is made of 100 percent recycled plastic.

“IQOS Iluma i is our most innovative offering to date and the new flagship in our portfolio of scientifically substantiated, heat-not-burn smoke-free systems,” said Bertrand Bonvin, president heat-not-burn platforms at PMI. “Like previous IQOS devices, it emits, on average, 95 percent lower levels of harmful chemicals compared with cigarettes. We are proud that consumer feedback continuously fuels our innovation, and IQOS Iluma i is a testament to that.”

March 13, 2024

PMI Sued Over Zyn

In the first major legal challenge to oral nicotine pouches, a consumer has sued Philip Morris International over its popular Zyn brand, saying the product is addictive and harmful to young people, reports BNN Bloomberg.

The plaintiff, Bailey Wolters, alleges addiction and dental issues as a result of his Zyn use. The lawsuit says that the pouches deliver more nicotine than cigarettes, and that PMI benefits from “Zynfluencers” who promote the brand on social media.

The suit, which is seeking class-action status, also names as a defendant Swedish Match, which made the pouches before PMI bought it for $16 billion in 2022.

According to the plaintiff, the companies failed to warn consumers about the risk of addiction and other harmful effects like cognitive issues, cardiovascular injuries, gastrointestinal problems and gum disease.

PMI insists its pouches are intended only for existing users of nicotine products.

The case was brought by Schlesinger Law Offices, whose initial lawsuit against Juul Labs investors including Altria Group expanded into thousands of legal actions and led to Altria’s eventual settlement of $235 million.

March 4, 2024

PMI To Build Cigarette Factory in Tanzania

Philip Morris International will build a cigarette factory in Morogoro and buy at least 12 million kg of Tanzanian tobacco annually over the next five years, reports The Citizen. The company hasn’t purchased leaf from Tanzania since 2017.

According to Minister of Agricultura Hussain Bashe, PMI has partnered with another firm in Tanzania to build a cigarette factory, which he says may commence operations toward the end of 2024.

Tanzania tobacco farmers produced 120 million kg in the most recent growing season. This year, they are expected to cultivate 200 million kg.

Anti-tobacco groups criticized PMI’s decision to build a factory. “The announcement is yet another act of hypocrisy from the tobacco giant that claims it is committed to “delivering a smoke-free future. You don’t achieve a smoke-free future by building new cigarette factories or by shipping 613 billion cigarettes worldwide, as Philip Morris did in 2023,” said Yolonda Richardson, president and CEO of the Campaign for Tobacco-Free Kids, in a statement.

“The move by Philip Morris to double down on cigarette sales in Africa shows that the company is blowing smoke and can’t be taken seriously when claiming that it wants to end cigarette sales. Philip Morris is working to sell as many cigarettes as it can for as long as it can.”

February 23, 2024

Firms Recognized for Sustainability

Philip Morris International and Japan Tobacco have been recognized for their environmental initiatives.

For the fourth consecutive year, PMI received a triple-A rating from CDP for its disclosures on climate change, forests and water security.

PMI has maintained a position on CDP’s Climate A-List for the past 10 years, reflecting its commitment to transparency and performance as the company progresses toward achieving its science-based targets as well as carbon neutrality for scope 1 and 2 by 2025 and net zero by 2040 for scope 1, 2 and 3.

PMI’s efforts to halt deforestation, moving to zero net deforestation in managed forests by 2030, have further been recognized by CDP, which placed the company on its Forests A-List for the fourth consecutive year. This is the fifth year that PMI has been featured on CDP’s Water A-List as the company works toward its water optimization targets, which include optimization of 10 million cubic meters of water in its tobacco growing areas by 2030.

“External recognition from organizations like CDP encourages us to continue our transformation journey and commitment to sustainability. We are pleased PMI has received CDP’s triple-A distinction for the fourth consecutive time,” said Scott Coutts, senior vice president of operations, in a statement. “Clear and transparent reporting of our progress helps us find new opportunities for action, identify and tackle growing risks, and get ahead of regulatory and policy changes.”

PMI is also committed to advancing the adoption of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations and intends to publish its first TNFD-aligned report for financial year 2025. Accordingly, PMI has been included in an inaugural cohort of organizations that intend to become TNFD early adopters.

“We recognize the urgency to address climate change and protect biodiversity, and this is why our decarbonization strategy and progress are closely tied to preserving natural ecosystems,” said Jennifer Motles, chief sustainability officer. “We are proud to be an early adopter of the TNFD framework and will be reporting on it in 2025, which builds on the work we have already done to incorporate climate-related risk and opportunities into our overall business strategy and disclosure efforts, following the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.”

Japan Tobacco was recognized by CDP for its leadership in corporate sustainability for a fifth year in a row. The JT Group is one of 61 companies worldwide and 22 in Japan to be included on the Climate Change A-List and Water Security A-List out of more than 23,000 companies participating in the 2023 CDP environmental disclosure program. Overall, this inclusion marks the group’s sixth recognition for climate change, and fourth recognition for water security.

“We are honored that the JT Group has been recognized on CDP’s A-List for a fifth consecutive year,” said JT Group Senior Vice President and Chief Sustainability Officer Hisato Imokawa, in a statement. “This inclusion reflects our continued efforts to reduce our environmental footprint and expand our transparency in disclosing information. ‘Living with the Planet’ is a key aspect of the JT Group Materiality, and we aim to achieve the sustainable relationship between nature, people and businesses through efforts to improve the impact of our activities on the environment. We are currently defining more ambitious targets for our environmental initiatives and plan to disclose them in early 2024. These targets will support our goals of contributing to the sustainable development of society by further fulfilling our responsibilities and maintaining the trust of our stakeholders.”

February 9, 2024

IQOS Surpasses Marlboro in Revenue

Philip Morris International reported net revenues of $9.05 billion for the fourth quarter and net revenues of $35.17 billion for fiscal year that ended Dec. 31, 2023. On a reported basis, the figures were up 11 percent and 10.7 percent, respectively, over the comparable 2022 periods.

Performance was driven by revenue growth in both the combustible cigarette business, where pricing offset reduced volumes, and the company’s smoke-free operations, which continued to increase their share of the company’s business mix.

“We are pleased that smoke-free products reached nearly 40 percent of our total net revenues and over 40 percent of our gross profit in the fourth quarter,” said PMI CEO Jacek Olczak in a statement.

“This was led by the continued growth of IQOS, which has now surpassed Marlboro in terms of net revenues, confirming its position as the leading premium nicotine brand less than 10 years from launch. The fourth quarter also marked the first anniversary of our combination with Swedish Match, which delivered very strong results in 2023 driven by the stellar U.S. performance of ZYN.”

PMI shipped 116.3 million cans of ZYN in the fourth quarter of 2023, representing growth of 78.2 percent versus fourth-quarter 2022 Swedish Match shipments of 65.3 million cans.

“We are entering 2024 with strong momentum, and we expect it will be another year of excellent performance underpinned by an acceleration in organic smoke-free net revenue and profit growth,” said Olczak.

PMI also expects to benefit this year from a recent settlement with British American Tobacco that resolves all ongoing patent infringement litigation between the parties related to heated tobacco and vapor products. The deal allows each party to innovate and introduce product iterations.

February 8, 2024

PMI and BAT Settle Patent Disputes

Philip Morris International and British American Tobacco have settled their ongoing intellectual property disputes relating to heated tobacco and vapor products.

The cigarette makers had been fighting a multi-front patent battle. BAT, which makes Vuse vapes and Glo heated tobacco devices, was ordered to pay PMI millions of dollars after losing one case, while PMI has been blocked from importing its flagship heated tobacco device IQOS into the United States as part of another.

The settlement includes non-monetary provisions between PMI and BAT that resolve all ongoing global patent infringement litigation, encompassing all related injunctions and exclusion orders, and prevents future claims against current heated tobacco and vapor products. The settlement also allows each party to innovate and introduce product iterations.

“We are pleased that this matter has been resolved to the mutual satisfaction of both parties,” said PMI CEO Jacek Olczak in a statement. “There is a clear and growing global desire from adults who smoke to choose from a range of smoke-free products, and we believe continued reduced-risk category innovation can accelerate declines in the harms associated with smoking to the benefit of consumers and public health at large as we continue PMI’s journey to end the sale of cigarettes.”

“This agreement is an important step forward for BAT and all our stakeholders,” said BAT CEO Tadeu Marroco in a statement. “Having already built two £1 billion [$1.28 billion] brands in Vuse and Glo, the potential for their continued impact on tobacco harm reduction is clear. I am delighted that this settlement will allow BAT to focus on developing innovative solutions that provide adult consumers with a greater choice of reduced risk products in support of our ‘A Better Tomorrow’ purpose. By doing so, we will help build a smokeless world for the benefit of consumers, investors and society as a whole.”

February 2, 2024

Activists Protests ‘Misguided’ Zyn Probe

U.S. Senate Majority Leader Chuck Schumer’s call on the U.S. Food and Drug Administration and Federal Trade Commission to investigate the marketing practices and health effects of Philip Morris International’s Zyn nicotine pouch brand provoked a backlash among advocates of tobacco harm reduction.

“The American people have seen this movie before with less harmful e-cigarettes,” said Tony Abboud, executive director of the Vapor Technology Association (VTA).

“Congressional leaders yell at unelected bureaucrats at the FDA who scurry to remove products from the market that offend their sensibilities—even though those products are less harmful than traditional cigarettes, and have been proven to help people quit smoking deadly cigarettes altogether.

“These misguided actions deprive American adults of less harmful, non-combustible, and non-tobacco nicotine products that are a proven alternative to combustible cigarettes and that the largest clinical trial in the U.S. has found to cause them to quit smoking even if they have no intention to quit cigarettes.

“There is already a de-facto ban on e-cigarettes. Sen. Schumer simply wants this ban extended to other products he and the Washington establishment deem undesirable.

“As with e-cigarettes, Sen. Schumer falsely asserted that Zyn products are popular with younger users. Yet, the National Youth Tobacco Survey data demonstrates that only 1.5 percent of youth have even tried nicotine pouches. When will the federal government stop hiding behind an excuse that has been disproven by their own data?

“VTA stands with Zyn, and the makers of modern oral nicotine pouches, in the fight against arbitrary and capricious government action. Because cigarettes remain the No. 1 cause of preventable death and disease in the U.S., VTA insists on broad access to a wide variety of non-combustible products to preserve freedom of choice for adults who want to use nicotine – and to provide access to proven harm-reduction and smoking-cessation options essential for saving American lives.”

Earlier, Schumer’s call for an investigation prompted PMI to publish a video clarifying its marketing practices.

January 28, 2024

Navaneel Kar to Lead IPM India

Philip Morris International appointed Navaneel Kar as the managing director of its India operations, IPM India Wholesale Trading (IPM India). Prior to joining IPM India, Kar served as the president of sales at Tata Consumer Products. He will be reporting to Ankur Modi, cluster head of South Asia and Indochina for PMI.

With over 25 years of experience, Kar has been associated with reputed brands like ITC and Tata Motors. He has successfully led teams and organizations across multiple categories and channels in the food, tobacco, personal care and beverage sectors.

“I am pleased to welcome Navaneel Kar as IPM India’s managing director,” said Modi in a statement. “Navaneel has displayed leadership and strength in delivering exceptional results through his career. His entrepreneurship and learning mindset will be central to bring the next phase of growth for our India business.”

Kar said, “I am excited to assume the new role at this interesting juncture and contribute to the company’s growth and overall success. I look forward to working with the team to deliver competitive performance along with building an inclusive, diverse and a progressive workplace.”

January 11, 2024

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