Tag: Philip Morris International

  • Philip Morris Korea Appoints New MD

    Philip Morris Korea Appoints New MD

    Photo: Celt Studio

    Philip Morris Korea (PMK) has appointed Hannah Yun as its new managing director. Yun will take the helm at the Seoul office on May 1, reports The Korea Times.

    “With its cutting-edge technology and dynamic market environment, Korea is one of the most important countries leading Philip Morris’ transformation to a ‘smoke-free future,’” said Yun, who is currently the managing director of Philip Morris Australia. “I will further strengthen the competitiveness of Philip Morris Korea by implementing consumer-centric strategies and services based on my international experience.”

    Yun joined PMK in 1997, where she took charge of corporate affairs, business strategy and budget management. From 2003 to 2007, she worked for Philip Morris International in Malaysia, Switzerland and Hong Kong, supporting the development of business growth strategies and operational plans for each market.

    She led PMI’s financial analysis and support division in Switzerland from 2008 to 2013, where she was responsible for managing the communication of consolidated PMI financial information.

    In 2019, Yun was entrusted with overseeing Philip Morris Australia’s financial and commercial strategies. Two years later, she was appointed as managing director of that affiliate, leading the business in Australia, New Zealand and the Pacific Islands.

    PMK’s current managing director, Paik Young-jay, will move on to new opportunities, the firm said. Paik assumed the position amid the Covid-19 pandemic and is credited with establishing a corporate culture of agility and collaboration.

  • Designing the Future

    Designing the Future

    An exclusive tour of PMI’s state-of-the-art heated-tobacco units plant in Bologna

    By Stefanie Rossel

    Photos: PMI

    A traditional cigarette factory gone sci-fi—that’s the impression Philip Morris International’s manufacturing site in Crespellano, near Bologna, is likely to leave on new visitors. Philip Morris Manufacturing and Technology Bologna (PMMTB), which is the company’s first factory dedicated exclusively to mass producing reduced-risk products (RRPs), provides a glimpse into the future of nicotine-delivery systems manufacturing. Presently, the facility focuses on consumables for the company’s IQOS heated-tobacco product (HTP).

    From the outside, the elongated structure with its glass facade and fountains framing the entrance, which was built in only 33 months and began production in 2016, could double as a modern congress facility. Measuring 110,000 square meters, the building hosts production, logistics, quality control and administration facilities, however. It has also been designed as an agreeable place to work. In addition to offices and a conference center, the building features a kitchen with a free-flow restaurant, modern changing rooms and a gym.

    To visitors, the site may seem more like a pharmaceutical facility than a traditional factory. To prevent contamination, no one is allowed to enter the shop floor without protective gear. A visitor center showcases the product ingredients and details the specifications of various IQOS consumables. Heets, the consumables of IQOS Original, comprise a tobacco plug, a hollow acetate tube, a polymer-film filter and a cellulose-acetate mouthpiece filter. In addition, there are outer papers and mouth-end papers.

    The tobacco part, visible at the end of each Heets, is made from fine tobacco powder mixed with fibers, such as cotton, glycerin and guar gum, and then cast into a sheet and rolled onto bobbins. The tobacco rods are manufactured by crimping the tobacco cast leaf in a patented process, which enables the heating blade to be inserted into the consumables.

    Terea Sticks, the consumables for IQOS Iluma, use Smartcore Induction System technology. Iluma, which does not need to be cleaned, is an induction heated device, hence the Terea sticks are equipped with a metal heating element, a thin solid metal thread that is coated with stainless steel and heats the tobacco from within. While with 4.5 cm it is as long as a Heets stick, the Terea consumable contains a fifth component: a front plug at the end of the stick behind the tobacco element to prevent contamination of the device. According to a PMMTB employee, the most challenging part in the production process is to put the metal stick into the center of the tobacco rod and allow eleven holes of filtration in the right place.

    Share the Learnings

    The highly automated shop floor comprises a series of halls that are arranged on both sides of a long corridor aptly called “the spine.” Among other things, they house the primary with the cast sheet production and the secondary with the filter-making division. The latter is divided into so-called cells, production lines that each comprise a crimper for turning the leaf sheets into the sticks’ tobacco elements, a filter combiner that assembles the consumables’ components and a packer. A web of buffer systems below the hall ceiling supplies individual cells with filter segments.

    Each part of the secondary has been designed to respond quickly to changing consumer needs and allow for future expansion. For instance, several of the cells that used to be dedicated to making Heets are currently being converted to manufacture Terea sticks, which Crespellano started producing in 2021. The cells’ new configuration reduces the space required for each production line from 1,200 square meters to 900 square meters. As it gained experience, PMMTB has been able to carry out such conversions quicker. While it took the company more than a year to refurbish the first line, it completed the fourth in four months.

    With more than 1,700 employees, the Crespellano site exports its products to about 40 countries where IQOS is presently marketed. In terms of value, the factory exports exceed Italy’s exports of olive oil and parmigiano cheese. To date, PMI has invested more than €1 billion ($1.06 billion) in PMMTB, which has become the company’s center of excellence for staff training, prototyping and large-scale production of smoke-free tobacco products.

    The plant is the largest factory in Italy to be built from scratch in 20 years and has made PMI one of the largest investors in the country. It is also the biggest facility dedicated to smoke-free products within PMI. PMMTB establishes the manufacturing processes for PMI’s HTP products worldwide. The learnings gathered in Bologna are then exported to PMI’s 38 manufacturing affiliates in 28 countries. Over the past five years, PMI has transformed several of its combustible cigarette factories into heat stick production facilities, including in Aspropyrgos in Greece, where it invested €300 million, Otopeni (Romania, €490 million) and Yangsan (South Korea, €420 million). Today, the company has seven smoke-free product manufacturing plants.

    In addition to the consumables manufacturing facility, the Crespellano site also houses PMI’s new Center for Industrial Excellence, which was inaugurated in the autumn of 2021 and is the largest within the company for industrialization, process innovation, engineering and sustainability. The center is part of a plan to invest approximately €600 million in smoke-free products in Italy over three years. The project is anticipated to create 8,000 direct and indirect jobs.

    The most recent addition to PMMTB has been the Institute for Manufacturing Competences (IMC), which opened in 2022. The company’s aims are to create a skills development center for continuous training and technology transfer, with a focus on manufacturing digital, sustainability, talent development and managerial competences. PMI wants the IMC to benefit not only employees but also suppliers and other stakeholders. The academy, which also finances scholarships, carries out applied research projects with the University of Bologna, the Polytech of Bari and various competence centers.

    In designing PMMTB, PMI paid considerable attention to its ecological footprint. The facility purchases 100 percent certified renewable electricity and features a photovoltaic system, avoiding emissions of about 2,000 tons of carbon dioxide per year. Between 2017 and 2020, the site reduced its emissions by 17.1 percent. Those of its supply chain declined by 56 percent from 2012 to 2020. Built in accordance with sustainability standards, the IMC is completely self-sufficient in energy.

    Longtime Player in Italy

    Italy is an important market for PMI. Statista expects tobacco products revenue to reach $24.73 billion in 2023. The market is expected to expand at a compound annual growth rate of 0.57 percent between 2023 and 2027. While cigarettes still account for the lion’s share of the domestic market, sales of novel products are growing quickly. In 2021, Italy was the world’s third-largest market for HTPs, with 9 billion sticks sold, behind Japan (45 billion) and Russia (21.7 billion), according to Euromonitor. By February 2023, about 2 million Italian smokers had completely switched to IQOS and stopped smoking, according to PMI.

    PMI has been in Italy for more than half a century. In 1963, the company set up Intertaba in Zola Predosa—a 10 minutes’ drive from Crespellano—to supply filters under license of the Italian tobacco monopoly ETI. In 2020, Intertaba became a reference point for the development of new technologies. In 2013, PMI finalized a high-tech filter production facility at the site, which then became the company’s Center of Excellence in Manufacturing and Technology for innovative filters and smoke-free products. With 20 standalone prototyping lines, Intertaba works as a vertical startup by developing new products from concept proof through technology verification. In 2020, the U.S. Food and Drug Administration authorized the marketing of the IQOS tobacco-heating system as a modified-risk tobacco product.

    Opened in Rome in 2001, Philip Morris Italia is responsible for the sale and marketing of PMI brands in Italy. In 2020 and 2022, PMI established digital information service centers in Taranto and Marcianise, respectively. 

    Pipeline of Innovations

    To date, PMI has invested more than $10 billion in its transition to smoke-free products. The company employs more than 980 people in R&D and has evolved into the EU’s 45th-largest patent filer. At the 2023 CAGNY Conference, Chief Financial Officer Emmanuel Babeau said PMI was on track to become a majority smoke-free company by 2025. Last year’s acquisition of Swedish Match provided a substantial boost to reaching this target. The smoke-free net revenues of the two companies combined amounted to about $12 billion in 2022, accounting for more than a third of total net revenues.

    PMI’s smoke-free business has been profitable for several years. The Swedish Match deal provided the company not only with a strong position in Scandinavia but has also given PMI a rapidly growing modern oral nicotine brand, Zyn. Swedish Match’s nicotine pouch led the U.S. retail category with 75.7 percent in the fourth quarter of 2022.

    IQOS continues to grow too. PMI’s shipments of heated-tobacco units grew 14.9 percent in 2022. In the fourth quarter of 2022, 24.9 million smokers worldwide used IQOS. Seventy percent of them had completely converted to the new product. In the fourth quarter of 2022, HTPs accounted for 8.8 percent of the EU market, up from 6.4 percent during the same period in 2021. Ninety percent of HTP users in Europe use IQOS. In Japan, growth of IQOS consumable sales has been driven by Iluma. In the fourth quarter of 2022, PMI’s HTPs had a market share of 24.5 percent.

    The company has set ambitious targets for its smoke-free business. By 2025, PMI wants to have a user base of more than 40 million smokers who have switched to one of its smoke-free products and stopped smoking.

    The company aims to have its smoke-free products available in 100 markets. More than $1 billion in net revenues is supposed to be generated by the company’s “beyond nicotine” business, which focuses on wellness and healthcare products.

    To achieve these goals, PMI is expanding its RRP portfolio. On Jan. 30, 2022, the company turned its 2020 cooperation deal with KT&G into a 15-year contract. The agreement gives PMI exclusive access to KT&G’s smoke-free brands and innovation pipeline. In return, KT&G benefits from PMI’s global commercial infrastructure and experience in commercializing smoke-free products. As a result of the collaboration, KT&G’s Lil HTP, which is considered complementary to PMI’s smoke-free products, is present in 31 countries in Central America, Europe and Central Asia.

    PMI aims to provide smokers in low-income and middle-income countries (LMICs) with less hazardous alternatives. About 80 percent of the world’s smokers live in LMICs and often have limited access to affordable RRPs. In November 2022, PMI launched a new HTP device—Bonds by IQOS. Based on IQOS Original’s blade heating technology, the product is marketed as “simple, convenient and affordable without compromising on a reduced-risk profile,” making it a relevant proposition for consumers in LMICs, according to Babeau. The product has shown promise during pilot launches in the Philippines. Further commercialization is anticipated during this year.

  • PMI Struggles to Sell its Russian Business

    PMI Struggles to Sell its Russian Business

    Photo: alex83ch

    Philip Morris International’s attempts to sell its Russian business have stalled due to the challenge of leaving the country on favorable terms, according to an article in the Financial Times.

    Discussions with at least three “serious” potential buyers have gone nowhere in part because of the strict government requirements, according to PMI CEO Jacek Olczak.

    Kremlin rules make it difficult for companies to exit Russia without taking a huge 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.

    Olczak told the Financial Times he had a duty to shareholders to recover value, adding he would “rather keep” the business in Russia than sell on stringent Kremlin terms. While the asking price was not disclosed, PMI has $2.5 billion worth of assets in the country, according to company filings.

    Many western companies vowed to exit Russia immediately after last year’s invasion of Ukraine, but less than 9 percent of EU and G7 groups in the country had left by the end of December, according to research by the International Institute for Management Development.

    Russia has historically been a huge market for the tobacco industry because of high smoking rates and consumer willingness to switch to vapes and heated-tobacco products. Together with Ukraine, it accounted for 8 percent of PMI’s $31.7 billion revenues last year.

    Imperial Brands sold its Russian operations to a local partner soon after the invasion, taking a $463 million hit to annual profits.

    Japan Tobacco does not plan to leave and BAT has struggled to get a sale over the line, although it said this month it was in “advanced talks.”

  • Olczak Outlines Harm Reduction

    Olczak Outlines Harm Reduction

    Jacek Olczak (Photo: PMI)

    In an address at the recent ET Global Business Summit 2023 in New Delhi, Philip Morris International CEO’s, Jacek Olczak, emphasized the need for leveraging science and technology for a better, more sustainable future, according to a PMI press release.

    Conceived in 2015, and now in its seventh edition, the Global Business Summit seeks to provide solutions to macroeconomic challenges by curating government-to-government interactions, business to government meetings, business-to-business engagements and to serve as a conduit for corporates and governments to secure investments in India from domestic and international allies.

    Held on Feb. 17-18, the New Delhi summit was attended by Indian Prime Minister Narendra Modi, along with several CEOs, policymakers and academics.

    Speaking on the theme “Sustainable economy for the greater good,” Olczak stressed how innovation has grown rapidly over the past decades with investments across a wide range of industries, including the energy and automotive sectors.

    “Science and technology integrated with a collaboration between private and public has proven to be key to identify solutions to overcome difficult challenges,” he said.

    Olczak then touched up PMI’s commitment to realizing a smoke-free future. Thanks to advances in science and technology, it is now possible to eliminate combustion and replace it with controlled heating, at much lower temperatures. At these lower temperatures, these products generate significantly lower levels of harmful compounds, according to Olczak, who also spoke about the clinical and non-clinical studies that have been conducted on PMI’s heated tobacco products.

    Drawing parallels with other industries, Olczak spoke about the need to address challenges at their source, while also working to identify safer alternatives. The harm-reduction principles underpinning the moves from wood-fuel stoves to gas-fueled stoves, and from combustion-engine vehicles to less-polluting alternatives, also apply to tobacco, according to Olczak.

    Taking the example of Japan, he noted how the introduction of heated tobacco products in that country has contributed to a decline in cigarette sales at an annual rate of 1.8 percent on average over the past few years.

    With the expanded availability of heated tobacco products, almost 35 percent of cigarettes in Japan have been replaced by heated tobacco products over the past seven years. Recent analysis has also shown a downward trend in hospitalizations for Chronic Obstructive Pulmonary Disease. Additionally, research funded by the country’s Ministry of Health and Welfare shows there is negligible adoption of these products by minors, according to PMI. “Similar dynamics are being observed in several European countries,” said Olczak.

    Olczak also spoke about how the estimated 200 million users of oral tobacco in India could be offered modern, safer oral tobacco products, like the ones available in Scandinavia.

    According to Olczak, PMI’s biggest contribution to society lies in addressing cigarette health effects. Throughout the company’s history, it has been a leading player in the cigarette market. Now, the company is intentionally leaving that behind, he said, embarking on a transformation to provide adults who would otherwise continue to smoke.

    “All that’s needed is for today’s innovative, science-based products to be matched by equally innovative policies that encourage people that smoke to switch to less harmful alternatives. This is where India can help drive positive change for the rest of the world. And as chair of the G20, it can be a prime example for emerging economies,” he opined.

    “Innovation in the tobacco industry is finally a reality,” said Olczak. “The question we must ask ourselves is this: How do we ensure that innovations are used in the service of people? In other words, how do we leverage technology, science, and innovation to accelerate public health progress and get millions of Indian smokers away from cigarettes? Given India’s history in leveraging innovative solutions to solve issues of society, I am confident that India will be a global leader in progressive tobacco policies going forward,” he concluded.

  • PMI: New Rules Make Leaving Russia Difficult

    PMI: New Rules Make Leaving Russia Difficult

    Jacek Olczak
    (Photo: PMI)

    New rules are making leaving Russia more difficult, Philip Morris International CEO Jacek Olczak told Bloomberg.

    Following Russia’s military invasion of Ukraine, PMI and other tobacco companies announced they would scale down their operations and eventually exit the country.

    In anticipation of that move, PMI throughout 2022 provided financial figures that excluded its Russian business. Its full-year results, however, included Russia again.

    Olczak told Bloomberg the decision does not signal a change in plans. Rather, it reflects the difficulty of exiting Russia. “As long as we are the owner, we will include the [Russian] number,” Olczak said.

    According to Olczak, new regulations have made it more difficult for foreign investors to exit Russia. In any transaction, the government now has an important voice on asset valuations, access to cash flow and dividends, he said. This makes it hard for any party interested in taking over the business.

    Meanwhile, Olczak said PMI was considering coming back on a more sustainable basis to Ukraine.

    In related news, BAT expects to complete the sale of its Russian business to local partners in 2023, according to Reuters.

    BAT said it was in advanced discussions with a “joint management distributor consortium” on the sale of its businesses in Russia and Belarus but did not reveal the identity of the party or divulge further details on the talks.

    The company said in March 2022 that it was in talks to transfer its Russian business to its Russian distributor, SNS Group of Companies.

  • IQOS Iluma One Debuts in South Korea

    IQOS Iluma One Debuts in South Korea

    Photo: PMI

    Philip Morris International has introduced its IQOS Iluma One in South Korea, reports The Korea Times. The launch comes three months after the debut of IQOS Iluma and IQOS Iluma Prime models in the country.

    According to Philip Morris Korea Managing Director Paik Young-jae, the launch of Iluma One completes the Iluma platform family.

    “The first two Iluma models have received a good response from the market, and if this continues, I am hoping that we will reclaim the leading position in the e-cigarette market here,” Paik said.

    Since the launch of the IQOS device in 2017, Philip Morris Korea had maintained the No. 1 spot in the domestic heat-not-burn for five years. However, in the first quarter of 2022, KT&G took over market leadership in the first quarter of last year.

    IQOS Iluma One retails in South Korea for KRW69,000 ($54.74), which is about 30 percent cheaper than the IQOS Iluma.

     The new device is made with an all-in-one lightweight design that can be held in one hand. A single charge can be used to smoke 20 tobacco sticks.

    Like other IQOS Iluma models, the IQOS Iluma One uses “Terea Smartcore” sticks, which heat tobacco with an induction system adopted inside its body so that users don’t have to clean any residue afterward.

  • PMI and KT&G Boost Collaboration

    PMI and KT&G Boost Collaboration

    Photo: KT&G

    Philip Morris International and KT&G are extending their cooperation in selling smoke-free devices with a long-term deal. The arrangement builds on a deal signed in March 2020 that has seen PMI commercialize the South Korean cigarette manufacturer’s Lil heat-not-burn product in more than 30 markets.

    The new agreement, signed on Jan. 30, runs until Jan. 29, 2038, with performance-review cycles and associated commitments, based on volume, to be confirmed for each three-year period. PMI and KT&G expect these commitments to increase over the full duration of the agreement, starting with a total commitment for the first three-year period equivalent to 16 billion consumables.

    The agreement gives PMI continued exclusive access to KT&G’s smoke-free brands and product-innovation pipeline, including offerings for low- and middle-income markets, that will enhance PMI’s existing portfolio of smoke-free products.

    It gives KT&G continued access to PMI’s global commercial infrastructure and experience commercializing smoke-free products to support the further expansion of KT&G’s smoke-free business outside South Korea.

    “We have been pleased with the success of our cooperation with KT&G so far and believe a long-term collaboration will accelerate the achievement of a smoke-free future. We want everyone who does not quit smoking to switch to a better alternative, for the benefit of their own health, public health, and society at large,” said PMI CEO Jacek Olczak in a statement, adding the KT&G’s Lil products play a complimentary role to PMI’s popular IQOS heat-not-burn device.

    “With KT&G’s technology and speed of innovation and PMI’s science and commercial infrastructure, we believe our partnership will accelerate our shared vision of a smoke free future.”

    “We are now able to further raise the competitiveness of KT&G’s smoke-free products in the overseas market and establish a basis for stable growth of our global business through the advancement of the strategic partnership with PMI,” said KT&G CEO Baek Bok-In in a statement. “KT&G will make efforts to acquire world-class capabilities to become a global top-tier company in NGP earlier than planned and to lead the next generation tobacco market.”

    KT&G introduced Lil in 2017 and has been launching updated versions of the product at frequent intervals.

    Following their March 2020 agreement, PMI and KT&G first introduced Lil in three markets including Japan. Later, they expanded sales to into 31 to countries in Europe and Central America, among other regions.

  • Three Heating Products Authorized in the U.S.

    Three Heating Products Authorized in the U.S.

    Photo: Destina

    The U.S. Food and Drug Administration has authorized the marketing of three new tobacco-flavored heated-tobacco products included in Philip Morris Products’ supplemental premarket tobacco product applications (PMTAs). The products receiving marketing granted orders are Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks and Marlboro Amber HeatSticks, each of which is used with the IQOS tobacco-heating device.

    Based on the FDA’s review of the supplemental PMTAs, the agency determined that the marketing of these products should be authorized because, among other things, the net population-level benefits to adult smokers outweigh the risks to youth.

    In 2019, the FDA authorized the marketing of IQOS and several other Marlboro HeatSticks products through the PMTA pathway. Philip Morris pursued marketing authorization for these new Marlboro HeatSticks by submitting supplemental PMTAs for modified versions and line extensions of the tobacco-flavored product for which the company had previously received a marketing granted order. A supplemental PMTA can be submitted in situations where an applicant is seeking authorization for a new tobacco product that is a modified version of a tobacco product for which they have already received a marketing granted order. 

    Following the FDA’s rigorous scientific evaluation of the applications, the agency determined that Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks and Marlboro Amber HeatSticks are comparable to the previously authorized tobacco-flavored product. Like the previously authorized products, the FDA has placed stringent marketing restrictions on the new products in an effort to prevent youth access and exposure.

  • PMI Inaugurates HEETS Factory in Indonesia

    PMI Inaugurates HEETS Factory in Indonesia

    Photo: Arkadiusz Fajer

    Philip Morris International’s Indonesian subsidiary, Sampoerna, inaugurated a factory for the production of IQOS HEETS consumables in Karawang, West Java, on Jan. 12, reports The Jakarta Post.

    The facility, which started operations in the fourth quarter of 2022, represents an investment of more than $186 million.

    The new HEETS factory, which will serve customers in Indonesia and the Asia-Pacific region, fits with the government’s policy to encourage investment and increase the export of finished products. Speaking at the inauguration, Coordinating Minister for Economic Affairs Airlangga Hartarto said the investment will encourage innovation and create value in other sectors, such as retail, agriculture and R&D.

    According to PMI, the Indonesian plant is the company’s seventh factory for innovative smoke-free products worldwide and its first in Southeast Asia.

    During the inauguration, Sampoerna President Director Vassilis Gkatzelis conveyed his appreciation to the Indonesian government for the conducive investment climate as well as the government’s commitment to maintaining national economic stability.

    “As a company that has been operating for almost 110 years, we aim to continue to contribute to the national economy through continuous investment as well as the economic impact on the national tobacco industry supply chain and ecosystem,” he said.

    Vassilis also noted PMI’s considerable investment in smoking alternatives. The company, he said, has invested more than $9 billion to develop, scientifically substantiate and commercialize innovative smoke-free tobacco products.

    IQOS debuted in Indonesia through limited market testing in 2019 and is available in Jakarta, Surabaya, Denpasar and Bandung, among other cities.

  • PMI, Medicago Cut Ties After WHO Rejection

    PMI, Medicago Cut Ties After WHO Rejection

    Credit: Antonioguillem

    Philip Morris International and the health group Medicago have severed ties after the World Health Organization rejected Medicago’s Covid-19 vaccine, according to a tobacco control body.

    Covifenz, the world’s first plant-based Covid-19 vaccine, was jointly developed by Medicago, which is owned by Mitsubishi Chemical, Philip Morris and Glaxo, according to Bloomberg. The Canadian government, which provided $173 million in funding for its development, has cleared it for use.

    The government of Quebec previously said it wanted to help Medicago replace its shareholder PMI with another investor so that the biotech firm can distribute its Covifenz Covid-19 vaccine internationally.

    “Tobacco corporations, vaccines and governments don’t mix well, and we applaud the expulsion of Philip Morris from the Medicago collaboration,” Les Hagen, the executive director of not-for-profit organization ASH Canada, said in a statement. 

    Medicago’s request for an emergency-use listing was denied earlier this year by the World Health Organization because of the links with tobacco industry.

    Earlier this year, Medicago announced it would cut 62 jobs at its manufacturing facility in Durham, North Carolina, USA, which played a key role in producing the company’s tobacco plant-based Covid-19 vaccine.