Marlboro parent company's move to a smokeless future not just hot air

Philip Morris South Africa CEO Marcelo Nico. (Picture: Supplied)
Philip Morris South Africa CEO Marcelo Nico. (Picture: Supplied)

Cape Town – When Philip Morris International (PMI), the owners of Marlboro cigarettes, decided to change its strategy to a smoke-free future, the decision was not taken in a whim. It was backed by 10 years of research amounting to an investment of $4.5bn (R54.96bn).

The company is so invested in this decision that in March Philip Morris announced that a factory of its Greek affiliate would stop cigarette production and solely focus on manufacturing a potentially healthier alternative known as heat sticks or “heets” as they are marketed.

An electronic device known as an iQos heats the tobacco at controlled temperatures. Instead of emitting smoke, or leaving behind ash, an aerosol is given off which does not linger.

But based on the first quarter results for 2018, Philip Morris’s share price plummeted 18% on the back of poor sales growth of the iQos device, Bloomberg reported.

Although SA CEO Marcelo Nico could not speak on why shareholders dumped Philip Morris following the release of its first quarter results, he said the firm is committed to a smoke-free future.

Speaking to Fin24 from the company's headquarters in Cape Town, he shared his optimism for getting smokers in South Africa to shift to smoke-free products. The company debuted the iQos product on South Africa last year. It is the “pilot market” in Africa and Nico said that so far a few thousand smokers per month have switched to iQos.

“Globally as PMI we have a vision to create a smoke-free world,” he said.

PMI wants to get smokers to switch to “a better alternative” as Nico put it. The products were first commercialised four years ago in Italy and Japan. So far 16% of Japan’s smoking market switched to iQos and overall 30% of the market has switched to similar alternative offerings, said Nico.

He noted that the movement is taking up quickly in the South Korean market where 7% of the smoking market has switched since the product was launched there a year ago.

PMI is applying to the US Food and Drug Administration to have the product’s health claims validated. Ulreich Tromp, director of corporate affairs of Philip Morris South Africa added that getting the US Food and Drug Administration to validate the product was important as it is seen as a golden standard internationally.

Targeting smokers

Nico said that the intention is not to get new consumers to start using the iQos, but instead to get smokers, even those of their competitors to switch to iQos.

“We want to communicate to South Africans who are smoking - if they want to continue to smoke there are better alternatives than tobacco,” he said.

“Society is expecting us to act responsibly, this is a fundamental element of that. Secondly based on 10 years of research that we have been doing - we have arrived at an alternative that is significantly better than continuing to smoke. It will not only reduce the smell and combustion but also dangers - that is the right thing to do,” said Nico.

Tromp added that PMI had the science to substantiate its claims, and so developed the alternative.

Smokeless future

“The global CEO envisions that eventually one day we will stop selling cigarettes. It’s not something crazy to think about. If smokeless products make up 30% of the market, it’s not too far of an ambition,” said Nico.

“We assume combustible products will gradually go down in sales and eventually disappear… Some consumers will stop smoking and some will switch to alternatives. We clearly see a future as a smokeless company.”

Nico said that a third of the PMI South Africa’s staff smoke, and since iQos was launched 95% have switched to the alternative. “If you go to the balconies there are no smokers there, they are just using iQos.” He added that the smoking room at the bottom of the building is going to be demolished because it has become “irrelevant”.

Nico shared how he got his sister to switch to iQos two years ago when he was on holiday in Buenos Aires, Argentina where he grew up. His sister had started smoking in high-school, and for years had tried to quit. She even tried e-cigarettes.

“I said I need to help my sister stop smoking so for Christmas I traveled to Buenos Aires and took the iQos device and heat stick to get her to stop smoking. Since then she has stopped smoking, she is just using iQos,” he said.

People at PMI refer their friends and family to the alternative in an effort to help them to stop smoking. Beyond friends and family, PMI is making efforts to educate retailers about the alternative products for their consumers, Nico explained.

“It’s not just me, everyone in our organisation knows we have something that is a much better alternative for people we care about who are smokers. We can help them.”

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