philip morris international

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This global conglomerate sells cigarettes and other tobacco products outside of the U.S.; more recently, it has begun focusing on smoke-free alternatives like "

Philip Morris International | 2022 Fortune 500

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Philip Morris International

Philip Morris International | 2022 Fortune 500 | Fortune

The company famous for its Marlboros is now expanding into health and wellness products.

Philip Morris International CEO: "We want to stop selling cigarettes"

Photograph Courtesy Philip Morris International

Leadership

Philip Morris CEO: "We want to stop selling cigarettes"

Yeah. So good of you to come by to talk to us about Philip Morris International. You know, when people think of Philip Morris, they think Marlboro cigarettes, but what they may not know is you're now expanding into wellness and health products. Tell us why you decided to move in this direction? Well, we have been building capabilities inside the company for the last decade or more actually, well, we've been a very focused on a developing products which are not safer to use than than regular cigarettes, the famous Marlboro. And we also realize that we have built a very unique set of assets inside the company which we can repurpose for our purposes. And it happened that this is in the territory of wellness and health care, which I admit it is not the first thing which will, you know, cross anybody's mind that the tobacco company can go as far as as into the wellness and health care. Yeah, it does seem like an odd fit that cigarette and tobacco company would get into health and wellness. Yes, but if you think more into with more into the details in order to develop the safer products to cigarettes, we had to really master the inhalation, okay, how smoke is delivered to the human lungs, how the aerosol is delivered to human lungs. And we actually built quite a lot of knowledge how the human respiratory system works. So this is how the knowledge about the human respiratory system I believe will serve us very well in developing the new product. You've already made several small Acquisitions that specialize in inhalation and respiratory medicines. And you said that you plan to invest $200 million 2025 we will achieve a $1 billion dollars from the revenues from the sales of this product. For me, it's not only that important that $1 billion 2025, but with we put a few products into the commercialization, we proved that we have a capability And you know in the business, once you achieve your first billion dollars, then you have $2 billion, $4 billion $31 billion dollars and most of that comes from your cigarette side of the business. How big do you think that the number Will be 5, 10 years from now? It can be very big. Um seven years ago when we started our smoke free part of the business as a replacement for cigarettes. We had literally $0 of revenue. And I fast forward seven years later, 30% of my total 30 billion is already generated by smoke food products. So it's always important to have the courage to start the earlier. You start the earlier, I believe you will come to harvest the results. It can be a very big business for like you've acknowledged, there's been criticism from medical societies about these acquisitions that you've made so far and you haven't been happy about it. Tell us what bothers you. There is a bit of a debate in some circles that, you know, tobacco companies of Philip Morris shouldn't have a license to operate in the domain of the wellness and health care. But actually we're doing this for the well defined purpose. We really want to leave a cigarette behind us. We want to solve the problem of smoking hands. The whole er area of the products were developing as the alternative to cigarettes, but we also, we believe we can push the company into completely new territory when we will have a net positive contribution to the society. The fact that they have a history of cigarettes, which by the way, we acknowledge that we want to stop selling cigarettes. That we want to go away from the combustible products as we know where to go to the safer alternatives. Were actually trying to remedy the situation and the fact that, you know, the medical community is going to the patients and telling them that if the product is coming from the tobacco manufacturer, then you shouldn't use the product. There are people suffering, the people who need the solutions. I don't think it's actually more of the medical community also has been very troubled by Philip Morris's recent hire of a scientist and top regulator from the FDA, the Federal Drug Administration and they see it as a conflict of interest. How do you see that? It's not really a conflict of inferences, actually, you know, these are the people who have spent quite a big part of the career of their life in the pursuing the tobacco harm reductions in trying to contribute to the problem of smoking. And I'm actually very pleased that the former F. D. A. Employees um perceived Philip Morris as the company which can contribute into effect the advancement of achieving this objective. So I don't think it's a conflict of interest is actually parties who are thinking alike alike, who truly wants to solve the problem of smoking and joining forces. What kind of feedback are you getting from your own industry from other cigarette manufacturers? Are they supporting you? Not as much as one could think, but I think the industry from a very monolithically, you know, type of an industry focused only on cigarettes is going through the challenge of going smoke free. And also, you know, each of us in the industry is trying to start thinking more ahead of uh, ahead of the times and, you know, see what else these companies can be standing for. But well, let's make it very clear, none of us likes change. Okay, so we always confronted with a change usually at the beginning, we all go through the stage of denial, then we start building a knowledge, then we're getting more confortable from a business perspective who runs faster presumably wins the most and that's what PM is playing today. But you know, I don't have any hard feelings with the people, you know, industry member seven years ago were all against us and pretty normal human behavior. What do you think it'll take for Philip Morris to win credibility in healthcare and not just from the medical world, but from the public as well by delivering the products, but, you know, proving to people that were walking the talk that this is not the window dressing, these are the significant, therefore it's human and capital allocation wise, Which we devoting to this strategy and I believe the success will be the best proof that we were right. And this was the good for the society for investors, for employees of the company. Let's talk a little bit about your campaign to help smokers to stop smoking. You've just come out with a new ad campaign and the headline really gets your attention. Does the world want 1.1 bill people to stop smoking or not? It sounds like a call to action. It is, it's a little bit provocative and essentially, I'm asking everyone who can support, can contribute to sit together and design the world without the cigarettes. And I've said it on a number of occasions, not more than a 10 years country by country, we can leave the smoking behind us, but we need to all act together rather than I still pretend that the solutions do not exist. Science doesn't exist etcetera. Well you're here in new york to promote more support and U. N. General Assembly is meeting the opportunity of a lot of influential people who are here and you're reaching out to policymakers, regulators, public health advocates, tobacco companies to unite about bringing about the end of cigarette smoking. What are you expecting? A reaction to the? Well I do expect that will have at least the conversations that will listen to each other. But I believe the time is coming now when we should really reflect again of this great vast opportunity which was never in front of us uh which can change the world at least the word for this one billion people who otherwise will continue smoking cigarettes. And I think the solutions existed this and joint wheel of all stakeholders really can can make the miracle. Well you say in the ad quote, my company is doing its part now, we need others to step up to. You said a moment ago that you know that cigarettes are not good for health that you ultimately want to remove cigarettes, what are you waiting for? Well, if we do it just unilaterally as Philip Morris, I don't think the problem is going to be solved. I mean you have another players in the industry, you have all the illicit trade, the risk of illicit trade etcetera. But I think we can orchestrate the change and the world has seen a similar transformations in our product categories. Maybe the next step for Philip Morris is to do the healthy thing, which is to actually stop manufacturing cigarettes and we are ready to do so. We are ready to do so. But we have to do it in a way which is well designed and well orchestrated if you like. You know, it is a very challenging situation to get this kind of change that you're dealing with. What do you think you have to do as the ceo of one of the largest cigarette companies in the world? You have to do to really lead the way, continue with what we're doing. I think the progress and the number of internal external resources which we have put around this vision, this strategy, I think we just have to continue work hard every day, every week, every month and the rewards will come. They will achieve our our our success

 CEO Jacek Olczak: "People will remember me that I had the vision to fully unsmoke them."

Philip Morris CEO believes the world can be smoke-free in 10 years

Jacek Olczak - CEO, Philip Morris International

PMI CEO believes world can be smoke-free in 10 years

Yeah, thank you so much for joining us to talk about your company Philip Morris. You know, it's interesting that when you became Ceo seven months ago, you launched a big marketing campaign urging people to stop smoking cigarettes and you ran a bunch of full page newspaper ads where Philip Morris wants to, I'm quoting you unspoken the future. You know, many people just don't buy into it. It's hard to believe that a company like Philip Morris would do such a thing given that you're one of the biggest cigarette companies in the world. What do you say to the skeptics? Well, judge asked by our results, 30% of our revenues already are coming from a non combustible products, So called reduced risk products within the 70 market. So we walked the talk every day and we're helping smokers to make a better choice is obviously the best choice is to stop smoking as in our, as is in our adverts. But the second best based choice if they don't stop smoking is to as fast as possible adopt or convert fully to the new products. We mean that one day we should uh forgot about the cigarettes and cigarettes will be just the past to the benefit of smokers society and others they called it. So what's your plan for getting to a world that is smoke free, go faster and be more innovative. We still have to work on the products which really can be made accessible to the people in, for example low income countries and I continue the current expansion. But everything what we have done so far is actually brings us Squarely into the trajectory to reach the 50% of our revenues coming from an un combustible product by 2025? Let's fast forward to 2025. And let's say you do hit those financial goals that you were just describing. How do you think the public and public health officials will view Philip Morris will, will your company's reputation change even though Philip Morris will still be selling cigarettes, but just not as many. Well, definitely the smokers will be like that thankful to Philip Morris that you know, we had the courage uh, to find a solution to the problem of smoking were already here today here, you know, a lot of positive statements coming from a small curse, literally they're saying that, you know, our product has changed their lives And it's very encouraging and I believe more and more people will recognize our efforts that you know, very important for us is the impact of our product on the society. We take it very seriously. We work hard for the last 10 years, science technology, etc to solve that problem. I personally think that they welcome the time soon, but I will have to remind the audience that Philip Morris International is the company who used to sell cigarettes, but it's no longer selling figures. Yeah, you talk about that a lot. You say that you can picture a world without cigarettes? Do you have a date in mind. Do you have like a timetable? When is that going to happen? Well, I think that evolved the the stars were properly aligned Within 10 years. In many, many countries in the world you could essentially closed once and forever the chapter of smoking conventional cigarettes. You're saying that it's conceivable in 10 years that this will be a world without uh cigarettes. So you're saying nobody is going to be selling cigarettes, no marbles for sale, is that right? That's right. I actually think it would be a lost opportunity if we don't achieve that demand in the next 10 years. And actually you said that you want to get into businesses that have nothing to do with nicotine. And since you took over as ceo, you've already made two acquisitions for certain and victoria. These are small companies but they are specialists in inhalation technology, respiratory and pharmaceutical products of all of the options available to you to branch out into a new business. You chose these? Why is that? What's the attraction here? The attraction is that over 10 years, over the last 10 years we've been building a new Philip Morris based on science and technology. We've learned a lot about the human respiratory system. I think we really have a big huge capability in the assessment of the various products delivered to the human body via, via inhalation. And I believe acquisition of these two companies further extends our capabilities so we can realistically dream about bringing the products which are addressing gunmen, human patient, consumer needs and have a net positive impact on a society. So it's a logical extension of the capabilities and the knowledge which you have built while solving the problem of smoking. Now we can repurpose this for the other applications. Yeah, you've spent nearly 30 years at Philip Morris. It's basically most of your career now as ceo you seem serious and determined about transforming the company away from cigarettes. So what do you want people to say about your contribution? Your legacy? Well, I would be very accomplished if I moved the company beyond the mark of a 50% revenue coming from the new product, the person who marked the company presence in beyond nicotine, a category that I accelerated the progress the company is making in a solving the important problem of smoking. I think also there will be a country by this time when people will remember me that I had the vision to fully and smoke them. And then I have delivered on that vision. This would be a nice accomplishment on my side

Philip Morris CEO: leading the way to help people “unsmoke”

CEO Calantzopoulos plans to grow PMI while promoting health.

Philip Morris CEO: helping people “unsmoke”

How André Calantzopoulos plans to grow PMI while keeping health concerns top of mind.

Andre, tell us a little bit about the Philip Morris submission off, creating a smoke free future. You run a tobacco company. So why did you come up with this idea? Our purpose is to do everything we can to replace cigarettes with products that are less harmful. As soon as you've also said that you want to help the world anew smoke. So why don't you just stop selling cigarettes? I don't think if we stop selling cigarettes, the world will stop consuming cigarettes because consumers quite choice they have, they don't find our brands. They either going to buy some competitive brand or they will buy contraband. But I don't think we have public health at all by just as unilaterally, no selling cigarettes. I think what we're doing offering for the people, not otherwise quit better products and putting all our commercial effort putting really our money and our resources where our mouth is. That's the better way to do it, because at the end of the day we replaced cigarettes and we are also gaining a little bit off share because we're the first ones. The margins of these products are as good or even better than cigarettes because sometimes a tax less so it makes financial sense for us is a company. It makes organizational sense because it's very exciting for the organization toe move away from cigarettes and it makes sense for society at the end of the day. So I think it's more sustainable is a business long term, but from the health aspect doesn't bother you that so many people do smoke and particularly young teens who are smoking and many of them have already gotten addicted to cigarettes. And there is a lot of restrictions on cigarettes. But you're right there, still teenagers and do start, and they're still adults that continue. We can continue the restrictive measures on cigarettes, and we should. But that should not be the only measure public health adopt if we have better products available for consumers in any product category, not only in cigarettes and had no cigarettes are very emotional. You offer them to the consumer, you explain to them what they are, and you give them incentives to move to something better, and that's exactly what we're trying to do. It must be tough to be in an industry that gets so much criticism from the public. How does this impact the way you lead the company? Philip Morris I think the moment you can changed the product you have the technology, have the science you have to. That can change varied dramatically. The public health question and the individual people. And that's exactly what I'm trying to do, is the leader in the organization tries to achieve, And I think that's a good thing to do. Does this negative public view impact your ability to attract the best people of the top talent to come to work for Philip Morris? I would say the cigarette industry, if we're only confined to cigarettes, it's more difficult to convince certain people for the new product. There's absolutely no problem and the new purpose and the actually many people that have joined because we changed even the leadership of the company in certain domains because we needed it. We need a technical skill. It's much easier, obviously because the purpose is much more compelling. But today it is certainly much easier and actually much more attractive to people looking inside of Philip Morris. I understand that some employees have been pushed back about this whole idea off introducing this product of I quote, what did you have to do to win them over? Well, I didn't say there was pushback. I think like in any change, because these products are much more complex, from science toe electronics to working in different ways. Toe reverse logistics. It was not a question about the purpose of the community questionable whether these products would be commercialized. But Maur, how am I going to get there? How I'm going to replace cigarettes with this new better ultimate how we're gonna change The working methods have become much more consumer centric. These are the questions the employees were worried about and still are because we're still in change. And that's where the dialogue with the organization needs to continue. But I think the Arab League have embraced the purpose from the very beginning. There is no question about that. And what about yourself, Andre? I mean, how did you change? Did you have to change your leadership approach? I had to change my style, which is asking people more what? How to do the things and let them do it rather than telling them how to do it. So my job becomes more, I would say assessing the organizational skill, be consistent with the message. Let people do the job by asking the right questions and giving the answers and changing the ways of working of the organization, which are all these things to say, not so used to do so. You've been CEO for six years now. If you look back, what do you most proud of within your proudest accomplishment? Well, I think the fact that we're now have in 52 countries in the world smoke free products that are better than cigarettes and that they have the potential to replace cigarettes. We work so hard, so long on this product and finally their reality. And actually we have already. More than 11 million people have adopted and they represent almost 18% of our revenue is just three. I think that's what makes me very happy and proud

[ MUSIC ] Andre, you say that Philip Morris his mission is to create a smoke free future. What does that mean exactly? It means a future where Philip Morris doesn't sell any cigarettes and for the people that do not otherwise quit, they have switched. To products that are better for their health, if better for them, it's better for public health. So I think it's a major change if we achieve this in the world. So, if you're successful at achieving this mission, it sounds like your company, which is the world's largest seller of cigarettes will lose a huge part of its business. So tell us what the plan is. Well, the margins of these products are as good or better than cigarettes because they pay less excise taxes. I think we're gaining share from our competitors who have better margins. So I think it makes financial sense for us because We still have shareholders. But if the products are better for the health of people, that's also a positive public health impact. Not for the individual, but also for the society, and I think that's much for sustainable as a business than cigarettes. So let's talk about some of the alternatives. Philip Morris has come up with a device that you're holding in your hand there called IQOS, I- Q- O- S. How did you come up with that name? In the course of finding names that are different from cigarettes, not a cigarette trademark, and express some sophistication I guess the technology of the product, all the controls in electronics That's the name I said. So it kind of looks like one of the vaping devices but it's not. It's different. How does this one work? Well, this one essentially has two parts. The one that it's a charger, you carry the product and helps you use the product for at least a day. And then a holder in which you have all the electronics, all the technology, all the controls that reduce the toxicity and in which you essentially insert a small piece, looks like a cigarette, but it's not, that contains tobacco. You turn it on, you heat it, and you have an aerosol that you inhale. It contains nicotine. But the reduction in toxicants because you hit you don't burn is 90 to 95 % compared to what least you use. It seems like the pitch that you're using for I close is that it's not using chemicals, toxic chemicals, but it's still not healthy. It's still not risk free, right? Absolutely. The product is neither expressed. It is addictive, and that what consumers need to understand very well is much better than cigarettes. Obviously, this has to be confirmed by the FDA that is in the process of doing this, but it's not a sprint. So this is not a vaping device. But I want to ask you about vaping because it's become so controversial. What's your take on vaping All of the vaping products if operating properly and manufacturer properly, produce much, much less toxic ones than cigarettes. So once they will go through the FDA process, I think and submit the scientific evidence. I think it will be clear that there are better alternatives than cigarettes. It is very controversial as you know President Trump Wants to ban vaping. Parents don't want their kids to get addicted. And, some officials are saying that vaping has created a public health crisis. So, what's the right thing to do in your view? First of all, we always said, nicotine products must be regulated. There is. A very big increase in the youth use of nicotine products, and that has to be stopped. There are also 11 million adults that use this product, and somehow, they need to continue having access to this product. The FDA covers all these, and if I judge from the order we receive. For our product regulates very clearly how you market and how you measure that you succeed in intended audiences and you minimise the impact the non intended audiences. So I think at the end of the day, this will normalise. Let me ask you this. We've spent so many years To get people to quit smoking, and now these new products come out that create a new health risk. What are your thoughts about that? I think we should minimize, the use of this products by youth. If you want to address the problem of youth, we need age Limits which now there is clearly a momentum to go to 21 years old, verification at point of sale be it commerce or retail, new education in schools where we tell the kids, we told them for years don't smoke, and now we have to tell them don't use nicotine. And technology that can do automatic age verification before you activate the device. And eventually, when you use a device if it's not the right person, the device stops. And that's the plan we need to put together with the agency to address the problem. But they should not come at the complete immediate detriment of the 11 million people who use the product today. And they are adults. Looking ahead we are at the beginning of a new decade a lot of changes going on at Phillip Morris will the next decade be the end of the [ INAUDIBLE ] era? Is if possible that Phillip Morris will not be selling anymore cigarettes? That's possible, and that's the objective. Whether it's the next ten years or not It doesn't only depend on us. We will do everything we can to achieve this. However, we also need governments and regulators to also support these products and then we can accelerate even more. You spent your entire career at Philip Morris, more than 30 years. How do you feel that at what at some point it will not be selling cigarettes? How do you feel about that? Well, I think I amongst the people who started the process of developing the new products, getting the organization to commercialize them, and setting the new purpose I will be extremely happy if we don't sell cigarettes one day and. That's what we are trying to do. I think success for us is the faster the better to get there. [ BLANK_AUDIO ]

PMI CEO André Calantzopoulos Is Looking Forward to a Cigarette-Free Future

Calantzopoulos details his plans for the company's future.


The PMI CEO Is Looking Forward to a Cigarette-Free Future.

Calantzopoulos demonstrates the new iQOS, and details his plan for the company.


Calantzopoulos details his plans for the company's future.

Year	Revenues ($M)	Profits ($M)	Assets ($M)	Total Stockholder Equity ($M)
2021	$28,694-3.7%	$8,05612.1%	$44,815	$-12,567
2020	$29,8050.6%	$7,185-9.2%	$42,875	$-11,577
2019	$29,6253.1%	$7,91131.1%	$39,801	$-12,459
2018	$28,7487.7%	$6,035-13.4%	$42,968	$-12,086
2017	$26,685-0.4%	$6,9671.4%	$36,851	$-12,688

Philip Morris International

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