Philip Morris International’s CEO took part in the 7th Delphi Economic Forum talking about PMI’s transformation and progress towards a smoke-free future. Bloomberg Business Week talked to him during the forum about the challenges for harm reduction products, leadership in challenging times and company’s expansion in wellness and healthcare products.
How important is regulatory endorsement of risk reduction claims and products, and what is the progress in Europe in particular in that area? Which are the biggest challenges for harm reduction in general?
Providing adult smokers with clear information about the opportunity that new products represent must be considered the shared responsibility of all who are interested in rapid reduction of problem of smoking. This includes industry, governments and civil society organizations. Our job as a company is to transform our business and offer less harmful alternatives to all the adults who would otherwise continue to smoke. Government’s focus remained unchanged during these initial two decades of tobacco control measure. The focus was naturally on prevention and cessation. Scientifically substantiated tobacco and nicotine that have the potential to be less harmful than continued smoking, have offered the opportunity for a tobacco control tool kit update, that will benefit smokers who should not be left behind because they haven’t stopped smoking. From public health institutions, experts, and governments, we are seeing support growing for the role of potentially less harmful alternatives for adult smokers and public health. Regulators in places such as Bulgaria, Greece, Italy, Portugal, the U.S., and U.K are recognizing the different nature of smoke-free products and setting rules to provide adult smokers with access to and information about science-based less harmful alternatives. We are also observing that some of the countries where smoke-free products are available to allow smokers to switch, present a low and lowering smoking prevalence, especially when compared with countries where smokers don’t have access, or where regulation confuses smokers when it equates non-combustible products to a cigarette. We hope that soon, others will start to take steps in the same tobacco and nicotine harm reduction direction.
Will the unstable economic situation impact the growth outlook for smoke-free products and their role in reducing cigarette consumption? What is the financial outlook of PMI for 2022 given the new conditions on markets in Russia, Ukraine, and Belarus, where you have significant exposure?
As the circumstances in those countries have unfolded, we have been constantly assessing the situation, and—in the context of an increasingly complex and rapidly changing regulatory and operating environment — we are working on options to exit the Russian market in an orderly manner. As we have stated publicly, Russia made up almost 10% of the company’s total shipment volumes and around 6% of our net revenues in 2021. We will provide an update of our 2022 financial outlook soon – with our Q1 earnings.
PMI is undergoing a major transformation in the last few years—as we see in society, leadership is crucial during challenging and transformational times. What are the key skills for a good transformation leader—a person or an organization? And is leadership changing fast enough in the dynamic times we live in?
During the last several years, leaders have been facing unimaginable crises. Most recently, the humanitarian crisis we are experiencing is placing extraordinary demands and pressures on leaders to act. Everyone struggles with the unpredictability of events and information. Today, the key skills for a good transformation leader—as an individual or an organization—are to embrace chaos, don’t be afraid of change and to act fast and boldly. The impact of two years of pandemic and then a war in Ukraine is, without doubt, significant and the consequences are global. Leaders are facing “make or break” moments continually. Being pragmatic is of essence.
How is the company going to develop its product portfolio in the field of smoke-free products, and what are your ambitions to expand your business into wellness and healthcare areas. Can we expect more investments similar to biotech company Medicago?
It is a natural evolution for PMI to further transform our business into a broader, consumer wellness, and healthcare company. This will deliver not only on our continued commitment to achieving a smoke-free future, but also in developing and commercializing products and solutions that meet unmet consumer and patient needs. The market for wellness and healthcare products is large and growing. For consumer and over-the-counter wellness products, we have several initiatives looking at focus, sleep, energy, pain, and calm. In healthcare, we believe there are significant unmet patient needs for fast and effective treatments in cardiovascular such as myocardial infarction and neurology such as migraine, which can be served by innovative solutions. We accelerated this part of our strategy when we acquired Vectura, a provider of innovative inhaled drug-delivery solutions, and Fertin, a leading developer and manufacturer of innovative pharmaceutical and well-being products based on oral and intra-oral delivery systems.
The world is fighting with different crises—economic, social, pandemic, etc. Information (and the lack of such) plays a big part. How do you see the role of fighting misinformation in resolving these crises and thus drive business growth?
I hope that we have learned in these critical times that misinformation only creates chaos and confusion and that ignoring science and innovation will hinder progress for a better society. To fight misinformation, we must respect the powers of science, innovation, and inclusion. This will require everyone—from policymakers to people on the street—to value solutions over outdated dogma. Then we can build a solid platform to build a better future for all, faster.
Every leader thinks about their legacy—what would make you a proud and satisfied leader when you look at your work 10 years from now?
We believe that with the right regulatory environment, support from civil society and trust in science, we can end cigarette sales in many countries within 10 to 15 years. So, in 10 years, I would be proud to look back and know that I was at the helm of a company that helped the world, collectively, seize the opportunity to make cigarettes a thing of the past. We have the chance to affect one of the greatest feats for public health in the history of the civilized world—what better legacy could there be?
