Philip Morris International : Transforming our Business the Sustainable Way

Aren't these smoke-free products just for the western world? What about the developing world?

That's a great question. We started our transformation journey three years ago by announcing our ambition to create a smoke-free world with the aim to offer a better choice for all 1.1 billion smokers, regardless of where they live or what segment of the population they represent. Our vision is to replace cigarettes and offer a better choice for all adult smokers - including in low and medium income countries (LMICs) - thus making our company smoke-free and leading the way to accelerate the end of smoking worldwide.

We are committed to doing our part to develop a range of products and business models that make scientifically substantiated smoke-free products an acceptable, affordable and accessible alternative to cigarettes for adult consumers at all income levels in all countries, regardless of development status, so that those in LMICs do not suffer the consequences of inequality.

While PMI is only at the beginning of commercializing a fully-fledged portfolio of smoke-free products, we will continue to work on different product platforms to achieve this goal. We are also experimenting with solutions to reduce the financial barrier for adult consumers in less developed parts of the world so they too can switch to better alternatives. These include the temporary lending of IQOS devices combined with promotional offers where permitted by local legislation.

Today, IQOS is sold in a few upper middle income countries, including Guatemala, South Africa and Kazakhstan, and we have put in place a dedicated team to focus on LMICs and how we can include them in our ambition to create a smoke-free world.

Why is PMI still marketing cigarettes if you want to create a smoke-free world? Why are you marketing cigarettes in countries where you've launched smoke-free products?

Replacing cigarettes with better alternatives will take time, but we are fully committed to doing everything we can to ensure that this happens as soon as possible.
We cannot do this alone. A paradigm shift of this magnitude can only be achieved through collaboration. Governments, public health experts, and NGOs all have a critical role in encouraging less-harmful alternatives to smoking and shaping a regulatory environment that propels consumer switching.

In some countries, we are unfortunately unable to make smokers aware that there are better alternatives to smoking; in others, we are not legally allowed to sell these products. In places where we have no choice but to continue selling cigarettes, we must compete in that market with the product we sell. That does not mean we are not actively working to make less harmful alternatives accessible and affordable in all markets. Meanwhile, we are committed to marketing our products responsibly.

Our Marketing Code sets out minimum global standards applicable to all sales and marketing activities for PMI's combustible tobacco products. This means:

We only market and sell our products to adult smokers;
We warn consumers about the health effects of our products;
Our marketing is honest, transparent, and accurate; and
We respect the law and our high standards.

Responsible commercialization is an area where many stakeholders have expressed concerns and we welcome opportunities to discuss and improve how we market our products responsibly.

In markets where we have already commercialized smoke-free products, we continue to re-allocate resources to accomplish our vision of a smoke-free future. In 2017, already 39% of our global commercial expenditure(our total global spend on marketing, consumer engagement and trade activities) was dedicated to smoke-free products. This is significant considering that we have not yet launched smoke-free products in the majority of our markets.

With teen vaping on the rise, how is PMI ensuring its smoke-free products do not appeal to youth?

Our strong belief-if you don't smoke, don't start-begins with a continued and robust focus on preventing youth from beginning to smoke or use nicotine products. Given the rapid pace of innovation in the tobacco products space, we are emphatic that youth should not use any tobacco- or nicotine-containing product. Nicotine is addictive, is not risk-free, and it poses particular risks for adolescents. We know that great care must be taken to achieve our smoke-free goal. Youth should not become nicotine users. Former smokers and those who have never smoked should not return to, or pick up, the tobacco or nicotine habit. The entire effort must be on providing better choices to the millions of men and women who smoke today.

PMI takes that responsibility seriously. Our Good Conversion Practices serve as the company's bedrock for encouraging adult smokers to switch while working to prevent unintended use in the countries where we sell innovative products that do not burn tobacco. In our IQOS stores, we refuse to offer these products to people who have never smoked or those who have quit smoking. We are also clear that these products are not risk-free or a safe alternative to cigarettes. Similarly, our marketing standards are rooted in the principle that we market and sell our products to adult smokers. Increasing the legal age of purchase for tobacco and nicotine products can play an important role in further guarding against youth use of such products, together with access control and education that has to expand from cigarette smoking prevention to the use of any nicotine product. However, that effort must first begin with companies themselves.

Tobacco and e-cigarette manufacturers must have the right approach, the right product and the right science as well as robust post-market surveillance programs to ensure new tobacco and nicotine technologies reach their intended audience-men and women who currently smoke. PMI turned to commercializing our smoke-free products only after we were confident we got all three right.

For example, although we do not conduct studies on youth, PMI studies among legal age young adults up to the age of 25 who have never smoked¹ suggest very low levels of intention to try and intention to use reported when exposed to various IQOS branded communications. This is encouraging and gives us confidence that these products do not appeal to youth.

Moreover, while we know that having options is important for smokers to make the switch to a better alternative to cigarettes, including different flavors and nicotine strengths, flavors should not be used to attract youth and we would agree in principle with restrictions on flavors that have a dominant candy-type component or confectionary flavor and are marketed in a way that is appealing to those underage, such as using cartoons or candy trademarks.