Jacek Olczak: «Our vision for a smoke-free future remains our top priority»
New Philip Morris International (PMI) CEO, given the chance of his new duties, talks about the international business challenges and the role of Greece
A new leadership in PMI means a new strategy. What are the first initiatives you are to undertake as CEO? Should we expect any changes in the philosophy and the vision of the company?
I am humbled and proud to have the opportunity to lead PMI. In the past two decades, I had the honor and pleasure to work closely with our previous CEO, André Calantzopoulos, to set the foundation to transform our company and gear up toward our shared vision: to replace all cigarettes with less harmful alternatives as soon as possible, to the benefit of adult smokers who otherwise would continue to smoke, shareholders, and society.
As CEO, my goal is to strengthen that strategic vision and increase the speed of the transformation for the company even more. I am committed to continuing to work with André in his new role as Executive Chairman and with the entire PMI team to seize the enormous opportunity of a smoke-free future.
I will, along with the support and expertise of the entire senior management team, ensure that we remain focused on leading with a scientific mindset. Leading with information, facts, and data—putting aside one’s prior beliefs and current preferences to evaluate the accumulated evidence objectively—in order to move PMI into the future.
You often talk about the end of cigarettes. Is this a realistic prediction and if yes, under which circumstances.
Our vision remains that one day soon smoke-free alternatives will replace cigarettes for good. In fact, with the right regulatory encouragement and support from civil society, we believe this can happen in many countries within 10 to 15 years. But we can achieve these ambitions much faster if everyone plays their role
People who continue to smoke deserve to receive accurate information on better alternative products to cigarettes: differentiated regulation from cigarettes or taxation based on risk profile of the products need to keep signaling what are better choices than continuing to smoke.
You have invested heavily on research regarding your smoke-free products portfolio. Although the scientific data is constantly updated with important findings this is undeniably a long-term process to justify your initial claim to deliver products that are better for consumers. When do you think you can be sure that you are definitely on the right track?
The best option for those who are concerned about the health effects of smoking remains not to start smoking, or to quit tobacco and nicotine altogether. What we do know now is that while smoke-free products are not risk-free—when subject to quality standards and scientific verification—they are better alternatives for adult smokers who would otherwise continue to smoke. And according to WHO estimates over 1 billion men and women around the world will continue to do so in the near future, which makes it an imperative that they have science based information on nicotine and tobacco products and that these products can benefit from risk proportionate regulation so there is an encouragement for change.
We have and will continue to conduct extensive and rigorous studies to demonstrate that, compared with continued smoking, switching to our smoke-free products results in a significant reduction in the risk of smoking-related disease. To date, over 30 independent studies, including from government research cen-ters such as the U.S. FDA, Public Health England, the Dutch Federal Institute for Public Health and Environment (RIVM), and the German Federal Institute for Risk Assessment (BfR), have confirmed important findings of our research.
Last July, the U.S. Food and Drug Administration (FDA) authorized the marketing of IQOS and three HeatSticks variants as modified risk tobacco product (MRTP) with reduced exposure information. In doing so, the agency found that issuing an exposure modification order for IQOS is “appropriate to promote the public health” and “is expected to benefit the health of the population as a whole.”
Harm reduction is the new and pressing request of society regarding all the pains that contemporary life is bringing upon the planet. I understand that harm reduction is key to what you do the past years with your new products. Society and stakeholders are skeptical about this harm reduction vision that you have. How do you intend to persuade them?
Harm reduction usually faces this sort of mistrust. I still recall many debates around the seat belt, one of the best-known harm reduction inventions, today accepted by all. And yet when the first carmakers introduced them and then authorities gradually made them mandatory a lot of people doubted their effectiveness and also if we compare the first seat belts over 20 years ago, with seat belts now…
So I totally understand that our transformation faces skepticism and misconceptions. However, we believe that the best way to counter these misconceptions is to be open and transparent and share our views with as many people as we can, hoping they will embrace positive change.
Therefore, rather than expecting implicit trust, we ask people to objectively judge our actions, review our science, and engage in probing discussions on our journey to a smoke-free future.
Some countries, or rather, some societies are doing better in adopting new nicotine products without combustion. Why do you think that happens?
In some countries people’s greater openness for innovation is matched by a regulation that recognizes that these products are different and they have seen in some cases how effective risk and harm reduction policies can be.
For current smokers, the best thing they can do is to quit tobacco and nicotine altogether. However, for those men and women who would otherwise continue to smoke, they deserve access to and up-to-date information about better alternatives to continued smoking and the opportunity to switch to better alternatives. An adequate regulatory framework can help accelerate a decline in cigarette consumption. While regulations should continue to dissuade people from starting to smoke and encourage cessation, they should be risk-proportionate and follow a commonsense approach: The most harmful product, cigarettes, should be subject to the most restrictive regulation.
It is encouraging to observe that in an increasing number of countries regulation of tobacco and nicotine products follows scientific evidence. EU countries such as Bulgaria, Cyprus, Greece, Italy, and Portugal introduced regulation for science-based reduced risk communication to adult smokers. Outside the EU, countries such as the US, New Zeeland, or Japan all have differentiated regulatory frameworks in place.
With its smoke-free vision PMI inaugurated a new business and product culture in its industry. Is this vision sustainable? What if things don’t go as planned? Are you returning to cigarettes as your core business?
We have fundamentally transformed our business to deliver on our vision of a smoke-free future—a future that remains my core focus. I take great pride in the strides we have made in less than a decade toward the better future we envision. Just five years after our initial market launch, in the first quarter of 2021 our smoke-free business generated almost 30 percent of our total net revenues. Our ambition is to increase this to 50 percent by 2025. We will continue to remain competitive in the cigarette category as the revenues drive our transformation but ultimately our goal remains to replace cigarettes wherever we operate with smoke-free alternatives.
From a product standpoint, we continue to invest and innovate in order to provide adult smokers with a range of smoke-free alternatives and accelerate switching out of cigarettes. We know that people smoke for different reasons—not just nicotine, but also taste, sensory experience, and ritual. We have four main smoke-free product platforms in various stages of development. As these products do not involve combustion, they generate significantly lower levels of harmful compounds compared with cigarettes. While not risk-free and delivering nicotine which is addictive, they are better alternatives for those who would otherwise continue smoking.
We also announced our ambition to derive at least $1 billion from ‘beyond nicotine’ products by 2025, as we leverage our capabilities in life sciences and product innovation in adjacent areas such as respiratory drug delivery.
How you respond to the criticism that your new products (easy to use, seen as a gadget) might be a gateway to non- smokers and young people?
So far our post sales surveillance as well as all public data does not confirm that.
Let me be direct. PMI has been clear that former and never users of nicotine-containing products, especially minors, should not use any tobacco or nicotine product. Smoke-free products are intended for one audience: adults who smoke and would otherwise continue to do so.
Alongside parents, public health professionals, and regulators, makers of tobacco and nicotine products must do our part to prevent youth access.
At PMI, we design all our communications in a way that is not appealing to youth and implement strict measures to limit youth interest in and access to our products. Our practices are governed by a set of internal rules— our Marketing Code and our Good Conversion Practices—that are often more restrictive than local laws.
A growing number of independent studies and surveys confirm that youth use of and youth initiation to IQOS and/or heated tobacco products is low. The U.S. FDA stated in the Agency’s July 7, 2020 exposure modification order for IQOS that «The currently available evidence suggests that youth uptake of IQOS is currently low in countries where it has been measured.»
You recently took on an ambitious and comprehensive sustainability strategy. Which are your main priorities and what are the main challenges in realizing it and delivering results?
PMI believes that what a company makes is as important as how it makes it and that our purpose of achieving a smoke-free future must be conducted sustainably.
For us, the word sustainability is not only about protecting our natural resources and protecting the health and safety of the people we work with and the communities where we work. Sustainability means first and foremost addressing the negative impact of our product by relentlessly focusing our resources to replace cigarettes with better alternatives. Innovating for better products is therefore at the core of our corporate strategy.
Sustainability is an opportunity for innovation, growth, and the long term value creation of our company. It is also a means for us to minimize our negative impacts while maximizing our operational efficiency and resource allocation. Sustainability stands at the core of our transformation and is embedded into every part of our business—from how we source tobacco and care for our workers to how we are reducing our environmental and social footprint, in addition to the ways in which we are addressing post-consumer waste. Our targets are ambitious, yet we pave the way with solid initiatives to meet them.
(And follow up question) However, your products score rather low on recyclability and waste generating. Can you share your plans on reducing your environmental footprint?
We are committed to understanding and managing environmental and social impacts across our entire value chain, including the life cycle of our products. Focusing on their sustainability is particularly important as we continue to deliver technologically advanced products that are at the heart of our transition to a smoke-free future.
With respect to our smoke-free products, our 2025 eco-design and circularity ambitions, which extend to electronic devices, accessories, and consumables, are as follows:
Provide access to collection and recovery for the device and its consumables to all IQOS users
Continue to reduce the carbon footprint of our smoke-free products in line with our science-based targets
Achieve eco-certification for all our PMI smoke-free electronic devices introduced on the market as of the end of 2025
In July 2020, we launched Our World Is Not an Ashtray, a web-based, corporate platform to educate, inspire, and engage the public on the issue of littering. We continue to work locally in partnership with all relevant stakeholders to develop and share the most innovative approaches to address the issue of post-consumer waste disposal of our products. By the end of 2020, 65 markets were using our global toolkit to develop localized strategies, with 33 of them having started implementation. The toolkit provides guidance on the development, monitoring, and evaluation of local programs, as well as best practices.
We are also committed to reducing the waste generated in our operations and to identifying and applying the most sustainable waste treatment options available. We are committed to achieving virtually zero waste to landfill across all PMI manufacturing operations by 2022All our manufacturing sites have annual waste targets that are supported by specific projects to ensure their delivery. Furthermore, we expect to implement new technologies such as pyrolysis on other sites to generate fuel out of our waste. We will further explore new technologies to minimize waste generation and continue industry partnerships on waste reduction and recycling.
What is the role of Greece and the 90-year old Papastratos in the realm of operating excellence towards realizing the smoke-free vision of PMI?
Delivering a smoke-free future is, or rather, has to be a collective effort if it is to be realized. Papastratos is a company with a nine decades-long track record of readiness to embrace the future, whatever meaning the future takes in different eras. In that respect, Papastratos, as the one out of two factories globally to end cigarette production and fully shift to manufacturing our smoke-free alternatives, was a landmark step towards our smoke-free vision. Furthermore, since our supply chain accounts for a significant portion of our social and environmental footprint, the long tradition of Greece in tobacco production, finds Papastratos in a position to play a significant role in creating the sustainable value essential to our long-term goals. The talent and resilience of the people in Papastratos constitutes a key regional agent in our efforts to drive operational excellence in everything we do. From managing our ethics and compliance program, to marketing our products responsibly, to engaging with stakeholders, as well as working with relevant authorities to tackle illicit trade of tobacco products.
PMI invested in Greece in two difficult periods for the country. In 2017, amidst the financial crisis and now again as the country tries to move to the post pandemic era. Why Greece and Papastratos and not any other of PMI’s markets?”
At PMI we always look beyond the here and the now, towards the dynamics of a better tomorrow that can be tangibly realized. Otherwise we could have never formulated let alone implement our smoke free vision. The decision in 2017 to put Greece productively at the center of the huge change that IQOS brought internationally, was a decision that today seems self-explanatory when you look at the results. To us it was self-explanatory even then. We saw the prospects that could open up by integrating innovations in the industrial environment of Papastratos in a way that could contribute to the achievement of increased overall social prosperity, parallel to any positive business outcomes. Back then, Papastratos’ readiness to embrace change and transformation, the talent and agility of its people, combined with the unique geolocation advantages of Greece formed a dynamic setting for development. Even more so, since it sent a loud a clear message that the country could revisit and re-shape its future based on innovation. Our new investment comes as proof that when transformative development is backed by a solid vision of commonly shared and sustainable growth, it can breed new opportunities, which in turn cannot but attract new investment.
During your presence at the Delphi Economic Forum you said that Greece might be one of the first smoke-free countries. What did you actually mean?
Greece used to have one of the highest rates of cigarette consumption in Europe, with no visible improvement in sight. Yet, in 2017 it took less than six months to turn Papastratos, from a traditional cigarette producing factory into a technologically innovative smoke-free products company. After that, it took less than a year for Astypalea to declare itself the first smoke free island in the world. Since then, the numbers of smokers in Greece who have made informed choices by switching to better alternatives and stopping smoking, keeps on rising. Finally, and most importantly, the recently voted regulatory framework for smoking, clearly shows that Greece has an open mindset when dealing with this matter and its policy can work as a guide for other countries too. In my view, this is a clear reflection of the country’s commitment to go smoke-free. Greece has all the markings for achieving it.
Greece recently adopted an advanced tobacco control framework. What would the next step be for Greece’s tobacco control policy?
By adopting the harm reduction strategy as the 4th pillar of the Action Plan against smoking, Greece indeed enjoys an advanced tobacco control regulatory framework. I must say that it is very strict but fair, based on scientific evidence and – most importantly – addresses the right of adult smokers to be accurately and properly informed about their choices. In my opinion, Greece has the opportunity to become quickly a lighthouse country within the EU when it comes to tobacco control. The combination of strong scientific assessment of the tobacco products, informed smokers and the implementation of the anti-smoking law can lead to the marginalization of combustible cigarettes very quickly, even during this decade. I truly hope that Greece will grasp this opportunity.
Illicit trade is a pain point certainly for you but for society as well. Greece due to its geopolitical place is a crossroad for illicit trade. How are you addressing to this important issue?
Illicit trade of tobacco products harms all of us, the society at large.
Greece is having some of the highest incidences of illicit trade in the EU, with about 600mio euro lost per year in state revenues.
Though, Greek law enforcement agencies fostered their efforts to fight illicit trade. I recall that Hellenic Police dismantled the largest illicit factory in Europe at the end of last year and only a few weeks ago, Greek Customs had a huge success with the seizure of 340mio illegal cigarettes. As illicit trade is multifaceted, so too is its solution. That’s where the role of private-public partnerships come in. The mutually supportive partnerships are important. Only by combining skill sets, insights, industry expertise, and resources we can identify issues and take actionable measures to eradicate it together.
For example, we’ve worked with the Hellenic Coast Guard for years. Through PMI IMPACT, we have donated high-speed boats of 2.4mio USD to this agency to patrol the Greek waters and protect the EU borders from illegal trade. Effective regulation is fundamental to reduce illicit trade; and if we want to achieve a world without cigarettes, it becomes imperative to secure a future without illicit trade. Greek government is stepping up their efforts and they recently ratified the World Health Organization Protocol to eliminate illicit trade in tobacco products, which we fully support.
Building on Greek government’s commitment to fight illicit trade, it is vital to foster the public-private partnerships to support law enforcement where possible and inform the society.