Branislav Bibic | Only the agile and commited will survive current sector disruptions, including tobacco industry
The only constant, they say, is change, and that’s certainly true of the business world at present. It’s virtually impossible to identify a sector that is not in the throes of major change, often driven by technology. For some industries, the disruptions are existential, and developing the right strategy to manage a complex transition is vital.
The tobacco industry is crossing its Rubicon, as is the automotive industry. Vehicle manufacturers face the daunting challenge of investing in an effective transition process that will provide internal-combustion vehicles that emit significantly less carbon and fewer other pollutants, while at the same time developing new vehicles that utilise totally carbon-free energy sources.
Another difficult - and even more delicate - transition faces long-established tobacco companies. Some of the transitional phases resemble those that vehicle manufacturers will have to go through but, in the end, tobacco companies face moving away from the very product on which their businesses were built.
Philip Morris International (PMI) is an excellent example. It is the world’s most successful cigarette company with some of the world’s most popular and iconic brands - yet it is clear that it wants to stop selling cigarettes. Why? Because it’s the right thing to do. We want a world where cigarettes disappear altogether whereas, by contrast, vehicle manufacturers will continue to make vehicles, just ones that use a different energy source.
Reducing the harm from tobacco
There still 1.3 billion smokers in the world, according to the World Health Organization (WHO) and the number continues to grow. They should be encouraged to quit smoking altogether, but those adult smokers who would otherwise continue smoking should be offered smoke-free products that are a better alternative.
To this end, PMI is focused on the development and commercialisation of tobacco and nicotine-based products that are scientifically substantiated to be significantly less harmful than cigarettes, and that they are available to adults who would otherwise continue to smoke. The fact that such less-harmful alternatives to smoking exist means that we are committed to phasing out cigarettes altogether.
The good news: it’s working. Already, 39% of our net global revenues come from our smoke-free business, so we are on track to having a substantially smoke-free business by 2030, with two-thirds of our revenues derived from this sector. The real-world impact of this shift is significant: an estimated 33 million adults use our smoke-free products, and 20.8 million adults are estimated to have switched to these products and stopped smoking altogether.
Of course, to achieve this has meant a substantial investment in R&D. To date in excess of $12.5 billion has been directed to develop, scientifically test and commercialise smoke-free products since 2008. We continue to expand into new markets to ensure that adult smokers who chose to continue have access to these better alternatives.
In tandem, we have implemented strict marketing guidelines to ensure that our products are only aimed at and sold to existing adult smokers. Our ultimate aim is that the vast majority of our product is sold to markets with a youth-access prevention programme in place.
Thankfully, independent studies “Multiple studies suggest youth initiation of heated tobacco products is low”, and has shown that our heated tobacco products are of limited interest to both youth and adults who have never used tobacco or nicotine products or have stopped using them. We are clearly reaching our intended audience.
And then?
There is a strong case for developing products that will reduce the harm to adult tobacco users. So what now, you might ask?
The answer will vary from company to company, of course. Some may go out of business, whereas others will change their business entirely. For our company, the intent is to leverage what we have learned during the transition period to identify and then explore opportunities in adjacent sectors such as wellness, lifestyle and healthcare in tandem with our smoke-free business.
In these fast-changing times, choosing to tread water is not really an option. Instead, we’ve chosen to do something really big: to consign cigarettes to the past and move into a world with a smoke-free future, while also looking for new markets.
*Branislav Bibic is Area Vice President Sub-Saharan Africa, Phillip Morris International.
Retail Biz proudly displays the "FAIR" stamp of the Press Council of South Africa, indicating our commitment to adhere to the Code of Ethics for Print and online media which prescribes that our reportage is truthful, accurate and fair. Should you wish to lodge a complaint about our news coverage, please lodge a complaint on the Press Council's website, www.presscouncil.org.za or email the complaint to enquiries@ombudsman.org.za. Contact the Press Council on 011 4843612.
Leave a Comment