On the Call: Philip Morris Int’l CFO Olczak

http://www.businessweek.com/ap/2012-10-18/on-the-call-philip-morris-intl-cfo-olczak

By The Associated Press on October 18, 2012

Tobacco companies including Philip Morris International Inc. have ventured into smokeless tobacco and other nicotine products as tax increases, health concerns, smoking bans and stigma cut into demand for cigarettes.

In 2011, the company purchased the rights to a technology that lets users inhale nicotine without smoking and is developing several other next-generation products, and “modified-risk” tobacco products that can reduce the health risks for consumers, as alternatives to conventional cigarettes.

Most public health experts say there is no safe way to use tobacco and push for people to quit above all else. Others embrace the idea that lower-risk alternatives can improve public health, if they mean fewer people smoke.

Philip Morris International has said it expects to launch the first of its next-generation products between 2016 and 2017, which could include an aerosol nicotine-delivery system or one that heats tobacco in a cigarette with a controlled heating mechanism.

Many other tobacco companies in the U.S. and abroad also have invested in cigarette alternatives, including electronic cigarettes, battery-powered plastic and metal devices that heat a liquid nicotine solution, creating vapor that users inhale.

But selling a reduced-risk product requires a lot of testing to substantiate those claims, as well as regulatory approval to market them as such.

In a conference call with analysts on Thursday regarding Philip Morris International’s third-quarter earnings, Chief Financial Officer commented on its next-generation products.

QUESTION: Given the success of electronic cigarettes in the U.S., would you consider putting those on the market anywhere? While you’ve noted that the nicotine delivery isn’t as comparable, but to the extent that there seems to be a consumer acceptance, would that change how you think about it as sort of an interim step?

RESPONSE: No, our strategy is very clear on this one. We want to commercialize (the next-generation products) but with a claim. So, I need the regulatory approval to allow me to say what the products … that we are working on can provide in terms of a benefit to a consumer. We don’t want to make a shortcut on this one, or launch a product which we have but without being able to make the claim. I think that’s very important.

5 comments ↓

#1 Bill Godshall on 10.30.12 at 1:49 PM

PMI’s decision to stay out of the surging e-cigarette market only benefits PMI’s competitors.

Waiting four or five more years to introduce new products that may (or may not) be competitive against ever improving e-cigarette products just so PMI can make a “health claim” (that may or may not increase use of the products) appears to be a foolish strategy.

#2 Jersey Kid on 11.01.12 at 2:10 AM

yeah but they actually have a point since the product that is out there in the market is really not that good. Just saw the new NJOY product and think they really have missed it.
Just not sure what they are thinking.

#3 Observer on 11.01.12 at 6:45 AM

PMI has enormous strengths but one thing the SNUS fiasco in the US has shown is that even the strongest tobacco brands do not travel very well across tobacco categories (think Marlboro moist snuff)…. So unless the innovation is so spectacular to the actual consumer, you cannot rely on the brand to carry the day.

Reynolds approach of engaging the consumer across multiple innovations seems to make a lot of sense to me.

#4 Jersey Kid on 11.02.12 at 6:42 PM

The moist issue was just ridiculous. The product sucked.
Their snus product is also just horrible. Now they have Verve and I wonder what you are supposed to do with it. I mean do you just let it dissolve and do you discard it or what?

#5 Anonymous on 11.06.12 at 2:57 AM

I have a question
Anyone know who Imperial Tobacco has partnered with that is a e-cig manufacturer. Keep hearing about it!

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