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The coronavirus pandemic has proven to be a huge challenge for multinational firms like Philip Morris International (PMI), with more people now cutting back on any form of tobacco consumption, but the Marlboro maker remains confident about its growth prospects.
In 2016, PMI made a bold commitment to transform its business by getting millions of smokers to quit the habit and switch to healthier, smoke-free alternatives.
About a year ago, it introduced in the UAE its smoke-free product, called IQOS, a device that heats up -- but doesn’t burn -- tobacco sticks. It’s being marketed as a cleaner way of enjoying tobacco without smoke, hence the exposure to harmful chemicals is potentially low.
PMI’s objective is that by 2025, about 40 million adults worldwide would have stopped buying the standard cigarette and shifted to the non-combustible device, like IQOS.
About half of these converts, or 20 million of them, would come from non-OECD countries like the UAE, Tarkan Demibras, area vice president for Middle East at Philip Morris International, told Zawya.
"PMI has set new and ambitious targets for 2025 — including the ambition to switch more than 40 million adult smokers to its smoke-free products by 2025, with half of the total to come from non-OECD countries," said Demibras.
However, while the traditional cigarette has indeed fallen out of favour, the shift hasn’t taken root yet, partly because the smoke-free campaign is relatively still in its infancy.
Since 2016, the company’s annual global combustible product shipment volume dropped by 114 billion units, while the number of IQOS users jumped to 14.6 million in the first quarter of 2020, compared to just 7.6 million in the first quarter of 2018.
Latest Middle East shipments
It’s not clear how many smokers in the UAE have already ditched the cigarette and started using smoke-free alternative. But one thing is clear, there’s been a drop in consumption of both cigarettes and less riskier alternatives in the Middle East and Africa region.
During the second quarter of the year, when everyone is mandated to socially distance and avoid parties and other forms of social gathering, Philip Morris saw its shipment volumes to the Middle East and Africa region drop to 27,373 million units, down by 15.4 percent compared to 32,378 million in the same period last year.
Sales of heated tobacco products suffered the biggest setback, with shipments falling by 74.3 percent to 185 million units during the same period.
A similar trend can be seen worldwide for cigarette shipments, which fell by 17.6 percent. However, global shipments of smoke-free alternatives actually went up by 24.3 percent, from 15,056 million units in the second quarter of 2019 to 18,708 million in the same period this year.
As for the regional figures, Philip Morris said in a report that the decline reflects “lower cigarette shipment volume, particularly in North Africa”, as well as in Turkey, and lower Duty Free sales.
Still confident
Nevertheless, PMI remains confident it would meet its previous targets in various markets, including the UAE, which saw the launch of the IQOS product only last July 2019.
“UAE was the first country in the GCC to regulate smoke-free products in 2019, which opened the door for IQOS and HEETS [a specially designed heated tobacco unit intended for use with IQOS holder] to be launched in the market and thus giving adult smokers better alternatives to continued smoking,” said Demibras.
“Given the fact that it has only been a year since the launch of these product in the market, it is rather hard to identify the total impact. But we are very happy with the consumer acceptance and demand for [our heated products],” Demibras told Zawya.
Overall progress
Demibras said they are making ‘tremendous progress’ toward their vision of a smoke-free future. PMI’s IQOs is already commercialised in 57 markets and in just five years, 14.6 million smokers have adopted the product, he noted. Importantly, he added, 73 percent of the customers have switched completely and abandoned cigarettes.
“Our ambition is to have smoke-free products account for 30 percent of our shipping volumes by 2025, which is equivalent to approximately 40 million smokers having adopted these products worldwide,” said Demibras.
“Though it is hard to predict the timing of such a change, for countries where there is a shared vision, including the UAE, which is a key market in our [push for smoke-free products], it is possible that we may be in a position to envision the complete replacement of cigarettes in a matter of years,” said Demibras.
The US Food and Drug Administration (FDA) has recently issued decisions on Modified Risk Tobacco Product (MRTP) applications for IQOS and three HeatSticks variants (the IQOS tobacco heating system) that Philip Morris International submitted in December 2016.
It marked the first time that the US FDA has granted MRTP marketing orders for an electronic alternative to cigarettes.
The FDA completed its scientific review of PMI’s evidence package—and independent studies—and decided that switching completely from conventional cigarettes to the IQOS system can significantly reduce users’ exposure to harmful or potentially harmful chemicals in accordance with their interpretation of the US law.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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