Philip Morris International is at the centre of the battle over the coming smoke-free world, having spent billions transitioning to reduced-risk products like oral tobacco, heated tobacco products, and vaping. Yet they are still one of the largest producers of combustible tobacco products. How is the journey to the smoke free future going?
Featuring:
Ondrej Koumal
Director External Affairs, Philip Morris International
pmiscience.com
Transcription:
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Brent Stafford: Hi, everybody. I'm Brent Stafford and welcome to another edition of Rug Watch on GFN.TV. We're here in Warsaw, Poland for the Global Forum on Nicotine 2024. And joining us today is André Coman from PMI, Philip Morris International. How's it going?
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Ondrej Koumal: It's going great, it's still the morning, so I'm fresh and ready to go. So you're the Director of External Affairs, is that right? That is correct, that is correct. So what is that? Well, that's a good question that I sometimes ask myself, but essentially I really work at the intersection of science, policy and communication, and the reason why I'm here at GFN is well I think the first GFN was maybe 12 years ago or something like that and I think at that time I came here for the first time because I worked with the joint venture that we had at the time with Swedish Match so the company that we acquired recently we actually have a history together that few people know about and at the time the The job of the joint venture was to try to commercialize snus, pouches did not exist at the time, outside of Scandinavia and the United States where Swedish Match already had a distribution. And this was really my first exposure, proper exposure, to the debate around these new products that can replace smoking. I came here for the first time and I needed to learn about the science behind these products, Swedish experience, snus experience, and I've been coming back since then. So even though my title is not scientific, I actually deal with science every day. If I go back to snus right now for a second, it's why do we know that snus works as a product that can displace smoking and why do we know that it's so much less harmful than smoking? It is because of the science, right? Because we have decades of data coming from Sweden that shows that tobacco-related mortality among men who were the first ones to transition to snus back in the 70s are actually far better off in terms of health risks than people who continue to smoke and are the best in Europe in that regard or in European Union.
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Brent Stafford: Let me ask you, Andre, the question that's the elephant in the room up front, and that is, you know, is there a war on vaping? How much is PMI implicated in that war? And what do you think of tobacco control?
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Ondrej Koumal: Okay, so there's a lot to pick here. So first of all, I think that there is a war on nicotine, there is a war on vaping, there is a war on the industry that makes these products. But I think it is waged only by a small group of people. Yes, they're loud, but it is a small group of people who probably, and I cannot speak about their motives because I truly don't know, but I think this is probably a group of people who believe that a nicotine-free society is within reach. I'm not so sure where that confidence comes from because based on what we know, for the past 30 years the number of smokers has not changed meaningfully actually there are some publications that say that today we have i don't know over 1 billion and it is actually more than we had in the 1990 right 34 years ago so um so i don't know whether they truly believe this is uh this is achievable to me it makes no sense because if you i like cars Okay, so it to me is a little bit, if I may use an analogy, it's like Tesla is the game changer, right? In the electric cars game, right? Tesla came around, was struggling for a little bit, but getting better and better. And today, of course, electric cars are a big thing. And it's like if... Some people would say, well, we like Tesla, Tesla can make electric cars, but Volkswagen, Ford or General Motors, you guys cannot. You cannot change your business. You cannot transition your business from combustion engine powered cars to electric cars. You have two choices. Either you stop making these combustion engine powered cars today, right? Or you're out of the game. And that just doesn't make sense, because that's just not how markets work, how people change behavior. It just doesn't make any sense to me, because we also know what happens when you stop selling that product from day one. I mean, we get questions, why don't you just stop selling cigarettes today, right? It's probably one of the questions you wanted to ask me, and I'm happy to address it right away. So, Brent. Are you a smoker or a nicotine user?
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Brent Stafford: 25-year smoker, quit through vaping. Excellent. Die-hard nicotine user.
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Ondrej Koumal: Okay.
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Brent Stafford: And you know, the thing is, is that e-cigarettes allowed me to continue my nicotine use without any of the harm or damage to my body.
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Ondrej Koumal: That's good. But let's go back to your earlier days as a smoker. And you probably had a favorite brand of cigarettes, right? And let's imagine that brand was made by my company, PMI, Philip Morris International. So you go to a store, you want to get your brand, and that brand is not available. What do you do?
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Brent Stafford: Well, it's tough because I had a real hard time adjusting to other blends. So once I found a brand, I had to stick with it. And I would drive miles sometimes out of my way to get that brand. And then when I moved to Los Angeles, I literally had to drive to the valley to get my brand at some specialty smoke shop.
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Ondrej Koumal: Okay.
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Brent Stafford: So, I mean, yeah, you've got to get what you're used to.
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Ondrej Koumal: So... This is not rehearsed, so I did not know what brand is going to answer, right? But I thought it will probably one of the two options. Either you pick another brand or you do exactly what you did. You drive to another shop, but what happens in that other shop is that that brand is not available either, right? Because we stopped selling that brand or our cigarettes were stopped being sold. So at some point, you will most likely pick another brand, you will get another cigarette. So fundamentally, it does nothing with the underlying demand. And we have great examples of not just companies stopping selling their products, but the whole category being illegal. Bhutan is a perfect example, famous example, I think in 2000 or in the 2003 ban, not just sales of Philip Morris cigarettes, but any cigarettes. Thank you. the demand state, all the market moved to illegal. I read in a WHO publication that this has triggered completely new problems with the youth being at the center of it. We have the experiment of South Africa during the COVID pandemic. They stopped alcohol and tobacco sales for a period of time. And what happened? I think that the illicit trade, which was already rampant, got completely through the roof, the government's revenues plummeted, and people still continue to smoke. So this notion of why don't you just stop selling cigarettes is a little bit insane to me, because I think that our objective should be, we should aim for trying to make sure that people don't want to buy cigarettes in the first place. So if you deal with the demand, and part of that can be shifting consumers away from cigarettes to a better product, then you're dealing with the problem, just like closing your eyes. I don't know of any example where prohibition would be a winning public health strategy.
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Brent Stafford: So let's just quickly deal with the promise that PMI has made to move your business to a smoke-free future. What exactly is that commitment? How far along is the company?
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Ondrej Koumal: Right. So I think that we officially pronounced that commitment in 2016, I believe. And one thing that is very important is this is not a slogan. This is not a PR exercise. This is a commitment that is signed by our board of directors. It's a company strategy. It's a business strategy. And what does it really mean? It means that Today we have one billion smokers, right, and our ambition is to transition them away from smoking to a better product as soon as possible. So that's the smoke-free future. Getting rid of smoking, some people of course will quit and that's a great thing, but many won't. And for those people, I think these products, vaping, heated tobacco, pouches, snus, anything that really doesn't burn tobacco, is scientifically substantiated at some level, I think will be better for a smoker than carrying on smoking. that were like 8 years, but 10 years really since we launched IQOS, our leading heated tobacco product on the market. And I think that actually that strategy is gaining momentum.
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Brent Stafford: Now, obviously some huge success in Japan and maybe some potential success coming up in the United States. Tell us about that.
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Ondrej Koumal: Okay, let me first, let me park it into two or divide it into three parts, even though you asked just two questions. So, first, let me address the business of PMI first. So, obviously, our heated tobacco products, ICOS, we first launched back in November 2014 in the city of Nagoya and in Japan and in Milan. in Italy. So, in 2014 basically our level of revenues from smoke-free products was zero. I think last year, at the end of last year or after the first quarter we are close to 40%. 40% of the net revenues of Philip Morris International comes from smoke-free products today. The smoke-free revenues from our ICOS franchise are today bigger than from Marlboro. Now, you probably think Philip Morris is a Marlboro company. Less and less so. It's more and more smoke-free business. And Japan is one of those countries where we've been doing, where heated tobacco has gained a lot of acceptability. among smokers. So it is one of, but not the only one, it is one of 25 countries that we have today where actually the revenue from smokery products in that affiliate, in that country for us, is larger than the revenue from combustible cigarettes. In Japan, heated tobacco has close to 40% of the market share today. In Tokyo, it's more than 50% now. So I think it's doing very well. Now, turning back to the US, We are with ICOS specifically, we are, I think, in around 80 jurisdictions, 80 markets, right? And what that means, there is still, I think, a lot of places where there are a lot of smokers and we are not there or we are not really everywhere. Even in a given country, we might be in the main city somewhere, but we're not everywhere. Now, the United States, of course, is one of those. one of those one of those countries so we are readying coming back to the United States launching IQOS in the United States and we're quite excited about the opportunity and I think that honestly the American smokers should be excited because I think that the biggest heated tobacco product brand is the returning to America and I think that is great news especially for smokers who have tried e-cigarettes for example or other alternatives and have not found really what they're looking for. So I believe that IQOS can be one of the products that can help.
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Brent Stafford: So talk to me a little bit about the status of IQOS and its modified risk approval. It seems to me that there's so few products in this space that have gotten FDA approval. You have one of them and it's not just a PMTA approval, it's actually you're able to make claims about the product that is extraordinary.
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Ondrej Koumal: Let me maybe, if you don't mind, if we have time for that, just a short background. So actually, IQOS is returning to America. It already was in America, in the United States, for a very brief period of time that coincided actually with COVID, so it was difficult to launch a new product. And that was at the time we had a partnership with Altria. our former parent company, but the companies today are completely separate. So they had distribution rights to market IQOS, our heated tobacco products, in the United States. Now, that is no longer the case. We also settled some of the disputes we had with BAT, our competitor, that allowed also for IQOS to come back. So today it will be PMI bringing IQOS to America. And I think that's great news for American smokers because that is one of the products that is actually missing, I think, from the market. But going back to the FDA, We've always actually wanted that FDA approval because it's a certain sign or confirmation that what we're doing in terms of science, we're doing it right. And of course it's a legal requirement as well because IQOS is a new tobacco product so it had to go through the FDA pre-market review process to receive the marketing authorization. You are right that we also have the modified risk tobacco product authorizations, which I think it's quite cool that Swedish Match has one too, so we have actually a modified risk snus product on the market through Swedish Match and we will be back with modified risk ICOS. or heated tobacco product on the market. So, the exposure modification order essentially says that the product reduces your exposure to harmful chemicals if you switch completely. Now, FDA stopped short of authorizing a claim of the reduction in disease. they did authorize the claim of reductions of a number of diseases for Swedish match, but when I see how the National Academies of Science, how they talk also about e-cigarettes, I think it seems to me that at this stage for any new product getting a reduction of disease claim authorization will be a challenge because what they basically today say is that yes these products reduce your toxic exposures as a user and it is reasonably likely that these reductions will translate into disease reductions in the future. We just don't have that proof yet. So only Swedish snus or only snus has that proof of the decades of epidemiology to show that you really have a far lower risk of oral cancer, lung cancer, lung diseases, heart disease, etc.
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Brent Stafford: So isn't snus a good example that even if you've got decades upon decades of science showing that it's effective and obviously safer, yet still tobacco control doesn't get out there and wave flags for snus. And snus is part of the same war on nicotine as any other product.
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Ondrej Koumal: It is sad because Sweden today, I think the latest data is 2022, if I'm correct. So if you look at the whole sample that is in this government survey, I think it's 5.6% daily smoking prevalence among adults. Of course, when you look at the evolution over the past decades, you will see really this cross of smoking going down correlated with snus going up. I think it's sad. Now, it's important also to note, because I mentioned this joint venture we had with Swedish Match more than a decade ago. We tried to commercialize snus outside of Scandinavia and outside of the United States. And I have to tell you it was not easy because the ritual of course of using Snooze is different. And just to illustrate how different the company I work for today is, from the company I joined 20 years ago, back in 2004, when we... and this was really like e-cigarettes just started being around, we did not have a heated tobacco product on the market yet, at least in the current generation, we had predecessors earlier. There were no nicotine pouches and I remember one of the internal briefing. So we would go and we would try to basically explain what Snus is to our colleagues in an affiliate. So let's imagine we have a candidate country, this is a place maybe where we could launch Snus. So you go there, you meet with the management team, with everybody, you show them what the product is because It's a niche product outside of Scania. People have not heard about it really. I mean, in the Czech Republic where I come from, it's actually been quite popular before we joined the EU and then we had to ban the product because the EU bans the product except Sweden has an exemption. So we would have these conversations and I still vividly remember a colleague of mine, will not say his name, he's retired since then anyway, but I think that he would not object if I shared this story. We explain everything. Snooze, the history, disease, how you use it, everything. And then at the end he takes the scan, he opens it, he looks at it and he's like, I still don't understand, so how do you smoke this? You have not been listening, so that's the mindset of the company at the time. No, you don't smoke it. That's the whole point. But it also makes the different ritual, makes it, of course, a little bit tricky, I think, for smokers to intuitively transition. Now, there is a tradition of oral tobacco use in the United States, in Sweden, in Norway.
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Brent Stafford: Right, and then you've got the more developed technology, the synthetic nicotine pouches, the Zyn product is taking off like crazy in the US. My question here is this, is that almost instantaneously the Democrats, public health, tobacco control in the US launched a whole massive moral panic. It was like, it's like they just reach into a box and they… pull out whatever it is, and the media just jumps with it right there. But, you know, there has been nobody had any disease. There has been no illnesses. But they gin that up. They say in the articles, oh, the public health is very concerned about the potential disease and the health effects and so forth. Meanwhile, it's not like there's anything. So I want to ask you this, when you see that, when your comms people and your external relations people watch that just kind of pop, do you kind of just go, well, yeah, of course, right? Like you expected it, it's operating like it should, or do you have to scream into some kind of an emergency mode to deal with the issues?
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Ondrej Koumal: I would say that probably not everybody is among the groups you mentioned, so it is not universal, but it is puzzling. I think maybe you go and scream in an empty room out of frustration, why is this happening? And it just doesn't make any sense, some of these claims, you know, with ZIN or Swedish Match, we don't do social media. Yes, we receive requests for partnerships, we reject them, right? So it's not even happening. You look at the government surveys and they show negligible, very low levels of oral nicotine pouch juice. So there is no substantiation. But then you step back and you realize, okay, It's not about Zin, right? It's about something you mentioned earlier, about the war on nicotine and the war on the industry that makes these products. So I think of these people who are against. These are people who want to take really the choice, you know, the opportunity for people who smoke. to switch to a better alternative. It just does not make any sense. But I agree with you that the debate is very politicized and I think it is very unfortunate. But it did not stop Zinn from growing and it's a spectacular success.
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Brent Stafford: The WHO just came out with this report, and it's all about how big tobacco is hooking another generation of young people on its products, and they're referencing a campaign for tobacco-free kids report from December of 2023, and some research there. And they had gone through and they had looked at all the social media marketing and stuff that was done, I believe it was PMI and one other company. And they came back and said, well, all of that marketing reached 385 million people. And then they went through the numbers, and it was obviously all about reaching kids with the social media. But it turned out that out of all those hundreds of millions reached, it was only 4% that was under 18. Yes. 4%. And so 96% was over majority age. So how can they turn that into like a thing that's all about targeting kids? And the language they use is kids, kids, kids, kids, kids. If you're 23 years old, they're calling you a kid.
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Ondrej Koumal: That's one part. And I remember looking at the report and basically, well, I'm not so sure why. And they also, what is the pain? They also confuse the content that they believe is PMI, BET, whoever, industry paid advertising with user-generated content that we have absolutely no control over, right? So we go, when we see, you know, illegal advertising, we go to the platforms, right? We go and we try to take down content every day, every day. But what you pointed out, I think it's interesting because of course they're all advocating for banning any advertising on the internet, let's put it so broadly. But the report actually, or the numbers you quoted show that actually you can target adult audience today quite well, right? So you can reduce that reach to the audiences you don't want to reach. So it's actually, it can work very well today.
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Brent Stafford: Well, that's what I thought, because I mean, I come from a background of advertising and many, many years in advertising. And I looked at that and went, oh, my God, that's such efficient marketing. It was amazing. So but who can explain this except for the fact is, is that they really want to crush individuals and they're seeking pleasure. You know, you can't allow an individual
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Ondrej Koumal: to have a moment of pleasure, because that, of course, is not controlled by... You are right, and there is a reason why some of these people are not with us here this week. in Warsaw, because they do not want to have a debate on merit. They just chose, we will play the man in this case, tobacco industry, not the ball, not the substance, right? So they just focus on the industry as the devil incarnate, right? To demonize the industry, demonize nicotine. But what they're doing by demonizing nicotine is really creating or even deepening the misperceptions that we already know. Today, survey after survey, we see that increasing proportion or majority of smokers today in many countries believe vaping is just as harmful or even much more harmful than smoking. That physicians believe that nicotine is the main cause of disease and gives you cancer, right? So you have all these misperceptions. And I think that when you add, you know, fuel to the fire you know for your for holy reason of nicotine-free society which in my view is unachievable in a foreseeable future you are actually Maybe, I'm sure there are actually people out there who see that, react to that, and these are people who maybe have switched or could switch and will reconsider because you know what? If these new things are as bad or even worse than a cigarette, I just better carry on smoking. It's the devil I know, right? And I think that's sad.
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Brent Stafford: So Andre, What is it about GFN, the Global Forum on Nicotine, that has PMI here?
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Ondrej Koumal: Okay, so I would go back to my Swedish experience, back to the days of the joint venture when I came here for the first time and I realized, so I was studying. I mean, I wanted to understand what is snooze, what is this, what does the data show? And of course, the scientific papers and authored by different kinds of people. When I came here first time, second time, third time, and I realized, my God, is that the guy who's here who authored this paper, right? I mean, it's a It's fantastic. I think it's fantastic that I could meet my heroes or heroes in this space here. So I think that's one thing. I think the other thing is that it is one of the few venues, increasingly decreasing number of venues where where actually everybody is welcome right so we as the industry are we can come here we can present our science we can engage in the debate consumers come here scientists come here It's a pity that Vital Strategies don't come here, right? The Bloomberg supported group or I don't know, Stanton Glance does not come here because again, they do not want to debate on merit. Nobody will shame them here or anything. So I think it's a very good inclusive venue and unfortunately, there are not many of them. So I think that's a great reason to be here.