Philip Morris International is present in Armenia not only as a market player, but also as an organization promoting research and development. Regional Post founder and executive director Arshak Tovmasyan talked to PMI’s Senior Vice President External Affairs Grégoire Verdeaux, discussing the company’s vision on the future and game-changing initiatives.
Interview: Arshak Tovmasyan
I would like to ask my question on the transformation of Philip Morris. I heard it already many times PMI wants a world without cigarettes. You know that not everybody’s going to quit smoking. Some people will continue to smoke so your responsibility as a business is to create products that will reduce harm. How is this transformation going and where is Philip Morris right now?
I think it’s been a long journey and when you look at the totality on the research on what would be less harmful alternative to cigarettes. In 15 years Philip Morris has invested over 10.7billion dollars in the development, scientific substantiation, manufacturing, commercialization and continuous innovation of smoke-free products. Such products started to be launched in 2016. Today we haven’t launched them everywhere. But today already our smoke free products are available in 78 markets. Our company expects them to be in 100 markets by 2025. So it is sort of a revolution in the making and very likely a biggest business transformation. The key factor is to look at what the society and the consumer need. The society clearly was at a point of no return in terms of cigarettes and reduction of the harm of cigarettes.
And also how the cigarettes are viewed by other people, non-smokers
We wanted to realign with the governments and the societies and really try to address the reality of quitting smoking. Not smoking is great. But the reality is different and as lots of people start smoking, many of them don’t quit. So the question is at that step in the journey, what do you tell them? And that’s where the idea came that even if you are not able to quit nicotine completely, you can go to better alternatives. The challenge at the same time was to meet both the requirements of the consumers and the requirements set by the government regulations. From the purely commercial point the things are going at lightning speed for smoke-free products, which constituted 0.2 percent of the company’s net revenue in 2016 and now it is almost 35 percent level.
Our horizon is to be able to have the majority of the net revenues within 2 years from smoke-free products. Just think about it. In less than 10 years a company of the size of Philip Morris with a history of production of cigarettes would have moved dramatically away from it. And it is not that another company will fill in the gap in the business. In fact, we help millions and millions of people to switch from cigarettes to less harmful products.
You are in the meantime creating new products with lots of innovation, lots of investment; would you comment on that?
That’s a pretty new approach. I mentioned regulations of the government, because it is my day-to-day job to speak to them and try to find the path toward the end of cigarettes. The traditional tobacco control policies – which by the way we fully support – are prevention, cessation and then taxation, which are supposed to regulate the consumption. All those policy tools are perfectly ok and they are in place for a long time. But when you look at, for example in Armenia at the smoking prevalence, it was over 25 percent in 2015. It is going to take long time before the end of the cigarettes and that’s where we say: “you can accelerate the whole thing by providing these adult smokers who do not quit, offering them better alternatives”. It’s a constant research in motion by PMI to find what is going to be the best solution and for whom. The more we develop products the more success it has the more we need to address the needs of the consumers.
For me one of the key elements of this is the harm reduction especially for thepeople who are close to the smokers - the second-hand smokers, which keeps me excited. I have never been a smoker in my life and I am happy that it addresses this category.
It is useful to mention harm reduction as lots of people don’t know it, instead thinking about the government policies on tobacco and cigarettes, and specifically on prevention, taxation and cessation. The harm reduction is a principle that is enshrined in the only international treaty on tobacco control which is the Framework Convention 2002. What we see is the potential of that concept to be used not only for the tobacco control but also other sources of non-communicable diseases. And a number of governments are going into that direction. I think a most formidable example of this is the case of the United Kingdom. There has been a clear endorsement by the public health and a clear recognition that if you are a smoker you should have access to a less harmful alternative. That is a kind of pattern that we want to see elsewhere.
Let’s come back to Armenia. PMI decided to open a Research and Development Center, one of the few in the world. Why did Philip Morris decide to do it in Armenia and what is your impression about the Armenian R&D Center?
Armenia has a very good reputation in terms of academic excellence. this is true for us and in a number of sectors and we’re looking at things which are going to positively contribute to the development of our company. We are doing various stages of research. A particular footprint we have here is the combination of engineering and data science. We are supporting thousands of students who have been able to use our facilities for years. We are completely fine with supporting the science and research ecosystem here in Armenia. And the fact that we have a diversity of activities made on behalf of the PMI here. It’s a bit like a swiss knife in innovation and research that we are positioning here. It’s been a sizeable investment here because since 2018 we have invested 20 million dollars which is commitment of the past five years regardless of the external circumstances. That’s the reason why I am here today. We would like this research and development footprint to help us to go further.
The establishment of the R&D center in 2018 here was a great thing and PMI coming here said “I’m not only going to use your science potential but also invest here” and I think Armenia greatly benefitted from it.
It was a win-win partnership. We know the importance of the research and scientific or the academic excellence of Armenia. One of the biggest facts for the future of the country is the brain drain. The fact that the talented people of Armenia go abroad and bring the expertise back to country. We like to think that this affects positively on the fundamental point for the future of the country, which is the ability to retain scientific and research talent.
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