Almost one year ago, we wrote one of our messages about the Future of the cigarette industry and the strategic steps one of the markets leaders, Philip Morris (PMI), was (not) taking to adapt to a “future without smoke”.
As we preview, the industry is swiftly pacing and PMI just announced cigarettes should be banned and the company will stop selling Marlboros in the UK within a decade. This measure was taken after the announcement, back in 2016, to commit to a smoke-free future. It also comes after the aftermath of many critics for the company acquisition of the British pharmaceutical company Vectura Group, which makes asthma inhalers (a business largely benefitting from smoke addiction).
While the company leaders flag these measures as “responsible business” and as part of their strategy to eliminate traditional cigarettes, many are the doubts that they are really putting their actions where their mouth is.
Is PMI really interested in helping nicotine-addicted people to move out from cigarettes and have healthier lives? Are they really concerned with their business long-term sustainability and its alignment with the well-being of its clients? Or are they just committed to short-term profit, while ignoring that 8 million people die annually from this addiction?
In the next 3 points I will share my vision on this topic:
1. They are moving, but until now, they fall short on an ambitious, positive plan for the industry
Until the moment, PMI's strategy has been to substitute traditional cigarettes for e-cigarettes. They committed to developing “breakthrough products that are smoke-free and enjoyable”. Knowing these products deliver a net negative contribution to society, this strategy is still very far from the holistic sustainability ambition of a Responsible business. A good example of an industry and responsible business move is the case of DSM we frequently present at the CRB or some of the examples we gave in the previous newsletter on the topic.
This way, to mention they are catching “the immense opportunity that smoke-free products present for advancing public health within the present generation of smokers” is neither convincing enough nor a strategy for long-term shared value creation.
2. Their solutions are still harmful and negatively contribute to human well being
While PMI bet their future on smoke-free products, the World Health Organization clearly states they are harmful to health. In fact, PMI also mentions the same in their communications: “they are not risk-free (referring to smoke-free products). The best choice is always to quit tobacco and nicotine completely. (…) Vaping generally involves inhalation of nicotine, which is addictive, and not risk-free”.
My rhetorical question is: Will we still invest and trust companies that deliberately produce harm to society without a consistent exit plan?
3. There is still hope! They are a step away from grabbing the opportunity to move faster and conquer not only reputation but also a competitive advantage.
While no clear mention is made on the PMI strategy on how they will reinvent themselves, if their ambitioned smoke-free future really happens, recent moves indicate that the company is trying to reinvent their business. Two weeks ago, they invested in diversifying their business away from harmful tobacco products and bought the nicotine gum maker: Fertin Pharma. Last week, they announced the acquisition of Vectura, a company producing inhaled drug delivery solutions for a number of diseases – including COVID-19. These two acquisitions are under the umbrella of a more ambitious plan called “PMI’s Beyond Nicotine strategy”, which aims to leverage PMI’s expertise in inhalation and aerosolization into adjacent areas – including respiratory drug delivery and self-care wellness. The company also announced aims to generate over 50% of its total net revenue from smoke-free products by 2025 and aims to generate at least $1bn in net revenues by 2025 from its ‘beyond nicotine’ products. Respiratory drugs are their key focus as the company aims to be “predominantly smoke-free” by 2025, when tobacco revenues will account for less than half of total income.
These recent moves may infer that PMI already understood that smoke-free products are not enough as a strategy for future success and human well-being. In fact, to change from risk mitigation to proactive, positive strategies, aligned with society's needs, is a much more compelling and profitable plan.
As market leaders, and with a position able to influence the worldwide cigarette industry, they have not only the responsibility but also the duty to pave the way to a better future for their clients and the whole society. The big question that remains is: Are they willing to commit It seems to me this is their only possible move if they do want to survive for the medium-long term and keep their business successful.
As Chesterton once said: “Courage is almost a contradiction in terms. It means a strong desire to live, taking the form of a readiness to die.”
Only the ones courageous enough are the ones making history advance. Let’s wait and see what the next chapters of this story will reveal…
Have a great and impactful week!
Filipa Pires de Almeida
Deputy Director
Center for Responsible Business & Leadership
This article refers to edition #99 of the "Have a Great and Impactful Week" Newsletter.
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