TASNIM LOKMAN and AHMADFAIRUZ OTHMAN speak to Philip Morris (M) Sdn Bhd managing director Kang Tae Koo on the company’s push for cigarette alternatives
QUESTION: PHILIP MORRIS MALAYSIA’S MARKET SHARE INCREASED TO 19.2 PER CENT IN THE SECOND QUARTER OF 2017. WHAT ARE THE FIGURES FOR THE COMPANY THIS YEAR?
Answer: Over the past five years, the legal market has seen quite a significant increase in the prices of cigarettes.
As a result, illicit incidences have increased to almost 60 per cent with illicit cigarettes retailing as low as RM3 to RM4 per pack of 20 sticks today.
In order to protect our volume, Philip Morris Malaysia introduced a Low Price/Value offering in late 2016 which gained wide acceptance by legal age smokers in Malaysia. We expect to closethisyearwithanapproximately20 per cent market share.
Q: WHAT IS YOUR TAKE ON THE ISSUE OF ILLICIT CIGARETTETRADE AND SMUGGLING IN MALAYSIA AND THE REGION?
A: Malaysia has seen a sharp increase in illicit cigarette cases since 2015. The high price of legal cigarettes compared to neighbouring countries make Malaysia an attractive destination for smugglers.
We are pleased to see enforcement efforts being stepped up by the Royal Malaysian Customs and a firmer stance by the new government to combat this illicit trade. This is an encouraging sign for the legal cigarette industry.
Q: WHAT IS THE STRATEGIC DIRECTION OF PHILIP MORRIS MALAYSIA IN 2019?
A: As an affiliate of Philip Morris International (PMI), Philip Morris Malaysia shares the same vision to replace cigarettes with less harmful, smoke-free products.
Smoking causes serious diseases, and the best way to avoid the harm of smoking is never to start, or to quit.
But much more can be done to reduce health risks for the world’s 1.1 billion men and women who would otherwise continue to smoke.
Through extensive investment in research and development, PMI now has a portfolio of smoke-free products with potential to significantly reduce health risks as compared to smoking.
We are increasingly shifting resources to the development, assessment and commercialisation of smoke-free products. We are building our current organisational strengths, and integrating our new capabilities and skill sets to bring our vision of a Smoke-Free Malaysia to reality as soon as possible.
We embarked on this bold journey with the introduction of one of our most advanced smoke-free products using heat-not-burn technology under the IQOS brand on Nov 8.
Q: ARE YOUR SMOKE-FREE PRODUCTS INTENDED FOR NON-SMOKERS? HOW WILL YOU GROW WITHOUT TARGETING NON-SMOKERS?
A: Our smoke-free products are intended only for adult smokers who want to continue enjoying tobacco.
There are currently more than one billion smokers worldwide, and public health authorities, including the World Health Organisation estimates the rate will remain in the next decade.
There are five million smokers in Malaysia. The Health Ministry said the statistics had increased between 2011 and 2015.
Our goal is to build awareness of better alternatives to cigarettes, and for legal age smokers, who would otherwise continue to smoke, to make the right choice for themselves and society.
Q: CAN YOU TALK ABOUT THE COMPANY’S OVERALL PUSH FOR SMOKE-FREE TECHNOLOGY?
A: PMI has so far invested over US$4.5 billion (RM18.8 billion) in fundamental research, product and commercial development, production capacity, scientific substantiation and studies on adult smoker understanding.
Our R&D centres in Switzerland and Singapore employ more than 430 scientists, researchers, engineers and other experts.
We plan for significant investments to build and convert our manufacturing facilities to produce innovative smoke-free products. We are very committed to a smoke-free future and have invested a lot on research, development, and production to ensure adult smokers have better options.
Let me explain what “better options” mean with some scientific background. Tobacco products contain nicotine which is naturally present in tobacco leaves. Many people assume nicotine makes cigarette smoking harmful.
While nicotine is addictive and not risk free, it is not the primary cause of most smoking-related illnesses.
Burning tobacco is the key problem as it creates smoke that contains harmful toxicants.
After years of tests and products research, we’ve found a way to heat tobacco without burning. That means no smoke is created.
Instead, tobacco vapour with dramatically lower levels of harmful toxins than cigarette smoke is generated, while delivering nicotine and providing the taste and ritual that smokers demand.
Nearly six million adult smokers worldwide stopped smoking and switched to our heat-not-burn product, which is available in key cities nationwide and over 40 markets globally. In Japan, this product achieved a more than 15 per cent market share of the total tobacco market within two years.
Globally, there is a growing array of products available and we welcome the development and growth of the category.
Q: HOW WILL PHILIP MORRIS AND ITS NEW RANGE OF PRODUCTS HELP MALAYSIA IN ITS MOVE TO BAN SMOKING IN ALL RESTAURANTS AND EATERIES?
A: We respect the government’s effort to ban smoking in these premises. However, it’s important to conduct proper consultation with all relevant stakeholders when new regulations are introduced.
Our smoke-free product in Malaysia heats tobacco to much lower temperatures compared to burning, generating a nicotine-containing vapour without combustion, fire, ash or smoke.
Because the tobacco is heated and not burned, the levels of harmful chemicals are significantly reduced compared to cigarette smoke. Because there is no smoke and less smell, using our smoke-free product has significantly less effect on the air than cigarettes. It does not produce second-hand smoke.
The vapour produced dissipates more quickly than cigarette smoke.
However, it is ultimately up to the government to determine the appropriateness of indoor use of tobacco products.
Q: DO YOU THINK THESE SMOKE-FREE PRODUCTS WILL BE WIDELY ACCEPTED IN MALAYSIA?
A: A recent survey of 1,000 Malaysian adults by independent market research and consulting firm, Ipsos, showed that 85 per cent of respondents believed that adult smokers should be given access to alternative cigarette options if the products were known to reduce the risks of smoking.
Of course, quitting is the best option. Smoke-free products are alternatives for those who would otherwise continue to smoke.
Q: DO YOU HAVE A TARGET IN TERMS OF THE COMPANY’S MARKETSHARE OF HEAT-NOT-BURN PRODUCTS IN MALAYSIA IN 10 YEARS’ TIME?
A: We are at a very early stage of our smoke-free journey so it’s hard to put a number at this point in time.
Globally, it is our ambition that at least 30 per cent of our adult consumers who would otherwise continue smoking, switch to our smoke-free products by 2025 versus 2010.
The combination of measures to discourage tobacco initiation and encourage cessation, and PMI’s full-scale effort to replace cigarettes with smoke-free products will help us achieve our smoke-free vision.
Q: CAN YOU ELABORATE ON HOW MAKING SMOKE-FREE PRODUCTS AVAILABLE CAN ENHANCE EXISTING TOBACCO CONTROL MEASURES?
A: Adult smokers, who would otherwise continue smoking, should be given the choice to switch to smoke-free alternatives.
They should be provided with information required to allow them to make an informed decision about making a switch.
Japan is leading the way when it comes to smoke-free products in Asia as heated tobacco usage among all tobacco users stood at 34.7 per cent in June this year, compared to 3.9 per cent in late 2015. The United Kingdom’s Department of Health is helping smokers quit by permitting innovative technologies that minimise the risk of harm, and maximise availability of safer alternatives.
Smokeless tobacco is fast replacing cigarettes in Norway and Sweden. Both countries have the lowest rates of daily smoking in developed countries at 11 and five per cent, respectively.
New Zealand’s Smoke-free Environments Act 1990 will be amended next year to regulate and recognise alternative products as an important tool to switch smokers from cigarettes.
Q: HOW DO YOU RESPOND TO THOSE WHO SAY THAT YOU SHOULD NOT BE ALLOWED TO COMMERCIALISE HEAT-NOT-BURN PRODUCTS AS EVEN WITHOUT THE HARMFUL CONSTITUENTS, THESE PRODUCTS STILL CONTAIN NICOTINE?
A: Nicotine is one of the reasons that people smoke, along with taste and ritual. In order for smokers to switch from cigarettes to less harmful alternatives, these products need to contain nicotine.
We base our product development on the principle of eliminating burning to reduce levels of harmful constituents.
And we can achieve a significant public-health benefit only when a large number of these smokers switch from cigarettes to better products. On the other hand, the United States Food and Drug Administration’s Tobacco Products Scientific Advisory Committee concluded in January that our product did not appeal to non-smokers and youths as it contained tobacco and has limited flavouring.
Q: PMI CHIEF EXECUTIVE OFFICER ANDRE CALANTZOPOULOS SAID LAST YEAR THAT SMOKE-FREE PRODUCTS COULD COMPRISE 50 PER CENT OF THE COMPANY’S BUSINESS IN THE NEXT 10 TO 15 YEARS, AND SPARK A RADICAL SHIFT IN THE TOBACCO INDUSTRY. HOW WILL THIS SHIFTBE IN COUNTRIES SUCH AS MALAYSIA?
A: In countries such as Japan and the UK where products such as e-cigarettes and heat-not-burn are widely available, we have seen a record number of adult smokers who have switched from conventional cigarettes to these smoke-free products.
We hope that Malaysian smokers will also see the benefits of smoke-free alternatives.