Philip Morris International (PMI), is one of the world’s leading international tobacco companies and maker of the iconic Marlboro brand. So, it was a bit of a surprise this week to hear new CEO Jacek Olczak calling on the U.K. to ban the sale of all cigarettes within 10 years:
"Olczak said the company could “see the world without cigarettes … and actually, the sooner it happens, the better it is for everyone.” Cigarettes should be treated like petrol cars, the sale of which is due to be banned from 2030, he said."
Ooh, tell us more...According to Olczak, PMI plans to generate over half of its total net revenue from smoke-free products by 2025 and envisions a tobacco free world! Yay! This is some next-level ESG....or is it? Okay, so a few things. First, PMI is not entirely getting out of the tobacco business. It will offer vaping products, saying on its website that "smoke-free products" are not "risk free" but "are a far better choice than cigarette smoking." Second, it is good business. The economics of smoking is shifting away from developed markets, such as Western Europe, where the bulk of PMI's revenue are currently generated to more loosely regulated emerging markets. Moreover, the U.K. had already floated a plan to become a "smoke-free by 2030," noting smoking killed more people in Britain in 2020 than Covid-19. So, PMI is just being pragmatic in the face of changing to consumer habits.
But then there was also this: The company recently launched a £1bn takeover bid for Vectura, a British pharmacy company that makes respiratory inhalers and related medicines. Not surprisingly, this has upset anti-smoking campaigners who argue, not unreasonably, that "tobacco companies are positioning themselves as part of the solution to a smoke-free world, while continuing to aggressively sell and promote lethal cigarettes." Hmmm, so PMI plans to profit from selling inhalers to millions of patients who got (and are still getting) lung disease from using their products. That is good business, I guess?
You also have to say this about tobacco, despite attempts to shame it out of business in many Western countries, the industry has been remarkably resilient. Even though retail sales volume have declined, sales value has continued to grow (click to enlarge chart below).
To quote John Oliver "it's an aging product that's decreasing in popularity and yet somehow can't stop making money...the agricultural equivalent of U2!" Harsh, very harsh...U2 is great, John! But he does make an important point(s). Ultimately, all the regulations in the U.S. and Europe push tobacco companies to market their products even more aggressively in developing markets. According to tobaccofreekids.org, 80% of smokers today live in low and middle income countries (click charts to enlarge). At current trends they estimate approximately 1 billion people will die from tobacco use this century. That's grim...but let John, circa 2015, explain:
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