Future of Indonesia's Largest Tobacco Company - Jacek Olczak | Endgame #48

TL;DR

PMI aims for a smoke-free future using innovative products.

Transcript

• You’ve mentioned publicly a few times, about how you want to leave a legacy of PMI’s unsmoking. Talk about that, going smoke free. The question is, how we can use the science and the technology today to address it, to have a product for the people who, otherwise, in our case, would continue smoking. [Voiceover: This is Endgame] GITA WIRJAWAN: H... Read More

Key Insights

• Jacek Olczak's career journey from finance to CEO showcases the importance of adaptability and seizing opportunities in a changing economic landscape.
• Philip Morris International's (PMI) strategic shift towards 'unsmoking' aims to reduce smoking-related harm through science and technology-driven products.
• PMI's heat-not-burn product, IQOS, significantly reduces exposure to harmful substances by avoiding combustion, offering a safer alternative for smokers.
• The company's goal is to have 50% of its revenue from smoke-free products by 2025, with a long-term vision of becoming entirely smoke-free.
• PMI is investing heavily in R&D, focusing 99% of its budget on developing reduced-risk products and exploring non-nicotine inhalation solutions.
• The transition to smoke-free products involves balancing technological advancements with social responsibilities, such as supporting tobacco farmers and workers.
• PMI's approach to digitalization includes using AI and big data analytics to better understand consumer needs and improve agricultural practices.
• Olczak emphasizes the importance of education and personal responsibility in addressing environmental issues, advocating for a shared ownership of the planet's resources.

Questions & Answers

Q: What is Jacek Olczak's career background?

Jacek Olczak's career began in finance, where he worked in accounting and consulting. He joined Philip Morris International in 1993 as the head of finance for a small office in Poland. Over the years, he transitioned through various roles, including operations and sales, before becoming the CEO. His career reflects a journey of adaptability and seizing opportunities in a rapidly changing economic and political landscape.

Q: What is PMI's 'unsmoking' initiative?

PMI's 'unsmoking' initiative aims to reduce the harm caused by smoking by developing and promoting smoke-free products. The initiative focuses on using science and technology to create alternatives like the heat-not-burn product IQOS, which significantly reduces exposure to harmful substances by avoiding combustion. The goal is to transition smokers to these safer alternatives and ultimately become a smoke-free company.

Q: How does the IQOS product work?

The IQOS product works by heating tobacco to a precise temperature that releases flavors and nicotine without triggering combustion. This process avoids the harmful byproducts of burning tobacco, such as tar and other toxicants found in smoke. As a result, IQOS offers a safer alternative for smokers, reducing their exposure to harmful substances by 90 to 95% compared to traditional cigarettes.

Q: What are PMI's revenue goals for smoke-free products?

PMI aims to generate 50% of its revenue from smoke-free products by 2025. The company is focusing its efforts on developing and promoting reduced-risk alternatives such as IQOS. This strategic shift is part of PMI's long-term vision to become entirely smoke-free, offering safer options for smokers and reducing the overall harm associated with tobacco consumption.

Q: How is PMI investing in research and development?

PMI is heavily investing in research and development, allocating almost 500 million dollars annually, with 99% of this budget focused on developing reduced-risk products. The company is not investing in R&D for combustible products, instead prioritizing innovation in smoke-free alternatives and exploring non-nicotine inhalation solutions. This investment underscores PMI's commitment to transforming its product portfolio and achieving its smoke-free vision.

Q: What challenges does PMI face in transitioning to smoke-free products?

PMI faces several challenges in transitioning to smoke-free products, including consumer acceptance, regulatory hurdles, and balancing technological advancements with social responsibilities. The company must ensure that smokers are willing to switch to alternatives like IQOS, navigate varying regulations across markets, and support stakeholders such as tobacco farmers and workers during the transition. Despite these challenges, PMI is committed to its vision of a smoke-free future.

Q: How does PMI view digitalization and technology in its operations?

PMI views digitalization and technology as essential components of its operations, particularly in understanding consumer needs and improving agricultural practices. The company utilizes AI and big data analytics for personalized marketing and employee relations, as well as advanced technologies like drones for precision farming. PMI believes that embracing digitalization will keep it competitive and enable it to achieve its smoke-free objectives.

Q: What is Jacek Olczak's perspective on environmental responsibility?

Jacek Olczak emphasizes the importance of education and personal responsibility in addressing environmental issues. He advocates for a shared ownership of the planet's resources, urging individuals and companies to recognize their role in preserving the environment. Olczak highlights initiatives like reducing cigarette butt pollution and encourages a collective effort to manage resources sustainably, ensuring a healthier planet for future generations.

Summary & Key Takeaways

• Jacek Olczak discusses his career path from Poland to becoming CEO of Philip Morris International, highlighting the importance of adaptability and seizing opportunities in a changing world.

• PMI is committed to a smoke-free future, focusing on developing and promoting reduced-risk products like IQOS, which significantly lower the exposure to harmful substances compared to traditional cigarettes.

• The company aims to generate 50% of its revenue from smoke-free products by 2025 and is investing heavily in R&D to innovate and expand its portfolio beyond nicotine-related products.