Vassilis Gkatzelis – Managing Director Egypt & Levant for Philip Morris International (PMI)With more than 15 years of international experience in General Management, Marketing and Sales, Vassilis enjoys a broad geographical exposure spanning Asia, the European Union, North Africa, and the Middle East.
An INSEAD Global EMBA graduate, he worked for personal care multinational L’Oreal, as well as in a family business, prior to joining PMI back in 2003.
Tell us about the story of PMI’s ‘migration’ toward a more consumer-centric company
PMI built its reputation as a leading cigarette company, with the world’s most iconic brands in the category.
Still, many would be surprised to know that PMI began to explore viability and product development of smoke-free alternatives in the early 2000s. And that, in recent years, we have hired over 430 R&D experts, among whom 300 world-class scientists, and have invested over USD 4.5 billion to ensure adult smokers have better options. In fact, our vision is that these products, which are likely to present less risk of harm than continuing to smoke but are still satisfying to smokers, will one day replace cigarettes completely.
The World Health Organization expects more than 1 billion people will still be smoking in 2025; that is about the same number as today. That’s one out of seven people on the planet. These people are not just some hallow statistic – they are our family and our friends. The best thing they can do is to quit but, despite the health warning labels and known health risks, the increased taxes and continuous conversations, many still do not wish to quit. We believe that those people who do not wish to quit still deserve access to better alternatives.
And this is where we can make a big impact: we have found a way to give adult smokers what they want but with an average of 90 percent reduction in the harmful chemicals that are found in the cigarette smoke. This goes beyond the product itself; it is about the whole consumer experience so that adult smokers fully switch.
How do you integrate ‘design thinking’ into your core business?
This is a spot-on question. The design process starts with empathy in order to understand the pain points and needs of consumers, exploring what might make their life better.
Let’s be blunt. It’s better to never start or to quit all forms of tobacco and nicotine use altogether. Smoking is harmful, this is a fact that is commonly known. But people often don’t know the ‘why’ and ‘how’ of this harm. Experts agree that nicotine, while addictive and not risk free, is not the primary cause of most smoking-related illnesses. It is the burning process that creates smoke which contains harmful toxicants.
Through years of testing and learning, we may now heat tobacco to release a satisfying aerosol without burning. This tobacco aerosol, which has dramatically lower levels of harmful toxins than cigarette smoke, still delivers nicotine while providing the taste and ritual that smokers demand. While heating tobacco is one possibility in developing alternatives to cigarette smoking, another approach is to produce a nicotine-containing aerosol without the use of tobacco.
Design thinking also involves the appetite to experiment and change. And with our fourth product launch within the last few years, we’re getting faster at delivering these improvements. It’s a simple equation. The faster we go, the more smokers switch and the bigger the positive impact we have on smokers and society.
Furthermore, IQOS will continue to improve. With our fourth and latest product iteration, IQOS 3, which has just been launched in selected countries around the world, we are not just delivering improvements to the product’s design and functionality, but also to the way we engage with adult consumers. There are few products that revolutionize their sector and change holistically the consumer experience. We believe IQOS is one of those products.
What is the status of Smoke-Free Products across launch markets?
PMI’s diverse smoke-free portfolio includes heated tobacco and nicotine-containing vapor products. Our flagship heated tobacco product, IQOS, is now commercialized in 43 countries.
So far, 5.9 million adult smokers around the world have already stopped smoking and switched from cigarettes to one of our alternative products. This number is growing, with approximately 10,000 smokers switching every day.
The IQOS tobacco heating system has a very high rate of switching, with more than 70% of people who buy IQOS, using it exclusively or predominantly.
Do you think smoke-free products have a future in Egypt & Levant countries?
Yes, I do. The estimated number of adult smokers in Egypt & Levant is 20 million, and it is our goal to be able to offer better alternatives to those who would not otherwise wish to quit. The majority of them are aware of the harmful effects of smoking, nevertheless, many of them do not wish to kick-off the habit. This is where a range of science-based tobacco and nicotine alternatives come into play.
Let me use the example of Lebanon. When I go out, I see numerous adult users of IQOS who have already stopped smoking. Although the product has not been launched in the market yet, incoming travelers still manage to bring it to the country. The Lebanese are known to rapidly embrace change and innovation that bring a positive change to their daily lives.
I am also confident that, by leveraging the learnings gained from other IQOS launch countries, we will accelerate the conversion of adult smokers to these better alternatives.
What type of support would you need to facilitate market entry of smoke-free products?
On our end, we are committed to offering a portfolio of products that will replace cigarettes while being transparent on our research and findings. But we can’t do it alone. Unfortunately, today there are many barriers in the way of making men and women who smoke aware of the choices they have. In most countries around the world, it is almost impossible for those people to make informed decisions about alternatives to cigarettes. They have the right to know, and we have a duty towards them.
People who smoke are looking for better alternatives, and governments have a unique opportunity to help facilitate informed choices and accelerate the move away from cigarettes. To this end, we believe regulatory frameworks and fiscal policies need to be risk-proportionate, in order to incentivize adult smokers towards embracing the great potential of smoke-free products, and consequently abandoning smoking once and for all.