Is Philip Morris’ claim it wants to phase out conventional cigarettes credible?

In recent months, Philip Morris International has been claiming it wants to lead the push to a smoke free world and  wants to work with governments towards the phase out of conventional cigarettes. The claims have been met with scepticism, but do they stand up to scrutiny?

 

At an investor day held in late September 2016, PMI chief executive officer Andre Calantzopolous outlined the company’s strategic priorities, which include “to continue leading the combustible product category and deliver against our current growth algorithm” and for “Reduced risk products (RRPs) to ultimately replace cigarettes to the benefit of all stakeholders”. Calantzopoulos described the ‘excellent combustible fundamentals’ which include: improving cigarette industry volume/trend mix, and broad and balanced geographic footprint with expansion opportunities. While these are not exactly the words of a leader who wants to get out of the cigarette business, he also states that the company is committed to achieving widespread conversion to RRPs, and that PMI “welcome all alternatives to achieve a combustion-free world as quickly as possible.” Together these contradictory priorities sound very much like a bet each way.

 

At first glance, the latter rhetoric sounds like the company has finally – after more than 50 years of denial and deceit about the harms of tobacco – realised that not only is the tobacco business ethically and morally bankrupt, but it is also the wrong profit-making horse to back. However, a closer look suggests that reduced risk products may be yet another cynical tactic for the company to position itself as a socially responsible entity that deserves to be treated as part of the solution, rather than the problem.

 

The glaring omission in the rhetoric is the most obvious alternative for PMI to meaningfully contribute to achieving a combustion-free world: announce a date by which the company will phase out combustible products entirely. Calantzopoulos is on record as stating the iQOS (I Quit Ordinary Smoking) technology which appears to be the platform it is pinning most hope on, put the industry “on the cusp of a revolution”. At the September meeting, he told investors that almost one million smokers have already converted to RRPs and it had captured nearly 3% of the Japanese cigarette market. Wells Fargo Securities tobacco analyst Bonnie Herzog estimates that iQOS could displace 30% of the global combustible market by 2025.

 

At the September 2016 investor day, Calantzopoulos was not shy about framing RRPs as a public health solution with enormous potential, claiming “…if we can encourage a meaningful portion of adult smokers to rapidly switch to RRPs that meet this standard, it is likely to create a significant additional population health benefit relative to current regulatory efforts.” He called on the public health community to embrace this approach, and noted “we are very much encouraged by the growing number of pre-eminent public health advocates that already support the principle of tobacco harm reduction through products and science.”

 

The public health community has seen similar promises before: the promise of reduced risk products is nothing new, and the safety of iQOS is largely untested. If these products fail, as their predecessors have done, PMI will have benefited from iQOS and other reduced risk products being branded consistently with its combustible tobacco products.

 

Presumably anticipating such objections, Calantzopoulos noted, “I fully recognise there is scepticism and a deficit of trust in our determination to lead the effort to achieve a combustion-free world as soon as possible. Although we cannot change the past, we can certainly change the future and transform our company.”

 

Indeed, PMI can certainly change the future and transform the company. Nothing will accelerate the transition to a smoke free world more effectively than PMI withdrawing completely from the combustibles market, supported by the intensive consumer engagement strategies it is already using to promote uptake of iQOS.

 

Public health advocates who are willing to work with the tobacco industry on joint harm reduction approaches would do well to remember the fable of the scorpion and the frog, in which the frog agrees to carry the scorpion across a stream. Halfway across, the scorpion stings the frog. As they both start to drown, the frog asks ‘why?’, to which the scorpion replies ‘it’s my nature’.

 

This is an edited version of an article which was published in the Worldwide News & Comment section of the November edition of Tobacco Control. 

 

Additional links:

  • Thank you for reviewing and outlining these issues and considerations.

    While this link provides perspective from a different company (and my client–full disclosures below) and in a different journal, I offer it to further the discussion:

    http://ajph.aphapublications.org/doi/full/10.2105/AJPH.2016.303456

    Joe

    Disclosures:
    PinneyAssociates provides consulting services on tobacco harm minimization (including nicotine replacement therapy and digital vapor products) to Niconovum USA, RJ Reynolds Vapor Company, and RAI Services Company, all subsidiaries of Reynolds American Inc. In the past three years, PinneyAssociates has consulted to GlaxoSmithKline Consumer Healthcare on smoking cessation and NJOY on electronic cigarettes.

    I also own an interest in intellectual property for a novel nicotine medication an option for which has been sold to Niconovum USA.

  • Marita Hefler

    The article you have posted doesn’t address the underlying problem, Joe. As long as tobacco companies are still in the combustible tobacco market, and actively subvert effective tobacco control legislation to protect their deadly trade, they have no credibility. It is as simple as that. They care about profits, not health.

  • Thanks, Marita, for your reply. I’ll throw in another post for you to consider (this time from David Sweanor on Clive Bates’ blog: as the URL won’t make it through the filter, just google “Big Tobacco’s Little Helpers” and it should take you to the piece at Counterfactual). We are engaging on critical issues here, I would say, and I would like to continue the dialogue in some manner.

  • Jon Fell

    This post raises very similar issues – and makes very similar criticisms of the tobacco industry – to The Conversation article published by Simon Chapman on 20th October this year), to which I responded on Clive Bates’ Counterfactual blog on 23rd November.
    I am always pleased when members of the tobacco control movement reference financial presentations on tobacco company websites, because there is much useful information to be found there. But I think it’s unfortunate that Marita Hefler repeats a number of unfounded criticisms of the tobacco industry’s engagement with risk reduction.
    Support for the contention that “reduced risk products may be yet another cynical tactic for the company to position itself as a socially responsible entity that deserves to be treated as part of the solution, rather than the problem” appears to boil down to two points:
    1) That if PMI were serious about harm reduction it would withdraw completely from the market for combustible cigarettes; and
    2) Previous reduced-risk products haven’t worked and iQOS is ‘largely untested’.
    The first point is simply unrealistic, and undesirable from a number of angles. The reason tobacco companies produce and sell combustible cigarettes is that there is considerable consumer demand for them. The idea that all this demand would disappear overnight if tobacco companies stopped producing cigarettes is not credible, as many studies of attempted prohibitions of alcohol and other drugs have shown.
    Cigarettes also produce large sums of excise tax for governments, and the profits that tobacco companies make from their legitimate business are turned into dividends for shareholders and pensioners. No tobacco company CEO would be allowed by their shareholders to unilaterally declare an end to the combustible cigarette business.
    The author writes that “nothing will accelerate the transition to a smoke free world more effectively than withdrawing completely from the combustibles market, supported by the intensive consumer engagement strategies it is already using to promote uptake of iQOS.” But where will the very significant resources needed to invest in R&D, rigorous scientific testing, marketing and the ‘intensive consumer engagement strategies’ she refers to come from if there are no longer any cash flows from the legacy combustibles business?
    The second point, that previous reduced-risk initiatives haven’t worked, is misleading. What about snus, a very successful harm reduction product in Scandinavia? Portions of the tobacco control community might consider whether their own actions to smear the product and its manufacturers are at least partially responsible for its lack of success in more markets. Why is snus still, ridiculously, banned in the EU?
    And if the author’s comments are an attempt to elide the distinction between tobacco heating / vapor products and initiatives like lower-tar cigarettes then I would suggest a re-reading of some of the many studies which have come to the conclusion that this generation of reduced-risk products is far removed from the efforts of three or four decades ago on conventional cigarettes (eg Public Health England’s E-cigarettes: an evidence update, published in August 2015).
    Setting unrealistic hurdles along the lines of ‘tobacco companies can’t be serious about harm reduction because they continue to sell cigarettes’ seems to be to be a way for some in tobacco control to excuse themselves from proper engagement in harm reduction. Just in case that excuse fails, the back-up seems to be ‘well, these products don’t really reduce risk anyway’.
    That attitude makes it even clearer why tobacco companies won’t announce any time soon that they’re stopping selling cigarettes. But the much more important reason why that won’t happen is that consumers don’t want it. If harm reduction is to be a success, it surely has to be driven via a process of expanding consumer choice to more attractive reduced-harm products, not suddenly snatching all choice away?

    Disclosure: I am a former City of London investment bank equity analyst with over 20 years’ experience following the tobacco industry and other consumer packaged good companies. I now manage a fund, in which I myself invest, that owns shares in a number of consumer companies, including tobacco stocks.

  • David Sweanor

    I am coming to this discussion a bit late, but thought I’d add to points already made, including that readers look at a more detailed
    piece I wrote. We can look very logically at this issue and recognise that either a company like PMI is serious about wanting to move out of combustibles,or that it is a cynical PR trick. Likewise, those with an interest in reducing the horrendous toll from smoking can either seek to support such an avowed interest, or not.

    If the company is serious, supporting the move has tremendous potential to force a transformation not just of that company but the
    entire industry. If they are serious but we seek to block them, tremendous potential health gains are forgone, plus the entire industry gets to blame our obstructionism for this outcome rather than their lack of serious intent. If they are not serious, taking them at their word and actively engaging in a process to transition away from combustibles as fast as possible will rapidly show that they are being disingenuous, and destroy any cynical PR advantage
    they seek to have. If they are not serious and we refuse to engage, there is little ability to show the world their true goals and their PR victory is all but assured.

    Many businesses and professions (not least medicine) have
    gone through fundamental transitions. To assume that it can’t be done, outright blocking the possibility, or setting terms that are impossible (such as demanding that they ignore fiduciary responsibilities to their owners) is hardly the recipe for success.

    As an initial step, those wishing to see a transition should
    make it possible rather than blocking it. Bans on massively less hazardous alternatives to cigarettes (snus, for instance), prohibition-by-regulation (e-cigarettes) and over-regulation to the point of consumer unacceptability (NRT) is hardly conducive to a marketplace transition. Nor is consumer deception about relative
    risks. For instance, imagine a smoker who is keen to reduce risks and would be very willing to try to switch to smokeless tobacco products or vaping. Imagine, in seeking to make an informed decision on whether to try, this person opts to look at information on the relative risks of these different products from the most authoritative government and anti-smoking group websites in their country. Also, imagine that this person lives in the United States. Go ahead, try it out. Ideally, where others will not hear your screams when you see what such a person will find.

  • While it will be important to see the full submission on which this article is based, and how closely PMI hews to recommendations from Chaloupka, Sweanor, and Warner (see https://tobacconomics.org/2015/08/14/differential-taxes-for-differential-risks/) even just this account is a noteworthy development, in my opinion. A development that could radically change how smokers get their nicotine.

    http://www.telegraph.co.uk/news/2017/03/03/tax-us-worlds-biggest-cigarette-maker-tells-philip-hammond/

    Disclosure:
    My employer, PinneyAssociates, provides consulting services on tobacco harm minimization (including nicotine replacement therapy and vapor products) to Niconovum USA, RJ Reynolds Vapor Company, and RAI Services Company, all subsidiaries of Reynolds American Inc. In the past three years, PinneyAssociates has consulted to NJOY on electronic cigarettes. I also own an interest in intellectual property for a novel nicotine medication.

  • While I disagree with his conclusions, Simon Chapman presents an energetic defense of Marita’s original article in The Conversation (link below). Might as well include it in this thread, I believe. Though I will express disappointment that the exchange of views in this blog has been rather tilted in one direction. Hopefully that might change?

    https://theconversation.com/can-we-trust-big-tobacco-to-promote-public-health-74370

    Disclosure:
    My employer, PinneyAssociates, provides consulting services on tobacco harm minimization (including nicotine replacement therapy and vapor products) to Niconovum USA, RJ Reynolds Vapor Company, and RAI Services Company, all subsidiaries of Reynolds American Inc. In the past three years, PinneyAssociates has consulted to NJOY on electronic cigarettes. I also own an interest in intellectual property for a novel nicotine medication.

  • This piece from 3 April in Bloomberg Markets would suggest that shareholders are finding PMI’s assertions both more credible and more appealing than Marita did, and are investing accordingly.

    https://www.bloomberg.com/news/articles/2017-04-03/cigarettes-crash-tech-giants-foothold-on-u-s-stock-domination

    Disclosure:
    My employer, PinneyAssociates, provides consulting services on tobacco harm minimization (including nicotine replacement therapy and vapor products) to Niconovum USA, RJ Reynolds Vapor Company, and RAI Services Company, all subsidiaries of Reynolds American Inc. In the past three years, PinneyAssociates has consulted to NJOY on electronic cigarettes. I also own an interest in intellectual property for a novel nicotine medication.

  • And not directly related to the issue of the incumbent cigarette companies transitioning to other products, this piece from the Wall Street Journal, while frustratingly behind a paywall (though the video is available, I believe), outlines some of the factors and outcomes that inform understanding of the US market.

    https://www.wsj.com/articles/u-s-tobacco-industry-rebounds-from-its-near-death-experience-1492968698?tesla=y

    Disclosure:
    My employer, PinneyAssociates, provides consulting services on tobacco harm minimization (including nicotine replacement therapy and vapor products) to Niconovum USA, RJ Reynolds Vapor Company, and RAI Services Company, all subsidiaries of Reynolds American Inc. In the past three years, PinneyAssociates has consulted to NJOY on electronic cigarettes. I also own an interest in intellectual property for a novel nicotine medication.