The Company is essentially disrupting its traditional business from the inside out and is leading the industry in this unprecedented transformation.
The Board of Philip Morris International Inc. has signed a letter to shareholders (the ‘2020 Shareholder Letter’) published as part of PMI’s 2020 Proxy Statement that reiterates PMI’s commitment to delivering a smoke-free future, while recognizing the support needed from a variety of stakeholders to succeed in achieving this vision. This 2020 Shareholder Letter marks an important milestone in PMI’s history, and reaffirms the role the company can play in positively transforming the global health trajectories of men and women who would otherwise continue to smoke.
Defining PMI’s corporate purpose
For PMI, the 2020 Shareholder Letter represents a clear commitment to the strategic direction first laid out in 2016 in a letter to shareholders signed by the Board of Directors and included in the 2017 Proxy Statement. The opening paragraph of the 2017 letter included full support of the Board of PMI’s objective to “lead a full-scale effort to ensure that smoke-free products replace cigarettes to the benefit of adult smokers, society, our Company and its shareholders.”
Delivering a smoke-free future
The 2020 Shareholder Letter reaffirms PMI’s commitment to “developing, scientifically substantiating and responsibly commercializing smoke-free products that are less harmful than smoking, with the aim of completely replacing cigarettes as soon as possible.”
PMI’s pace of transformation and delivery against the vision of a smoke-free future has been rapid, and significant progress has been made, as the 2020 Shareholder Letter makes clear:
“In 2019, the Company’s smoke-free products were already commercialized in 52 markets and represented 18.7 percent of PMI’s global revenue, 71 percent of its commercial expense and 98 percent of its R&D expenditure. As of December 31, 2019, of the approximately 150 million people who regularly use the Company’s products, approximately 14 million already use IQOS, of whom approximately 9.7 million have stopped smoking and switched to this product. The Company is actively accelerating the decline of cigarette smoking beyond what can be achieved by traditional tobacco control measures alone.”
Stakeholders are key to a smoke-free future
The 2020 Shareholder Letter acknowledges that “as the Company continues to transform its business and organization, its core effort to provide smoke-free alternatives that are satisfying to today’s adult smokers—and to work hard to convince them to switch—will not be enough.” Put simply, PMI cannot do it alone, and “needs to continue earning the trust and active cooperation of a host of stakeholders, from its supply chain partners to regulators and public health authorities” in order to succeed.
PMI’s stakeholder groups – including its own employees, as well as regulators, the public health community, supply chain partners, civil society, and of course its shareholders, are all critical to not just achieving a smoke-free future, but also to the pace with which that can happen.
“(…) the Company will be ready to support an industry-wide gradual phase-out of cigarettes as soon as a majority of smokers in a country have switched to scientifically substantiated smoke-free products. PMI believes that with the right regulatory encouragement and support from civil society, cigarette sales can end within 10 to 15 years in many countries.”
PMI’s smoke-free products are not risk-free and should not be used by youth or non-smokers: “For those who use nicotine in any form it is best to quit completely. The Company must market them responsibly, so as to minimize any unintended use, while maximizing the switching of adult smokers who would otherwise continue smoking.”
The 2020 Shareholder Letter states: “when better alternatives to cigarettes exist, the discussion should not be whether they should be made available to the more than one billion men and women who smoke today, but how fast, and within what regulatory framework to maximize their adoption while minimizing unintended use.”
Achieving PMI’s purpose
How PMI achieves a smoke-free future is important and “the Company understands the need to continue to build legitimacy and trust by being honest, respectful, fair and transparent, and by aligning actions with words across all areas of its business.”
A full copy of the Board of Directors’ 2020 Shareholder Letter is included below.
