TOBACCO: PHILIP MORRIS INTERNATIONAL


Elaborating on the importance of DF&TR in terms of overall business, Katilius, who reveals PMI Duty Free is one of the top 10 PMI affiliates comments: “Duty free is a very important channel for our business, providing us with a global presence. “Consumers are at the heart of our


transformation and travelling is part of consumers’ lifestyle. Our presence in travel retail allows us to reach 100m international travelling adult smokers per year and inform them of better alternatives to cigarettes.”


Strong base to build from Currently, PMI is present in 26 travel retail markets with over 130 travel retail locations. The aim is to continue expanding its travel retail footprint in line with the expansion of Iqos on the domestic market. “Our strongest travel retail


locations are those which have the right regulations in place for us to ensure adult travellers have access to less harmful alternatives and information about their benefits. “Today, Japan, Korea and Dubai


Duty Free are strong examples of this approach,” acknowledges Katilius. Dubai International Airport and


Dubai Duty Free was actually the location for the launch of the Iqos 3 Multi in July 2019. “The heated tobacco category calls for constant innovation. The ‘Radiant Red’ IQOS 3 Multi is the most recent example from our ‘traveller exclusive’ line for consumers who are looking for a unique product. “Currently, traveller exclusives


contribute to a quarter of our overall Iqos sales. We are looking to strengthen our traveller exclusive line in the coming months with a special Iqos 3 Duo traveller exclusive.” The fragmented travel ecosystem


is one of the main challenges facing PMI’s DF&TR business, as Katilius explains: “The consumer journey is disconnected. Our objective as travel retail players (airlines, airports, retailers and brands) is to offer a seamless journey to our travelling customers. “Secondly,


infrastructure


development is lagging behind consumer trends. Today, there is insufficient infrastructure for our smoke-free product users. There are more than 11m users of Iqos


OCTOBER 2019


tobacco heating systems globally, of which 70% have stopped smoking cigarettes completely and switched to Iqos (Source: PMI Q2 2019 results conference call). “These Iqos users have made


the bold decision to switch to a better alternative to continued smoking, however, they are still treated as conventional cigarette smokers. There are no smoke-free spaces dedicated to those who have switched to better alternatives to continued smoking.” Another challenge is that many


airports and operators still tend to treat smoke-free products as conventional cigarettes. “Finally, we have a new category that establishes different regulations. “Fundamentally, the smoke-


free product category provides a better alternative compared to conventional cigarettes. We need to openly talk about different concessions applied to reduced risk products and cigarettes.”


Backed by ‘solid science’ The priority for PMI is to switch all adult smokers who do not quit, to its smoke-free alternatives, as soon as possible. But can electronically heated products co-exist alongside conventional tobacco items? Katilius says: “While discontinuing


cigarette sales would simply result in competitors and illicit trade filling the market space, we are fully committed to doing everything we can to ensure smoke-free products replace cigarettes as soon as possible. “Across the entire company,


“We’re getting faster at delivering upgrades and new products, to provide the opportunity for more and more adult smokers, who would otherwise continue smoking to switch to better alternatives to smoking.”


Edvinas Katilius, Vice President, PMI Duty Free


we are shifting our resources to support smoke-free products. This is our focus and goal. As smoke- free products are new and science is fast developing, we are making considerable investments in the quality of our scientific research. “We are also building our current


organisational strengths, as well as integrating our new capabilities and skill-sets to meet the needs of our changing company.” Aside Iqos, another key


opportunity is the development of a fully integrated travel ecosystem. This requires open relationships among key players to better serve consumers. “By working closer with airports, duty free operators and brands, we can offer more memorable experiences


to


our customers,” adds Katilius. “With the growing number of


passengers and rapid digitalisation, the travel retail channel is data-rich. Exploiting these trends, combined with the immense number of data points, provides a unique opportunity to better understand, address customer pain points and provide better service.” «


The Iqos 3 Duo is the latest addition to PMI’s smoke-free product portfolio and will be launched in duty free this month.


TRBUSINESS 107


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