‘Tobacco industry is here to stay’

By Aoife White

Date: 07/07/05

Big tobacco has moved beyond issuing blanket denials that smoking might be linked to lung cancer and heart disease.

Europe's largest tobacco firm, Philip Morris International (PMI), says the way it deals with public concern about the health risks of smoking has evolved.

"We are a unique industry. We make a product which causes disease. We make a product which is addictive," says David Davies, PMI's senior vice-president for corporate affairs.

His company sold 235 billion cigarettes in Europe last year, 37% of the market - well ahead of nearest rival British American Tobacco on 16%. Europe is Philip Morris's "most significant market", says Davies, though he would not give figures on total European sales revenue. "We certainly are a very profitable company whether you measure us in terms of sales or market capitalisation."

With the health risks, come responsibilities, he says: "We think regulation is essential for this industry." Philip Morris wants to see licensing which would enforce the same set of rules across the tobacco sector and force all firms to obey rules on the way tobacco products are made, sold, distributed and "communicated about". Tobacco advertising is banned across most of the EU but companies can use indirect ways of making their brands known, such as selling the Marlboro brand clothes.

"We have tried for quite some time to understand what people expect of us. When you talk to people they tell you that they want to know the risks, they want to keep the product away from kids, they want you to work on modifications to the product in an effort to reduce risks, they want you to talk to them about it," Davies says.

"As you understand that, you are able to respond to it."

Philip Morris has a huge challenge to change its public image. Davies says there were certain perceptions of the industry that made it more difficult to talk to regulators and health campaigners. "We try very hard to overcome those perceptions and invite people to look at what we do...there is no question that we ourselves as an industry have contributed to those perceptions. They are not always wrong. However, the perceptions continue. For my company they are wrong today," he says.

But he believes that the tobacco industry is here to stay. "If Philip Morris were to pull out of the tobacco business, you would still have a tobacco industry," he says.

The target customer for brands such as Marlboro is an adult smoker who has made the decision to smoke, disregarding government health warnings, anti-smoking campaigns and even leaflets on the dangers of tobacco that Philip Morris includes in some of its cigarette packs.

Overall, the total cigarette market in Europe is shrinking. But Philip Morris is not worried, saying its business model is based on taking market share from rivals which should provide enough of a challenge for decades to come.

The real growth in new smokers is expected to come outside Europe. Davies said a billion people in the world today smoke. Population growth means that 10 to 15 years from now the world will still have a billion smokers. If public health campaigns have their way, Europe's dwindling number of smokers will be less and less important for tobacco giants.

Author takes a look at how Europe's largest tobacco firm, Philip Morris International (PMI), deals with public concern about the health risks of smoking, concluding that the industry in general has moved beyond issuing blanket denials that smoking might be linked to lung cancer and heart disease.

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