Philip Morris CEO does not need M&A to hit smoke free goals

By Dasha Afanasieva and Siddharth Cavale

(Reuters) – Philip Morris will reach its target of 50% sales from smoke-free products by 2025 through organic revenue growth rather than mergers and acquisitions, its CEO told Reuters.

The maker of Marlboro cigarettes has spent more than $8 billion on reduced risk products since it began developing them a decade ago, Chief Executive Jacek Olczak said in an interview during the Reuters Next conference.

About 30% of revenue at Philip Morris now comes from “smoke-free” products such as iQOS tobacco heating devices, Olczak added on Thursday.

Philip Morris has also set a target of generating $1 billion in sales from non-nicotine products by 2025 as part of its evolution into a broader “healthcare and wellness” company.

“The way we look at these targets, we achieved the current 30% organically and I believe we can get to 50% by continuing this organic growth,” Olczak said, adding: “Our $1 billion target of achieving sales from non-nicotine products we can also to a very large extent achieve organically.”

Olczak’s comments come nearly two months after Philip Morris bought British inhaler-maker Vectura, a deal which faced opposition from public health experts who questioned whether a tobacco group should own a company that cures the respiratory illnesses which cigarettes cause.

Asked if he was surprised by the backlash, Olczak said there were “a few voices of criticism” and that he expected “negative emotions” to fade as Vectura launches products over the next few years that will address unmet patient and consumer needs.

Since it was announced in July, critics have put concerted pressure on shareholders and the government to block the deal.

In August, a group of more than 35 health charities, experts and doctors across the world wrote to shareholders over the damaging effect tobacco has on United Nations sustainable development goals, following up with a letter to the British government to look at conflict of interest issues in September.

“Nothing we are doing should come as a surprise, we are putting in action the visions that we shared openly seven or so years ago about leaving cigarettes behind,” Olczak said.

“This is completely moving the company in another direction.”

To watch the Reuters  Next conference, please register here: https://reutersevents.com/events/next (This story corrects to remove reference to nicotine pouches in paragraph 3)

(Reporting by Dasha Afanasieva and Siddharth Cavale; Editing by Alexander Smith)