The Marlboro maker wants to generate half of revenue from smoke-free products © Igor Golovniov/SOPA Images/LightRocket via Getty Images
The Marlboro maker wants to generate half of revenue from smoke-free products © Igor Golovniov/SOPA Images/LightRocket via Getty Images

Philip Morris overhauls supply chain as it seeks 'smoke-free world'

16 September 2021

Philip Morris International’s (PMI) global head of strategy Ankur Modi says the company has reconfigured its supply chain as it looks to move beyond cigarettes. 

Speaking at the Gartner Supply Chain Symposium, Modi warned customers: “If you can avoid smoking, please do it.”

Modi said the company transformed its supply chains so that almost 30% of revenue now comes from smoke-free products.

The company has a target of generating half of its revenue from smoke-free products within four years, up from around a quarter. 

Modi’s comments come as PMI announced it has taken control of UK inhaler firm Vectura in a £1.1bn takeover deal. 

Modi explained: “As we have transformed the business, we have also worked to transform the supply chain. And there has been a massive reinvention.”

He said the company had moved from being a traditional tobacco company to also selling electronics and accessories. The company has shifted from being a B2B business to a B2C business in order to “execute our agenda towards a smoke-free world”.

PMI has established a global hub to source materials and track supplies and demand, which has allowed it to create a stronger advanced planning system.

He said the company operates in around 67 international markets, and by better monitoring supply, it has been able to “actually act and react faster”. 

Modi explained PMI has worked to improve end-to-end visibility throughout supply chains, with better monitoring of data it collects from tier three suppliers and consumers. He said this enhanced the company’s replenishment process, channel fulfillment and forecasting capabilities. 

“Our journey is not over yet,” he said. “We still have a clear target. We want to convert the billion smokers which we have in the world out of smoking and today we have crossed the 20 million mark. And I think as we go into this journey, it's an exciting space for Philip Morris.” 

The company, which makes Marlboro and Parliament cigarettes, said it had secured nearly 75% of Vectura's shares, well ahead of the 50% needed to confirm the takeover, despite objections from healthcare charities.

PMI’s chief executive officer Jacek Olczak said: “We are very excited about the critical role Vectura will play in our Beyond Nicotine strategy and look forward to working with Vectura’s scientists and providing them with the resources and expertise to grow their business to help us achieve our goal of generating at least $1 billion in net revenues from Beyond Nicotine products by 2025.”

However, a coalition of 35 healthcare charities including Asthma UK, British Lung Foundation, Cancer Research and the British Heart Foundation have written to the UK government to warn of their “deep concern”. 

Sarah Woolnough, chief executive of Asthma UK and the British Lung Foundation, said: “Vectura has sold out millions of people with lung disease, and instead prioritised short-term financial gain over the long-term viability of Vectura as a business. Vectura is now owned by a tobacco company, and this could cause considerable problems, such as the firm being excluded from research and clinical networks. 

“There’s now a very real risk that Vectura’s deal with big tobacco will lead to the cigarette industry wielding undue influence on UK health policy. We call on the government to stand by its commitment to the World Health Organization Framework Convention on Tobacco Control to prevent this happening.”

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