How Philip Morris is navigating the shift from big tobacco to big tech

We're sitting in The Cube, the company’s giant, sprawling R&D centre on the blue bank of Lake Neuchâtel in Switzerland just along the way from Nestlé’s HQ. The building houses 400 scientists and researchers in a mixture of labs, open plan offices and contemporary ‘brainstorming zones’. They’re tasked with developing a portfolio of ‘less harmful’ alternatives to traditional smokes.

The only symbol of its ‘big tobacco’ status is a host flowering Nicotiana plants dotted along the ground floor. Otherwise, it would be easy to mistake the sprawling campus for the HQ of Google, Facebook or another tech company.

Is that how it sees itself now? “Kind of,” says Zielinski.

“We have scientists working here who were hired from pharma,” he explains. “Some scientists told me they lost their friends when they moved to tobacco. But when you talk to them today, they’re proud of the science they are doing here. They’re also being recognised in conferences and by the wider scientific world.”

For Zielinski, The Cube is a symbol of how the Philip Morris brand has evolved since it was first founded in 1847.

After over 170 years of trading cigarettes, the Marlboro-maker has been underlining its ambition to “ultimately stop selling them”. Instead, with global smoking rates in steady decline and vaping and e-cigarette sales on the up, it will focus on alternatives.

In the UK, it recently pumped ad spend behind promoting this U-turn but quickly drew suspicion from consumers and courted the outrage of cancer charities, health experts and regulatory bodies who derided it “staggering hypocrisy”.

George Butterworth, a senior policy manager at Cancer Research UK was among those who blasted the move, saying the Mission Impossible-style ads (below) had been sold under the “guise” of a public health campaign.

“If Philip Morris really want to help people to stop smoking, the best thing they could do is stop making cigarettes. But that’s not going to happen.”

Philip Morris isn't denying that in the interim it's still going to make cigarettes and put them in the hands of the circa 1 billion people who smoke worldwide. In fact in the first nine months of September 2018 it shipped 550bn of them.

At the time of writing, the company was set to announce its most recent quarterly update taking it to the end of 2018, and analysts seem buoyant about its move to electronic alternatives. Shipments of cigarettes already declined by 2.7% by Q3 last year, and shipments of what it calls 'reduced risk' replacements increased 42.4% by compared to the same period in 2017.

It's easy to see then why Philip Morris is insistent that, one day, it will stop making cigarettes as we know them.

The company has spent $4.5bn on research since 2008 to develop what it claims are less harmful cigarette alternatives and in the process, it’s laid claim to 3,000 patents with another 5000 pending.

Among these is Iqos, which uses electronics to heat a tobacco stick to below 350-degrees, meaning there’s no burning involved (traditional cigarettes burn at 600-degrees, which apparently releases more harmful chemicals). It’s also different from vaping because there’s no liquid. Philip Morris claims it provides the same “ritual, taste experience” as traditional cigarettes, but without smoke and with a reduction in toxins to the tune of 90%.

But others are to be convinced. The group is facing numerous challenges from scientists, government advisors and marketing regulators indicating its road to kicking its cigarette habit – and changing brand perceptions along the way – isn’t going to be easy.

‘An obligation to inform consumers’

Iqos is available in 45 markets including Japan (its largest), the UK and Korea. Crucially, an application to sell it in the US as a lower risk alternative to traditional cigarettes is being considered by the Food and Drug Administration (FDA). It's also not available in China – the largest cigarette market in the world.

It's been hit by other roadblocks too, not least a claim that Philip Morris’ own data shows ‘heat-not-burn’ products may still lead to as much lung damage as cigarettes.

Despite this, 6 million smokers have already made the swap, with more than half of those based in Japan – where vaping is losing ground to heat-not-burn tobacco.

For its part, Zielinski’s R&D team works closely with other departments within Philip Morris, including the marketing department, to talk to consumers in a way that is easily explained and “palatable”. What Philip Morris doesn’t want to do, he insists, is attract new smokers or stop people from quitting – both of which it has been accused of.

“We have good conversion practices, we don’t sell this product to non-smokers, we don't sell it to previous smokers, we don’t sell to those who want to quit, we don’t sell it to kids. We have 1.1 billion people around the world that decide to continue smoking every day and we have a right to give them an answer to one fundamental, simple question: ‘should I quit?’,” he says.

“This is the legitimate question... smokers today might be confused, under-informed, or might not believe Philip Morris. They might say, ‘we don't trust a tobacco company, why would they be doing this?’ So, who should take responsibility to answer that question?” he asks. “The [tobacco] industry has an obligation.”

Zielinski would argue that all brands have a responsibly to inform customers about their product. He believes it's also on “journalists, governments and academia” to spark public discussion around better alternatives to traditional smoking, in lieu of quitting – which he unequivocally agrees is the best thing to do.

“We have no doubts that for every smoker who is concerned about the health risks related to smoking, the best solution is to quit, and we don’t want to encourage this process and we understand it,” he asserts.

Despite talking up its research and development credentials, a cursory glance at the headlines show why big tobacco's move into big tech is being met with cynicism.

Last year, Philip Morris was forced to deny claims from an anti-tobacco lobbying company that it had secretly paid influencers to promote cigarettes on platforms like Instagram, Facebook and Twitter as part of a marketing strategy alleged to span more than 40 countries.

‘We don’t expect people to trust us’

Drawing on methods used in big pharma, Zielinski’s science and tech team conduct toxicological tests, clinical studies and post-market assessments.

While this all serves to help Philip Morris make the case for its reduced risk portfolio, two further key barriers the giant still has to overcome are: shaking off its big tobacco image and convincing ad regulators that rules for non-combustion products should differ from the stringent ones in place for ordinary cigarettes.

One way it’s tackling the former (and arguably circumventing the latter) is through ‘Mission Winnow’ – a partnership it runs with the Ducati Corse racing team and Scuderia Ferrari that sees the Moto GP and Formula 1 teams' suits and livery branded.

The whole point of Mission Winnow (pronounced win-oh and literally interpreted as a word that means 'separating the wheat from the chaff') is to draw a through-line between motorsports and Philip Morris as two entities that are “constantly improving and evolving”, highlighting the power of “innovation to build a better future”.

“We are trying to improve both our knowledge and technology for the better solution, it has no end,” explains Zielinski.

There’s no product placement or mention of Philip Morris in any of the campaign communications – instead the advertiser wants to direct people to seek out more information about Mission Winnow, and in the process Philip Morris, for themselves.

“We don't expect people to say thank you, we don't expect to be trusted, we expect to have a chance to talk to consumers and tell them what we know an as long as we do it in a way which separates truth from mistruth, relevance from irrelevance. [We want to be] honest and transparent about what we do it in this we think we have the right to continue doing what we are doing."

“Mission Winnow will never promote tobacco product because it's not the purpose it's [about] us. It’s [about] who we are,” he adds.

Although it's launched a number of Iqos ad campaigns and retail experiences in countries like Japan, in key markets like the UK Philip Morris is prohibited from promoting any of kind tobacco or tobacco-related products.

Last year, it was ordered by the government to remove promotions for Iqos from stores. However, Zielinski is confident the UK will eventually relax the rules around heated tobacco products; which would be a key step for the group in relaying its messaging to consumers.

"The UK is very advanced in recognising the benefits of reduced risk product but the science behind e-cigarettes is not yet even comparable to what we have behind heated tobacco."

A group of MPs argued last year that the government was missing an important opportunity to cut deaths from smoking, urging it to allow more advertising and to rethink the ban on vaping on buses, trains and in other public places.

"We believe we should get a fair assessment of our science, we think [a new structure] has to be put in place and we are very confident what comes out of this," says Zielinski.

"Reduced risk products or e-cigarettes, or any other form which is using non-combustible tobacco... has to treated differently, because consumers have a right to know."

As the interview draws to a close, I notice he hasn't taken a single puff of his Iqos.