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Philip Morris chief lashes out at Hong Kong e-cigarette ban

Prohibitions are 'illogical' given tobacco health concerns

Banning next-generation cigarettes is "a very wrong thing to do because the alternative is to continue smoking," Philip Morris International CEO Andre Calantzopoulos said. (Photo by Ken Kobayashi)

TOKYO - Philip Morris International's chief executive has accused Hong Kong regulators of "illogical" behavior in proposing a ban on electronic alternatives to cigarettes as the world's largest tobacco company fights a widening backlash against devices it sees as key to winning over health-conscious consumers.

Andre Calantzopoulos told the Nikkei Asian Review that prohibiting so-called heat-not-burn devices like its IQOS and other electronic cigarettes is "a very wrong thing to do because the alternative is to continue smoking."

Such regulations would also complicate Philip Morris' plans for selling IQOS devices -- electronic wands that heat cigarette-like sticks to lower temperatures than burning -- more broadly in Asia following the product's success in Japan.

Calantzopoulos said the maker of Marlboro cigarettes is "in discussion with various authorities including ones in the Philippines and Indonesia" about the regulatory framework for heated-tobacco products to be launched there "in the next two to three years."

IQOS represents a shift in emphasis for Philip Morris away from traditional cigarettes as smoking rates decline in once-thriving markets. But a number of Asian countries have banned or are weighing restrictions on e-cigarettes amid concerns they simply replace one form of nicotine addiction with another. Besides Hong Kong, Singapore and Thailand have already prohibited such products

Facing tough competition, Philip Morris International unveiled two lower-price IQOS smoking devices for the Japanese market on Oct. 23. (Photo by Karina Nooka)

Calantzopoulos said he hopes new regulatory frameworks avoid "characterizing IQOS as a cigarette" and make it easier to advertise and display these products at stores, unlike with traditional cigarettes, which are barred from ads in Canada and Australia.

The maker of Marlboro cigarettes has asked the U.S. Food and Drug Administration to allow IQOS sales in America, and Calantzopoulos expects approval "before the year end." The company is also asking the FDA to allow it to claim that the health risk of using IQOS is lower than smoking tobacco, contending that its product eliminates 95% of the toxic compounds found in cigarette smoke. The CEO expects this change to be cleared next year.

"Some [jurisdictions] are waiting to see what the FDA will decide," said Calantzopoulos. "I am sure that Singapore and Hong Kong will change their opinion later on, as IQOS becomes more widespread."

Calantzopoulos' confidence stems from the Switzerland-based company's success in Japan. Since its nationwide launch of IQOS in 2016, ahead of competitor's heat-not-burn products, the brand has become popular among younger Japanese.

According to Euromonitor International, the Japanese heat-not-burn cigarette market reached $5.3 billion in 2017, almost triple the size a year earlier. Philip Morris holds a 94% share of this market, where more than half of the world's IQOS users live.

Facing competition from rivals -- including Japan Tobacco's Ploom Tech sticks -- the company on Oct. 23 said it will launch in November two new IQOS devices that are more affordable than its existing products.

Philip Morris Japan said last year it would eventually exit the slumping conventional cigarette sector and focus on IQOS. The subsidiary saw its market size shrink by 60% last year compared with 1996.

Emerging Asian markets, on the other hand, still depend on traditional tobacco products. But according to Philip Morris, total cigarette volume in Indonesia and the Philippines is slightly decreasing.

"We are focusing resources and investments in reduced-risk products, but this does not mean that we will give our competitors market share," Calantzopoulos said.

The company's net revenue in South and Southeast Asia rose 7.1% on the year in the first nine months of 2018, thanks mainly to price increases.

"Health concerns among smokers are much lower in countries like the Philippines and Indonesia than in Japan or in Europe," said Calantzopoulos. While the company is focusing on lobbying governments in the region, "you need some additional education and preparation for these countries."

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