COLOMBIAN SPIRIT

Colombia 2015 | AGRICULTURE | INTERVIEW

TBY talks to Jorge Omar Iezin, General Director of Coltabaco S.A., on the role that tobacco farming and manufacturing played over they years, important mergers and aquisitions, and the importance of regional markets.

Jorge Omar Iezin
BIOGRAPHY
Jorge Omar Iezin started his career at PMI in Argentina in 1984. Soon after, he was relocated to its headquarters in New York. His knowledge of the Latin American region and Canada positioned him in senior regional positions. He was named Financial Director of the Andean Region and later on, he assumed responsibility of Argentina, as well as Uruguay, Paraguay, Bolivia and Chile. In 2009 he went to Colombia to develop PMI’s business in that country. On the strength of his thorough knowledge of the market and a deep understanding of the opportunities and challenges of the country, he took charge of Philip Morris Colombia in 2011. Additionally, since 2013 he has held responsibility for Philip Morris Peru, Ecuador, and Venezuela.

What have been Coltabaco's milestones since its foundation in 1919?

Since 1919, Coltabaco has reinvented itself to be at the forefront and at the same level as the best tobacco companies in the world. The launch of Pielroja was an important moment in 1924. Later, in the 1930s, we promoted the Colombian economy through our navigation on the Magdalena river, a time when we acquired new machinery, equipment, large production capacity and the tobacco to drive forward navigation on the river, contributing to making it a vital artery of the economy. Similarly, in the 1940s, we achieved a major recapitalization through a share issuance, which allowed us to invest in modernizing and upgrading our equipment and start a decade with high technology and the possibility of territorial expansion with new offices and factories in the major geographical points of Colombia. In the late 1970s, we started our export activity of Colombian black and blond tobacco to Eastern Europe. From that moment, we undertook a wave of launches, first bringing Derby cigarettes to the market; then in 1996, we launched our Caribe cigarettes; and finally three years later, we launched the Boston cigarettes, now the number one cigarette brand in the country. With the new century came new machinery and equipment for the manufacture of cigarettes, especially for the primary sector of the manufacturing process, while we also continued with exports and launched the Green mark in 2001. Four years later, one of the greatest milestones in the history of Coltabaco was achieved with the acquisition of a 96.65% stake in Coltabaco by PMI, a transaction exceeding $300 million. It was rated one of the most important in Colombian history. Today, we ourselves are recognized as a milestone in Colombian history as the oldest and largest tobacco company in the country, holding 51.8% of the cigarette market, according to Nielsen data, and 99.9% of domestic production.

How did the merger with PMI impact Coltabaco's corporate culture in Colombia?

It was more about how we decided to merge the two cultures and build one among ourselves, where multinational policies from a company like Philip Morris International blended with components of a traditional national flagship company such as Coltabaco. From the outset, we knew we had to keep the national push that succeeded in developing Colombia and that had become representative of one of the most important sources of employment, keeping in mind that we would have to adapt to new processes, practices and international policies that were handled by PMI, which from then on we would part of. In essence, there were great cultural matches from the start between the two organizations.

How important are PMI's Colombian operations for Latin America?

In Latin America, we represent the fourth largest market after Mexico, Argentina, and Brazil, in terms of total volume of cigarettes sold and market share in each country. To PMI Latin America, Colombia is an attractive market for the great competition between the two main firms; the large number and variety of brands in its product portfolio and above all, by the challenge of having a regional portfolio, where there is an unquestionable leader in each region, either ours or competitors'. Likewise, although Coltabaco in Colombia has taken important steps, as their latest launches of L&M, Fortuna, and Piel Roja Blue, it is important to mention that the company has been deeply impacted by contraband cigarettes, the incidence of which has increased dramatically from 1.8% in 2009 to 19% in 2013, according to studies by Invamer, after the government increased the excise tax on cigarettes by 50%. In Colombia, legitimate cigarette sales have fallen over the past three years (about 17%), while consumption falls at an average annual rate of 1.8%; i.e. smuggling has replaced the legal product.