Feb. 5, 2015


Jorge Omar Iezin

Colombia

Jorge Omar Iezin

General Director, Coltabaco S.A.

"Our funding for social projects focuses on access to education, economic opportunity, and empowerment for women."

BIO

Jorge Omar Iezin is the General Director of Coltabaco S.A., a subsidiary of Philip Morris International, Inc. (PMI). He 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 saw his appointment to senior regional positions. He was named Financial Director of the Andean Region and subsequently assumed responsibility for Argentina, Uruguay, Paraguay, Bolivia, and Chile. In 2009 he relocated to Colombia to develop PMI’s local business, where he took the helm 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. Speaking of milestones, I must begin with the most emblematic and significant in our history: the launch of Pielroja in 1924, a hallmark brand not only for Coltabaco, but for Colombia in general, and one that years after its launch would become one of the most popular, with an important market share reaching international markets. Later, in the 1930s, we promoted the Colombian economy through our navigation on the Magdalena River, at a time when we acquired new machinery, equipment, large production capacity, and the tobacco to drive forward navigation of the river, thereby rendering 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 modernization thereby launching a decade of high technology. This also saw the start of territorial expansion with new offices and plants in the major geographical areas of Colombia. Later in the 1960s, we entered the blond tobacco market and managed to position four new brands in the Colombian market. These multiple investments began to pay off and it was in the late 1970s when we started our export activity of Colombian black and blond tobacco to Eastern Europe, which encouraged these countries to promote the cultivation of blond tobacco of the Burley variety from the areas of Quindío and Santander. From that moment, we undertook a wave of launches, first bringing Derby cigarettes to the market; then, in 1996, launching our Caribe cigarettes, and finally, three years later, the Boston brand that has been well received since its launch, and which has become the number-one cigarette brand in the country by sales. The new century brought new machinery and equipment for the manufacture of cigarettes, especially for the primary manufacturing process, while we sustained exports and launched the Green brand 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, rated one of the most important in Colombian history. Today, we ourselves are 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 the components of a traditional national flagship company such as Coltabaco. From the outset, we knew we had to sustain the concerted national drive that succeeded in developing Colombia and that had become a representative of one of the most important sources of employment. This meant having to adapt to new processes, practices, and international policies that were handled by PMI, which thereafter we would be part of. In essence, there were great cultural matches from the start between the two organizations.

“Our funding for social projects focuses on access to education, economic opportunity, and empowerment for women."

What were Coltabaco's key capital investments of the past year, and which remain to be made?

Coltabaco has continued to make the necessary investments at its manufacturing plant in Medellín and at its stemmery tobacco plant in Barranquilla, to ensure their suitability for high technology and plant efficiency in step with PMI's global standards. Since 2005, these investments have exceeded $80 million. Over the past six years, Coltabaco has invested over $9 million in irrigation systems, infrastructure construction for Burley and Virginia tobacco curing, and improved cultivation practices and reforestation in order to improve the productivity of our growers. For the short, medium, and long term, we have established an agenda of activities to increase productivity, which would require investment from Coltabaco and allies such as Fedetabaco, the national government and its departments. From 2015 through 2018, we will be working on six fronts that will require additional investment of $13 million. First, we will be strengthening the experimental farm in Santander through infrastructure, irrigation, greenhouses, and specialized equipment. The second involves the construction, extension, repair, and conversion of the curing sheds of Burley tobacco for Coastal and Santander. The third is the repair and refurbishment of Virginia tobacco curing kilns. The fourth is the supply of clips that will allow a more efficient process of Virginia tobacco drying. The fifth concerns the construction of new greenhouses for the production of seedlings, and the sixth the construction of deep wells and irrigation systems necessary for the cultivation of snuff.

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 of great competition. And although Coltabaco in Colombia has taken important steps, such as its 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, following the government's 50% increase in excise tax on cigarettes. In Colombia, legitimate cigarette sales have fallen over the past three years by about 17%, while consumption falls at an average annual rate of 1.8%; smuggling has replaced the legal product.

Since 2008, Coltabaco has positively impacted more than 27,000 people directly and 78,000 indirectly. How will you further expand the social impact of the programs?

Within the global context, we have been strengthening our lines of action based on the needs of the most vulnerable populations. Our funding for social projects focuses on access to education, economic opportunity, and empowerment for women, as well as disaster relief. We are finishing the installation of 22 stores operated by 66 victims of armed conflict and assisting more than 600 displaced families return to their land located in el Carmen de Bolivar. And in relation to productive opportunities, we are creating a distribution channel for 20 veteran women keen to market their products and boost the economic development of their families and communities. Similarly, we believe job creation to be a vital achievement, and accordingly purchase tobacco leaf from over 5,000 farmers, providing 100% financing of input, signing a pre-established purchase contract and providing technical advice and assistance when required.

© The Business Year - January 2015

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