Kazakhstan 2017 | INDUSTRY | INTERVIEW

TBY talks to Aibat Akhmetalimov, Managing Director of Philip Morris Kazakhstan and Central Asia, on introducing non-combustible products, remaining competitive in a health-conscious world, and the company's vision for a smoke-free future.

 Aibat Akhmetalimov
Aibat Akhmetalimov joined Philip Morris International at its headquarters in Switzerland in 1997, following the completion of his studies in the US. He held numerous leadership positions in strategic planning, business development, marketing, sales, and general management, spanning Eastern Europe, Middle East, and Africa (EEMA), the EU, Latin America, and Canada. He holds an MBA from Emory University in Atlanta, as well as an engineering degree from his native Kazakhstan.

What have been the milestones of your operations in Kazakhstan?

Our first milestone was the acquisition of a state-owned tobacco factory in 1993 in what was one of the first examples of FDI in Kazakhstan. The times were incredibly difficult, with the country's economy in a desperate tailspin. The tobacco factory we purchased was not fully operational, causing cigarette shortages, and the market was flooded with illicit tobacco. We rapidly moved to inject capital and liquidity to re-start production. Our second milestone was the construction of a modern greenfield facility. We have been actively contributing to Kazakhstan's economy over the past 24 years by being a sizable investor and taxpayer. Last, but not least, was the introduction of non-combustible products, which potentially represent a game-changer for the industry.

How do tobacco giants like Phillip Morris successfully operate in a world newly conscious about people's health and remain successful?

Clearly, the safest approach from a health standpoint is not to consume tobacco at all. However, despite increased regulation and smoking prevention campaigns, there are still more than 1 billion smokers globally. According to the World Health Organization's base projection, this figure is unlikely to decline quickly enough in the years to come. Philip Morris supports regulation intended to reduce harm caused by smoking. The regulations should be well conceived in order to minimize severe unintended consequences, such as the emergence of illicit trade. Illicit trade is unregulated by its very nature, and defeats public health objectives. Besides regulatory tools, the product itself should be addressed fundamentally. Cigarette smoke contains flavor from the tobacco blend, and nicotine, which occurs naturally in tobacco leaves. It is flavor and nicotine that smokers enjoy in cigarettes. However, when a smoker burns (or combusts) tobacco, the resulting chemical reaction produces about 8,000 different chemical compounds, approximately 1% of which—including carbon monoxide, benzo[a]pyrene, tobacco-specific nitrosamines, benzene, and others—are known to be the causes, or potential causes, of smoking-related diseases such as cardiovascular disease, lung cancer, and emphysema. There is frequently an assumption that it is nicotine that makes smoking harmful. Nicotine is addictive, but it is not the main concern related to smoking. While nicotine is not risk-free (it can increase heart rate and blood pressure, for example), the main causes of smoking-related diseases are various chemicals produced as a result of tobacco combustion. As the UK National Institute for Health and Care Excellence says, “it is primarily the toxins and carcinogens in tobacco smoke—not the nicotine—that cause illness and death." The conceptual thinking about how to reduce harm, while allowing people to continue enjoying tobacco, has been around for some time. The key concept is that tobacco should be warmed to a temperature, just enough to release nicotine and flavor—which is what consumers enjoy—but not enough to combust tobacco and produce smoke.

Is this when you started producing iQOS, your new reduced-risk product line?

We have been investing in the development of combustion-free alternatives since 2008. Our R&D is focused on developing products that offer a flavorful, nicotine-containing vapor—but with far lower levels of the harmful chemicals found in cigarette smoke. IQOS Tobacco-Heating System (THS) is one of the platforms in Philip Morris' innovation pipeline. It uses sophisticated electronics to heat a special tobacco stick to less than 350°C, temperatures at which combustion and smoke production cannot occur. While IQOS is not totally risk-free, our laboratory tests of its vapor indicate that it is significantly less toxic than cigarette smoke. We have run two separate 90-day exposure studies, one in the US and one in Japan. These studies reported that smokers who switched completely to IQOS THS reduced their exposure to selected harmful or potentially harmful chemical compounds (based on the measurements of biomarkers of exposure), and the levels of reduced exposure approached the levels observed in people who quit smoking for the duration of the studies. And, according to air-quality tests, the use of IQOS does not negatively impact indoor-air quality. So we believe that IQOS is a viable alternative for adult smokers who would like to continue using tobacco. Importantly, our research indicates negligible interest in IQOS among never-smokers and former smokers.

What is your expectation for 2017?

In the near to medium term I think the absence of bad economic news would be great news. Hopefully, consumers will be a little more confident going forward.