When did Philip Morris enter the Ukrainian market?
Philip Morris international was one of the first foreign companies to come to Ukraine. It is hard to believe, but it is been almost quarter a century since Philip Morris began its operations in Ukraine in 1994. We began as a representative office with less than a dozen people all working in one office. Very soon, we acquired Kharkiv tobacco factory. It was located in the very center of the city.
Was it a modern factory?
Not really. You would not call it a modern factory. Actually, we had to invest heavily into it and to expand vertically and horizo ntally in any possible direction. That expansion continued until we realized that it was impossible to fulfill our needs. Ultimately, we had to move to new facilities.
Did you buy another factory?
We actually built a new factory from scratch. The company bought a land lot at the old training ground of the Kharkiv tractor plant. It is located a little outside of Kharkiv in what was planned to become as a dedicated industrial zone. Other than this dedication, the land lot had literally nothing. We built all the communications and utility lines ourselves including gas, water, sewage, and electricity.
What year was that?
We commenced the factory in 2004. It was, and continues to be, one of the most technologically advanced in the country. Our colleagues use very little manual labor. For example, a few years ago they used to move the master cases to pallets manually. Today this is a fully automated process.
What makes this factory special?
I would mention three things. Firstly, our priority is the labor safety of the people who work there. We received recognition from the State Labor authorities for outstanding results in labor safety. This is not easy since roughly 700 people work at the factory.
Secondly, our top quality standards. We currently export to 13 countries including Japan. The Japanese are probably the world’s most demanding consumers in terms of product quality. I am glad we are up to standard. Thirdly, I would mention sustainability. Just to give you one figure – 90 percent of our waste is recycled.
What investment have you put behind these and other projects?
Our investment exceeds USD 348 million up to the present date.
Do you engage in social projects?
We do extensively. We have our priorities. We have supported and continue to support some social establishments, helping to install alternative energy sources to provide them with heating and hot water. This is important because it is a clean way to receive energy. In our factory in Kharkiv, we are finishing a boiler system operating on pellets, a natural material for use instead of gas. We also have a number of “small” initiatives. For example, we encourage separate garbage collection throughout our offices and offer real coffee mugs to our employees instead of plastic and paper cups. These are small things but they change attitudes.
We are also very serious about ensuring sustainable business throughout our value chain. As a company, we implement the Sustainable Development Goals introduced by the United Nations. In line with this commitment, we support the STALO project aimed at support of small and medium businesses in Ukraine by mentoring them and providing additional media coverage. We care about employee safety, diversity and education. I am proud to say that for four years in a row, we have been recognized as a Top Employer in Ukraine according to Top Employer Institute. But our biggest social project is to create a smoke-free future for Ukraine.
Do you really want to stop selling cigarettes?
We do as a company and I do as individual.
What brought you to this radical change?
Look, people are becoming increasingly more thoughtful about the effects on their health and on the environment of the products and services they are using. That is why people try to drink fewer fizzy drinks, use fewer aggressive chemical detergents, drive smaller and more efficient cars, and so on.
And what is your response to them?
We are very plain and clear: if you want to eliminate risks to your health, you should quit smoking. This sounds good, but many people continue smoking. According to the World Health Organization, in 2025 there will be over 1 billion smokers around the world. In order to address this issue, PMI decided to produce and provide less harmful products available to such smokers who would otherwise continue smoking. Scientists know that the biggest danger to health caused by cigarette smoking comes from setting tobacco on fire. Hence, when you eliminate the burning phase, you significantly reduce the content of harmful components in the aerosol versus cigarette smoke. Our true ambition is to give every adult smoker a better and less risky alternative to conventional cigarettes and a product that does not bother the people around you. I have been using IQOS for the last five years. I am living through these changes and I can personally evaluate the benefits of using IQOS compared to smoking cigarettes.
Do you see a smoke-free Ukraine emerging in the near or distant future?
Good question. The example of Japan indicates that a 15% market share is within reach. Today we are very far from this number in Ukraine, but changes can happen rapidly. We see consumers are ready and we see interest from other companies. However, in this journey we also need the help of governments around the world to properly regulate reduced risk products and give people who would otherwise continue smoking a fair chance to move to a better life.
What are your priorities for the next three to five years?
I want to see fewer people who light up cigarettes. I want a smoke-free Ukraine to become closer, and I want Philip Morris to lead this change.
Finally, what gives you optimism in Ukraine?
The energy, the enthusiasm, and the positive attitude of Ukrainian people is what really inspires me! I am positive that with people like this, in such a rich country, the future will be prosperous and successful. Ukrainians will find their own ways to unleash all the power and energy of Ukraine!