1. Big interview
7 October 2011Asian Trader54 Asian Trader7 October 2011
Big interview
55
How potentially big an issue could this be for
the industry?
Forretailers,webelievetheimpactofplainpackag-
ingcouldevenbegreaterthantheimplementation
of the display ban, as this measure would make
iteasiertocounterfeitcigarettepacks,andcould
stimulate an illegal market in branded products
purchased abroad, thus negatively impacting
legitimateretailers.Itsimplydoesnotmakesense.
AsPhilipMorris,westronglyopposeplainpack-
aging, which would constitute an expropriation
of our trademarks. By eliminating all product
differentiation, other than through pricing, we
believe that plain packaging will transform the
industry into a low price commodity business
withoutreducingconsumption,smokingincidence
or initiation. Furthermore, for a company like
PhilipMorrisLimited-whichhasasmallmarket
shareintheUKmarket- plainpackagingwould
impair free competition. Overall, we expect it
would spur illicit trade and counterfeit activity
Asian Trader talks to Jens Behrendt, Managing Director of Philip Morris
Ltd, the UK division of Philip Morris International, the world’s leading
tobaccocompany,aboutthelegislativechallengesfacingtobaccoretailers,
thelatestmarkettrendsandthecompany’sportfoliooficonicbrands.
interpretation of a point of sales display ban.
How can independents capitalise on the so-
called‘windowofopportunity’whenthedisplay
banwillbeinforceinlargesupermarketsbut
not yet in small shops?
The‘windowofopportunity’yourefertoismid-
term.Iexpectthelargesupermarketstobecome
morefocusedonpricewhentheyotherwisehave
tohidetobaccoproductsfromtheircustomers.It
isthereforeimportantforindependentstoremain
price competitive.
The government has announced that it will
carry out a consultation on plain packaging
for cigarettes. What would the effect of plain
packaging be?
Letmefirstsaytoyourreadersthatplainpackaging
referstoregulationthatwouldrequiremanufactur-
ers to remove all brand features – such as trade-
marks,logos,colourschemesandgraphics–from
Do you have any particular tips on how inde-
pendentscanmaximisesalesofsuchbrands?
The UK market is very competitive and retailers
know best their customers and business. A key
principle of sales remains availability and price:
Neverrunoutofstockwithakeybrandandalways
remaincompetitiveinyourpricingoryourunthe
risk of losing customers. It is not worth losing a
customer for either of the two mentioned. Con-
sumerstodayexpecthighqualityatacompetitive
price.Thisappliestotobaccoproductsaswellas
otherconsumerproducts.Independentretailers
should therefore ensure that the products they
sell meet those needs.
What are the main consumer trends within
the cigarette category in the UK right now?
It’s no surprise that the lower price segment is
gainingimportanceinadifficulteconomicenvi-
ronment.Consumersnowexpectmorefortheir
moneywithoutsacrificingquality.Recognisingthe
importanceofthissegment,PhilipMorrislaunched
Chesterfield this year in 5 variants, which offer
adultsmokersdifferentalternatives.Chesterfield
is a high quality cigarette with a flavourful taste
andat£5.75atacompetitivepriceinitssegment.
Withouttheabilitytoadvertisebrandstocon-
sumers,whatmechanicsdoyouusetomarket
your brands in the UK.
Thecurrentlegislationheavilyrestrictsourability
to communicate with adult smokers. Our com-
munication is limited to the point of sale and in
selected locations where we can conduct sales
events.
Sowhatroledoindependentretailersplayin
helping you market your brands in the UK?
Retailers have direct contact with adult smok-
ers and therefore play a key role in terms of
communication. If an adult smoker has any
questions about a particular brand it is impor-
tant that the retailer be well versed in product
characteristics so they can provide accurate
information and a high quality service to adult
smokers. Additionally, retailers play a vital
role in ensuring that only adults can purchase
tobacco products.
Isthereanythingyouthinkourreaderscould
dotomitigatethepotentiallynegativelegisla-
tiveenvironmentwithinwhichtheyareforced
to operate, and within which they may find it
harderandhardertomaintaintheireconomic
viability?
Iamgenerallyconcernedaboutincreasingregula-
tion and taxation and I hope that politicians find
a way out of this vicious cycle. I sincerely believe
that everyone could learn a lot by spending one
daybehindacounterofaconveniencestore;for
some politicians it could be an eye-opener. So
inviteyourlocalMPtoyourshopanddebateyour
issues and concerns with him or her.
Jens, thank you very much for talking to us.
Thankyouforlistening.AndmayIwishallAsian
Trader readers a really happy Diwali.
tobaccoproductpackaging.Packagingwouldalso
likely be required to be in the same plain colour,
bearing the health warnings currently required
by law. Two years ago, the previous UK govern-
mentheldaconsultationonplainpackagingand
concludedthattherewasnotsufficientevidence
that this measure would reduce smoking rates.
Thecurrentgovernmenthasannouncedtheywill
again conduct a consultation on the packaging
oftobaccoproductstowardstheendofthisyear.
However,webelievenocredibleevidencehasbeen
developed since then that warrants a different
conclusiontoday.Shouldthegovernmentdecide
to press forward with plain packaging, I believe
we would see a dramatic increase in illicit trade
as brands would become easier to counterfeit
and a black market for branded products from
neighbouringcountrieswouldbeboosted.While
overall tobacco consumption is not likely to be
affected by such a measure, the impact on legal
sales would be significant.
‘WHY DISPLAY BANS
AND PLAIN PACKAGING
SIMPLY DON’T MAKE SEN SE’Hello Jens. Tobacco is a a vital category for
Asian Trader readers, yet one that is beset
by massive legislative control. What effect
is the forthcoming display ban likely to have
on retailers’ ability to manage the category?
I think it is important for your readers to know
that display bans implemented in Iceland and
neighbouring Ireland have not caused a reduc-
tion in overall smoking rates. Other countries
that have adopted display bans have witnessed
numerous difficulties for retailers without see-
ing any impact on smoking rates. My personal
observationisthattodayconsumersusedifferent
terms and names to describe the products they
wish to purchase. First of all, with a large choice
of brands available, they often help retailers by
pointing to their preferred product on the shelf.
With the implementation of the display ban, the
salestransactionbetweenaretailerandanadult
smoker will take more time and frustrate other
customerswaitinginline.Secondly,therearese-
curityissuesatstake.Whileashoptenantlooksto
retrieveacustomer’sproductfrominsideaclosed
cabinet,heorshecannotobservewhatisgoingon
intheshop,whichcaneasilycreateopportunities
fortheft.Lastbutnotleast,theimplementationof
a display ban means costly refurbishment for a
retailer; money which could be spent otherwise
in the current difficult economic climate.
Areyouincommunicationwithretailersabout
the ban?
We are still awaiting the final regulations to be
released by the Government but we will con-
tinue to share information with retailers as it
becomes available to us. I must say though, that
it is surprising to me that different parts of the
UnitedKingdomsuchasScotlandandNorthern
Ireland have their own regulation, timing and
to the detriment of the legitimate industry, its
entiresupplychainandgovernmentrevenues.
In terms of world tobacco company rank-
ings, how big a company is Philip Morris?
PhilipMorrisInternationalistheleadingtobacco
company,withproductssoldinapproximately
180 countries. In 2010, we held an estimated
16.0percentshareoftheinternationalcigarette
market outside of the U.S.
YourMarlborobrandistheworld’sbiggest
sellingcigarettebrand.Whyisitsopopular
globally?
Marlboro has been the
world’s number one
cigarette brand since 1972. In 2010, Marlboro’s
salesvolumeoutsidetheUnitedStateswas297.4
billioncigarettes,whichislargerthanitsnexttwo
competitors combined. The key recipe for suc-
cess is that we continuously invest and innovate
across the brand portfolio. Our 2011 initiatives
in the UK include Marlboro Gold Touch, which
provides a new dimension in smoking with new
taste sensations to adult consumers.
WhatareyourbiggestbrandsintheUK?Who
are they aimed at?
Marlboro of course is our biggest brand in the
UK and the leading brand in the premium price
category.Ourcigarettesaremadeforadultsmokers
withhighproductqualityandtasteexpectations.
We have recently launched Chesterfield and are
confident that as a value proposition it will be as
successfulhereintheUKasitisabroad.Wealso
have Virginia S. by Raffles a traditional brand in
superkings format in our portfolio.