Phillip Morris International ranks second on 2020 Tobacco Transformation Index

One of Malawi’s biggest buyers of tobacco, Phillip Morris International (PMI), has been ranked second in the world as a tobacco company that is reducing tobacco harm, lowering health risks and mitigating the world’s smoking burden.

This is published in the newly-introduced Tobacco Transformation Index, that is set to be providing comprehensive metrics and insights into how some of world’s 15 largest tobacco companies are deploying (or not deploying) their capital and other resources in pursuit of reducing tobacco harm, lowering health risks and mitigating the world’s smoking burden.

The Tobacco Transformation Index ranks Swedish Match — which divested its cigarette business in 1999 — in first position; PMI in second and British American Tobacco in third.

In July 2020, the United States’ Food and Drug Administration (FDA) authorised PMI’s innovative response aimed at reducing tobacco harm by inventing a smokeless cigarette smoking gadget named IQOS.

The innovation helped PMI to garner good points and be ranked second on Tobacco Transformation Index, and also bring a new ray of hope to the African industry in which PMI buys its tobacco from, including Malawi — whose earnings from the green gold has sharply declined in recent years.

FDA verified that the IQOS system, which heats tobacco but does not burn it, significantly reduces the production of harmful and potentially harmful chemicals that are emitted from smoke when tobacco is actually burned.

Made possible with funding from the Foundation for a Smoke-Free World, the Tobacco Transformation Index finds that most of the 15 largest tobacco companies are not making substantive progress in phasing out cigarettes and other high-risk tobacco products and transitioning smokers to reduced-risk alternatives.

This was revealed on Monday by Dr. Derek Yach, President of the Foundation for a Smoke-Free World during a global virtual press conference to announce the publication of the first-of-its-kind — the Tobacco Transformation Index.

The Index says though some tobacco companies have touted a desire to change, data still shows that 95+% of global industry sales are still dominated by cigarettes and other high-risk tobacco products.

The Index says with 85% of the investment in tobacco companies coming from large institutional investors such as banks and pension funds, accelerated transformation will likely come from greater financial market pressure on company management.

It says a small group of companies have made public commitments to harm reduction and backed them with significant investments.

“A majority of companies have made no such commitment to tobacco harm reduction,” says the Index. “With 1.3 billion tobacco users in the world, of which 8 million die annually from tobacco-related diseases, the stakes for global health are high.

“Adult cessation and tobacco harm reduction could reduce deaths within the next two decades.”

The 2020 Index assesses tobacco companies’ activities from 2017-2019 related to: strategy and management, product sales, capital allocation, product offer, marketing, and lobbying and advocacy.

Derek Yach said: “Inspired by the success that indexes focusing on other sectors have demonstrated, the goal of the Tobacco Transformation Index is to stimulate external pressure and the industry competition needed to take combustion out of the cigarette market, accelerate change, and lower the unnecessary disease, death, and misery it causes so many people.

“Society and large institutional investors such as banks and pension funds, which represent 85% of investment in publicly traded tobacco companies, have the leverage to push tobacco company management to drive measures that greatly improve health.”

In 2019, 13 of the 15 tobacco companies in the Index generated at least 95% of net sales value through high-risk tobacco products including cigarettes.

In 2019, Swedish Match’s sales of reduced-risk products accounted for 44% of its net sales, followed by PMI at 19%, and British American Tobacco and KT&G at 5% each.

Over the period of 2017-2019, eight of the 15 companies allocated 10% or less of research and development and capital investment expenditures to reduced-risk versus high-risk products.

During the Index’s review period of 2017-2019, several companies, including British American Tobacco, Japan Tobacco, PMI, and KT&G Corp, made acquisitions of primarily cigarette businesses.

These acquisitions were frequently focused on low-medium income countries (LMICs), where smoking rates are highest.

Among the six companies who made public commitments to harm reduction, between 30% and 55% of their marketing budgets were still devoted to high-risk products including cigarettes.

“The tobacco companies are still spending a significant amount of their marketing budgets on high-risk products and, while a handful have increased their focus on youth access prevention, the impact of these policies is still unclear.

Overall progress in reducing smoking and the use of toxic smokeless tobacco products globally remains frustratingly slow,” said Yach.

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