Earning money without glowing sticks: What does the tobacco industry do without smokers?

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Earn money without glowing sticks
What is the tobacco industry doing without smokers?

From Kevin Schulte

Statistically speaking, smokers die earlier, and they may even soon die out completely. Cigarettes from the USA, Europe, Australia and Latin America could largely disappear in just a few decades. How does the tobacco industry earn its money then?

Smoking is not cool. The proportion of German young people who take up cigarettes is lower than ever. Currently, only 5.6 percent of 12 to 17 year olds smoke. Statistically speaking, about one in five of the 18 to 25-year-olds use the smoldering stick, according to a study by the Federal Center for Health Education (BZgA) last year. These are historic lows.

If the development continues like this, smokers will almost completely die out in just a few decades. Citibank analyst Adam Spielman most recently predicted that cigarettes from the USA, Europe, Australia and Latin America could largely disappear as early as 2050.

Meanwhile, the tobacco industry itself also assesses this, says Claudia Oeking, Managing Director Politics and Communication at Philip Morris, in the ntv podcast “Learned again”. The industry has not been particularly agile for a long time. “In our case it was 160, 170 years without much having happened. It was mainly about marketing, new brands, but not really about product improvement.”

At the beginning of this millennium, Philip Morris then embarked on a new path. “We said about 15 years ago that we couldn’t go on like this,” reveals Oeking. The company’s transformation finally culminated in a remarkable sentence: “I hope one day we will no longer sell cigarettes,” said CEO André Calantzopoulos in 2016. “That must actually be possible within 10 to 15 years, perhaps not all of them Regions of the world. But you should at least have the right to claim, “demands Claudia Oeking.

700 billion cigarettes a year

Philip Morris still earns the most money with the classic glow stick. Brands like Marlboro or Chesterfield pour billions into the coffers every year. Around 700 billion Philip Morris cigarettes are sold worldwide each year.

Claudia Oeking is a member of the Philip Morris management team.

(Foto: Philip Morris)

But the future lies elsewhere. The company wants to guide its consumers away from the glowing stick: from smoking buns to e-cigarettes or the Iqos tobacco heater. In the case of the heaters, the tobacco is not burned, but only made hot – there is steam and no smoke. This means that fewer pollutants get into the lungs. Those who smoke inhale thousands of chemicals such as arsenic, lead, cadmium and nicotine. Tobacco heaters filter out 95 percent of these toxins, according to Philip Morris. “The question that science, but of course we as manufacturers too, now have to answer: How does that actually affect the consumer’s body? The main thing is to work with long-term data,” says managing director Oeking.

Nowadays, Philip Morris makes a quarter of his annual turnover with alternatives to the classic cigarette. With the decision a few years ago to bet on a smoke-free future, the competition was put under pressure, says Claudia Oeking. “In the beginning it was difficult to convince the trade. In the end, however, it affected the entire value chain, because of course a lot has changed in raw materials, mechanical engineering and production. Overall, however, we were able to convince the partners that this was the right one and sustainable way. ”

Jobs are being cut

However, the transformation process also involves sacrifices. At the end of 2019, Philip Morris shut down cigarette production at the main Berlin plant. 1000 employees were laid off, only about 75 stayed at the site, according to “Tagesspiegel”. They produce volume tobacco, a preliminary product of the stuffed cigarette.

“Learned Again” Podcast

“Again something learned” is a podcast for the curious: Will Deutsche Bank get its money back from Donald Trump? Why do some commercial pilots have to pay money for their job? Why is chip maker TSMC the most important company in the world? Listen to it and get a little smarter 3 times a week.

You can find all episodes in the ntv app, at Audio Now, Apple Podcasts and Spotify. You can use the RSS feed for all other podcast apps. Copy and paste the feed url and simply add “Again Learned” to your podcast subscriptions.

This trend affects the entire industry: In the mid-1990s, more than 14,000 employees were still working in the tobacco industry; now there are fewer than 9,000 who work for Philip Morris or the major competitors in the German business, Reemtsma or British American Tobacco (BAT ), are employed. “How can you take colleagues from there into the new product world? Where can locations be converted? Converting the older cigarette factories was particularly difficult. Especially now at a time when the demand for the new products is not that great. There were painful decisions, “says the Philip Morris managing director.

In classic cigarette production, jobs are being lost, instead new jobs are being created in marketing and sales in order to bring the new products to men and women.

Claudia Oeking fears that it will be more difficult for consumers to switch in the future. The federal government has decided to increase the tobacco tax. After years of zero, the prices for a pack of cigarettes will rise by an average of eight cents a year from 2022 to 2026, heated tobacco is treated the same as traditional tobacco for tax purposes and is therefore also more expensive. It cannot be ruled out that many steamers will resort to the glowing stick again as a result.

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