Philip Morris shuffles management on its quest toward a smoke-free future

Key Points
  • Philip Morris appointed Jacek Olczak to its new chief operating officer position.
  • The company reorganized its regional structure, increasing the number of regions to 6 from 4.
  • The changes are intended to drive its transformation toward a smoke-free future while maintaining its financial performance, Philip Morris said in a press release.
A man smokes a Philip Morris International iQOS electronic cigarette.
Akio Kon | Bloomberg | Getty Images

Philip Morris International announced a slate of personnel and structural changes on Thursday, a move the company said will help it transition to a smoke-free future.

Among the personnel moves, Philip Morris appointed Jacek Olczak to its new chief operating officer position, where he will be responsible for global strategy and delivering results for both conventional cigarettes and reduced-risk products, including iQOS, according to a press release.

Most recently, Olczak served as chief financial officer, a position he has held since 2012. Olczak joined Philip Morris in 1993.

"He is a key company leader who has always delivered results with precision and quality," a company spokesman said in an email.

Martin King, currently president of the Asia Region, will take over for Olczak as chief financial officer. André Calantzopoulos will remain chief executive officer.

Philip Morris reorganized its regional structure, increasing the number of regions to 6 from 4.

The Asia region has been divided between the East Asia and Australia region, including Japan and Korea, and the South and Southeast Asia Region, including Indonesia and the Philippines. Eastern Europe is now its own region, whereas before, it was grouped with the Middle East and Africa Region and PMI Duty Free.

"Re-aligning the role and composition of the regions reflects an increased focus on growth for our potentially reduced-risk products," the spokesman said in an email. "The regions will equip and support countries to deliver success, based on their specific business environments and consumer base."

All changes are effective Jan. 1, 2018.

Philip Morris makes cigarette brands including Marlboro, L&M and Parliament, but it has adopted the manifesto "designing a smoke-free future." The company has focused on expanding iQOS, a heat-not-burn tobacco product it says is potentially less harmful than combustible cigarettes.

The device is already available in some international markets, including European countries, Canada and Japan, where it has become popular.

Philip Morris' announcement shows the company remains focused on designing a smoke-free future and will keep that and the development of iQOS at the center of its core, long-term strategy, Wells Fargo analyst Bonnie Herzog wrote in a note to investors on Thursday.

"To us, [Philip Morris] couldn't be clearer that their future is smoke free!" Herzog wrote.

Changes to the company's leadership should improve Philip Morris' ability to control and increase visibility on iQOS progress and conventional cigarette business in key markets, such as Europe, Russia, Indonesia and the Philippines, Herzog wrote.

Appointing Olczak to chief operating officer is a positive move, she wrote, because he has been "instrumental" in iQOS' success. Now, he will have full oversight of the company's global strategy, including the iQOS business.

"In our view, his new role signals [Philip Morris] is advancing to the next phase of its transformation toward [reduced-risk products]," Herzog wrote.

Even before the announcement, Wall Street had been hopeful about iQOS' potential.

Goldman Sachs added Philip Morris to its conviction list, a group of stocks the firm strongly recommends investors buy. In its explanation, Goldman cited iQOS, calling it a "game-changer for Global Tobacco."

"We continue to view [Philip Morris] as the best positioned in [next generation products because of] the quality of its iQos platform from design of the product, nicotine delivery mechanism, scientific research to commercialization strategy," Goldman analyst Judy Hong wrote in a note to investors on Thursday.

Shares of Philip Morris rose about a quarter of a percent on the news. They're up about 22 percent this year. Philip Morris was spared the beating other tobacco stocks took in July after the Food and Drug Administration announced it would seek to reduce nicotine to non-addictive levels.

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