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Stefan Bomhard, c.e.o., Imperial Brands
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Jacek Olczak, c.e.o., Philip Morris International
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Bok-In Baek, c.e.o., KT&G Corporation
Stefan Bomhard, c.e.o., Imperial Brands
Last February Imperial Brands announced the appointment of Stefan Bomhard as c.e.o., but it was not until July that he fully took over. Prior to joining Imperial, Bomhard was c.e.o. of Inchcape Plc., a global distribution and retail leader in the premium and luxury automotive sectors, where he demonstrated strong strategic and operational leadership. Bomhard holds a Ph.D. in marketing and has significant experience across multiple consumer sectors and within large multinational organizations, particularly in brand building and consumer-led sales and marketing.
Prior to his time at Inchcape, Bomhard was president of Bacardi Limited’s European region and was also responsible for Bacardi’s global commercial organization and global travel retail. Before that, Bomhard was chief commercial officer of Cadbury Plc after being c.o.o. of Unilever Food Solutions Europe. This followed senior management and sales and marketing roles at Diageo (Burger King) and Procter & Gamble.
In January this year, after a six-month review, Bomhard made waves with a five-year strategy for Imperial which would see the company pivoting back to cigarettes, an area that, according to Bomhard, had been “neglected” as Imperial became “overly focused” on vaping devices and other alternative nicotine products. The emphasis for the new strategy was to focus on the company’s top five cigarette markets that provide 72% of its profits (Australia, Germany, Spain, the UK, and the US), to take a “more disciplined” approach to next-generation products (NGPs), and to bolster its sales force.
“The vapor business expanded too quickly and too broadly, with little consumer validation and poor investment decisions,” Bomhard said, adding that previous investments had not sufficiently been based on consumer research.
“The new strategy will have a renewed emphasis on a more focused group of priority tobacco markets and a more disciplined execution in NGP,” he said. He also said that the company’s strategy for NGPs would depend on the market, such as placing greater emphasis on heated tobacco products in Europe, vaping in the US, and oral tobacco in Scandinavia.
By end of March 2021, it seemed that the new strategy had largely been working. Imperial reported increased tobacco market share in its main five markets with gains in the US, the UK, and Spain outweighing declines in Australia and Germany. The company also reaffirmed its forecasted low-to-mid single digit growth in organic adjusted operating profit growth for the year, saying that its tobacco sales matched its expectations. Imperial has predicted its revenue will grow by 1% on an organic, constant currency basis for the first half of the coming financial year due to increased tobacco prices and raised NGP revenue growth, as well as expecting increased profits from Logista, its logistics operations in Europe.
Jacek Olczak, c.e.o., Philip Morris International
In December 2020, Philip Morris International (PMI) announced that Jacek Olczak would be taking over from André Calantzopoulos as c.e.o. in May 2021, as Calantzopoulos takes over his responsibilities as executive chairman of the board, succeeding Louis Camilleri, who retired.
Holding a master’s degree in economics, Olczak served as PMI’s c.o.o. since January 2018 and as c.f.o. from August 2012 through December 2018. He joined the company in 1993 and worked in finance and general management positions across Europe, including as managing director of PMI’s markets in Poland and Germany and as president of the European Union region before his appointment as c.f.o. in 2012.
Olczak has worked closely together with Louis Camilleri and André Calantzopoulos since PMI became an independent company, sharing a single strategic vision, so a seamless transition and continuity of leadership is only natural.
That strategic vision is leaving traditional combustible cigarettes behind and “delivering a smoke-free future.” Key to this vision is PMI’s IQOS device, which heats tobacco rather than burn it. The latest IQOS VEEV, which was launched in New Zealand in Q3/2020, heats e-liquids which contain pharmaceutical-grade nicotine and food-grade flavorings.
In an interview with The Edge earlier this year, Olczak said, “Our ambition is that all those adults who would otherwise continue smoking cigarettes around the world switch to better alternatives based on science.”
“Adult smokers who would otherwise continue to smoke deserve to know about, and have access to, better alternatives to cigarettes. Smoke-free products such as IQOS, while not risk-free, are a much better choice than continuing to smoke. We must get the facts straight to clear up any confusion for consumers and prevent them from going back to and using cigarettes, one of the most harmful forms of nicotine consumption.”
In February, PMI announced an ambition for smoke-free products to account for more than 50% of its total net revenues by 2025, a significant increase on the previous 2025 ambition of 38-42%. The company also aims to have commercialized IQOS in 100 markets by the end of 2025—an increase from the 64 markets at the end of 2020 – as well as launch the IQOS ILUMA in the second half of 2021.
PMI reported strong Q1/2021 results, with net revenues climbing by 6% to US$7.59 billion year-on-year in Q1 (+2.9% on an organic basis), ahead of expectations. Net revenues from smoke-free products accounted for 28% of total net revenues, with operating income up by 23.5% to US$3.44 billion and adjusted operating income rising by 18.5% to US$3.49 billion on an organic basis. Market share for heated tobacco units in IQOS markets, excluding the US, increased by 1.7% to 7.6%.
Bok-In Baek, c.e.o., KT&G Corporation
Bok-In Baek was reappointed c.e.o. of KT&G Corporation this March. This is his third term as c.e.o., with his first term starting in 2015 and his second term in 2018.
Baek is the first-ever c.e.o of KT&G who joined the company (Korea Tobacco & Ginseng Corporation at the time) through open recruitment and climbed all the way up the ladder. He has cultivated a wide variety of experiences on his way during his 29 years at the company since 1993, taking on key roles in the company’s core businesses including strategy, marketing global business, manufacturing, and r&d.
Shareholders have highly recognized Baek’s success in expanding the company’s global business. Under his leadership, the number of KT&G’s exporting countries has dramatically increased. In 2017, the company exported to approximately 50 countries. By the end of 2020, that number has more than doubled to over 100 countries.
In his c.e.o. speech after his reappointment during this year’s general shareholders meeting, Baek said, “This year, due to the prolonged Covid-19 pandemic and steep decline in the exchange rate, uncertainties have been more heightened than ever. Under the heightened uncertainties, KT&G has set the word ‘resilience’ as the keyword for the year 2021’s business management goal. The keyword ‘resilience’ reflects KT&G’s determination to not only recover from the negative impacts of Covid-19, but also leap forward and achieve greater advance amid the pandemic situation. This year, KT&G will strive to secure a leadership position in the market and seize opportunities in the rapidly changing world economic order.”
During his previous two terms of leadership and his implementing a “two-track” strategy, both KT&G’s cigarette and heat-not-burn (HNB) business segments thrived. While the cigarette segment remains KT&G’s primary business category, the company has made great achievements in the HNB segment as well. The company registered its first patent related to heat-not-burn technology in 2005, resulting in the launch of KT&G’s first HNB product, lil 1.0, just a few months after IQOS was introduced in Korea.
KT&G may not have been the first to launch in Korea’s HNB market, but it has today succeeded in securing a leading position in the market by executing a ‘fast follower’ strategy. When PMI’s IQOS and BAT’s glo were first launched in Korea, many consumers gave feedback that it would be more convenient if the device could be used consecutively without a recharge. Based on such feedback, KT&G designed ‘lil 1.0’ in a way that it provides three consecutive smoking experiences without having to recharge. Over the last four years, KT&G launched a number of subsequent models, such as lil Plus, lil mini, and lil HYBRID, with each model offering new features.
KT&G has continuously expanded its HNB segment, both domestically and internationally. Last year, the company joined hands with PMI to kick off the overseas expansion of the lil product line. Following the agreement, KT&G and PMI launched lil Solid and its consumable Fiit in Russia and Ukraine in August and September, respectively. In October, ‘lil HYBRID’ and MIIX consumables were launched in Japan.
However, this does not imply that KT&G’s focus will significantly tilt towards the HNB segment. HNB products (all manufacturers included) account for less than 15% of the overall tobacco market in Korea, and combined with a recent stagnation in the e-cigarette market and increasing government regulations, many manufacturers are acknowledging the need to focus on both traditional cigarette and HNB segments. KT&G’s ultimate goal is to excel in both segments and the company is prepared to maintain its leading position in both segments as its two-track strategy has been driving its operations for years.
While some smokers have completely switched to heat-not-burn products, still a majority of them are cigarette smokers or multi-users (of both cigarette and heat-not-burn). Thus, while it is important to increase presence in the HNB market that has significant room for growth, it is also important to maintain a leading position and optimize customer retention in the already mature conventional cigarette market. For such reasons, KT&G aims to maintain a well-balanced portfolio between both segments.
KT&G is also increasing its presence in the Asian market, recognizing the region’s great significance and potential due to the market size and consumer behavior (the smoking rate is especially high in south and southeast Asia, and consumers in the Asian region tend to be very sensitive and responsive to new trends.) The company currently enjoys the #1 position in the Mongolia market, accounting for 36% of the market at the end of 2020. KT&G is also exceling in Taiwan, where it sold more than 771 million sticks last year. Based on such an accomplishment, KT&G saw a very prospective outlook for the Taiwan market, resulting in the company establishing an overseas subsidiary in Taiwan in March. ‘KT&G Taiwan Corporation’ now marks the fifth subsidiary KT&G owns in the overseas market after subsidiaries in Turkey, Russia, Indonesia, and the US.