Philip Morris at CAGE Conference Notes

Jacek Olczak – CFO

There were some periods in Europe where price elasticity went up

“There were periods I have to admit that few years ago, especially in Southern Europe, Italy, where the elasticity really went up higher as you know the pricing then would be a little bit more open headed, they think a bit more to increase the prices there to bring cool down like a little EBITDA market. The reason was that number of the countries again very much into Southern Europe have been making — have been implementing on the austerity measures which at the end of the day were doing nothing but just eroding the consumer purchasing power but quite importantly, also consumer sentiment that we had developed the strength over the last two years and hence the volumes in Southern Europe, you take Spain, you take Italy, you take some other places that really to improve the territory to the extent that you have actually the volume guidance of the industry and obviously for us.”

Heat not burn technology

“I think, the history of e-cigarettes presence in Americas over the last 3, 4 or 5 years demonstrating that, I mean there is a need for the consumer to go to the alternative, the combustible product and is very much sort of a self-driven. I mean science is very important that really direct the consumers to the product which are proven by scientific evidence etcetera but they do carry much less risk than a conventional product. I think there will be consumers who will like to have still some experience with the product which contains tobacco and it’s the platform one and two which are tobacco based. But based on the concept of the heat not burn and therefore it reduce exposure and therefore hopefully reduce risk. And there will be consumers who will just want for a change. I mean would just like to go and use the nicotine in a liquid form and the [indiscernible] is different, etcetera. So I think we have reasons why we have all this in investing behind all these four platforms because there will be a consumer need and actually need to have the portfolio approach rather than focus on one category as existing.”

This is not just a marketing gimmick

“They know that we serious about the thing, this is not just the marketing type of gimmick, in the absence of a better word but we are serious about proving that there is a way of producing a product which has a potential to significantly reduce the harm to the individual and to the public as such.”

People aren’t switching back from iQOS

“the people of course smoking — who are using combustible product, they switch to iQOS and I have not heard about a single person who would go back to combustible cigarettes. The same thing which we observed in the market, I mean adults who have adopted iQOS, so you go into the exclusive use of the product for about two weeks or so and they have no desire and they are not reverting to the previous product which is a very critical component of the success of a product vis-à-vis obtaining the staples of, you know review the risk papers. “