Philip Morris International Inc · NYSE:PM
Philip Morris International — Investor Day (June 2014)
84 slides from Philip Morris International's investor day presentation, Jun 26, 2014
Slide 1: Investor Day – Marketing & Sales
Investor Day – Marketing & Sales Lausanne, June 26, 2014 Frederic de Wilde Senior Vice President, Marketing & Sales Philip Morris International
Slide 2: Agenda
Agenda ● Core Brand Portfolio: - Marlboro Brand Family: • Marlboro Flavor • Marlboro Gold • Marlboro Fresh - Parliament - L&M - Chesterfield ● Commercial Approach 2
Slide 3: 2013 Tobacco Industry
2013 Tobacco Industry(a) Cigars/ E-Vapor Cigarettes Fine Cut Cigarillos Smokeless(b) Products(c) Volume (units billion): 3,055 155 10 19 CAGR 2009-2013: (2)% 4% 4% 4% Retail Value ($ billion) 409 21 3 3 2 CAGR 2009-2013: 5% 13% 2% ̶ % 45% (a) Excluding China, the USA and duty free (b) Excluding chew
Slide 4: PMI: Superior Brand Portfolio
PMI: Superior Brand Portfolio International Local Heritage Premium & Above Mid-Price Low-Price Note: Pack designs are for illustrative purposes only 4
Slide 5: PMI Top Cigarette Brands (2013)
PMI Top Cigarette Brands (2013) (units billion) 291 95 45 45 45 35 34 Note: Excluding Chinese brands Source: PMI Financials 5
Slide 6: Key Emerging Product Trends
Key Emerging Product Trends ● Lighter and smoother tasting products ● Slimmer diameters ● Fresher / less lingering aftertaste ● Ability to vary the nature and taste intensity of the smoking experience on demand Industry product innovation significantly accelerated 6
Slide 7: Key Taste / Format Segment Dynamics
Key Taste / Format Segment Dynamics(a) International Industry: Segments Shares of Market (%) Low Tar(b) Slims(c) Menthol +2pp +6pp +0.5pp PMI SoS 30% 32% +2pp 28% 31% +3pp 28% 46% +18pp & Growth 42 40 12 6 6 6 2008 2013 2008 2013 2008 2013 Total Volume (units billion): 1,286 362 187 (a) Excluding Ch
Slide 8: Key PMI Portfolio Priorities
Key PMI Portfolio Priorities ● Continuously strengthen the equity of our brands ● Increase our share in all growing segments ● Strive for the right balance between supporting the core and innovation ● Leverage new touch points and channels opened by the commercial approach 8
Slide 9: Global Innovation Corridors to Address Evolving Preferences of Adult Smokers
Global Innovation Corridors to Address Evolving Preferences of Adult Smokers ● Taste Smoothness: ● Fresh Taste Dimensions: - Lighter, more rounded taste and - Different intensities and varieties of smoking experience menthol - No lingering aftertaste / bitterness - Capsules and other means to custom
Slide 10: Optimized Innovation Process
Optimized Innovation Process ● Focus on sustainable and rapidly scalable new product launches ● Enhance support behind core variants ● Rationalize the portfolio through morphing 10
Slide 11: Slide 11
Slide 12: Marlboro: Summary
Marlboro: Summary ● Marlboro is the world´s largest brand and continues to perform well in difficult economic environment commanding a share of 9.2%(a): - Cigarette volume reached 291 billion units in 2013 - New products account for 12% of Marlboro’s volume in 2013 Marlboro Share of Market (%) 2012
Slide 13: Marlboro Flavor
Marlboro Flavor Note: Pack designs are for illustrative purposes only
Slide 14: Marlboro Flavor: Summary
Marlboro Flavor: Summary Performance: ● Achieved 150 billion units in 2013 ● Marlboro Flavor alone is the largest cigarette brand in the world with a global market share of 4.7%(a) Strategies: ● Evolve Marlboro Red franchise to Architecture 2.0 ● New Marlboro Red 2.0 global roll-out in 2014 /15 ● De
Slide 15: Investor Day – Marketing & Sales (Video)
Investor Day – Marketing & Sales Lausanne, June 26, 2014 Video (Approximately 75-second video)
Slide 16: Marlboro Flavor: New Marlboro Red
Marlboro Flavor: New Marlboro Red Key innovative elements: ● An intriguing design with new touch and feel ● A firm filter, easier to stub out ● Satisfying round taste Note: Pack designs are for illustrative purposes only 16
Slide 17: Marlboro Flavor: New Marlboro Red
Marlboro Flavor: New Marlboro Red ● Extensive adult consumer research around the globe ● 6 city tests in 4 markets (Brazil, France, Germany, Italy) ● Very promising results, as the move to Architecture 2.0 has proven to evolve the brand into the intended territory of enhanced: - Smooth taste percept
Slide 18: Red Is
RED IS ——_««~—S—f Smoking kills
Slide 19: Smoking kills
Smoking kills
Slide 20: Smoking kills
Smoking kills
Slide 21: Red's
RED'S &@ SO“HArUS i | ( Le Smoking kills
Slide 22: New Marlboro Red: Point of Sale Activation
New Marlboro Red: Point of Sale Activation 22
Slide 23: New Marlboro Red: Point of Sale Activation
New Marlboro Red: Point of Sale Activation 23
Slide 24: New Marlboro Red: Point of Sale Activation
New Marlboro Red: Point of Sale Activation 24
Slide 25: Innovation in Marlboro Flavor: Marlboro Premium Black
Innovation in Marlboro Flavor: Marlboro Premium Black ● An above-premium price Marlboro proposition ● Elegant pack designed in collaboration with Pininfarina ● Use of superior tobacco grades ● Featuring ProFresh ● GCC duty free launches in 2012-2013 ● Market Shares(a): - Dubai Duty Free 1.4% in 15 m
Slide 26: Note: Visual execution and pack design is for illustrative purposes only
Note: Visual execution and pack design is for illustrative purposes only
Slide 27: Marlboro Gold: Summary
Marlboro Gold: Summary Performance: ● Achieved 110 billion units in 2013 ● Reached 3.5%(a) global market share ● Excellent adult smoker profile Strategies: ● Capitalizing on successful line extensions ● Tapping into emerging segments with Marlboro Advance in Asia ● Evolve Marlboro Gold following the
Slide 28: Marlboro Gold Touch
Marlboro Gold Touch ● 6.2 billion units in 2013 in 57 markets ● > 0.5% SoM in 35 markets and in 17 of those >1% SoM ● Excellent adult smoker profile ● Less smell benefit highly relevant and appreciated 2013 Market Shares in Marlboro Gold Touch Key Volume Markets (%) 3,9 2,9 2,5 2,1 2,0 1,9 1,6 Iraq
Slide 29: Marlboro Gold Innovation: Marlboro Advance
Marlboro Gold Innovation: Marlboro Advance ● Recessed filter for an ultimate smooth taste with less smell and cleaner aftertaste ● Rolled-out in Singapore (0.7% SoM(a)), Malaysia (0.4% SoM(a)) and Taiwan ● High brand awareness and positive reactions after adult smoker trial ● Additional expansion pl
Slide 30: Marlboro Fresh
Marlboro Fresh Note: Pack designs are for illustrative purpose only
Slide 31: Marlboro Fresh: Summary
Marlboro Fresh: Summary Performance: ● Achieved 31 billion units in 2013 driven by successful line extensions accounting for 57% of the volume ● Excellent adult smoker profile Strategies: ● Position the brand to be the reference in taste freshness, high cooling taste and new taste sensations ● Evolv
Slide 32: Marlboro Fresh: New Marlboro Fresh
Marlboro Fresh: New Marlboro Fresh ● Upgrade overall brand experience: - A modern pack design with a distinct touch - Upgrade product with firm filter as tangible unique selling proposition - Coherent look and feel across the franchise Note: Pack designs are for illustrative purposes only 32
Slide 33: Marlboro Ice Blast / Blue Ice
Marlboro Ice Blast / Blue Ice ● A fresh-to-fresh capsule product available in 41 markets, 8.5 billion units in 2013 ● One of the most successful line extensions reaching 0.3%(a) SoM globally ● Reaching 0.4% SoM or higher in 22 markets ● Excellent adult smoker profile 2013 Marlboro Ice Blast / Blue I
Slide 34: Innovations in Marlboro Fresh
Innovations in Marlboro Fresh Marlboro Fuse Beyond: ● The first ever regular cigarette with two capsules in the filter which can provide 3 tastes in one smoking experience ● Geographical expansion planned in several markets in 2014 Marlboro Micro Beyond SSL 100s: ● First ever super-slims offer from
Slide 35: Marlboro Kretek: New Taste Sensations
Marlboro Kretek: New Taste Sensations ● Kretek and kretek mint taste have shown strong potential across geographies ● Marlboro Kretek Mint was launched in Mexico in August 2013, reaching 0.5% SoM in December 2013(a) ● Expansion planned in several markets in 2014 (a) In OXXO chain, which represents 2
Slide 36: "Be Marlboro" Campaign
"Be Marlboro" Campaign ● Launched in 2011 and rolled out across 52 markets (22 of Top 30 OCI markets) ● A flexible platform that can be tailored to cultural differences and brand priorities ● Strong positive adult consumer response and brand image enhancement 36
Slide 37: Slide 37
Slide 38: Slide 38
Slide 39: Nir
Nir F MEROKOK DAPAT MENYEBABAN ANIKER, SERANGAN JANTUNG, \M/POTENS| Day GANGGUAN KEHANTILAN
Slide 40: Be Marlboro campaign creative (Japan)
Note: Translation from Japanese: "The nail that sticks out gets beaten down is strong enough to take a beating"
Slide 41: Be Marlboro campaign creative (Arabic)
Note: Translation from Arabic: "Maybe I will have passion"
Slide 42: Be Marlboro – Phase 2
IS INTERNATIONAL BE MARLBORO — PHASE 2
Slide 43: Be Marlboro Phase 2 visuals
Note: Visual execution is for illustrative purposes only
Slide 44: Be Marlboro Phase 2 visuals
Note: Visual execution is for illustrative purposes only
Slide 45: Be Marlboro Phase 2 visuals
Note: Visual execution is for illustrative purposes only
Slide 46: Be Marlboro Phase 2 visuals
Note: Visual execution is for illustrative purposes only
Slide 47: "Be Marlboro": Point of Sale
"Be Marlboro": Point of Sale Japan Brazil Philippines 47
Slide 48: "Be Marlboro": Adult Consumer Engagement
"Be Marlboro": Adult Consumer Engagement A wide range of direct contacts and digital initiatives 48
Slide 49: Marlboro: Conclusion
Marlboro: Conclusion ● The brand has achieved very positive performance in difficult economic times ● Marlboro Red upgrade is a major milestone to make it smoother tasting, more approachable and reinforce its premiumness ● Roll-out of "Be Marlboro" campaign is helping to strengthen the image of the
Slide 50: Parliament
PARLIAMENT Bi i hs), YY y PARLIAMENT A - KYPEHUE YBUBAET — = PARLIAMENT PARLIAMENT Plas KYPEHME YBUBAET - > ; KYPEHNE YBUBAET RE
Slide 51: Parliament: Summary
Parliament: Summary Performance: ● Achieved 45 billion units in 2013 (+2.9% vs. 2012) ● High profitability Strategies: ● Built around its unique Recessed filter technology ● Undisputed above-premium quality, prestige and status ● Innovative adult smoker engagement ● Geographic expansion where the de
Slide 52: Parliament: Global Brand Performance
Parliament: Global Brand Performance Parliament International Cigarette Volume Parliament Smoker Shares (%) (units billion) LA (min. 18)-64 LA (min. 18)-24 43,4 44,7 12,8 11,7 39,4 11,1 6,9 6,1 6,2 4,1 3,6 1,2 1,4 2011 2012 2013 Russia Turkey Ukraine Japan Korea Source: PMI Financials and PMI Market
Slide 53: Parliament visuals
Note: Visual execution is for illustrative purposes only
Slide 54: Parliament visuals
Note: Visual execution is for illustrative purposes only
Slide 55: Parliament visuals
Note: Visual execution is for illustrative purposes only
Slide 56: Parliament visuals
Note: Visual execution is for illustrative purposes only
Slide 57: Innovation in Parliament: Carat Line
Innovation in Parliament: Carat Line ● Launched in Russia in 2012 ● Balanced gender profile ● Geographical expansion planned in four markets in 2014/2015 Parliament Volume in Russia Carat SoM in Moscow City (units million) 12.407 0.4% 12.289 Carat 239 12.254 12.168 0.1% 2012 2013 Sept Jan Dec 2012 2
Slide 58: Parliament Hybrid: Korea
Parliament Hybrid: Korea ● World’s first Recessed filter capsule launched in 2012 ● Extended to king-size 1mg segment and SSL 1mg segment ● Reaching 1.6% market share in April 2014 ● Relevant innovation built on strong core Source: Hankook Research 58
Slide 59: Slide 59
Slide 60: L&M: Summary
L&M: Summary Performance: ● Third largest brand in the world ● Achieved 95 billion units in 2013 (+1.4% vs. 2012) Strategies: ● Strengthen brand image via new communication platform ● Fortify value for money equation via product proposition upgrade ● Successful innovation in emerging segments Source
Slide 61: L&M: Global Brand Performance
L&M: Global Brand Performance L&M International Cigarette Volume L&M Smoker Shares (%) (units billion) LA (min. 18)-64 LA (min. 18)-24 93,7 95,0 41,0 90,1 34,8 30,4 26,3 23,7 21,1 17,9 9,5 6,7 3,1 2,8 4,3 2011 2012 2013 Egypt Russia Turkey Germany Poland Thailand Source: PMI Financials and PMI Marke
Slide 62: L&M: Franchise Upgrade in Russia
L&M: Franchise Upgrade in Russia L&M Market Share (%) 3.1 2.5 Jan Jan Jan Mar 2012 2013 2014 Source: Nielsen 62
Slide 63: L&M visuals
Note: Visual execution is for illustrative purposes only
Slide 64: L&M visuals
Note: Visual execution is for illustrative purposes only
Slide 65: L&M visuals
Note: Visual execution is for illustrative purposes only
Slide 66: L&M visuals
Note: Visual execution is for illustrative purposes only
Slide 67: L&M 4.0 Design: Core Line upgrade
L&M 4.0 Design: Core Line upgrade ● Contemporary and confident design ● Introduction of FineCut blend processing that strengthens high quality perception ● Launched in Greece in June 2014 Source: PMI Market Research (exploratory researches in Brazil, France, Germany, Poland, Russia and Spain) 67
Slide 68: Innovation in L&M: L&M Forward in the EU Region
Innovation in L&M: L&M Forward in the EU Region ● In 2013, L&M Forward continued to grow in 9 markets in the EU Region ● L&M Forward is a leading capsule product in 4 EU markets ● Proposition was successfully line-extended with Forward Link 100s super-slims in Poland 2013 L&M Forward Share of Market
Slide 69: Slide 69
Slide 70: Chesterfield: Summary
Chesterfield: Summary Performance: ● Achieved 34 billion units in 2013 ● Mainly present in EEMA and EU ● Significant increase in the number of Chesterfield markets (from 40 in 2009 to 57 in 2013) Strategies: ● Capitalize on heritage, prestige and differentiation ● Address evolving adult smoker needs
Slide 71: Chesterfield: Core Line Upgrade
Chesterfield: Core Line Upgrade ● Re-designed pack with soft touch and highlighting the crown ● Modernized filter tipping design ● Launched in Serbia ● Further expansion planned in 2014 71
Slide 72: Chesterfield: Progressive Line Launch
Chesterfield: Progressive Line Launch ● 7.0 product with tangible benefits delivering on ego-social friendly needs: - Ash control(a) - Less smoke smell - Smooth taste ● Launched in Ukraine and Russia in Q1, 2014 (a) Ash control refers to less loose ash and less ash flying around 72
Slide 73: Innovation in Chesterfield: Pipeline New Taste Sensations
Innovation in Chesterfield: Pipeline New Taste Sensations ● Launch of Kretek Duo, a menthol kretek offer in Guatemala and El Salvador ● Planned geographical expansion Note: Translation from Spanish: "The menthol that changed the rules. Act differently. Think Chesterfield" 73
Slide 74: Commercial Approach
IS INTERNATIONAL COMMERCIAL APPROACH
Slide 75: Principles of the Commercial Approach
Principles of the Commercial Approach ● Adult smoker centricity ● Empowerment of territory frontline staff: - Global tools & programs - Capabilities-building program - Territory management ● Integrated Marketing and Sales teams 75
Slide 76: Commercial Approach Brings Innovation to Consumer Engagement
Commercial Approach Brings Innovation to Consumer Engagement Consumer engagement: ● Expand touch point universe ● Identify adult smoker profile by shop and time of the day ● Use segmentation data per store to achieve more targeted execution and increased effectiveness 76
Slide 77: Commercial Approach Brings Innovation to Consumer Engagement
Commercial Approach Brings Innovation to Consumer Engagement Retailer engagement ● Identify retailer profile based on multidimensional segmentation ● Equip retailers to deliver product messages ● Activate more than one brand at the point of sale 77
Slide 78: 2013: Year of Pilots (37 markets)
2013: Year of Pilots (37 markets) Spain France Poland Switzerland Germany Italy +0.4pp +0.3pp +2.0pp +0.7pp +0.5pp +0.7pp Note: Spain and Switzerland pp change vs. control; France, Poland, Germany and Italy pp change vs. national Source: Results as provided by markets in October 2013. Periods differ
Slide 79: 2013: Year of Pilots (37 markets)
2013: Year of Pilots (37 markets) Spain France Poland Switzerland Germany Italy +0.4pp +0.3pp +2.0pp +0.7pp +0.5pp +0.7pp Japan +0.5pp Mexico Turkey Indonesia Ukraine +6.9pp +2.2pp +1.2pp +0.4pp Note: Spain, Switzerland and Mexico pp change vs. control; France, Poland, Germany, Italy, Turkey, Ukrain
Slide 80: Commercial Approach
Commercial Approach ● Major transformation across Marketing and Sales ● Massive training to increase our global capabilities (9,000 people trained) ● Positive results in pilot cities across the world Global Roll-Out 2014/2015 80
Slide 81: Visual executions
Note: Visual executions are for illustrative purposes only
Slide 82: Conclusions
Conclusions ● Strong brand portfolio ● Positive performance of our flagship brand, Marlboro in 2013 ● Innovative and relevant Marlboro Architecture 2.0 initiative: - The most significant change for the iconic brand since the early 50´s - To be rolled out internationally in 2014/2015 ● Unprecedented
Slide 83: Questions & Answers
Investor Day – Marketing & Sales Lausanne, June 26, 2014 Questions & Answers
Slide 84: Reconciliation of non-GAAP measures included in this presentation
Reconciliation of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided on our website at: www.pmi.com/2014InvestorDay/RecSlides Glossary of Terms: www.pmi.com/2014InvestorDay/Glossary
Philip Morris International — Investor Day (June 2014) on 6ix