INTERVIEW: Philip Morris International mideast chief on using hi-tech to progress toward a smoke-free future

Illustration by Luis Grañena
Updated 18 August 2019

INTERVIEW: Philip Morris International mideast chief on using hi-tech to progress toward a smoke-free future

  • Tarkan Demirbas tells Arab News how smart technology will woo 9 million Gulf smokers and reduce risk

Alongside politics and religion, there is one other dinner party subject virtually guaranteed to push people to opposing extremes: Smoking.

In much of the world — especially the West but increasingly in the Middle East and other emerging markets — tobacco has been marginalized to the point where smokers feel shunned and lonely in many social environments, banished to pavements or poorly ventilated kiosks in airports.

After a series of multi-billion dollar lawsuits around the globe for the undoubted bad effects smoking has on health, Big Tobacco — the giant multinational companies that made billions out of the nicotine habit but neglected to say exactly how bad it was — is nowhere near as big as it once was.

All of which leaves Tarkan Demirbas with something of a challenge. He is vice president for the Middle East of one of the biggest tobacco companies, Philip Morris International (PMI).
Think Lucky Strike and the Marlboro Cowboy, legends of the industry and of marketing before grim, litigious reality overtook
the business.

BIO

BORN • 1968, Erzurum, Turkey.

EDUCATION • Bogazici University BSc Industrial engineering. • University of West Georgia, MBA.

CAREER  • Senior management positions at PMI in Hungary, Colombia, Malaysia, Singapore, Switzerland. • Vice President Middle East.

Demirbas is on message for the new anti-tobacco era. “There is no doubt that the best way to reduce the risks of smoking is to not smoke or use any nicotine product at all,” he said recently at an event in Dubai’s Capital Club, an oasis of tobacco-friendliness in the anti-smoking desert of the Dubai International Financial Centre.

On the surface, that seems a strange line from somebody who for the past 15 years has been promoting PMI’s products around the world, from southeast Asia through Budapest and on to Bogota with a stint at PMI’s Swiss HQ along the way.

But it coincides with a new direction PMI has taken. The new buzz-phrase in the company is “a smoke-free future.”

PMI launched the initiative with a “commitment and ambition to replace cigarettes as soon as possible with better alternatives to smoking for the millions of men and women who would otherwise continue to smoke.”

That might sound like turkeys voting for Christmas, but there is a sound business logic, as Demirbas explained. “The reality is that the vast majority of smokers simply do not quit. Even the World Health Organization’s own predictions forecast that there will continue to be more than 1 billion smokers by the year 2025,” he said.

“This is why a growing number of experts believe that public health policies should not be based solely on discouraging initiation and encouraging cessation, but need to leverage the potential of scientifically substantiated smoke-free products for the benefit of smokers and public health,” he added.

Technology is key to the campaign, and the product that PMI has come up with is IQOS. The Dubai event marked its regional launch. Imagine a slim mobile phone with a stubby cigarette sucking out of one end, encased it in a stylish carrying case-cum-charger, and you have an idea of IQOS.

Unlike other electronic smoking devices which vaporize nicotine juice, avoiding the harmful effects of the pathogens produced by burning tobacco, IQOS stays with the weed but does not burn it.

By heating tobacco sticks — called Heets — that look like mini-cigarettes to 350 degrees Celsius, the nicotine that smokers crave is released, but the tobacco is not burnt. Demirbas cites respected scientific sources as well as PMI’s own research indicating that 95 percent of the harmful by-products of tobacco are avoided.

Amid jokes that the Marlboro Cowboy would find it hard to use IQOS and ride his horse at the same time, nicotine-hooked cigarette smokers at the event said the result was pretty close to the “real thing.”

There is potentially a big market to go for, globally as well as regionally. Worldwide, some 150 million people use PMI’s tobacco products, still overwhelmingly traditional cigarettes. By 2025, he aims to get 40 million of those onto heated tobacco products like IQOS.

“This year, our priority is to go deeper into existing launch markets. We are encouraged by the results to date, including that there approximately 8 million smokers who have completely abandoned cigarettes and switched to IQOS. Japan is the best example of IQOS’ success, where we have achieved nearly 17 percent of the national share of the market,” he said.

IQOS is currently in nearly 50 markets, including Japan, Korea, Canada, a number of European countries such as Germany, the UK and Spain, as well as Russia, Ukraine and Colombia.

PMI passed a significant milestone in its campaign to go global with IQOS when the American Federal Drug Administration authorized IQOS and other variants. It will market its products in the US in partnership with Altria, the big investor which has made a commitment to the “smoke-free future” with multibillion dollar funding of Juul, the market leader in the worldwide vaping craze.

 “There are 40 million American men and women who smoke. Some of them will quit, but most won’t, and for them IQOS offers a smoke-free alternative to continued smoking,” Demirbas said.

Progress towards smoke freedom remains elusive in China, the world’s biggest market, where PMI markets Marlboro and in turn promotes traditional Chinese tobacco brands around the world.

The UAE joined the list of countries heading smoke-free last year when an IQOS stand appeared in Dubai International Airport’s duty free section. The UAE was ambivalent about the value of trying to lure smokers off tobacco and onto safer products, with the Emirates’ health authorities warning against the use of e-cigarettes and vaping devices. 

But the IQOS airport stand was a sign of a change of heart, and was followed by public pronouncements that vaping would also be made legal. Users in the UAE had previously resorted to some pretty furtive measures to get their nicotine fix, but non-tobacco nicotine products appeared to be here to stay, judged by the large numbers of people seen sucking on devices in many outdoor public places.

After the UAE launch, non-cigarette nicotine is going mainstream. The Heet sticks will be on sale for around DH20 (SR20) per pack — roughly the same as a pack of Marlboro — in most traditional smoking shops, while the devices — retailing at around Dh250 — will be sold in Carrefour supermarkets and, eventually, branded flagship stores.

Demirbas sees the UAE as a testing ground for expansion into other Middle Eastern markets, with Saudi Arabia high on the list of targets. PMI already knows there is an appetite for its device in the Kingdom from the large numbers of Saudi citizens buying them at Dubai airport.

At the airport, they have to present national ID cards or passports as proof of age — 18 is commonly the age limit for buying tobacco products in the Gulf region — as well as making a declaration that they are already smokers who wish to quit cigarettes. “I stress that we are trying to convert existing smokers, not trying to get anybody started on nicotine,” Demirbas said.

“From a public health standpoint, we see great potential for reduced risk products in Saudi Arabia. In our view, it is important to set the right regulatory framework to ensure companies adhere to best practices and comply with local legislation with the adult consumers of these products in mind, particularly as alternative forms of nicotine consumption are being recognized in leading global markets, including Saudi Arabia,” he said.

“Our ultimate goal is to convert all the 9 million adult smokers across the GCC, who would not otherwise quit, to IQOS,” he added.

PMI faces significant competition in its mission. Juul, the trendy but controversial device that has grabbed a big slice of the global market as the “iPhone of the vaping business.” Several other vaping products already have a foothold and a cachet that could be challenging for PMI.

At the Capital Club, the test audience for the IQOS launch was a mixed band of cigarette and vape users who gave the new product serious consideration. Some were sold on it straight away, others said they would give it a try and were gifted samples by PMI. The stylish look of the new product was a big selling point for the tech-style savvy consumers.

Others were put off by the charging process that has to be carried everywhere and used between smokes. One complained that the taste was simply too similar to the cigarettes he had been trying to kick for years.

As Big Tobacco seeks to reposition itself in the new anti-smoking age, the multibillion dollar nicotine industry will always be controversial. Maybe IQOS will be the hi-tech product that helps millions finally kick the smoking habit. Demirbas hopes so.

“We’ve invested $6 billion in it. It’s the most advanced technology there is,” he said.

 

 


EXCLUSIVE: Emirati tycoon Khalaf Al-Habtoor plans multimillion-dollar Saudi leisure project

Updated 19 January 2020

EXCLUSIVE: Emirati tycoon Khalaf Al-Habtoor plans multimillion-dollar Saudi leisure project

  • In an exclusive interview, the Al-Habtoor boss reveals his views on the Kingdom, the UAE economy, Trump and Iran

A word often used to describe Khalaf Al-Habtoor — founder and chairman of Al-Habtoor Group, and one of the Middle East’s most venerable business leaders — is “forthright.”

His tweets, TV broadcasts and public statements all display a quality of candid outspokenness rare in senior business leadership in the Arab world.

In the course of an early morning conversation at his headquarters in Dubai last week, he was forthright on a host of subjects, ranging from ambitious expansion plans in Saudi Arabia to the challenges faced by the UAE economy and the global geopolitical scene.

Al-Habtoor is not a man given to diffidence, though he said he would not be sharing his views with the “global elite” preparing to travel to the World Economic Forum annual meeting in Davos next week. “We leave that for the really big people. It’s really entertainment rather than anything else,” he joked.

Entertainment and leisure have been the mainstays of the Al-Habtoor business empire, which is as old as the UAE itself and one of the country’s best-known brands, with interests in construction, real estate, motor distribution and education.

The group has hotel operations in Europe and the US, but the chairman is now looking at Saudi Arabia as a major avenue for expansion, with a multimillion-dollar investment project planned for the Kingdom. The opportunities are mind-boggling, he told Arab News.

“I call Saudi Arabia a continent rather than a country. It has history before Moses and Abraham,” he said.

“We’re seeing now on TV something we’ve never seen before — we see green fields, we see skiing, we see sun and desert. You can’t believe this is the Arabian Peninsula,” he added.

“That makes it very attractive to every tourist or investor because they have variety, because you’re not restricted to one area or sector where you want to build something. You have a choice as to what you can do.”

Al-Habtoor has chosen — in partnership with the Saudi tourism authorities — to back a huge leisure and recreation project outside Riyadh.

It will draw on the successful Habtoor City development in his native Dubai but on a much bigger scale: Up to 7 million square meters of hotels, restaurants, theaters, retail and residential facilities, and — imagine it — lakes and beaches. “You’ll ask me now where does the beach come from in Riyadh. We’ll create it,” he said.

The project is still at the planning stage and subject to final approval from all parties.

It will borrow some of the elements from the successful Habtoor City development in Dubai, notably a Saudi version of the spectacular theatrical production La Perle. But it will not be a straightforward copy of the Dubai attraction, nor indeed of the Dubai development strategy.

“In Dubai, we don’t have oil. If we were dependent on oil, we wouldn’t be like this now. Saudi Arabia has a bigger population — 30 million people, 90 percent of them Saudi, who want to enjoy their lives and their history,” he said.

Born:

• Dubai, UAE.

Education:

• Al-Shaab School, Bur Dubai.

Career:

• Founder and chairman, Al-Habtoor Group.

“We in the rest of the Gulf haven’t seen this history, and I personally would like to go and see this history and see Riyadh, the Eastern Province and the Red Sea.”

Al-Habtoor believes that the Kingdom can use the lessons of Dubai’s development, especially in creating a more liberal social and cultural environment in what is generally regarded as a more conservative country.

“The word ‘conservative’ needs some explanation. The people of Saudi and the UAE are from the same background, the same family. We’re related. When they visit us, they see that,” he said.

“The original people of the UAE are conservative by background, too, but they also enjoy going to restaurants, to the movies, to the theater. They want to go everywhere. They want to be free,” he added, while allowing that there are limitations to freedom.

“Freedom doesn’t mean you should abuse your country, your people or the authorities. You have to protect your culture by educating other people.”

On the question of whether alcohol could ever be served in Saudi Arabia as it is in Habtoor’s UAE establishments, he replied:  “To be honest, I can’t comment on that because I don’t know what their plan is for that.

“But everything is changing, everything is possible,” he added.

The Vision 2030 “masterplan” is changing perceptions of the Kingdom, he said. “It really is an excellent strategy. Everything is clear and transparent. There is a huge future for Saudi Arabia as far as investment and visitors and tourists are concerned.”

Al-Habtoor Group has interests in many sectors of the UAE economy, and from this position the chairman is well qualified to give an authoritative opinion on the challenges facing the country as it prepares for the Expo 2020 business exhibition.

The most pressing worry for economic analysts has been the oversupply of residential and hotel developments, and rising prices that some believe are forcing expatriate workers out of the UAE.

“Well, 2018 wasn’t a very good year, and 2019 was also very slow in the beginning, but by the end of the fourth quarter you could see the signs of improvement in the market. You could see it in retail, things were moving. In the land department, people were buying and selling land and real estate,” he said.

In his car-leasing business, in real estate, luxury cars and his education business, he saw signs that the UAE economy was picking up again. “Definitely. I can see improvement,” he said.

But the volume cars business was lagging, reflecting different spending patterns by expats who often now choose to rent a car long term rather than buy. The rising cost of living was also a big factor, he said.

“Everything is becoming more expensive. The only cheap thing in the country is hotel rooms — they’re among the cheapest in the world,” he added.

“There are too many hotel rooms and residential developments, and it’s not recommended that we should build more.”

The UAE government has taken some measures to limit supply of real estate and hotel projects, which Al-Habtoor thinks is a good thing.

But the introduction of VAT was, in his view, a damaging economic mistake that should be rectified immediately.

“I think it should be cancelled, and also all the money taken should be refunded. The idea of VAT is wrong in my country for the time being. Maybe in the future,” he said.

He would prefer to see the cancellation of sales tax and the scrapping of government fees for services such as visas and business licenses, replaced by a standard rate of income tax.

“I’d recommended they stop all the fees and VAT and let them take from income, like Britain, for example,” he said.

In international affairs, his opinion of US President Donald Trump has wavered between condemnation of his policy to ban travel from some Muslim countries, to warm approval of his current policy toward the Middle East.

Now Al-Habtoor seems overwhelmingly positive on Trump and would like to see him re-elected.

“I said that we need a businessman rather than a politician to lead the world. But whatever he said in the past I think it was just to get elected, and a lot of his supporters didn’t know about us, the Arabs,” Al-Habtoor said.

“They don’t know whether we were terrorists or good people. There are a lot of naive people in the US.”

In particular, he is a firm supporter of Trump’s recent policy toward Iran, though he feels that US sanctions could be better focused.

“If Trump wants to make (Iran’s Supreme Leader Ali) Khamenei and his gangs starve to death, he can do that. So I can’t understand why he isn’t doing that,” Al-Habtoor said.

“There are sanctions, but he’s not killing the rich people. They still eat caviar and the best steaks while the poor people are starving.”

On the US killing of Qassem Soleimani, Al-Habtoor is in complete agreement that it was the right thing to do, but hinted that he believed there was Iranian collusion in the attack.

“It should’ve happened a long time ago. He was the biggest criminal on earth. I think maybe the Iranians wanted him gone, too, otherwise how could the Americans have tracked him? But what happened is good, it doesn’t matter who did it,” Al-Habtoor said.

He is adamant that there should be no further escalation in regional tensions, but believes the next big threat will come from Hezbollah, Iran’s ally in Lebanon.

“I think Hezbollah is more powerful than Iran, and I think (Hezbollah leader) Hassan Nasrallah is the biggest threat to peace in the region,” Al-Habtoor said with forthright finality.