In July, Philip Morris Romania announced it was investing a record EUR 490 million in the conversion of the Otopeni factory, among the group’s top performing cigarette factories, into one fully dedicated to the manufacture of HEETS for its heat-not-burn product IQOS. The investment, Branislav Bibic, managing director Philip Morris Romania told BR, spearheads the group’s efforts to offer consumers worldwide alternatives to smoking.
Philip Morris International announced the investment in late July in the presence of Romanian PM Mihai Tudose at an event held at Bucharest’s National Theatre. “Late last year, Philips Morris International chief executive Andre Calantzopoulos defined a bold vision by saying our ambition was to replace conventional cigarettes with no smoke products,” Christos Harpantidis, managing director Philip Morris Balkans, said at the event. “What was considered by some a revolutionary statement is something we have been working on for many years. Starting 2008, when Philip Morris began its research, USD 3 billion have been invested. We are one step closer to our smoke-free vision and today’s announcement is an important step towards this direction,” Harpantidis added.
The Otopeni plant will be PMI’s fourth production facility fully dedicated to the manufacture of tobacco sticks. “The investment project is a significant one, both for the local market and for IQOS consumers worldwide,” and “will contribute to the development of the investment environment in Romania, Bibic told Business Review.
“The production at the Otopeni factory will serve both the local market and several other markets around the world, Bibic said, noting that “IQOS has become the top priority in the company, both globally and locally. The fact that we chose one of our best performing factories is further proof of our commitment to offer smokers around the world smoke free alternatives,” Bibic added.
Otopeni factory to employ 950 staff by 2018
The Otopeni factory, which currently employs 650, will be converted partially in 2017 already and will start producing HEETS by the end of the year. “At the moment, the machinery and all the technologies are in place and the production of the first HEETS in Romania is expected to start in the near future,” Bibic told BR. The factory will experience a full conversion in 2018, when it will become an extension construction with a section for tobacco processing.
In order to support its activity, the Otopeni factory will increase its staff by 300 over the next two years, with the first wave of new employees coming in this year.
According to Bibic, they will be paid “to a standard as close as possible to the European one.” Currently, there are over 2.9 million IQOS users worldwide and PMI expects IQOS to be available in key cities in over 35 markets by the end of 2017. The product was launched in Romania in 2015 and over the last year was sold mainly online and in Bucharest. Since the beginning of this year, the product was marketed in the main 16Romanian cities. As of April 2017, IQOS has a share of 1 percent of the Romanian market, which consists of Bucharest and the largest cities in the country. “For the tobacco industry, this means a very rapid growth rate,” Bibic explains, adding that the product has managed to achieve a 7 out of 10 conversion rate among adult smokers.
According to the Philip Morris Romania Managing Director, smuggling is a major concern for the company, which operates in a country where, according to a March2017 study, illicit cigarette trafficking accounts for 15.2 percent. “For HEETS we think we will be dealing in the first phase more with the smuggling from non-EU countries, but we are constantly paying attention on how we can address this possibility.”
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