Investor Day EEMA Region Lausanne, September 29, Drago Azinovic President, Eastern Europe, Middle East & Africa Region & PMI Duty Free

Transcription

1 Investor Day EEMA Region Lausanne, September 29, 2016 Drago Azinovic President, Eastern Europe, Middle East & Africa Region & PMI Duty Free

2 Agenda Overview and Key Results Vision and Strategic Pillars Cigarette Business and Performance in Key Markets Developing Untapped Markets Reduced-Risk Products Concluding Remarks Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes 2

3 EEMA: A Vast and Diverse Region Cigarettes Industry Volume (units trillion) PMI SoM Industry Net Revenue Pool ($ billion) PMI Share of Industry Net Revenue Pool PMI Footprint Adjusted OCI ($ billion) Employees Contribution to PMI Results PMI Cigarette Volume Adjusted OCI % 21 31% , % 31% Note: SoM and Net Revenue Pool exclude duty free 3

4 EEMA: Strong Fundamentals Population Growth (billion people) GDP Growth ($ billion) CAGR: 2.0% 1.8% 2.9% 7.6% 2,167 13,543 1,799 7, Source: Oxford Economics (Nominal GDP) 4

5 EEMA: Delivered Double-Digit Adjusted OCI Growth, Ex-Currency Industry Cigarette Volume (units billion) PMI Cigarette Volume (units billion) PMI Net Revenues ($ million) PMI Adjusted OCI ($ million) CAGR (a) : (2.9)% (1.6)% 8.1% 12.4% 1,174 1, ,025 7,364 3,651 3, (a) 2015 vs CAGRs for net revenues and adjusted OCI are ex-currency 5

6 Regional Vision and Strategic Pillars GROWTH ENGINE FOR PMI DELIVERING LOW DOUBLE-DIGIT ADJUSTED OCI GROWTH (a) GROWING CIGARETTE BUSINESS DEVELOPPING UNTAPPED MARKETS SUCCESSFULLY LAUNCHING RRPs Focus behind corporate brands Leverage key growth segments Digital trade and adult consumer activation Entering whitespaces Enhancing footprint in under-represented markets Attractive Region for RRPs Platform portfolio to address adult consumer needs REALLOCATING RESOURCES TOWARDS RRPs and MARKET ENTRIES THROUGH BUSINESS and PORTFOLIO STREAMLINING (a) Excluding currency and RRPs Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes 6

7 Continue to Strengthen Our Share Leadership Share of EEMA Cigarette Market 30% 25% 1.7pp Gap (PMI SoM vs. #2 Competitor) 2.4pp PMI 20% #2 Competitor 15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Note: Excluding duty free. #2 Competitor defined as trademark owner with second largest SoM for relevant quarter 7

8 Maintain Superior Price and Growth Segment Positioning Key Segments (H1, 2016) Volume Split by Price Segment Key Growth Segment Share 11% Premium 37% 28% Competitors Mid Low 23% 40% 61% PMI s Regional Share 24.6% Competitors 29.4% 49.5% 24.3% 29.9% (a) (b) Low Tar Recessed Slim Capsules (a) Includes low tar nicotine (LTN), ultra LTN and super LTN (b) Historical view. Includes slims, extra slims, super slims and micro slims Note: Excluding duty free. Premium includes above premium 8

9 Judicious Pricing Momentum EEMA Region Pricing Variance as % of PY Net Revenues 13.4% Annual Average ( ) 5.8% 9.5% 7.4% 9.1%

10 Environment of Reasonable Affordability Marlboro vs. Big Mac Index in PMI s Top Markets (% of Big Mac Price) 150 Average 0 Note: Prices are as of June 2016, and The Economist Big Mac Index (July 2016) 10

11 Significant Volume Potential Cigarette Industry Volume (units billion) Reduced-Risk Products Not Present Under-indexed 1, Over-indexed Note: Not present, under and over-indexed figures are based on H1, 2016 market share data, excluding duty free. Not present reflects market with PMI share of market below 0.1%. Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Pack design is for illustrative purposes only 11

12 Focused Portfolio With Leading Brands International Brand Share of PMI Regional Cigarette Volume (H1, 2016) (%) 10 Cigarette Regional Market Shares for Top-5 International Brand (H1, 2016) 78% Marlboro L&M Bond Street Note: Excluding duty free. Pack designs are for illustrative purposes only 12

13 Marlboro: Continue to Strengthen the Brand Marlboro Cigarette Market Share (%) H1, 2016 Note: Excluding duty free. Visuals are for illustrative purposes only 13

14 Marlboro: Innovations Delivering Strong Growth TURKEY Marlboro Touch Slim SoM (%) UAE Marlboro Double Ice / Double Mix SoM (%) March 2014 June 2016 December 2014 December 2015 June 2016 Note: Slim includes slims, extra slims, super slims and micro slims. Pack designs are for illustrative purposes only, and Nielsen 14

15 Parliament: Strong Growth Despite Recessionary Environment EEMA Region (a) Russia Parliament Cigarette Market Shares (%) Saudi Arabia Turkey Kazakhstan Variance: +0.5pp +0.7pp +1.5pp +2.6pp pp H1, H1, H1, H1, H1, 2016 (a) Excluding duty free Note: Top-4 OCI markets where Parliament is present. Variance is H1, 2016 vs Pack designs are for illustrative purposes only, and Nielsen 15

16 L&M: Continuing the Regional Success Story L&M Cigarette Market Share (%) H1, 2016 Note: Excluding duty free. Pack designs are for illustrative purposes only 16

17 Bond Street: Expanding Presence with Slim Offerings Bond Street Slim Regional Cigarette SoM (%) Note: Excluding duty free. Slim includes slims, extra slims, super slims and micro slims Q Q

18 Russia: Cigarette Industry Volume Declines Subsiding Cigarette Industry Volume (% Decline vs. PY) H (7.6) (6.4) (6.4) (5.3) (9.3) 18

19 Russia: After Strong Growth, Temporary Tail-Off PMI Cigarette Market Share (%) +2.0pp (0.6)pp H1 Note: Pack designs are for illustrative purposes only, and Nielsen 19

20 Russia: Growing Share in Resilient Premium Segment Premium Mid Price Segment Share of Market (%) PMI Price Segment Shares (%) 36.1 Premium PMI #1 Low H H1, Low PMI # H1, 2016 Note: Low includes filter (value-price, low filter) and non-filter products Source: Nielsen 20

21 North Africa: Many Years of Strong Growth, Recent Pressures PMI Cigarette Market Share (%) H1,

22 North Africa: Re-instilling Passion into Marlboro in Algeria Key Focus Areas Revitalizing Marlboro brand image and product design MSCAPE REDZ adult consumer engagement platform launched Redesigning route-to-market to increase trade and adult consumer reach ROUTE-TO-MARKET SALES ACTIVATION 22

23 North Africa: Take-back and Portfolio Expansion in Morocco MOROCCO 15.5 PMI Cigarette Market Share (%) Chesterfield Next L&M Marlboro H1,

24 Turkey: Cigarette Industry Recovery and PMI Share Turnaround Cigarette Industry Volume Change vs. PY (%) PMI Cigarette Market Share (%) H1, (7.6) January 2015 January 2016 June 2016, and Nielsen 24

25 Turkey: Leading Premium Segment Growth Premium Premium Segment Share (%) SoM Change (H1, 2016 vs. H1, 2013) +3.2pp Parliament SoS: 48.1% SoS: 51.0% SoS: 52.3% SoS: 50.4% +2.1pp Marlboro SoS: 44.7% SoS: 40.8% SoS: 41.2% SoS: 43.7% +1.3pp H1, 2013 H1, 2014 H1, 2015 H1, 2016 Note: Historical price class Source: Nielsen 25

26 Saudi Arabia: Significant Share Gains Fueled by Marlboro PMI Cigarette Market Share (%) Marlboro H1,

27 Opportunities to Develop Untapped Markets Above EEMA-average share Below EEMA-average share Not present Note: Not present reflects market with PMI share of market below 0.1% (H1, 2016) 27

28 Ivory Coast: Success Story PMI Cigarette Market Share (%) Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug

29 Tanzania: Successful Entry into Challenging Market IMS Volume PMI Cigarette Volume (units million) Focus on Dar-es-Salaam Expanding distribution Combining PMI brand strength with commercial capability of local distributors Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun

30 RRPs: Very Attractive Prospects for Roll-Out in EEMA Heated Tobacco Products Platform 1 iqos PMI RRPs Portfolio Nicotine-Containing Products Platform 3 Strong macroeconomic fundamentals Different platforms to address adult consumer needs Platform 2 Platform 4 By end 2017: RRPs launched in key cities in over 10 markets (75% volume weight) Note: Regional PMI cigarette volume weight, excluding duty free. Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. The products depicted are subject to ongoing development and therefore the visuals are illustrative and do not necessarily represent the latest stages of product development 30

31 RRPs: iqos s Early Momentum 2016 Monthly Variance in HeatSticks Offtake Volume Moscow, Russia +38% +14% +33% Kiev, Ukraine +74% +22% +60% +50% +41% +28% +60% +30% +21% +87% Jan Feb Mar Apr May Jun Jul Aug Feb Mar Apr May Jun Jul Aug Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Pack designs are for illustrative purposes only 31

32 Conclusion A growth engine for PMI, delivering low double-digit adjusted OCI growth, excluding currency and RRPs Robust plans to grow cigarette business: - Judicious pricing in an environment of economic recovery and reasonable affordability - Focused innovation - Leveraging superior brand portfolio Developing untapped markets: - Entering whitespaces - Enhancing presence in under-represented markets Successfully launching RRPs: - Attractive Regional characteristics - Aggressive roll-out plans Business and portfolio streamlining to reallocate resources towards attractive growth opportunities Note: Reduced-Risk Products ("RRPs") is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes 32

33 Investor Day EEMA Region Lausanne, September 29, 2016 Questions & Answers

34 Reconciliations of non-gaap measures included in this presentation to the most comparable GAAP measures are provided on our website at: Glossary of Terms: