[Greg] Dominic, Joerg, thanks very much for taking part
in this edition of Global View.
Let's start by talking about some of the changes in sales.
Imperial has moved away from the growth and returns model
to one that's more defined by geography.
So, Joerg, you're responsible for Europe.
Why has Imperial made these changes?
[Joerg] Thank you, Greg.
Good question.
Historically, the differentiation between growth
and returns market made a lot of sense
because we wanted to focus more on financial delivery, where we
already had high market shares.
And more on growth, where the market shares were smaller.
Going forward, most of the organic growth for us
as a company will come from NGP.
So that historical definition made less sense.
[Greg] And Dominic, you now cover, really, a vast area,
don't you?
The Americas, Africa, Asia, and Australasia.
That must involve a lot of travel.
[Dominic] It involves a huge amount of travel, yeah.
But it's also a very interesting job
because there's quite a lot of variation
in some of these markets, variation on market positions.
But our objectives are very clear in what
we're trying to do and we're achieving them
quite successfully.
[Greg] So, with these changes, what
would you say are your sales priorities in 2019?
[Dominic] It's really very clear.
And I think it's very clear for both divisions, actually.
So we want to achieve net revenue;
we want to achieve our operating profit targets;
we want to achieve our market share target;
which means growing in as many core markets
as we possibly can; and most importantly of all,
in both divisions, we want massive growth in Next
Generation Products.
[Greg] Joerg?
[Joerg] I'd completely agree with it.
It makes the prioritisation very easy across the group.
There's really three things that matter.
[Greg] So looking at tobacco, Dominic, what work have you
been doing on reclassifying growth brands?
[Dominic] We've done a lot of work over the past few years
on growth brands.
And, if you remember, we've gone from having an enormous number
of brands, an enormous number of SKUs, really
to narrowing that down to make sure we have a much more
efficient portfolio.
And we can really support the brands that matter.
So what we've got now is, we've got four global growth brands:
West, Davidoff, P&S, and JPS.
And we're pushing, really, all the heavy artillery
behind those brands, making sure that we grow
market share with those brands.
And the indications behind them have
been really pretty positive across the entire business.
[Greg] And Joerg, looking at blu,
in the markets where that's growing,
are you concerned that you're going to be cannibalising
your tobacco business?
I mean, that's got to be a risk, hasn't it?
[Joerg] I'm smiling.
Funny that you ask that.
That was a discussion we had internally.
And really, really cannibalization
is not much of an issue for us.
First of all, because if consumers like something more
than another thing, it's going to happen one way or the other.
And we rather do with them than somebody else, competition.
Secondly, most of the smokers that come to vaping, and to us,
come from competitive brands.
Even in our high share area, like in Europe, 60 to 80%
of smokers will come from a competitive brand.
And finally, lastly, most importantly,
probably, at least in the initial stage of change
from smoking to vaping, consumers
are not typically reducing the consumption
of FMC or cigarettes.
They're mixing vaping with cigarettes,
so we shouldn't really be concerned about that.
[Greg] Do you think that there might be a feeling that tobacco
has slightly taken a back seat to Next Generation Products?
Because NGP is where the emphasis is,
but tobacco is still, by far, the bulk of your business.
[Dominic] I mean, there's an emphasis in both areas.
So, as you said, tobacco generates enormous profits,
enormous net revenue for the business.
But the amount which the tobacco businesses
is capable of growing, the percentage levels of growth
that it could achieve, are smaller
than the NGP business can.
So actually what we need to do, as both divisions,
is to make sure we still achieve growth
in the tobacco business, what we call the Tob Max business.
Keep that running very successfully,
which is what we're doing.
Whilst at the same time generating really impressive
growth with NGP.
And those two things together can have a very positive impact
on our group performance.
[Greg] Joerg, it seems like the whole focus of the sector
is on Next Generation Products, NGP,
but tobacco is still the bulk of your business.
So shouldn't you be talking about it more?
[Joerg] Funny that you say that because it's
people like you who ask a lot of questions about NGP, rightfully
so, that we end up spending a lot of time on it.
Which doesn't change the fact that we actually
work a lot on Tob Max, which is still
the chunk of the business.
Just as an example, we are right now changing and migrating
a lot of brands into growth brands in various core markets,
like Germany, the UK, and in Spain.
We're also revamping our Gauloises brand.
We're getting ready for the menthol ban in Europe.
And we're getting ready for track and trace.
So there is a lot of work going on Tob Max,
and it's the cross-functional team delivering that.
[Greg] But, ultimately, you want to move smokers
on to lesson harmful NGP.
Isn't that what Creating Something Better is all about?
[Joerg] Well you see, thanks for mentioning Creating Something
Better, which is our vision.
Not only for NGP, but for the entire business,
including Tob Max.
And some of the changes I just mentioned on the branded
and product side are actually there
to deliver a better experience also in tobacco.
Having said that, we're happy for any smoker who
decides to move to a risk reduced product.
The reality is that, those people who still smoke today,
genuinely likes smoking.
And it's our duty to also give them better solutions.
[Greg] Do you think investors have confidence
both in your performance and your strategy?
[Dominic] It's not up to us to second
guess the basis on which investors make these decisions.
What it's up to us to do, what me and Joerg
are trying to do everyday, and generally succeeding,
is making sure that we deliver a fantastic performance
for the business in total, the tobacco category for the Next
Generation Products.
[Greg] You both have a significant other
responsibilities beyond, if I can call it, the day job.
So Joerg, you're leading the DriveSafe Policy.
Why is that important for Imperial?
[Joerg] Yeah, very good question.
Road accidents, unfortunately, are a critical risk area
when it comes to health and safety of our employees.
And obviously, we in the sales division
have a lot of field sales force people on the road,
especially in some hazardous conditions,
like in Africa and Russia.
That is an opportunity to make a difference.
We have an objective, as well, to improve our lost time
accident rate year on year.
Good news is, year to date, we're
actually making the progress.
We're better than 2018.
And right now is not the time really to be complacent,
but to stay vigilant and focused on it.
[Greg] And Dominic, you're responsible for diversity.
Do you think Imperial's been a bit behind the curve on this?
[Dominic] I don't know if we're behind the curve,
but certainly there's more we need to do.
So if you look at the Hampton-Alexander
recommendations, we need to get 33% of our board and top
management as females.
And we're saying we'd like to do that by 2023.
And that's a significant uplift versus where we are now.
So we've got quite a comprehensive set of actions
in order to correct that.
And, of course, it's worth reminding you,
there are two reasons why we do this.
One of them is it's the right thing to do.
We firmly believe as a business diversity is the right thing
to do.
But we also have a more selfish reason to do it,
which is that we believe it can give us commercial advantage.
We generally underperform in many of our markets
with female consumers, we sometimes underperform
with young adult smokers.
So if we allow our management to better reflect the consumer
base in the places where we compete, we believe that,
as well as being the right thing to do,
that can give us a competitive and commercial advantage.
[Greg] Well, Dominic, Joerg, it's
been good to hear from both of you.
Thanks a lot for taking part in Global View.
[Joerg] Thank you.
[Dominic] Thank you.