Philip Morris coming to state
Move of HQ to bring 200 jobs
STAMFORD — Philip Morris International made a loud arrival in Connecticut Tuesday, promising to set up shop in the state with its headquarters and 200 jobs, a move that boosted the standing of Gov. Ned Lamont, heated up the Fairfield County business climate and brought both praise and skepticism that the world’s largest tobacco company is moving beyond its cigarette culture.
The company anticipates it will complete the head-office move from New York City to a yet-undecided location in Fairfield County by summer 2022, raising the number of Fortune 500 companies in Connecticut from 14 to 15.
That would mark the state’s most significant economic development win since the days of former Gov. Dannel P. Malloy’s multimillion-dollar incentives. It would recoup nearly the number of jobs lost when General Electric moved its corporate headquarters from Fairfield to Boston in 2016.
“Connecticut offers a valuable mix of technological know-how, future-forward thinking, and an open-minded approach to problem-solving. We consider it an ideal location for our new U.S. head office, where we will be working to more quickly achieve our vision of a smoke-free future,” Philip Morris International CEO Jacek Olczak said in a news release.
The tobacco giant ranks 101st on the Fortune 500 list of the largest U.S.-based companies, ranked by total sales, which would make it the third-largest company in the state behind Bloomfield health insurer Cigna and Stamford’s Charter Communications.
Lamont elaborated on the move by the maker of Marlboro cigarettes to southwest Connecticut at a panel hosted by economic development nonprofit AdvanceCT alongside Olczak Tuesday morning. PMI’s new headquarters will house its North American team and other parts of its corporate workforce.
“PMI and Connecticut: we’re both sort of reinventing ourselves,” Lamont said to an eager crowd at The Village, Stamford’s newly established media and technology campus. “This is a state that had TV, and now we’re leaders in digital media. We had finance and banking; now we’re leaders in fintech. We had medicine; now we have biopharma.”
The 200 new jobs for Connecticut will include both new hires and transfers from the company’s Manhattan headquarters, PMI spokesman David Fraser said.
Praise and scorn
For Lamont, the move could become a business cornerstone to an expected run for reelection in 2022. Unlike Malloy, who lured and kept companies with incentives sometimes well over $100 million, Lamont has steered clear of special packages, instead focusing on stabilizing the state’s fiscal and economic climate — with mixed results.
Lamont drew a parallel between Connecticut’s makeover and that of PMI, which markets tobacco products overseas and has said it intends to dramatically lower its dependence on cigarettes over the next few years — using safer delivery systems and expanding into medical products.
But big names like the American Cancer Society and the Campaign for TobaccoFree Kids depicted PMI’s years-long facelift as a distraction from its history of wrongdoing.
“Connecticut leaders should not be welcoming today’s announcement by global cigarette giant Philip Morris International,” said Campaign for Tobacco-Free Kids President Matthew Myers in a statement. “They should not fall for Philip Morris’ empty promises that it is committed to a smoke-free future. The reality is that Philip Morris’ main business is to sell deadly and addictive cigarettes, it aggressively markets cigarettes around the world, and it fights policies that would actually reduce smoking and help to create a smoke-free future.”
The American Cancer Society sang a similar tune and called on the state’s lawmakers to make decisive moves against tobacco companies through legislation.
“With the tobacco industry taking up residence in Connecticut, it’s time for lawmakers to recommit to protecting our kids, communities of color and other groups targeted by Big Tobacco from deadly tobacco addiction,” Amber Herting, a spokeswoman for the society’s political action committee, said in a release.
The American Cancer Society specifically called on lawmakers to end “the sale of all flavored tobacco products, including menthol cigarettes” in Connecticut. Just days before the Philip Morris announcement, advocates pulled their proposed ban on flavored vapes from the state Senate after it was replaced by a diluted version of the bill. Lawmakers in April pulled a provision that would ban menthol cigarettes in Connecticut, citing lost state revenues.
Lamont, when asked Tuesday, vehemently denied PMI’s relocation had anything to do with the death of the flavored vaping bill.
A 21st century spinoff
Despite its iconic name, Philip Morris International as an independent entity is relatively new. It made up a significant part of the Altria Group, known previously as Philip Morris Companies, before spinning off into a separate corporation in 2008.
Philip Morris International does not sell cigarettes in the United States; its market share lies in 180 other countries. Altria subsidiary Philip Morris USA makes American Malboros, a distinction that Olczak joked has caused some branding confusion for his company.
“We got divorced, but we forgot to change our names,” he said to the audience in Stamford Tuesday.
The split freed the majority of Philip Morris’s products from legal challenges facing the tobacco company in the United States following high-profile lawsuits against tobacco firms.
Until 2001, Philip Morris International, then as a division, called nearby Rye Brook, N.Y., home before the company’s operational branch moved overseas to Switzerland. The company employs more than 71,000 people worldwide.
Olczak said PMI has not settled on where in Connecticut the company will nest but clarified that PMI has its sights set on lower Fairfield County expressly. Lamont emphasized the lack of perks, saying PMI will not receive any loans, grants or tax credits for its move across state lines.
“This is a different type of relationship,” the governor said. “You’re used to relationships where we paid people incentives based upon a certain number of jobs.”
He added, “They’re going to come into the state, create a brand new product that makes a big difference, and we did that on the basis of trust.”
Economic and Community Development Commissioner David Lehman described the thinking behind a strategy that doesn’t offer big incentives.
“Even if you assume 50 percent of these company relocations would have happened, but you’re giving 100 percent of them incentives, then you’re overspending by half,” Lehman told Hearst Connecticut Media. “We’re really trying to focus on competing on our merits. We think that’s going to be more persuasive and more fair to taxpayers over time.”
Discussions about the move, Olczak revealed, have been in the works since September 2019, when company chairman André Calantzopoulos was still chief executive. Olczak ascended to Philip Morris International’s top spot last month.
Old company, new outlook
Since 2016, PMI has publicly committed to transforming its business model, “replacing cigarettes with better alternatives,” and moving longtime smokers away from traditional products. But that doesn’t mean that the Malboro Man is quitting coldturkey.
In place of old-school tobacco products, PMI flooded billions of dollars in research and development for its “heat-not-burn tobacco” product IQOS. Unlike e-cigarettes or vaporizers — which use a nicotineinfused liquid — non-combusted cigarettes heat tobacco to a low temperature. Though Philip Morris sells the device in 64 countries, American customers can only buy the burn-free product in a handful of states.
After the Food and Drug Administration authorized the pseudo-cigarettes in 2019, PMI started selling IQOS, through an exclusive license with Altria, in the Carolinas, Georgia and Virginia.
In 2021’s first quarter, PMI saw 28 percent of its revenue come from IQOS sales globally. By 2025, PMI wants smoke-free products to account for 50 percent of its total net revenues.
Alongside the new product, the corporation also became the sole financier of the Foundation for a Smoke-Free World in 2017. PMI committed to giving the organization $1 billion over 12 years to help “end smoking in this generation.” Even though the foundation calls itself an “independent, nonprofit, tax-exempt, private” entity, the World Health Organization issued a scathing rebuke of its relationship with PMI that same year.
Even after catching heat from public health officials and advocates, Olczak has doubled down on PMI’s smoke-free future.
“I know it’s the words of a CEO, so they always have to be taken with some doubt, but I believe what this company is really great on all aspects,” he said. According to PMI Lead Independent Director Lucio Noto, paying for executives at PMI is tied directly to meeting its tobacco-related goals.
Lamont firmly endorsed the company’s trajectory ahead of any potential criticism about Big Tobacco’s newfound presence in Connecticut.
“Look at the new PMI,” Lamont said. “Listen to what Jacek said about how PMI will be defined over the next three to five years.”
But the transformation isn’t just a boon to PMI, he continued. It also builds his administration’s attempts to attract and retain young residents, something one of the event’s co-hosts, AdvanceCT co-chair Indra Nooyi, made abundantly clear.
“We have talent. We have an abundance of well-educated and gifted people. We have a world-class education system. And people enjoy a quality of life that we often boast,” she said. “Please go around telling people that because this is an awesome state for women to work and for young family builders to actually build a family.”