Credit Suisse Investor Visit PM Germany Berlin, May 19, 2010 Raman - - PowerPoint PPT Presentation

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Credit Suisse Investor Visit PM Germany Berlin, May 19, 2010 Raman - - PowerPoint PPT Presentation

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Credit Suisse Investor Visit PM Germany Berlin, May 19, 2010 Raman Berent Managing Director Germany & Austria Philip Morris International Forward-Looking and Cautionary Statements This presentation and related discussion contain statements

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Credit Suisse Investor Visit PM Germany Berlin, May 19, 2010

Raman Berent Managing Director Germany & Austria Philip Morris International

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Forward-Looking and Cautionary Statements

This presentation and related discussion contain statements that, to the extent they do not relate strictly to historical or current facts, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. PMI undertakes no obligation to publicly update or revise any forward-looking statements, except in the normal course of its public disclosure

  • bligations. The risks and uncertainties relating to the forward-looking

statements in this presentation include those described under Item 1A. “Risk Factors” in PMI’s Form 10-Q for the quarter ended March 31, 2010, filed with the Securities and Exchange Commission.

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Management

Wagner Erne

Marketing

Raman Berent

Managing Director

Lutz Hollemann

Other Tobacco Products

Siegfried Hanke

Human Resources

Ralf-Wolfgang Lothert

Corporate Affairs

Mark Niehaus

Finance & IS

Alexander Ott

Austria

Arndt Wippert

Sales

Susanne Hübner

Senior Counsel

Matthias Knoop

Operations

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Agenda

  • Germany at a glance
  • Tobacco market dynamics
  • PMI objectives and strategies
  • Concluding remarks
  • Questions & Answers
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Headquarters Factory

Germany at a Glance

Economic Indicators (2009)

Population: 82 million GDP/capita (nominal): US$ 40,875 GDP growth (real):

  • 5.0%

Unemployment: 8.2% Inflation: 0.4% Budget deficit (% of GDP, est.): 3.3%

Munich Dresden

Source: Federal Bureau of Statistics, International Monetary Fund, DIW January 2010 & April 2010 and PMI’s GCTS

Berlin

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Headquarter Factory

Germany at a Glance

Economic Indicators (2009)

Population: 82 million GDP/capita (nominal): US$ 40,875 GDP growth (real):

  • 5.0%

Unemployment: 8.2% Inflation: 0.4% Budget deficit (% of GDP, est.): 3.3%

Munich Dresden

(a) Fine cut converted to cigarettes equivalents based on conversion ratio of between 0.5 and 0.75, depending on the product (b) LA (min.18)-64yos (c) Cigarettes only Source: Federal Bureau of Statistics, International Monetary Fund, DIW January 2010 & April 2010 and PMI’s GCTS

Industry / Demographics (2009)

Tax-paid volume: 125 billion units Total adult smoking incidence(b): 23% Average daily consumption(b)(c): 15.6 cigs.

Berlin

(a)

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Headquarter Factory

Germany at a Glance

Economic Indicators (2009)

Population: 82 million GDP/capita (nominal): US$ 40,875 GDP growth (real):

  • 5.0%

Unemployment: 8.2% Inflation: 0.4% Budget deficit (% of GDP, est.): 3.3%

Philip Morris GmbH

1960 Launch of Marlboro in Germany 1970 Establishment of Philip Morris GmbH 1987 Market leader 1990 Acquisition of f6 Cigarettenfabrik Dresden

Munich Dresden Industry / Demographics (2009)

Tax-paid volume: 125 billion units Total adult smoking incidence(b): 23% Average daily consumption(b)(c): 15.6 cigs.

Berlin

(a)

(a) Fine cut converted to cigarettes equivalents based on conversion ratio of between 0.5 and 0.75, depending on the product (b) LA (min.18)-64yos (c) Cigarettes only Source: Federal Bureau of Statistics, International Monetary Fund, DIW January 2010 & April 2010 and PMI’s GCTS

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Manufacturing

Dresden

  • Factory founded in 1900
  • Acquired by PMI in 1990
  • Local heritage brands,

such as f6

  • Main manufacturing center

for OTP

  • Over 13 billion units equivalent

produced in 2009

  • About 400 employees

Source: PMI

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Manufacturing

Berlin

  • Production started in 1972
  • One of the three largest PMI

manufacturing centers

  • Supplies German market and

exports to other markets, such as Japan and the Middle East

  • Over 63 billion cigarettes

produced in 2009

  • About 1,300 employees

Source: PMI

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  • No. of Outlets

800 Cigarette & OTP Wholesalers Consumers

Distribution and Retail Channels

Tobacconists Gas Stations Vending Food Retailers 13,400 29,100 410,000 50,600 Cigarette 25% 27% 12% 36% OTP 38% 16% 0% 46%

Manufacturers

Source: PMI Market Statistics for whole industry based on USP Full Coverage Panel / RTC. Data is for 2009

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22.0 20.8 20.3 38.6 37.1 39.7 149.9 145.5 89.3 86.9 85.5 144.9 2007 2008 2009 Border Sales(b) TOTAL Cigarettes Other Tobacco Products(a) 128.0 124.0 125.2 Taxable Consumption

Total Consumption 2007 - 2009

(billion units)

Variance vs. PY

0.4 % 7.1 % (1.7)% (2.6)% 0.9 %

(a) Fine cut converted to cigarettes equivalents based on conversion ratio of between 0.5 and 0.75, depending on the product (b) Based on NMA Empty Pack Study and PMI estimates Note: Columns may not add due to rounding Source: PMI Market Statistics based on MSI

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Total Consumption 2007 - 2009

14.6 14.3 13.9 7.0 6.8 6.8 31.6 30.6 28.4 27.3 25.6 25.8 22.7 21.0 23.6 2007 2008 2009

Border Sales(d) Upper Price Industry Cigarettes(a) Other Tobacco Products(c) Lower Price Industry Cigarettes(b) Private Label Cigarettes (%)

(a) Upper Price: mainly Marlboro, Gauloises Blondes, Lucky Strike, HB and Camel (b) Lower Price: mainly L&M, JPS, Pall Mall and West (c) Fine cut converted to cigarettes equivalents based on conversion ratio of between 0.5 and 0.75, depending on the product (d) Based on NMA Empty Pack Study and PMI estimates Source: PMI Market Statistics based on MSI

52.6% 52.0%

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Excise Taxation

Cigarette

  • Ad valorem (% of RSP)

24.66 %

  • Specific (€ / 000)

82.70

  • Minimum excise tax (€ / 000)

139.30 - 143.70

  • Retail prices (€ per 19)

3.70 - 4.70 Fine Cut

  • Ad valorem (% of RSP)

18.57 %

  • Specific (€ / kg)

34.06

  • Minimum excise tax (€ / kg)

53.28

  • Retail prices (€ per 19 equiv.)

1.00 - 1.90

Source: German Tobacco Excise Tax Law (PMI calculation, May 2010)

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Cigarette Retail Prices

(May 2010) Retail Selling Price € / 19 Index Upper Price Industry (e.g. Marlboro) 4.70 100 Lower Price Industry (e.g. L&M) 4.25 90 Private Label (e.g. Goldfield) 3.70 79

Source: PMI Market Statistics based on MSI

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Continuously develop an agile and winning organization Sustainable profitable growth

PMI Key Objectives & Strategies

Develop cigarette portfolio to secure future growth Further reinforce PMI’s position in OTP Ensure a sustainable fiscal and regulatory environment

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Regulatory Framework

  • Reasonable public smoking restrictions
  • Outdoor, cinema, POS and one-to-one marketing

permitted

  • Our objective is to maintain a reasonable regulatory

environment, with a particular focus on our ability to communicate with adult smokers

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Excise Taxation

  • Objective: all tobacco products should be taxed in a fair

manner and product definitions should be consistent with EU directive

  • Strategy: PMI is working with key stakeholders to reduce

the excise tax gap between cigarettes and OTP, and reinforce the Minimum Excise Tax

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Continuously develop an agile and winning organization Sustainable profitable growth

PMI Key Objectives & Strategies

Develop cigarette portfolio to secure future growth Further reinforce PMI’s position in OTP Ensure a sustainable fiscal and regulatory environment

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Cigarette Market Shares by Competitor

36.5 36.9 36.5 18.4 11.3 11.5 27.1 27.5 27.1 18.4 18.0 11.7 5.0 5.0 5.0 10 20 30 40 2007 2008 2009 (%) PMI IMT(a) BAT

(a) Gauloises Blondes shown under IMT Source: PMI Market Statistics based on MSI

Private Label JT

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Cigarette Retail Prices

(2009) May June August Marlboro € 4.00 / 17 € 4.20 / 17 € 4.70 / 19 L&M € 3.60 / 17 € 3.80 / 17 € 4.25 / 19

Source: PMI

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Cigarette Market Shares by Competitor

36.5 36.9 36.5 35.2 18.4 18.3 11.3 11.5 12.8 27.1 27.1 27.5 27.1 18.0 18.4 11.7 5.0 5.0 5.0 5.0 10 20 30 40 2007 2008 2009 YTD Mar 2010 (%) PMI IMT(a) BAT

(a) Gauloises Blondes shown under IMT Source: PMI Market Statistics based on MSI and PMI estimates

Private Label JT

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Key Brands

(% Segment Share; Q1, 2010)

PMI Competition Upper Price

Segment Shares: 47% 12% 10% 5%

Source: PMI Market Statistics based on MSI and PMI estimates

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Key Brands PMI Competition Upper Price Lower Price

Segment Shares: 47% 12% 10% 5% Segment Shares: 22% 7% 22% 20% 13%

Source: PMI Market Statistics based on MSI and PMI estimates

(% Segment Share; Q1, 2010)

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Marlboro Market Share

25.3 24.2 23.0 21.3 30 2007 2008 2009 (%) YTD Mar 2010

Source: PMI Market Statistics based on MSI

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Marlboro Marlboro

Expanded reach through three separate pillars

Flavor Family Gold Family Fresh Family

Marlboro Architecture

Volume split(a): 64% 33% 3%

(a) Q1, 2010 Source: PMI Market Statistics based on MSI

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Marlboro Flavor Family

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Marlboro Break Free Promotion

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Marlboro Gold Family

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Marlboro Smoker Shares LA(min.18) – 24 yos(a)

10 20 30 (%) 21 16 18 Marlboro 2007 2008 2009

(a) 6mma (6 months moving average) Source: PMI General Consumer Tracking Survey or “GCTS”

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2.6 5.1 2.9 4.9 8.6 9.1 8.3 7.0 0.9 6.6 8.4 7.8 7.0 9.3 2.2 4.5 6.8 8.0 5 10 2005 2006 2007 2008 2009 YTD Mar 2010

Share of Market

L&M Performance vs. Key Competitive Brands

L&M JPS Pall Mall(a) (%)

(a) Excluding premium offers Source: PMI Market Statistics based on MSI and PMI estimates

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L&M Architecture

Volume Driver Image Sharpener Extend growth momentum through a mix

  • f mainstream and differentiating product offers
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L&M Metropulse Campaign

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L&M Image Sharpeners

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L&M Performance

(a) 6mma Source: PMI Market Statistics based on MSI and PMI’s GCTS

7 8 5 5 10 15 20 2007 2008 2009 8 13 17 Share of Market LA(min.18)-24 yos share(a) 2007 2008 2009 3 9 (%)

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21.3 9.1 3.1 5 10 15 20 25

Top Ten Brand Families

(a) Q1, 2010 Source: PMI Market Statistics based on MSI and PMI estimates

Share of Market(a)

(%)

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Chesterfield

New pack and campaign

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Continuously develop an agile and winning organization Sustainable profitable growth

PMI Key Objectives & Strategies

Develop cigarette portfolio to secure future growth Further reinforce PMI’s position in OTP Ensure a sustainable fiscal and regulatory environment

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OTP by Category

27.3%

2009 Total Consumption: 145.5 billion units(a)

89.4% 3.3%

2009 OTP Consumption

7.3%

:

(a)

Filter Cigarillos Fine Cut

39.7 billion cigs equivalent

OTP Other

(a) Fine cut converted to cigarettes equivalents based on conversion ratio of between 0.5 and 0.75, depending on the product Source: PMI Market Statistics based on MSI

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Fine Cut by Price Segment

49.8 50.1 23.0 19.8 19.0 25.6 26.7 30.4 30.9 51.3 50.3 23.1 10 20 30 40 50 60 2007 2008 2009

Share of Market

(%) YTD Mar 2010 Lower Price Industry

(€ 3.92 / 40g) (a)

Private Label

(€ 3.44 / 40g) (a) (a) Weighted average price (pouch), status October 2009 Source: PMI Market Statistics based on MSI and PMI estimates

Upper Price Industry

(€ 5.26 / 40g) (a)

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PMI Fine Cut Portfolio

1983 1989 1984 2005 2003 2004 2005

(year indicates launch year)

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PMI Fine Cut Portfolio

1983 1989 1984 2005 2003 2004 2005 2006 2006 2006 2007 2007 2007 2006 2007 2006 2007

(year indicates launch year)

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PMI Fine Cut Market Share

2 4 6 8 10 12 14 16 2005 2006 2007 2008 2009 2010 (%) 2.4 6.5 5.8 5.5 New since Jan 2006 Portfolio until end

  • f 2005

5.5 7.3 7.5 8.3 7.9 13.8 13.3 13.8 Total(a) 6.9 4.4 11.3 2005 2006 2007 2008 2009 YTD Mar 2010 3.7 3.7

(a) 6mma Source: PMI Market Statistics based on MSI

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PMI New Fine Cut Launches

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Fine Cut Share of Industry Volume

27% 20% 19% 34% IMT(a) BAT PMI Other

2009

(a) Gauloises Blondes shown under IMT Source: PMI Market Statistics based on MSI

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Continuously develop an agile and winning organization Sustainable profitable growth

PMI Key Objectives & Strategies

Develop cigarette portfolio to secure future growth Ensure a sustainable fiscal and regulatory environment Further reinforce PMI’s position in OTP

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Organization The organization has been re-aligned to focus on strategic priorities:

  • Consumer engagement organization supported by a

restructured field force

  • Stronger focus on key accounts
  • Establishment of dedicated OTP group
  • Leaner and more efficient back office

Extremely professional, skilled and motivated employees, ready for the challenges ahead!

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Concluding Remarks

  • 6th largest tobacco products market outside the USA
  • Consumption of tobacco products is stable
  • PMI has two best brands:
  • Marlboro, with its new architecture and innovations
  • L&M, the fastest growing brand in the market
  • PMI has made significant inroads in fine cut
  • Fiscal strategy to support business growth
  • Highly skilled and motivated people

An increasingly profitable market for PMI

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Credit Suisse Investor Visit PM Germany Berlin, May 19, 2010

Questions & Answers