Philip Morris feels vindicated with investment in Greece

Philip Morris International feels it has won a bet with a 300-million-euro investment in Greece after an agreement reached between Greek authorities and its creditors, Christos Harpantidis, CEO in Papastratos -a subsidiary of Philip Morris Intl- said in an interview with Bloomberg on Friday.

“The New York-based company and its wholly owned subsidiary, Papastratos, didn’t want to wait. Now, with review talks completed between the government and creditors,” Christos Harpantidis, Papastratos’s chief executive officer, says the company feels vindicated.

“Our example will be followed by many others,” Harpantidis, who took charge in August, 2015, said in an interview with Bloomberg in Athens.

The investment from the manufacturer of Marlboro and Chesterfield cigarettes is among the biggest such inflows for Greece since the debt crisis in 2009, and is a much-needed boost for a country that has seen its economy shrink by more than a quarter. Europe’s most-indebted nation needs investments that can rekindle its economy as it works on putting structural changes in place to comply with the terms of its bailout.

Greece resolved the latest impasse over the terms of its bailout program with international creditors in the early hours of May 2, unlocking the way for debt-relief talks and the disbursement of the next tranche of emergency loans. A euro-working group is due to take place on May 15, while Greek lawmakers are due to vote on the agreed measures by May 18.

Philip Morris and Papastratos have begun transforming the unit’s factory in Aspropyrgos, a suburb of Athens, into a producer of tobacco sticks to be used in its state-of-the-art smoke-free systems called IQOS. The plan is to use Greece as one of the company’s bases to produce sticks for exports to more than 30 countries by the end of 2017. Papastratos’s factory currently produces about 12 billion cigarettes per year. When the transformation of the factory is complete, the plant will be producing 20 billion IQOS, Harpantidis estimates. IQOS products are electronic devices that heat specially prepared and blended tobacco. The system heats the tobacco just enough to release nicotine-containing vapor without burning the tobacco. IQOS is a growing market, according to Harpantidis, because these heat-not-burn gadgets are drawing smokers who don’t want to quit but want to limit the harmful effects of smoking. IQOS have more than 1.8 million users and that market is expanding.

“Development shouldn’t come just through shrinking costs, but through identifying your comparative advantages and building on them, like the IQOS,” Harpantidis said. “We have already hired 250 employees for the new factory and when the investment is over we will have 400 more.”

Papastratos, the largest manufacturer and distributor of cigarettes in Greece, currently employs 1,050 people. It had revenue in 2015 of 1.3 billion euros with a 40 percent share of the domestic market. The new jobs at Papastratos will help spur economic activity in Greece, which has seen its unemployment rate surge during the crisis years, taking it to more than 23 percent, according to Harpantidis.

Papastratos expects it will be able to produce the new products from January 2018. For Harpantidis, what’s key is that the investment gives Greece an important piece of the emerging trend in the world’s smoking industry. “We changed our focus because we believe that the future belongs to smoke-free products and in this context Greece will have a key role,” he said.