RESPONSIBLE MARKETING PRACTICES AT PMIRESPONSIBLE
MARKETING PRACTICESAT PMIDECEMBER 2019

AN ASSESSMENT OF OUR RESPONSIBLE
COMMERCIALIZATION STANDARDS, OUR ADHERENCE
TO THESE STANDARDS, AND AREAS FOR IMPROVEMENT
1RESPONSIBLE MARKETING PRACTICES AT PMI

Dear Reader,
While youth smoking rates have gone down in many
countries around the world, youth continue to smoke.
And with the advent of new nicotine-containing
products, people are rightly concerned that youth
are also using these new products.
Let me be clear. Youth should not use any nicotinecontaining product; nicotine-containing products
are addictive and not risk free. As the CEO of Philip
Morris International, I do not want youth to use anyof our products.
Manufacturers of tobacco and nicotine-containing
products have a key role to play in guarding against
youth use of their products. We take this responsibility
seriously. This is why we have worked consistently over
the years to develop and embed in our organization
global responsible marketing standards. And as wemove forward in our mission to develop smoke-free
products that are better alternatives for men andwomen who smoke, we continue to strengthen anddevelop our responsible marketing standards tomeet these new challenges.
Nonetheless, we recognize we can always do more.
To that end, I am pleased to present the results ofour comprehensive assessment of the steps wetake across our commercial activities to restrict
our product marketing and sales activities to adults.
We undertook this assessment at the request of
one of our shareholders, Trinity Health, who asked
us to report on our adherence to our responsible
marketing standards.
I believe the results of our assessment demonstrate
our strong adherence to our standards and ourcommitment to doing our part in preventing youth
use of tobacco and nicotine-containing products.
I cordially invite you to comment on this report
and to continue to challenge and guide us on thisimportant matter.

André Calantzopoulos
Chief Executive Ofﬁcer
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RESPONSIBLE MARKETING PRACTICES AT PMIINTRODUCTION
In November 2018, Philip Morris International Inc. (PMI)1 received a proposed shareholder resolution from Trinity Health and several co‑proponents.
The resolution raised questions about how
we market our cigarette brands.
Trinity Health is a Catholic health systemthat provides health care in communities
throughout the U.S. and engages in shareholder
advocacy on issues that are central to its
mission, including reducing the negative
impact of smoking and tobacco usage. The
proposal from Trinity Health referenced
allegations that the Campaign for Tobacco
Free Kids (CTFK) set out in a petition thatit and other organizations filed with the U.S.
Federal Trade Commission regarding allegedcigarette marketing practices on social media.2
Trinity Health requested PMI’s Board of
Directors “to review worldwide corporate
adherence to Philip Morris’ own policies
aimed at discouraging smoking among young
people, and report the results of that review

to shareholders by November 2019.”
Members of PMI’s management team reached
out to representatives of Trinity Health todiscuss their proposal. We agreed to undertake
an assessment of our marketing practices andto prepare a report, overseen by PMI’s Boardof Directors, which would be made publicly
available by the end of 2019. We also updated
Trinity Health on the progress of our work in
August 2019.
Although Trinity Health’s shareholder resolution
was focused on the marketing of our cigarettebrands, we expanded the assessment to include
the marketing of our smoke-free products
because of the significance of these products
to our business.
Our ambition is to replace cigarettes withsmoke-free products, and we are developing

and commercializing a range of smoke-free
products that, while not risk free, are a muchbetter choice than continued smoking. Our
smoke-free product portfolio includes heated
tobacco products and nicotine-containing
vapor products (e.g., e-cigarettes), and ourinnovative products are already available inover 50 countries. We are drastically shifting
our resources in marketing and sales awayfrom cigarettes (“combustible products” inthis report) toward our smoke-free products.
For instance, in 2018, 92% of our investment
in research and development and 60% of
our global commercial expenditures werededicated to smoke-free products.
Unlike combustible products, which are known
the world-round, smoke-free products are a
new product category, still relatively unknown.
Our priority is to create awareness among men

and women who smoke that better alternatives
exist. Our marketing activities for smoke-free
products are intended to do just that. As we
progress in our efforts to commercialize thesenew products, we will continuously collectfeedback to ensure that we are continuing toreach the intended audience and minimizing
exposure of unintended audiences, mostimportantly youth.3
The review requested by Trinity Health has
been an important step in our efforts tocontinuously improve. We have now completed
the assessment and take this opportunity tomake the results publicly available. We expect,
and welcome, the public’s feedback on ourassessment and this report.

PMI as used in this report refers to Philip Morris International Inc. and one or more of its affiliates, as appropriate in the context.
Campaign for Tobacco Free Kids et al. v. Philip Morris International, Inc., Request for Investigative and Enforcement Action to Stop Deceptive Advertising Online, Aug. 24, 2018,https://www.tobaccofreekids.org/assets/content/press_office/2018/2018_08_ftc_petition.pdf.
3
Throughout this report, the terms “youth” and “minors” refer to those who are below the legal age for smoking and/or vaping in their countries, or if there is no minimum age law in a country, below the age of 18.
1
2

3

RESPONSIBLE MARKETING PRACTICES AT PMIMETHODOLOGYAND PROCESS
Starting in early 2019, a cross-functional team undertook a comprehensive and critical review of thesteps we take across our commercial activities to restrict our product marketing and sales activities toadults. The project team’s work was supervised by the Deputy General Counsel and the Chief Ethics &Compliance (E&C) Officer, who report to the President, External Affairs and General Counsel, a memberof our Senior Management Team. In December 2019, the Nominating and Corporate GovernanceCommittee of PMI’s Board of Directors reviewed, commented on, and approved this report.
Our assessment started with the review of
PMI’s existing principles, policies, guidelines,
and practices related to the development,
marketing and sales of both combustible andsmoke-free products. The project team also
reviewed global training figures, reported andsubstantiated cases of non-compliance with
PMI’s Marketing Code and Good Conversion
Practices, potential concerns raised on social
media and other channels (www.pmi.com),and corporate audit results.
We interviewed subject-matter experts
from across the company, both in our central

functions and in our market affiliates, to gather
information on our marketing practices and to
get their feedback on how we could strengthen
existing policies and practices. We also surveyed
market affiliates on current youth accessprevention activities at retail. The Corporate
Audit department also performed field visits inseveral market affiliates to check compliancewith provisions of our Marketing Code.
In addition to assessing our own policies andpractices, we looked at publicly available
policies and practices in other companies,
including those in regulated sectors (e.g.,

e-cigarettes, alcohol, gambling) and thosethat that have come under scrutiny for theirmarketing activities (e.g., confectionary andsugar-containing beverages).
Following this review, the project team
identified measures that PMI might introduce
to strengthen our existing policies and practices.
The findings were presented and discussedwith members of the Senior Management Team.
The results of our review and the improvements
we are putting in place as a result of this exercise
are presented in the following sections.

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RESPONSIBLE MARKETING PRACTICES AT PMISUMMARY
OF RESULTS
I. EXISTING PRINCIPLES,
POLICIES & PRACTICES
PMI’s marketing practices must adhere tofour core principles, without exception andregardless of the country or the type of product,as set forth in our Guidebook for Success4,
which is PMI’s global code of conduct:(1) We only market and sell our products
to adult smokers.
(2) We warn consumers about the healtheffects of our products.
(3) Our marketing is honest, transparent
and accurate.
(4) We respect the law and our highstandards.

We also apply, as a minimum, guidelines
to all our commercial activities to reduce
the likelihood that they will be particularly
appealing to minors; for example:(i) we do not use images or promotional materials
that have particular appeal to minors, including
youth-oriented celebrities or cartoons, orbrands, toys or other merchandise which areprimarily for, or used by, minors;

We have policies that set out the standards andrequirements to conduct market research for
combustible products and for our smoke-free
products. The policies restrict such research
to legal age adults who smoke or use othernicotine-containing products. All employees
and third parties who handle market research
activities must receive training on the policies,and relevant third-party suppliers must be
contractually bound to comply with the policies.

(ii) we do not use models who are or who
appear to be under the age of 25;(iii) we do not use branding on promotional items
that is visible to others when the promotional
items are used; and(iv) we do not pay for product placement.

4

Our Guidebook for Success is available on our website, https://www.pmi.com/who-we-are/standards/compliance-and-integrity.

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RESPONSIBLE MARKETING PRACTICES AT PMI

A. MARKETING & SALES OFCOMBUSTIBLE PRODUCTS
Marketing and sales activities for our
combustible products are also governedby PMI’s Marketing Code. The Marketing
Code sets global standards that we follow
along with applicable national laws. Thesestandards reinforce our aim to restrict productmarketing to adult smokers. A summary of thecomprehensive standards in our Marketing
Code is available on our website. 5
The head of each PMI market affiliate isaccountable for the affiliate’s compliancewith the Marketing Code. For example, allactivities subject to the Marketing Codemust be reviewed by the affiliate law andcorporate affairs departments and approvedby the affiliate head and the affiliate head ofmarketing and/or sales. These reviews anddecisions must be documented.
All PMI employees who are responsible formarketing and sales of combustible products,
and any third parties who are substantively
involved in such activities on behalf of PMI,
must receive training on the Marketing Code.
We have also implemented additional guidance
related to other aspects of the marketing of
our combustible products. Because Trinity
Health’s proposal referred to the CTFK petition,

5
6

which was focused primarily on social media,
we describe below additional guidance wefollow relating to our digital activities.

Social Media
Since July 2015, PMI does not use social
media to market its combustible tobacco
products. This applies to all advertising, directcommunications, campaigns or activities,
whether they are branded or unbranded. The
same rule applies to contracted parties suchas event organizers, third-party agencies orbrand ambassadors.

Advertising on the Internet
In countries where advertising on the internet
is not prohibited, PMI may place advertisingfor its cigarette brands on websites that areaccessible to the general public, so long as:• the advertising is accessible only in thatparticular country;• the website has a user base that is reasonably
estimated to be at least 75% adults6;• the advertising is not placed on, or adjacentto, content or features that are directed
to minors;• the advertising is not interactive.

Company Consumer Database andCombustible Product Content Website
We include only age-verified adult smokers
in our company consumer databases, andaccess to our consumer websites is limited toage-verified adult smokers. One or more of
the following age verification processes musttake place before an adult smoker is included
in a database or allowed to access a consumer
website for our combustible products:• A face and age technology that is tested
and proven to be reliable confirms that theconsumer is at least of legal age (minimum
18 years of age in all cases). If the face andage technology is not sufficiently reliable
as a standalone protection, it must be used
together with another technology thatallows age verification of the adult smokers
when they upload identity documentation;• A reliable third party, such as a bank, credit
institution, mobile phone operator, or public
body responsible for population data, verifies
the accuracy of the age provided by theadult smoker in writing or electronically.
In addition, the landing page for any companysponsored consumer website for our
combustible products must be unbranded;must clearly state that the site is only for adultsmokers; and must require adult smokers toregister before accessing the content on thesite. The homepage must also contain a linkto important information about the healtheffects of tobacco consumption.

• When there is direct in-person contact withthe consumer, a face-to-face age check is
conducted by (i) looking at the individual’s
official photo ID and (ii) documenting thischeck in writing; or• the advertising consists only of banners that,for example, announce promotions or provide
a link to a company consumer website; andhttps://www.pmi.com/resources/docs/default-source/sustainability-reports-and-policies/overview-of-marketing-principles.pdf?sfvrsn=5dc091b5_2.
The 75% adult audience requirement is in line with standards applied by other manufacturers and providers of age-restricted goods and services, as well as regulators like the UK Committee of Advertising Practice.

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RESPONSIBLE MARKETING PRACTICES AT PMI

B. MARKETING & SALES OF SMOKEFREE PRODUCTS
In addition to the four core principles discussed
previously, in May 2017, we articulated a setof rules – Our Good Conversion Practices(GCPs) – to govern marketing and sale of oursmoke-free products. In August 2019, we
updated these rules. Consistent with our aim
to provide better alternatives to smokers, ourgoal is to convert adults who would continue
to smoke or use other nicotine-containing
products to our smoke-free products. Thisis the central focus of our GCPs.

PMI’S GOOD CONVERSION PRACTICESPMI offers a variety of quality, scientifically substantiated smoke-free products that are muchbetter choices than continued smoking. Our vision is that our smoke-free products will one
day replace cigarettes.

1

Cigarette smoking causes serious
diseases and is addictive. Without
question, the best decision
any smoker can make is toquit tobacco and nicotine use
altogether.

4

PMI’s smoke-free products are
not risk free and contain nicotine,
which is addictive. Switching to asmoke-free product is, however, amuch better choice than smoking.

7

Minors should not use tobacco
or nicotine in any form.

2

PMI’s smoke-free products arefor adults who would otherwise
continue to smoke or use othernicotine products.

5

We support our adult smoke-free
product users in their journey tofull conversion through educationand guidance.

8

Pregnant women, diabetics andpeople with heart problems should
not use any tobacco or nicotine
product.

3

We do not offer PMI’s smoke-free
products to people who havenever used tobacco or nicotine
products or who have quit using
tobacco and nicotine products.
Our smoke-free products are notan alternative to quitting and are
not designed as cessation aids.

6

For consumers to experience thebenefits of smoke-free products,
they must switch completely andabandon smoking permanently.

RESPONSIBLE MARKETING PRACTICES AT PMI

Each market affiliate that sells smoke-free
products must implement the GCPs using
centrally developed guidelines, toolkits,
training, and other resources. The guidelines
cover four key areas:

Market affiliates are required tomaintain training records. Training isreinforced through in-field observationand coaching by supervisors, as wellas online annual refresher trainings.

(1) Recruitment: The GCPs must be
discussed with prospective employees
and third parties who will interact
with consumers of our smoke-free
products. We will hire employees orengage third parties only if they agree
to follow the GCPs.

(3) Display: The GCPs must be displayed forstaff and consumers at stores and otherdirect retail locations for our smoke-free
products that we own or control.

(2) Training: All employees and third parties
who interact with consumers of oursmoke-free products must complete
in-person training on the GCPs. That
training includes: (a) discussion of
the core GCP principles and theirimportance to PMI’s overall vision; (b)role plays of consumer interactions
that require application of the GCPs;(c) guidance on how to get help andeach participant’s responsibility to
speak up about potential violationsof the GCPs; and (d) tests to facilitate
discussion and learning by participants.

(4) Agreements: Each market affiliate must
update relevant agreements with third
parties to reflect the GCPs and to ensure
contractual compliance with them.
All marketing and sales initiatives andcorresponding materials for smoke-free
products are reviewed to check consistency
with the GCPs and implementation guidance.

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RESPONSIBLE MARKETING PRACTICES AT PMI

In addition to the GCPs, we have developed global
guidelines for digital commercial activities related
to the marketing of smoke-free products. The
guidelines incorporate best practices from various
countries and industries and provide guidanceon both the content of our digital marketing andthe tools we use to reduce the likelihood of youth
being exposed or, most importantly, attracted.
We describe those guidelines below.

Social Media Brand Activation Accounts7• We open an account on a social media
platform only if it has its own native agegating technology and if we have reliable
audience measurement data in the country
that show the audience is at least 75% adult.
If the data are derived from self-declared
age data (whether from the social media
platform owner or a third party), we obtainfurther data to validate the accuracy of theself-declaration.
• We take additional steps to assess the likely
audience of a social media account, which
may include engaging a reputable third-party

audience measurement firm to survey theaudience of the account, random surveys
of individuals using questions designed toelicit whether someone is an adult, or asking
individuals to confirm their age when they
contact PMI directly.
• In addition, we monitor and remove from all
PMI-controlled social media accounts usergenerated content that does not comply withour content guidelines or that is identified
to have been posted by a minor.

Advertisements on Third-Party Websites
and Other Media• We place digital commercial content only
on media for which reliable audiencemeasurement data show that the audienceis at least 75% adult. For targeted digitalcommercial content, we take additional
steps to reduce the likelihood of minors
being exposed to the content by using
available targeting criteria to bias the likely
audience towards adults and intentionally
excluding minors.

• We maintain a list of online channels andtypes of content that could be of particularappeal to minors in and next to which wewill not publish our product content

Smoke-Free Product Websites• We require individuals to self-declarethey are legal age (minimum 18 years ofage) before they are allowed access to a
PMI-controlled product website.
• If an individual visits a PMI-controlled
product website, and self-declares to bea minor, the individual is prevented fromentering the website.
• Where technically possible, we are
implementing technology on our productwebsites that can recognize a device previously
used by someone who self-declared as beinga minor. This enables us to block access to our
website from that device for a period of time.

• Of course, for purchases on our smoke-free
product websites, we have implemented
a variety of age verification measuresin different markets. The measures
implemented vary market to market including
third-party database checks, ID upload
checks, and age verification on delivery,
and are designed to always comply withthe requirements of local law.

Company Consumer Database
At a minimum, we require individuals to selfdeclare their age and confirm they are adults
who smoke or use other nicotine-containing
products before they are registered into a PMI
consumer database. Before we give accessto our smoke-free products to any of these
consumers, for example through a guided
trial, they are age verified.

• PMI includes statements on its productwebsites explaining that its products are
only for adults who smoke or use othernicotine-containing products.

97“Social Media Brand Activation Accounts” are accounts focused on marketing our smoke-free products to adult nicotine users, and are distinct from customer care accounts, which provide customer support to existing adult users of our smoke-free products.

RESPONSIBLE MARKETING PRACTICES AT PMI

II. ADHERENCE TO EXISTING PRINCIPLES & POLICIESPMI has a robust and tested infrastructure for
ensuring compliance with its existing policies
and processes. Three functions—Ethics &Compliance, Internal Controls, and Corporate
Audit—support and monitor compliance with
the Guidebook for Success (i.e., our Codeof Conduct) and our Principles & Practices(P&Ps), through trainings, communications,controls, investigations, and audits.
Overall, our assessment found strong adherence
to our responsible marketing practices. Our
main findings are summarized below.
• Throughout PMI, people not only understandbut are passionate about the fundamental
principle that we should not target ourmarketing and sales activities to youth.
Employees apply this standard routinely
and reliably when developing and deploying
marketing and sales activities, regardless ofthe product, activity, or country. This sharedcommitment is instilled in part throughextensive training on PMI’s Marketing
Code and the GCPs and was reflected in theinterviews we conducted with employees
throughout the organization.
• Marketing materials and activities arereviewed by relevant functions to ensure
8
9that the content of those materials is notparticularly appealing to youth. For global
campaigns, marketing materials and initiatives
are reviewed both at the global level and at
the affiliate level, including by members of
the Law Department.
• Third-party suppliers that provide relevant
services are contractually bound to comply
with the Marketing Code and the GCPs.
• Relevant employees and third parties receive
training on a rolling basis on the Guidebook for
Success, the Marketing Code, and the GCPs. 8- Just in 2018, 86.9% of all PMI employees
participated in training sessions pertaining
to our Guidebook for Success. The
sessions build awareness about risks,
support good ethical judgment, andprepare people to speak up if somethingis wrong or can be improved. During
the first three quarters of 2019, 74.5%
of employees participated in training
sessions pertaining to our Guidebook
for Success.
- More specifically, in 2018, we provided
approximately 26,7009 training sessions
on our Marketing Code through different

channels to employees and relevant third
parties, including suppliers, retailers, andhostesses. During the first three quartersof 2019, we provided approximately 7,700
training sessions on our Marketing Code.
- Extensive training on GCPs is being
delivered to employees and relevant
third parties in the countries where wesell smoke-free products. In 2018, wetrained approximately 27,100 people
and during the first three quarters of
2019, we have trained approximately
30,300 people on GCPs.
• Employees have the obligation to reportpotential misconduct. In relation to Marketing
Code and GCPs violations, seven cases of
misconduct were substantiated in 2018,
and 12 so far in 2019. Three of the cases
involved supplying a device used with oursmoke-free products to a minor as a result of
failure to verify age, and one involved sending
promotional communications to a minor as aresult of failure to verify age. The employee
who failed to verify the consumer’s age ineach instance was terminated. The remainingcases did not involve allegations related topromoting or selling our products to youth.

Employees are notified if they are required to complete training and will receive additional notices and warnings if the training is not completed by the specified deadline.
2018 training numbers include trainings that were conducted during the year but reported after the publication of our 2018 Sustainability Report.

• The Corporate Audit Department, which
reports directly to the PMI Board’s Audit
Committee, also monitors compliance with
our Guidebook for Success, the Marketing
Code and GCPs. The Corporate Audit resultsfor 2018 showed that only a few affiliates
had issues related to Marketing Codecompliance, and the few cases identified
were related to procedural issues.
• During 2019, Corporate Audit conducteda review of controls over various trade andsales activities at our Indonesian affiliate.
The audit included the review of a new
digital platform (i.e., a mobile application)that allows retailers to share promotional
content related to PMI cigarette brands
with registered consumers. The audit foundthat, while no local laws were violated,
the age control measures for the mobile
application did not comply with PMI’s
Marketing Code. As part of the registration
process, consumers were asked to provide
their name, date of birth, and identity
card number and to self-declare that they
were adult smokers, but the consumers’
ages were not subsequently verified as
required by the Marketing Code. Based on

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RESPONSIBLE MARKETING PRACTICES AT PMI

these findings, an action plan was put into
place and several steps were immediately
taken to address the deficiencies, including
removing all data related to any underagesmokers from the consumer database andcontracting with a third-party provider toverify the accuracy of the age provided
by all adult smokers before they can beregistered to use the mobile application.
• During 2019, Corporate Audit conducted
additional field visits in each of PMI’s six
business regions with a focus on checking
compliance with Marketing Code provisions
related to our responsible marketing
standards. Corporate Audit selected one
country in each business region (China,
Greece, Mexico, Indonesia, Russia andTurkey). Members of the Corporate Audit
team visited five discrete points of sale in eachof these countries to assess compliance with
the Marketing Code provisions. No issues
related to youth access were identified inany of the locations visited.
• PMI’s business activities are also subject
to intense external scrutiny fromgovernment agencies, NGOs, media andother stakeholders. PMI takes seriously
and investigates thoroughly any specificallegation regarding youth targeting, usage
or access, where the company may havebeen implicated. The results of two suchinvestigations are summarized below.

• On August 24, 2018, several public healthorganizations, including CTFK, filed a petition
with the U.S. Federal Trade Commission
urging it to take action against four tobacco
manufacturers, including PMI, for alleged
promotion of cigarettes brands using social
media. As discussed above, the use of social
media to market our combustible tobacco
products is prohibited by our Marketing
Code and implementation guidelines.
Therefore, we immediately undertook aninternal investigation of the allegationsin the CTFK petition. Our investigation
confirmed that in none of the countries
identified had any law or regulation been
violated. However, we identified instanceswhere there were insufficient controls toensure third parties complied with ourguidelines. Based on our findings, we took
several steps: (1) we revised our existing
policies, guidelines and internal processes
to clarify that any use of social media for
combustible tobacco products is prohibited;(2) we communicated these changes tomarketing and sales employees, as well as
the agencies and third parties with which
we work; and (3) we strengthened ourcontrols to effectively monitor compliancewith our principles and practices.

• On May 10, 2019, we received an inquiry
from Reuters regarding certain social media
posts that it believed did not follow our digital
influencer guidelines. Prior to this, we engaged
with digital influencers in certain countries
to promote our smoke-free products. We
implemented several guidelines that applied
to all of our activities with digital influencers,
including that digital influencers must be
over 25 years of age and adult smokers
or users of smoke-free products. We also
posted these guidelines on pmi.com. In
response to Reuters’ inquiry, we immediately
suspended our digital influencer program
while we investigated the allegations. Ourinvestigation was not limited to the social
media posts that Reuters identified but
extended to all countries where we were
engaging with digital influencers. Ourinvestigation revealed that while no laws
were broken, we fell short of our internal
guidelines for digital influencer activities incertain instances. In one of the social media
posts shared by Reuters we concluded
that the paid digital influencer was above
the legal age for smoking but that she wasunder the age of 25, as required by ourinternal guidelines. Our global review foundadditional instances in Russia and two othersin Europe where digital influencers were oflegal age but were under 25. Though there
was no intent to violate our guidelines, there
were insufficient controls in place to ensurecompliance. Following our investigation,
two individuals received written warnings.
On October 16, 2019, senior management
issued new guidance making clear that wewill no longer engage with anyone for the
purpose of generating social media posts
about our products.
The assessment we conducted in response
to Trinity Health’s proposal is, of course,
not without limitations. We did notconduct checks in every country orinterview all employees who are involvedin the marketing and sales of our products.
Nonetheless, the findings and data intheir entirety provide a solid basis forconcluding that there is strong adherence
to our responsible marketing policies
and practices. While there have been a
few cases of non-adherence, relative tothe size of PMI’s operations, the numberof such instances is very low, and we
found no pattern that would suggest any
systemic problems. The systems we havein place to detect non-compliance areworking; we have taken all allegationsof non-compliance seriously; and wehave acted promptly to address issues
that have been identified.

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RESPONSIBLE MARKETING PRACTICES AT PMI

III. STRENGTHENING OUR EXISTING POLICIES AND PRACTICESAs part of our effort to continuously improve, we also considered whether there were opportunities to strengthen our existing responsible
marketing policies and practices. Below we discuss several of the improvements we are making, including strengthening our programswith trade partners on youth access prevention, adopting additional measures to monitor compliance with our responsible marketing
standards, and developing a new Marketing Code.
A. YOUTH ACCESS PREVENTIONPROGRAMS WITH THE TRADE
PMI neither owns nor has any means of control
over the vast majority of the retail points ofsale around the world where people buy our
products. However, we recognize that when
we have the opportunity, for instance with ourdirect trade partners, we have a responsibility
to set robust standards and to work with themto guard against sales to underage purchasers.
We conducted a survey of PMI affiliates acrossthe world to collect up-to-date information on
youth access prevention programs with ourtrade partners. We also wanted to identify
best practices that could be replicated inother countries.
Some affiliates confirmed that they had
ongoing programs or activities with trade
partners related to youth access prevention,
but the scope of those programs varied
greatly by country. Based on our findings, weconcluded that there was an opportunity tobring consistency through global guidanceon how to implement and strengthen suchprograms. We have since developed a set oftools for affiliates to use to work more closelywith their trade partners to guard against sales
to underage purchasers. The tools consist of
the following:• Model contract clauses. Beginning in
October 2019, all affiliates were required toensure that new contracts and amendments
to existing contracts signed with retailers
contain specific provisions related to youth
access prevention. The model contract
clauses require retailers to ensure strict
compliance with minimum age laws or, incountries where such laws do not exist, torefuse sales of nicotine-containing products
to anyone under the age of 18. Retailers
are also required to display and maintainany legally mandated signage about theprohibition to sell nicotine-containing
products to minors.

• Educational Modules for Trade Partners.
We developed educational modules on
youth access prevention for our digitaltrade engagement (DTE) platform, which
we use to communicate with our retailtrade partners in various countries. The
educational modules consist of banners,
informational slides, animations and otherinteractive content designed to educate
trade partners on the topic of youth accessprevention for both combustible andsmoke-free products. The modules also
include knowledge checks to assess trade
partners’ understanding of the information.
Trade partners who currently use the DTE
platform will be required to complete theeducational modules beginning in January
2020, and the information in the modules
will be reinforced with all DTE users on asemi-annual basis. Our DTE platform iscurrently used by affiliates in 68 countries
with approximately 529,700 registeredpoints of sale.

• Point-of-Sale (POS) Materials. We developed
stickers for display at the entrance of retaillocations indicating that they do not sellnicotine-containing products to minors.
Additional POS materials are being developedand should be available for affiliates in early2020. Sales representatives must documentthat the locations they visit contain signage
related to the prohibition of sales of nicotinecontaining products to minors.

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RESPONSIBLE MARKETING PRACTICES AT PMI• Written Communications to Trade Partners.
The head of each market affiliate must senda letter, based on a model template, to all
active trade accounts by January 2020 thatreinforces PMI’s commitment to not sell its
products to minors and PMI’s expectationthat all retailers who sell PMI products willtake steps to ensure our products are notsold to minors.
• In-Person Conversations with Key Trade
Partners. Each market affiliate sales
team must have and document regularconversations with all significant trade
partners regarding PMI’s commitment
to guarding against underage sales of its
products. All members of each affiliate’s
sales field force will be trained to conduct
these conversations by the end of 2019.
All affiliates must submit the deployment plans
for their youth access prevention programsby the end of the year and will report on theimplementation of their plans in April 2020.
We are reinforcing the key principles of the
youth access prevention program throughinternal communications to relevant employees
regarding PMI’s commitment to do its partto prevent the marketing or sale of our
products to youth.

B. MONITORINGAs discussed above, PMI has a robust and tested
infrastructure for monitoring compliance with
its existing policies and processes. Nonetheless,
we looked for opportunities to strengthen
our monitoring, and are taking the following
steps, some of which we referred to above:• Concerns around marketing and sales
to youth will be included annually in ourIntegrated Risk Assessment as a global
risk. Corporate Audit will include the issue
in its risk-based audit program each year.
• We will continue to use digital tools, including
social media listening and audience data
analytics, to monitor our digital marketing
activities to ensure that we are reachingintended audiences and to detect any
inappropriate marketing activities controlled
or initiated by PMI affiliates.PMI runs amystery shopping program in a sample ofour smoke-free product retail stores. PMI
contracts with an independent third party
that uses secret shoppers to measure thequality of services offered in these storesas well as compliance with our GCPs. We
are evaluating whether this program canbe scaled up and provide robust feedbackon the consistency of age controls at oursmoke-free product retail stores.

• We will introduce additional monitoring andcontrols for age-verification at delivery forour online sales of smoke-free products.

C. NEW MARKETING CODE FOR ALL
PRODUCTS
Until now, our Marketing Code applied only
to combustible products. After we beganselling smoke-free products, we developed ourGood Conversion Practices (GCPs), discussed
previously, as the foundational guidance for all
our marketing and sales activities for these new
products. Over time, as we gained experience,
we developed more detailed implementation
guidelines. With several years of experienceand learnings, we are now in the process ofdrafting a comprehensive Marketing Codegoverning the marketing and sales of all our
products, including smoke-free products.
The new Marketing Code will continue to be
based on the same values and principles that
already underlie all of our marketing and sales
activities, including our responsible marketing
standards. The new Code is expected to be
finalized during the first quarter of 2020,
after which it will be rolled out to the entire
organization. We anticipate providing a further
update in our next sustainability report.

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RESPONSIBLE MARKETING PRACTICES AT PMICONCLUSION
Overall our assessment showed strong
adherence to our responsible marketing
standards. We are encouraged by the results
and believe they reflect our consistent focus
on the responsible marketing of our products
and our employees’ commitment to thesefundamental principles.
We acknowledge that there were a few
instances when we fell short. Our assessmentshows that when we learn about allegations of
non-adherence to our responsible marketing
standards, we take them seriously, we investigate
their veracity, and where they are substantiated,
we take appropriate follow-up actions. In short,
our monitoring and compliance systems areworking as intended.

But we cannot become complacent. Rather,
we must continue to look for opportunities
to strengthen our standards and processes.
This assessment prompted us to do so, andour report describes some of the additional
measures we are putting in place.
We will continue to improve and evolve thepractices, processes and controls, including
the use of technology, described in this report
as we gain experience and learn more. And
we will report publicly again on our progress
in two years.
We also welcome the public’s feedback on thisreport and on the responsible commercializationof our products.
Finally, we sincerely thank Trinity Health for
prompting this assessment and for their candid
discussions with us on this topic.

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RESPONSIBLE MARKETING PRACTICES AT PMI

We welcome your feedback. If you have comments or suggestions,please contact ResponsibleCommercialization@pmi.com

Headquarters

Operations Center

Philip Morris International Inc.
120 Park Avenue
New York, NY 10017-5579
USA

Philip Morris Products S.A.
Avenue de Rhodanie 50
1007 Lausanne
Switzerland

www.pmi.com

www.pmi.com

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