Mindaugas Dacys, General Director at Philip Morris Baltic: 'We are celebrating the 10th anniversary of introducing our leading smoke-free product'

  • 2025-01-27
  • Linas Jegelevicius

The Philip Morris International factory in Klaipeda, Lithuania, has become an integral part of the seaport city’s history. It stands out as one of the first foreign investments in the region—most notably, the first American investment and among the earliest U.S. investments in the country. “When Philip Morris International (PMI) invested in Lithuania more than 30 years ago, we had just regained our independence and were striving for global integration and economic growth. The company saw potential in the port city with an existing tobacco factory,” Mindaugas Dacys, General Director at Philip Morris Baltic, told The Baltic Times Magazine

When buying this factory in 1993, he says, PMI envisioned investing in the greenfield. Thus, in 1997 the company opened larger state-of-the-art facilities on the city outskirts, one of the region’s first greenfield investments. “With new facilities, good and safe working conditions for the employees were ensured,” M. Dacys said.

In 2002, PMI transferred the old Klaipeda Tobacco Factory landmark building to the city for a symbolic 1 litas. Now called the Klaipeda Culture Factory, it is being preserved and serves for the city’s social and cultural activities.

How has the factory evolved over the years? How has the geographic distribution of your end clients shifted over time?

 

Since PMI came to Lithuania, we invested over 400 million euros into production, processes, product quality and employee development. After product quality and packaging improvements, it started producing for other markets: in 2005 – for duty-free shops abroad, and in 2011 – for the Japanese market. 

 

Today 98 percent of the factory’s production is exported to 33 markets and accounts for a significant share of the region’s exports and the Klaipeda seaport’s load. According to the economic overview by the Lithuanian Innovation Agency, in 2022 tobacco products accounted for 17.5 percent of Klaipeda County’s exports. 

 

Over the years, production volume increased, and the factory in Klaipeda now ranks high among PMI factories worldwide – it is the second-largest PMI production facility in the EU and fourth globally. Over our history, production has increased more than 10-fold. 

According to the latest local study, in 30 years the return on investment was 13 euros for each 1 euro invested. Also, PMI companies here paid over 4 billion euros of taxes during those 30 years.

I assume your Klaipeda factory is now carbon-neutral. What are your next steps in aligning with the European Green Deal, and what new sustainability goals are emerging for your operations?

Sustainability has always been a core priority for us, and even before the European Green Deal became a central focus, we were already committed to environmental responsibility. 

Since 2015, we have been working to reduce our environmental impact by investing in renewable energy sources and innovating our operations. In 2019, we achieved a significant milestone when Klaipeda factory became the first PMI facility globally certified as carbon neutral. 

The factory also follows a strict "zero waste to landfill!" rule: all waste is sorted so it can either be recycled and turned into new products or incinerated so the extracted energy can be used as heating for the city. factory continues to implement various initiatives related to reducing Greenhouse gas (GHG) emissions across the supply chain. 

These efforts contribute to PMI’s global sustainability goals and are essential because achieving carbon neutrality in our direct operations by 2025 and across our entire value chain, including indirect emissions by 2040, are key objectives for PMI. As we progress, we will continue to innovate and collaborate with our suppliers to reduce emissions and ensure we meet our ambitious sustainability targets.

Philip Morris is widely recognized as a caring, equitable, and diversity-conscious employer. Please speak about that.

Being among the first international investors, we also brought the working culture and standards of the advanced Western and an exceptional approach to the employees that had not been seen here before. Many of these are common to more businesses now, but we aim to do more, as it is crucial to the company’s growth and growth of people, our business environment and Klaipeda.

We care about the culture of equality, diversity and inclusion that encourages innovation and creativity, helps to reveal our talents and thus helps us to achieve common goals. For example, in the Baltic States, women already account for 60 percent of management positions in companies – significantly higher than the EU average of 35 percent

We provide opportunities for development and career advancement. We encourage talent growth inside the organization and are proud of our talents, who now work in very responsible positions worldwide. 

Your ambition is to become substantially smoke-free by 2030, with your smoke-free business generating over two-thirds of total net revenues. Are you on the path to achieving it without any adjustments?

This year, we are celebrating the 10th anniversary of introducing our leading smoke-free product. Launching this innovation was a breakthrough toward our commitment to a future without cigarettes. 

Results also illustrate our aspiration to transform. As of June 30, 2024, PMI's smoke-free products were available for sale in 90 markets, and we estimate that 36.5 million adults around the world use PMI's smoke-free products. They accounted for 38% of the company’s net revenues in Q3 2024, up from practically zero in 2014.

To date, we have invested over $12.5 billion to develop, scientifically substantiate and commercialize innovative smoke-free products. These products are a better alternative for those who would otherwise continue to smoke. Also, different health organizations in the US, UK and other countries have publicly stated that smoke-free products are less harmful than cigarettes and that switching to them can contribute to improving public health. 

How are all Philip Morris International factories doing amid the shift from the traditional cigarette to a smoke-free future? Does your Klaipeda factory stand out in a way? 

PMI is amid transforming its business and is massively investing in phasing out cigarettes in favor of scientifically substantiated reduced-risk smoke-free products for adult smokers who don’t quit. Today, seven out of eleven countries where PMI manufactures its’ smoke-free products are in Europe. Greece, Italy, and Romania alone account for almost 75 percent of PMI's heated tobacco products. 

The factory in Klaipeda is one of the few throughout the EU that still produces only cigarettes. It is one of the company’s most important in terms of cigarette production capacity – the third-largest facility in the EU and one of TOP5 worldwide. In most countries, such factories have already been converted to partial or full production of heated tobacco products.

As we make progress towards a smoke-free future we will continue to consider our global footprint and ensure we have enough capacity to provide those who switch to smoke-free alternatives with the product of their choice. Like other important PMI factories, Klaipeda is a key part of this assessment.

What are you expecting from 2025?

Stability and predictability are essential for business and dialogue regarding the potential of the change in the tobacco market. Also, the market faces the dynamics of the illicit market and taxation policies that impact the smoke-free shift. Thus, the regulatory decisions and the state’s position regarding smoke-free products play an important role in the shift of society to leave cigarettes behind. 

We strongly believe that each year could bring us closer to a smoke-free future. It was successfully done in Sweden, where cigarette consumption recently fell below 5 percent, compared to 29 percent in Lithuania, 33 percent in Latvia and 25 percent in Estonia. This could be achieved if not only business but also the state and EU institutions would encourage change.

We will continue to take care of our employees’ well-being, ensure sustainability in all our activities, and seek a smoke-free future globally.

What will Philip Morris International look like in, say, 20 years from now?

It is my strong belief and motivation that in 20 years we as a society could phase out cigarettes. A smoke-free future is attainable, and the benefits it can bring both to the people who would otherwise continue to smoke and global public health are enormous. With the right regulatory encouragement and support from civil society, cigarette sales can end within 10-15 years in many countries.

We hope to remain part of Klaipeda’s business landscape, continuing to implement higher standards in production quality, employment, sustainability and business conduct.