I'm Nick Rolli, Vice President, Investor Relations and Financial Communications. Earlier today, we issued a press release containing information that will be presented during today's event. You may access the release on www.pmi.com or the new PMI investor relations app. Today's remarks contain forward-looking statements and projections of future results. I direct your attention to the forward-looking and cautionary statements disclosure in today's presentation and press release for a review of the various factors that could cause actual results to differ materially from our forward-looking projections or statements. Please also note the additional forward-looking and cautionary statements related to COVID-19. A glossary of terms, including the definition for reduced-risk products or RRPs, are posted on our website. Please note also that the growth rates presented on an organic basis reflect currency-neutral underlying results, and like-for-like comparisons where applicable. Unless otherwise stated, all references to IQOS are to our IQOS heat-not-burn devices and consumables. Let's take a quick look at the agenda. We have three presentations from senior management. We'll have a 10-minute break in between each presentation and before the Q&A session. This event is a live video webcast. We will post the slides of each presentation at the start of each presentation, and following today's meeting, we plan to also post the full transcript, including the Q&A session, as soon as reasonably practicable to our website. It's now my pleasure to introduce André Calantzopoulos, our Chief Executive Officer. André? Thank you, Nick, and welcome to all of you. Good morning, good afternoon, depending on the time zone you're in. Would of course have loved to have this meeting in person, but we'll try to do our best, looking at a screen to explain our strategy and our mid-term outlook. Before that, I would like to first summarize what we achieved so far. It is just over five years now since we launched full-scale IQOS and also the beginning of our smoke-free transformation. I think we've made tremendous progress. We did try many things. We innovated a lot. We invested a lot, as you all know, and learned a lot. All this, I think, made us a much better organization, much more prepared, and even more confident for the years to come. In summary, almost $7 billion in net revenues coming from IQOS. Almost one quarter of our business and 35%, if we aggregate the three regions where IQOS is meaningfully present. Almost 18 million users, which is just the beginning, obviously. We are scratching the surface with IQOS across 64 markets. We have maintained 80%+ segment share of heated tobacco products with premium positioning, and despite all the competitive activities. Very importantly, we focus on responsible marketing practices to minimize unintended use because we know from a regulatory and public health perspective, this is a very important subject. PMI and the IQOS brand are the clear leader in smoke-free, I think both in volume and in brand equity, as we will see today, just as Marlboro is in cigarettes. Actually, IQOS is already the number five nicotine brand, despite only being present in less than half of the world. I believe it could reach the number two position just after Marlboro by 2023. I think we are pioneering in tobacco harm reduction. That supports a unique ESG impact story, which we'll elaborate today. Obviously, the product change, and switching smokers out of cigarettes into less harmful alternatives is the biggest contribution we can make to society and public health. We excel in many other important ESG areas, as Emmanuel will explain later on. Finally, all these achievements didn't come without investments. $8.1 billion in cumulative investments in central developments. That includes, clearly, commercial activities. I think we have now built the platform from which we can expand further. Of course, during the last five years, we had prolonged currency headwinds on our dollar earnings. This year, I think we have, for the first time, a positive currency, and I hope it will remain. That will help us clearly enormously. The big question still is the effects of the COVID crisis, especially on the combustible business. As we all know and explained in the investors calls previously, IQOS is remarkably resilient, although we had obviously some delays, compared to our original plan. Having said all that, what are we going to cover today? We have gathered a lot of investor feedback in preparing this event, and we plan to address the main questions. First of all, what is the RRP category growth outlook? What are the obstacles and the enablers? I will spend some time on the most important one, that is regulation. Reality is, we are just at the beginning of the RRPs, and I think the potential is still enormous. The second question is, why do we believe that we will maintain PMI's leadership in smoke-free products, which I'm convinced we will, and we will explain why. We'll give you more granularity on category economics and profitability, especially on IQOS, because there are many questions to understand how the top line translates into bottom line. Of course, we had the questions from investors. Yes, we do keep an eye on combustibles. I'll explain the strategy we have and the outlook also in a post-COVID context. We will talk about capital structure, shareholder returns, and especially the resumption of share buybacks. As I said previously, ESG and sustainability, because I think we have a unique story and contribution, and I think we need to do a bit more work, or much more work actually, with ESG investors as PMI story and contribution is not fully understood. I'll also touch upon how we can leverage existing capabilities we have developed in life sciences, preclinical and clinical, in formulation of substrates, and respiratory capabilities and aerosolization capabilities, so that we can start expanding beyond nicotine over the longer term, so we are not just a tobacco or nicotine company, but more than that. I will touch upon all the subject to provide context to the extent possible, obviously, Jacek and Emmanuel will give much more details and color. The first, I think, highlight is we aim to reach over 50% of net revenues from smoke-free products or non-combustible products by 2025. I think we're on the right path to get there, and I think we're driving, I would say, a new phase of category development. So far, I think we used only one platform and essentially one technology. I think we can do much more to accelerate in this field. Now we have the infrastructure, knowhow, and product pipeline to do so. We will continue leveraging, obviously, our leadership in combustibles so that we can support the smoke-free expansion. Obviously, smoke-free products don't need financing from combustibles, but still, access to smokers and infrastructure, especially for new markets, is important. An accelerator to all this can be a differentiated regulation that applies specifically to smoke-free products, both in terms of taxation, ability of communication, pre-market and post-market elements, so that this can be, I would think, an important accelerator to growth, but we have not taken this into consideration at least for our 2021 to 2023 projections. Let's come to the numbers now. Starting from the top obviously, we project more than 5% organic growth at revenue level over the next three years, and I will explain how we get to this. We expect an acceleration in margin and EPS growth and target more than 9% earnings per share. We believe that by 2023, we'll be around 40% of net revenues from smoke-free products on the way to 50% by 2025. The important number here is the heated tobacco shipment volumes of a range of 140 billion-160 billion. We also target cost efficiencies that Emmanuel will explain, but they come both from manufacturing, I would say half of it, and also half of it from SG&A. Obviously this is growth. Some of that will be reinvested to fuel the growth of the RRPs. Let me explain a little bit how we come to this more than 5%, it may well be higher, obviously, I will explain the factors. First of all, if we look at heated tobacco units, we take, just as an example, 10 billion heated tobacco units growth, we have to subtract, obviously, the cannibalization of our own portfolio of tobacco products. I would say that if we compare the markets we are in, and assuming existing pricing and existing tax rates, 10 billion heated tobacco units for PMI will give incrementally something between $650 million and $700 million of net revenues, to which we can add 8%-10% for device sales in terms of revenues. That would translate to around $525 million- $550 million in gross profit, and Emmanuel will come back on how now that can flow to the bottom line. That's the first thing to remember, and I'm trying here to give as much color as possible so that everybody can calculate more easily their numbers. If we look now at the range of 140 billion-160 billion units, that gives approximately a 1.5 compound average growth difference from lower to upper hand of the range net of cannibalization. Then we come to the impacts of COVID. The first question is, when is duty-free going to come back? Duty-free fully recovery can add up to 1.1% compound average growth rate. We don't know exactly when is it going to happen, to which extent this is going to happen, 100% or 80%. I give you this range from zero to 1.1% CAGR. We said that we lost a lot of consumption last year, and some of this volume can come back during the 2021, 2023 period. I would say the COVID recovery could be between zero and 1.4% compound average growth rate. That is all combustible. The easier numbers to calculate to see the ranges in which we can be above 5%, is to know that a 2% combustible volume decline, if we now have excluded already the cannibalization, is about - 1.7% CAGR, and a 3% volume decline is - 2.5% CAGR. Typically, we cover and much more than cover these numbers through price. That's the parameters to see what ranges we can have, and as you see, there is some degree of uncertainty, especially because of COVID during this period. I think we spent a lot of time here on this slide, but I thought it was important. If we look at a little bit of the outlook, we expect the total nicotine industry to decline about 1%-2% over the next three years. Also, as I said, depending on COVID rebound. We assume, I would say cautiously, 10% of international industry by volume to be smoke-free by 2023, and heat-not-burn to be at least 70% of the category. Bear in mind that in the markets where IQOS is present, these 2020 percentages are approximately double. Obviously, as I said, this does not assume a major acceleration in regulatory progress. Heated tobacco products will continue operating with the same restrictions as cigarettes in many markets. If we look at differently the retail value, we estimate that although heat-not-burn was 3.3% of industry volume, it was 4.7% of retail value. Obviously more at the net revenue level due to higher net revenue per unit. Conversely, the vapor is lower because also of the prevalence of open tax systems that particularly reduce the average value and the absence of excise tax although the trade margins are much higher. The next five years, we expect the overall retail value to grow by approximately 4%. This, of course, includes pricing and taxation. This includes an over 25% growth in heat-not-burn and 10%-15% growth of e-vapor, depending on the mix of open and closed systems and the conversion rates to full use. I think this is moving in the right direction, and clearly, better regulation and a more unanimous front amongst the industry competitors would accelerate these results. A different way to look at this is now we look at the markets in the first two columns left and right, both in terms of number of consumers or users and in billion units. As we can see, IQOS, just in the current footprint, we have still to go for 150 million people, and if we address the entire footprint in the current markets without even expansion, we have 250 million users potentially and 1.2 trillion units. Just in the markets we are in, and of course we're planning geographic expansion, I think we have room to grow. I'm not saying it's the easiest thing on earth, but I think we are well-equipped to progress. Now, I tried to list here what we have learned from commercializing RRPs now for five years, and what it takes to excel in this category. Obviously, the first one is product. We need to master. The common denominator, as we all know, of these products is the absence of combustion. I'll come back to this, but that's the problem in cigarettes. All these products are non-combustible products. Clearly, you need to master aerosolization, and we all know that internal heating gives the best sensory. Of course, you have electronics and electronic supply chains, and most importantly, we need constant innovation, and I will come to our innovation philosophy. The second thing is we need to build new brand equity. It takes time, but I think IQOS has the highest equity, and by and large, among all products in the RRP space. Obviously, we need life sciences for substantiation and post-market surveillance, including very strict surveillance to make sure that youth and other unintended audiences are minimized. The manufacturing and supply chain is very different because we have electronics, we have third-party partners, we have reverse logistics, and we need investment, obviously, new machinery. The consumer journey is completely different because we need own retail, third-party retail, customer service, after-sales care, and it's a full journey from category understanding to post-market surveillance. As I said, the regulatory landscape is still uncharted except for the US FDA. Very few countries have regulation in place that is comprehensive. I think that is very important. I'll come back to this. It's very important to have high conversion rates, both from a harm reduction perspective and public health. Also because otherwise, the infrastructure costs that you have to do to make upfront as we did, to have a meaningful entry in the category, if we don't have high conversion and high consumption of consumables, if it's scattered or you have dual use, clearly it takes you much more time to break even. All this obviously requires many new organizational skills, as there are very many new areas that you don't have in cigarettes and completely different ways of working. That's what you need to compete successfully and lead, in my view. The rewards are also significant. Much more positive public health impact, obviously, higher profitability and growth potential as we have the ability to gain market share. It's a much more sustainable business model that has potential adjacencies, as we now have introduced many new areas in the business. What has been our philosophy, and I think I have explained this a few times, but I will repeat it because we always get the question, why not first e-vapor products and so on. We knew from the beginning that the best product in the category is heated tobacco products, and internal heating is much better than any other form of heating the tobacco. It was natural to launch this product first because it has the highest capability to convert the adult smokers and also build trust in the brand. If you try a product and you don't like it, then obviously your trust and brand equity are not there. I think we are succeeding with IQOS having also a first-mover advantage. Clearly, IQOS needs still work to build its brand equity, but I think we're on the right path. Our ambition is, in a few years, we'll be as high up there in the minds of consumers as Marlboro and other iconic brands have been. The second thing is to establish all the science and start building public health credentials, and I think an increasing number of countries are recognizing that this product is different than cigarettes, and it has harm reduction potential. Obviously, the PMTA and subsequently Modified Risk Tobacco Product authorization of the FDA have helped. I talked about upfront investment in order to build profitability later, and I think we are at this stage. Organizational capabilities. We have all that established, and we can leverage all this to have better growth. A very important thing is the IQOS ILUMA, and I'll talk about it, but it's a brand-new product with new aerosolization technology or with internal heating, but using induction. I think that will be a major accelerator, both in terms of consumer adoption, but also doing with lower costs. Overall, if I just start with heat-not-burn, I think that we will need two to three technologies. We have the blade technology, we have, obviously, now the induction technology, and Jacek is going to talk much more about that. With maybe in different markets, we also need a different, I would say, technology. I don't know if it's peripheral heating or any other type of heating. It's very unlikely that we'll deploy three different technologies in the same market. Then to cover the entire spectrum of price segments, you may need three to five price points in maximum. In Europe, obviously two to three in total to cover everything. If you go to countries like Indonesia or Russia, we may need four price points, but never all in the same place. The pace of innovation, in our view, should be aerosolization engine changes every four to five years. IQOS ILUMA is a very good example because it comes after the blade. Obviously, as consumers interact with the product, you need to constantly upgrade the interface, the user experience, the smaller things that make the life of consumer easier. The consumer portfolio change the sensory experiences with expansions and additions every 6-12 months. I think more or less the same philosophy applies to e-vapor as not one platform and not only one price point of cartridges will win the market over time. Now if we move to e-vapor and the other categories, I think IQOS VEEV device and consumables, and we announced the gradual introduction in 20 markets, they're all going to be introduced with premium position. The issue here and the focus is different. We don't need to build category understanding and awareness to the extent, and by and large, not to the extent that we have done for IQOS and heat-not-burn. The second thing here is differentiation. We need to prove our product is better in terms of usage, experience, and also trust and brand loyalty and brand equity than other products. You see here the audiences, I think we will elaborate on this also during the Q&A and Jacek. Addressing the category concerns, especially youth access, is fundamental for every platform, but for e-vapor products, a bit more fundamental. That's why we are now developing technology that the device cannot be activated without age verification. I will come to all these points a bit later. The key success factor in e-vapor, although its economics are good, is minimize dual use, but also the dilution you get as consumers own five, six different devices from different manufacturers. An individual manufacturer has very low consumption of their own cartridges or pods, so the profitability takes a lot of time to come and hardly pays for the infrastructure sometimes. We believe that over time, consumers need to be offered different products. There will be predominant of one, say, heat-not-burn, and we believe heat-not-burn, for the foreseeable future, is going to be the product that can switch consumers most successfully out of cigarettes. Clearly, consumers will use two or three products as, if I take an example from beer, we drink beer From alcohol. We drink beer, we drink wine, we drink whiskey. We are predominant of something, but we also use the others. We need to enlarge the offering, but we use this offering to the extent feasible and logical under IQOS umbrella for premium, and clearly we may need a second brand in the time for the lower end of the market. If I look at the economics, we aim to, as we said, approximately double a heated tobacco unit volume by 2023, of course, there is a range. This means a significant expansion in net revenue per unit. I explained the economics previously and how to calculate this. There are questions and concerns of investors, whether it be excise tax increases, closing the differentials between heated tobacco products and cigarettes. Of course, we have very good reasons to believe we can keep the differentials, but there is room if there are tax increases that close the differential because the IQOS price productivity is significantly above cigarettes, as I will show you in a few slides. Secondly, IQOS, because we pass a large part of the tax advantage to the consumers. Also, it's kind of mid-position in a way, the average price. We have also, compared to the premium cigarette segment, room to grow. Obviously, excise tax differentials are important, they make sense, and we're watching this very closely. Now, if we look at below the gross margin, obviously, we think we have capacity to at least cover 150 billion heated tobacco units. You have here the number, every 10 billion costs $150 million in CapEx. We got to this number because we also increased substantially productivity. SG&A costs will grow. I don't want to steal Emmanuel's thunder, he will explain to you the split between what we consider fixed and what is variable and volume-related. There has always been new market entries. As we will see over time, our time to break even is becoming shorter and shorter, and now we're at below one year on average. Overall, we will see expansion also of the operating margin of IQOS and its contribution to PMI in the years to come. Now, the IQOS VEEV economics, I try to explain a little bit, are slightly different. It's much less fixed investments needed, as we already have the IQOS commercial platform being physical or digital. The majority of the costs are variable, they are volume-related, and it's about differentiating, so much more classic marketing. The IQOS brand, we believe, will help add credibility to a category that still is very fragmented. Our objective, as I said, is premium positioning, increasing conversion, and minimizing dual use, and brand loyalty, so consumers consume our pods and cartridges and not somebody else's. If we look at the gross margins, at premium, the vapor category, assuming full conversion and full brand loyalty, it's 1.6 x cigarettes. It's not bad. If we avoid fragmentation, profitability can be pretty good, especially since we don't have to amortize infrastructure. The taxation is more favorable than heated tobacco products. Actually, it's 4% compared to 30% of the retail price, 33% of the retail price, if I'm not mistaken. The trade margins are much higher. Sometimes they are 3x that of cigarettes, so they act a little bit like an ad valorem tax. Over time, I think this can be reduced. There is always a big conversation on why we don't have unanimous acceptance of harm reduction through smoke-free alternatives. I'll come to why there is opposition, but let's get a rational and factual look. I think that there are 1 billion people that smoke today in the world, and the projection is there's going to be the same number of smokers by 2025, based on the World Health Organization. The current fiscal regulatory measures, and they can range to extreme ones like plain packaging, display bans, continuous tax increases, are not truly accelerating cessation. Without stopping them, clearly a second pillar is required and absolutely actually necessary, makes sense for public health. Harm reduction is not a new concept. It's applied in many industries. We have climate change, and we incentivize people and we promote alternative energy, solar panels, aeolian, or electric cars. It's not that these products have no impact on the environment or they don't use energy. Of course, they do because you need to build them, you need to maintain them, you need to transport them, and so on. They are better than burning coal. Better in harm reduction is good. The same applies to our category. Scientifically substantiated products can play a very important role and can switch consumers out of cigarettes much faster than restrictive measures only. Now, we absolutely differentiate the regulatory frameworks if we want to be successful and have acceleration. By differentiated, I mean differentiated taxation, and there we are fairly successful, but also differentiated communication, because in many markets, it's quasi impossible to speak to consumers if we apply cigarette restrictions. Of course, we don't talk about some free-for-all situation. It has to be highly regulated with the right post-market and pre-market reviews, but a notch better can give information to people that they need to make their own decisions and switch. The key here is to put the interest of the 1 billion people who smoke at the center of the conversation, not politics and ideology. I would say we must stop debating whether RRP should be made available, but how fast and how best to minimize unintended use so that we can help the men and women that would otherwise continue smoking. Here is the first problem of confusion, nicotine. Nicotine is not the real problem in cigarettes, as tobacco is not. Combustion is. Nicotine is addictive but does not directly cause disease. Yet 70% of smokers, almost, and also the vast majority of regulators think that nicotine is the problem. That needs to be diffused. As you see in the small print underneath, that's clearly the position of the FDA issued in September 2017. It's clearly stating that nicotine is not directly responsible. It's the smoke created by combustion that is the issue. When we have NGOs and people in public health creating confusion, clearly that does not incentivize the people who smoke to switch because all the smoke-free products do contain nicotine as well. Now, the other issue is what is going to be the reduction in morbidity and mortality. It's pretty clear, logically, that a 90%-95% reduction to the exposure in harmful chemicals and 99%+ for e-vapor products will result in better public health outcomes. To be absolutely precise, we need long-term epidemiology. To establish long-term epidemiology, we obviously need protocols because today if we go to a doctor, it's very unlikely that they ask you whether you use an e-vapor product or a heated tobacco product. You are either a smoker or a smoker. If we just have this device, it's difficult to establish epidemiology. Let's look at first signs, I would say. If we take Japan, we all know that in Japan the advent of heated tobacco products led by IQOS has resulted in the highest reduction in cigarette use ever seen, especially in a market of this size. You would expect to see some first signs. What we did, this is not epidemiology clearly, but we did what we call an ecological study just looking at admissions in hospitals of COPD exacerbations. COPD is chronic obstructive pulmonary disease. We look at admissions where there is aggravations of COPD symptoms. You see the line that changes direction in a way that is rather significant after 2016. The only intervening event is the introduction of heat-not-burn. Now, that's the first indication is not epidemiology, but it's an encouraging sign that positive effects will occur. We have a PMI Open Science event in February 17 so you can follow a bit more this and the other work we are doing already in this field. As I said, there is opposition and I will not going to read the slide, but there are two important things here. That's it's ideologies, politics, it's many things. What we start seeing over the last two years and many of you experienced also with e-vapor controversies in the U.S., we have a lot of ideologically biased research that confuses both the consumers and regulators. We got to a point where 50%, 60% of smokers believe that e-vapor products are equally bad or worse than cigarettes, which is not something that makes sense and people should be held accountable for that. The second is the World Health Organization, which truly has anachronistic positions and its special interest influence, NGO influence, and by and large not facts and science. It is about time that we see the World Health Organization looking at real facts, real evidence, reads the research and doesn't just listen to extremists in order to define their positions. If that happens, clearly we can have an enormous acceleration in people switching out of cigarettes. The other thing is there is wrong focus on companies, not 1 billion people who smoke. The thing is, if we ban completely or recommend that all these products are strictly regulated or banned, then essentially everybody perpetuates smoking and I think that's what NGOs, the World Health Organization and people in public health have to understand. We have to stop the confusion because if the confusion stops, we can have the acceleration I talked about. Now, I think I covered these subjects in my previous intervention. I think the right regulation first of all eliminates confusion in the minds of consumers, increases consumer confidence in the products that have been through the right pre and post-market process, and more information gives them knowledge to make the right sale. Obviously, as I said, closed markets can reopen if we have clarity like Singapore and others, and some have. Growth can be accelerated in what we call restricted markets. Markets like, I don't know, the U.K. or Canada or so on, where essentially there is very little to do if you don't differentiate smoke-free products from cigarettes. You can do it also with much lower cost from the company perspective. It makes sense for consumers, it makes sense for the company. At least regulation needs to give short-term pre-market notification, at least, with product standard in place, post-market monitoring of use, and design the epidemiological studies, so they're going to have the long-term effects. Once the products are in place and sufficient penetration of the smoke-free products has occurred, then we can think of supply side measures like cap and trade, taxation based on share of combustibles, nicotine reduction, although not probably the best measure as the FDA suggested. These are all stick and carrot policies so that the manufacturers innovate and put their heart behind these products as we did. I think then we can arrive in elimination of cigarette market faster. Youth prevention is very important, here I listed all the things that need to be done. I think we are all familiar from age verification, age limits, education at schools. Because so far we're told teenagers don't smoke, and they can rightly say, "That's not smoking," so no use of nicotine. The right post-market surveillance systems, as the FDA has imposed in the U.S., for a very simple reason. You can easily take any activity that is commercial and say, "That may influence teenagers." It's only by measuring what the actual effect is, with the right way, that we can define whether this is a problem or not. That's the only way through an interactive process where we measure intended audiences, we measure unintended audiences, then we accentuate the intended communication if we're not achieving awareness, and go the other way, obviously, if we have any problem with teenagers. That's the only way to maximize adoption and minimize unintended. The good news for us is that we don't have any underage issue with IQOS because we pay a lot of attention in everything we do in this field. I think I talked about engaging with various stakeholders. I think we are making progress. There is more and more national authorities that recognize the science behind our heated tobacco products. Obviously, the FDA was the precursor. As consumers adopt the product, governments have to listen to what people say. This is a long journey. This is not done. Progress is there. It could be much faster and much better, and we will continue the dialogue with governments and different groups in the public health sphere and use consumer advocacy where needed because we need to resolve the regulatory issues as fast as possible. Now, on combustibles, I think our combustible portfolio is sufficiently invested. Clearly, Jacek will talk more about that. Clearly, we may need some more investment depending on how the post-COVID impacts unfold. I think in particular, we need to focus on price-cost management as we did in 2008 crisis. We need to continue putting some effort to grow share in the low price segment, as we may have some temporary down trading. We will continue the progress on SKU consolidation and also in the efficiency of our new product launches. We have much fewer but much more successful ones, so we're on the right path. If I talked about variations we can have in volumes, when I gave the explanations on the guidance. Overall, if we look at the fiscal environment, okay, for 2021 is well known, but the most important thing is that fiscal structures, in terms of more specific, continue to improve. That helps our portfolio, but also helps price productivity. Overall, the price elasticities do remain around -4.4. Combustible pricing will continue, as I said previously. Overall, as IQOS volume grow and it has more importance in the mix, price productivity will increase despite cannibalization for the reason you see here. If we look at the evolution over the last 10 years, and we look here at incidence and also composition of the tax, the specific has increased over time and the ad valorem has decreased, but obviously is not as good as the heated tobacco units where the taxation is mostly specific, and it's only in Japan we have ad valorem taxation. As Japan grows less in the mix, obviously, we'll have even further improvement. Overall, I think the environment is good, and during the last week we discussed the specific of the excise tax outlook for 2021. We had an above-average increase in Russia, but we have a minimum pricing that helps price gap management. The increase in Indonesia was significant, but for us a bit smaller because of the favorability we have for the hand-rolled kreteks. We have an excise tax for improvement in Turkey. Overall, the environment is good. What obviously we need to watch out is, as government run bigger deficits, that we have gradual tax increases as we have normally and not fast and ones that create contraband and other undesired effects. I would like to spend two minutes on the organization. I described previously all the success factors. Obviously, these need organization and people to make them happen. We started at the top. We have 45% external talent come here, the senior management team, in the last three years. A lot of new skills. Our ways of working have changed. We are organized on a project basis because nobody can deal with the complexity and no function individually. All our work and practices are along the consumer journey, and the performance management has changed. Overall, I wouldn't say we're where we want to be, but we made an enormous progress, and that transformation is a continuous thing. It doesn't stop. We are also making very good progress in terms of diversity, inclusion, and equity. You can read the numbers here. We're EQUAL-SALARY satisfied. Sorry, certified and satisfied. We're named at the Bloomberg Gender-Equality Index. Good progress. Much more to be done here. Now, this is our projection of how we will fare in the years to come. We have 28% of the value of combustibles, and I think we can maintain it. Clearly, we will have an increasing share of RRPs, including e-vapor products. I think we have the innovation capability, sometimes with partnerships. We have the brand equity and the first-mover advantage. We have the engine to continue growing with the category and expand in the other new categories of e-vapor and pouches or P3. Finally, a few words about new avenues or adjacencies. As I said, we do have developed new capabilities in certain areas. We are looking at leveraging these capabilities so that we bring new products or services to consumers. We look at, as a first cut, in three specific areas. First, botanicals in the broader term. I will explain the focus areas in a second. Either to extend RRP consumables into new sensorial experiences. Here we can think of a lot of things, the obvious cloves, but also star anise, chamomile, and so on. Also moving into botanicals that have no nicotine, and they can apply more broadly and using our expertise in substrates. Respiratory drug delivery is an interesting area. I think we understand inhalable delivery, and here is not to become a pharma company, to be clear. This is about taking existing drugs, existing molecules, where a respiratory delivery can increase the bioavailability of the molecule by an enormous factor that can be very vital in certain conditions. If I use an obvious example, if you have a myocardial infarction, the first thing you do is take aspirin. It takes 30 minutes, 25 to 30 minutes to act. If you take it through a respiratory way, assumingly, then you can have bioavailability in one or two minutes, and that can save a lot of lives just by a different way of delivery. Our business model in this area is not to build everything from upstream to downstream. Stay at the center with our clinical capabilities, our formulation capabilities, our delivery capabilities, and then partner, outsource, and orchestrate an ecosystem that has the skills we don't have. We are trying to minimize investment here, but maximize what we can offer to these new products. Here is some indication of the initial areas of focus, and the projected addressable market value. Of course, that's the beginning, areas of opportunity in botanicals is sleep aid, energy and focus, calm, control, and I described respiratory drug delivery. Finally, but very importantly, is sustainability at PMI. Emmanuel is going to talk more about that, but clearly there are four things that are important to retain here. First of all, we have a statement of purpose that covers all stakeholders of the company, that describes the impact on all constituencies of our transformation process to a smoke-free company. We have established a rigorous materiality analysis. We have identified four areas, innovating for better products, operating with excellence, caring for people who work with us, and protecting the environment. We have established for all these Tier 1 topics, 2025 roadmaps with KPIs that we will every year publish in our annual integrated reporting. I think the bottom line here is product is clearly, as I said previously, the most important part, but we are doing extremely well in many other areas. For example, our CDP A-List on water, on waste, on forests, and obviously on carbon. We have a target by 2030, probably earlier, hopefully, to be carbon neutral, at least for our own Tier 1, Scope 1 and 2, which is our own facilities, I would say. Our product can have the biggest impact on society and the sustainability of our business. Beyond nicotine products, obviously play in the same ground, and Emmanuel would explain all the other areas and how we prioritize them. I would conclude my part, by saying smoke-free future is within reach. I think there can be, with the right frameworks and dialogue, countries where we can stop cigarettes in 10 to 15 years and replace them, for the people who would continue smoking, with smoke-free products. I think we have an ambitious goal of reaching 50% of our net revenues by 2025. I think our profitability, both at the revenue line and at the bottom line, will continue growing. I think, over the long term, we can develop sustainable growth and superior shareholder returns as we will be successful in these areas. That's all from me. I think we have a break just now, and Jacek will join us in about seven minutes. [Break] Welcome back to PMI's 2021 Investor Day. Our next speaker will be Jacek Olczak, our Chief Operating Officer. Jacek? Thank you, Nick. Good morning. Good afternoon. Nice to be with you here, although this virtual arrangement is not my preferred style, but I guess we have no other options or choices at this moment. For an hour or so, I will be talking about how we are leading industry transformation with IQOS. There will be some repetition to what André has told you a moment ago, but this is intentional repetitions, and I hope I'm going to add you some granularity to some of the points which André has highlighted in his remarks. Well, I will be talking about how our commercial approach maximizes consumer and financial impact, how relentlessly focused on consumer, being relentlessly focused on consumer feeds our continuous innovation and serves consumer needs along the entire consumer journey. I will also cover how we are scaling profitably along three vectors, innovative products and range of consumables across the platforms, including brand marketing and campaigns, the deeper geographic and consumer segment penetration in existing IQOS markets, and obviously how efficient and a fast entry and scaling of new IQOS markets and categories contributes to our further growth. I will also talk about our strong leadership in combustibles to drive performance and how do we leverage our strong position in combustibles to support our smoke-free strategy. Before I start with PMI leadership in industry transformation, let us have a look at progress so far from a different and broader perspective. I do admit it is more for the illustrative purposes, but we took an attempt to compare the speed of penetration of other industries where a new technology is replacing existing consumption. I pick here very much the solar power energy and hybrid and electric cars. Smart watches might be questionable whether it's the right comparison. I compare it to penetration of IQOS, in this case, of Russia and Italy over the same period of time in terms of a measure by the share of market penetration. Another interesting observation is that the hybrid electric car than a solar, also examples, if you like, of harm reduction strategies, which unlike IQOS so far actually enjoyed the regulatory and political support, although was confronted at the beginning with some controversy as well. We can see clearly that IQOS adoption is at least on par, if not ahead, of the selected few other industries. Frankly speaking, IQOS has demonstrated so far a stunning pace of adoption. Please note that I have not put IQOS performance in Japan and some other very fast-growing markets on this chart. Our transformation is led by the product, which André highlighted very well, for the reasons, obviously, that this is the biggest positive impact on harm reduction. We are the segment leader, we have the strongest brand, and obviously, we are leveraging the first-mover benefits. This is not all given, obviously, this is all earned. From the very beginning, we were very serious about this opportunity. The highest investments from our side are paralleled with internal transformation. We built from scratch or significantly enhanced capabilities which were not needed in the combustible business, which is very much business-to-business type of arrangements, and obviously it is being conducted at the maturity of the category. The rigor and scientific validation standards was prioritized from the very beginning. The fact that we have successfully passed the bar of FDA PMTA and ultimately MRTPA authorization is, as first and so far the only heat-not-burn product, is a proof that our strategy was right. It comes without saying that the responsible and sustainable marketing practices are a backbone of everything which we do. You're all familiar with this chart from our last week earnings call. We're approaching 18 million users of IQOS. Very importantly, more than 70% of them have fully left smoking behind them, either fully converted. It's about 13 million smokers at the year-end of 2020. A very spectacular result. You see our continuous progress from the very beginning of our journey with heat-not-burn with IQOS. Heat-not-burn is the biggest and fastest-growing smoke-free category of size. With above 80% of category share, our leadership is indisputable. Our value share is even higher and stands at around 60% for total RRP. This is still with essentially no presence in the e-vapor, which I will cover later on. Building a strong brand is a key component of our strategy. As the RRP category is in its early stages, strong brands bring so much needed credibility to consumers. Taking into considerations that IQOS is merely six years old, this a very spectacular result if I compare it later on to Marlboro, which have five decades of marketing, of support, international presence, et cetera. The gap to the next strongest competitor is even more meaningful, as currently there is no other competition brand so broadly available with one uniform look, feel, and experience. IQOS is already number three brands in a market where it is present. Considering Marlboro, again, as the reference brand with 13% share and more than five decades of history, IQOS with already more than a half of Marlboro share and five years of history, is again a testimony of a very strong result. If you want to be serious about and believe in the opportunity, you need to put adequate resources behind, which we did from the day one and continue doing so. This chart presents our cumulative resources spent behind the IQOS, behind the heat-not-burn platform from the very beginning of our journey. We exceeded $8 billion. This spend covers the product and marketing development, scientific substantiation, including regulatory reviews, manufacturing capacity to expand, build up and expansion, but excludes commercialization expenses at the market level. As we move forward, the annual increments which you see at the bottom of this chart, are somehow moderating, as many of the big-ticket items has been already addressed. Our new initiative, frankly speaking, are leveraging on the past learnings and developments. Let me move to IQOS performance. We have delivered very strong and repeated share gains in key geographies. You have here Russia, Japan, and the U.S., the total block of other markets. These are truly very spectacular results, and we continue growing. These results are leading us to more balanced geographical contributions to IQOS growth. You remember, for the first two or three years, we've been very much skewed, essentially dependent only on Japan. Now by additions and opening IQOS to other geographies, few first markets in the E.U. region, Russia, other markets in the Eastern Europe, Latin America and Canada, and so on. We expanded IQOS. We're now in the 64 markets, 76 billion unit sales. It gives us more balanced geographical footprint. IQOS enjoys the growth by the mix of expansions into new markets. Again, let me repeat, continuous growth within existing markets. IQOS is able to meet consumer taste expectations across various markets archetypes. I am really here focusing on the taste type of an archetype. I brought here these five markets, which constitute a good representation of the markets which are very much for flavor skewed, like Portugal and Malaysia, more menthol skewed. You have here Japan and Poland. The markets which are very low or relatively low on a full flavor and have almost non-existing menthol segments, which is the case in Russia. The common denominator across all of these markets is, if you like, that IQOS has already produced significant inroads in these places. In addition to meeting the taste expectation of IQOS also responds well across level of affordability, works in emerging and developing market and developed markets, works in e-vapor markets and oral tobacco markets. During the next few slides, I will show you IQOS penetration level across the, a very long list of key cities, which are representative of various archetypes, which I just mentioned, which is again, the e-vapor markets, oral nicotine products, different affordability levels, and again, different spectrums of the traditional full flavor lights or menthol segmentations. I start with the very strong double-digit penetrations market shares in key cities. You have here Vilnius, when we crossed the magic one-third of the market. Tokyo, which is approaching in a, well, it's actually exceeded almost 25%, so a quarter of the market. Kiev, Athens, and so on. You've seen some of the slides during, I believe, Emmanuel's earnings call. I thought that we can look at this also by visualizing the underlying market archetypes behind these markets to demonstrate that IQOS has a potential across the number of geographies. You could see here, as mentioned again on earnings call, some quarterly fluctuations in share, which I know sometimes some of my audience here is excited about. I think there is this volatility which is coming through the combustible market due to the seasonality of pandemic-related factors. If you're interested more into this, we can cover this during Q&A. Strong growth in Western Europe, finding right formula amid the stricter regulations and more skeptical consumers. The long-awaited good progress in London when we're approaching four share points, showing IQOS can and does work in markets with a big e-vapor presence. We have also good progress in emerging market key cities, coming from Asia, Latin America and Eastern Europe. Also is very pleased with the faster recovery in Cape Town in South Africa, following the most drastic restrictions which we have been confronted with during COVID, when essentially there was a ban on sale on any nicotine product for the quite a good few months of last year. You see very strong recovery of IQOS in the geography. 2020, as you know very well, offered us a plenitude of challenges. This makes us and me very pleased with IQOS performance in the geographies which we entered last year. I'm very satisfied with the good progress in Mexico. We just focus on Mexico City. Very quickly we start climbing to the almost one full share point on the Mexico City. Greater example in Stockholm, and I would read this as the first proof that IQOS also can have significant inroads in oral tobacco market. Very good progress and a fast progress in Vietnam. It was one of the few European Union markets which we didn't enter with the first waves of other rollouts. This was despite the very severe COVID restrictions. Also excellent progress in Georgia, obviously Georgia in Eastern Europe, not the Georgia in the U.S. Very strong progress in a very short period of time. We have also started in Philippines. In line with our strategy tested in other geographies, with remaining razor focus on Metro Manila first before we start going to the remaining geographies in Philippines. Obvious question is, if IQOS had such a spectacular growth, what is in front of us and how far we can go with our IQOS heat-not-burn? I have put on a chart here key select geographies with the national and key city market shares in the Q4 of 2018 and the Q4 of 2020. The national shares in all of these markets now are above key city shares of two years ago. Key city shares continue growing, as we know. To illustrate, if this was repeated over the next three years from a Q4 2020, we would already be very close to our targeted range of 140 billion-160 billion units in 2023. I admit this is a bit of oversimplification. This also assumes that there would be no further growth in key cities, which I think is highly unrealistic. Obviously, with further geographical expansion within existing markets, we are moving to new consumer groups with different profiles. We are moving to less urban territories. With our continuously evolving portfolio of IQOS proposition, its strong brand, and a recognizable and strong brand, and infrastructure tested to operate at scale, this target is within our reach. This led me to this slide where I am showing in more granularity how the expansion within a country looks like. I have obviously brought here Russia, which is the best market to demonstrate how that focused expansion strategy work and serve us well so far. We had so far three waves of expansion. First wave with the bigger cities, eight cities, when we started in 2017. We follow the year later with the expansions to the next 27 largest cities. A year later with another 40 cities. Altogether, we are now present in Russia with more than 70 cities, which represents about a 90% coverage of cities with population more than 250,000 citizens. This gives us today a coverage of about a half of legal age smokers in Russia. Again, the most important takeaway from that slide is that as we are continuing, as we are expanding, we continue our growth across all waves of expansion. You see on the wave one, we started with 100,000 users, went to 600,000, 1.3 million, and the last year we closed with 1.7, while obviously adding the new geographies and to continue growing. I think this is a good example how that focus expansion works, and I believe we can all use it as a proxy, how we will be, and we are, and how we will be expanding further IQOS to the more sizable and the more complex, if you like, the geographies. We wouldn't be where we are today with IQOS and our transformation if we didn't put consumer at the center. We all, as consumers of many other products and services, experience our own consumer journeys, consciously or not. Concept of a consumer journey is not new to us, right? Many consumer-centric companies are applying it. Bringing a consumer journey to this industry is new. Remember, we're going for the combustible business, which is very much based on a business-to-business model, and we're transforming this company into the business-to-consumer model. Again, in addition to a great product, understanding consumer needs at each stage of the journey, ability to listen to and act upon consumer feedback along critical consumer journey episodes from awareness to retention is, in our opinion, a critical contributing factor to adoption and conversion. This is especially more paramount for the product or categories which did not exist before, which are new to the world. Consumer journey, in our case, drives downstream commercializations like channels, programs, other enablers, and upstream activities like product and consumables and brand marketing development. This is how we're using a consumer journey of essentially a backbone of our activities. In 2020, last year, we have conducted more than 2 million Net Promoter Score surveys. We were covering more than 1.6 million unique consumers. If you remember the scale of the consumer base which we have, we definitely are above any industry norms, at least at this stage. In addition to this is the most interesting part, I believe, in addition to this, we conducted 180,000 callbacks. The callbacks is nothing else than the longer format conversations, 20, 30, one 30 minutes, one hour, two hours on occasions, with our consumers, performed directly by our frontliners and by management. That's the interesting thing which you never had in Philip Morris before, and I doubt you will find it in another companies in our industry. This allows us to get first-hand feedback from a consumer. Over 600 improvements so far, improvement initiatives on product changes, consumer engagements, and our operations were actually coming from that direct contact with the consumers. Needless to say, how happy are consumers when they receive a call from us, which is without any strings attached. It is not a promotional call. It is a genuine curiosity, how well are we serving them, how well our channels perform, how our product is perceived. Is there anything which continues bothering our consumers, and do they have any recommendations? We try to incorporate it and serve it back to our consumers. You're very familiar how we have expanded the portfolio of IQOS devices. This is one of the examples how we are applying the real-life consumer feedback, translated into insights and converted into product or service features. This allows us to further improve performance through higher conversion, higher NPS, and very importantly, higher retention on new devices. You see on the chart, IQOS 3, which many of us already almost don't remember, compared to the IQOS 2.4+ increased our conversion rate by six points. When we come, about two years ago with IQOS DUO, we managed to lift our conversion rates by additional 5 percentage points. This is obviously a big release, if you like, from that productivity and also efficiency. It also flows to the or is behind our continuous margin improvement. Consumer feedback also resulted in many other improvements or additions beyond the products, which are physical products, which I am showing you here. These programs are covering referral programs, the search engine optimizations, bridging initiatives, which are very important to accelerate bridging within the existing IQOS device families, but also bridging from combustible product to IQOS. Device lending, a new feature which we roll out about 18 months ago, where consumers can take the product home for the week, two, three weeks, and have in a piece in his home. Proper trial. We offer support via virtual coaches, which can connect with the consumers. It all results that the consumers are getting better educated, and they successfully migrating to the full usage of our proposition. The one of the remaining major opportunities in existing markets which lies in front of us is obviously moving the consumers along the journey. We see on this chart, and this is the group of seven key markets so far for IQOS. We're all aware, we all remember the already significant market share when IQOS generates in all of these geographies. Here I'm showing how many users, smokers, adult smokers in a given geography are still not even aware that IQOS or category exist. You see in case of Russia, 41% of consumers are not aware, legal age smokers are not aware that IQOS exist. Follow Poland, 60%, these are the most extreme type of a case. Obviously, on one hand, this is a reflection of our geographical focus in the given geography, and on the other hand, is a result of relatively restricted communications environment in which we operate. We don't have access to the full channels to communicate, to talk with smokers. While continuously working on awareness of IQOS, even more important, however, is the consumer understanding of category. André highlighted a couple of a few issues which are pretty painful at this stage and would argue slows even accelerated growth and adoption of this category. Everyone knows that smoking causes lung cancer and other serious disease, but there are misperceptions about what are exactly the causes of this harm. Misperceptions of tobacco harm risk is evident on this chart. When we're conducting the research in a number of the European markets in Japan, and clearly you can see that nicotine is perceived by smokers as most harmful or one of most harmful, and we all know that this is not the case, and there is enough of the scientific evidence to confirm that this is not the nicotine which is a prime cause of a harm created by smoking. It is tar, but look what the tar is in the consumer understanding. Obviously the category understanding is improving on what we call the educated awareness, where people understand truly the benefits and how the category works among IQOS users. However, burning, for example, still ranks low. This translates into misperception of differential in heated tobacco product risk relative to cigarettes. The same, unfortunately, also applies to electronic cigarettes. This obviously leads or may lead to the wrong choices made by consumers, by smokers who clearly are unaware that as long as if they wish to continue smoking, they should definitely consider the better alternatives which are available today. As legal age smokers go through the consumer journey, their perception of harm gets closer to reality. However, even among IQOS users we see here, the perceptions are relatively high compared to what the science would tell us. Clearly, this is a territory which requires concerted effort by all stakeholders, obviously us, industry, regulators, and NGOs, and André was talking about it. However, still today, in too many places, unfortunately, consumers are confronted with contradicting messages being a mix of science, of science-backed facts, and they are mixed with opinions which are serving nothing else than the old entrenched political views. Now, this slows down the progress or even worse, as we have experienced in a few places. You may remember what we have encountered some time ago, for example, in Korea or Romania, where we have experienced in a few places that consumers confused now by the messaging coming from the very much regulators and NGO, we just go back to combustible cigarettes. Which from the harm reduction perspective, is frankly speaking, a disaster. As we continue to engage with regulators and other key stakeholders, we're also doing our part of building category benefits understanding. Here is an example of our newly developed launch campaign. It's a more lighter approach, focusing on understanding the combustion is a triggering point in causing harm. For some people who are more on the vegetarian side, that picture on the left on the yellow background is the sausage. I was told that it's closer to the German sausage. Whatever origin of that sausage is, the fact is that it tastes better if this is not burnt. The same applies to IQOS. That is, tobacco is better if you don't burn tobacco. We have another example here. I have another example here of a more lighter approach. Focus again on burning versus heating and delivering on the satisfaction. You can deliver the satisfaction with heating, and burning is essentially not needed here. For those people who don't like previous animal, we also have a version with another animal. You understand which directions we're going. It is less about the creating the brand. Obviously, it is more about the creating the basic principles of a category and informing consumers what is the real problem of smoking, where it is coming from, combustion, generation of tar, and allowing them to consider, try, and hopefully adopt the existing today and scientific substantiated alternatives. There is, however, growing recognition by voices in public health, speaking up more frequently about the tobacco harm reduction and the reduced risk. I think the progress is visible but not sufficient yet. I believe that the next three years will be pivotal in recognizing the RRP category as largest opportunity in accelerating and finally solving the problem of smoking once and for all. Let's now move to our commercial model. IQOS business model is built on consumer journey. I mentioned this already a few times. It covers all key critical episodes and experiences from how adult smokers can learn about the category, can do her own research and evaluation, can try the product, eventually move through to buy and use and become a brand advocate. If you do this exercise well, which I believe we're doing well, you essentially are creating a very happy consumers who solve the problem of smoking. They are willing to share their experiences with others. This whole commercial engine starts really working very well. All the episodes or steps through the journey are taking place across the multiple channels and cover obviously online and offline. The right combination and almost seamless connections between channels creates a great experience which is appreciated and rewarded by consumers. Very often we have these conversations, and I get the questions, can you just only go online? Is online not cheaper? Can you just stay with an offline and use your existing retail type of infrastructure? The answer is very simple. If you want to deliver on this unique experience, I believe you need to be both in online and offline. Frankly speaking, I think we have a parallelism in other industries, that this is not just the one solution which fits all. It's the combinations and the right blend of the solutions which creates this unique experience, which serves, in our case, on the one hand, obviously having the highest conversions because we do take care of the consumers along this journey. We don't leave them unattended. On the other hand, the consumers are very willing and very open to advocate to other smokers around them to consider and to try the IQOS. It is not enough to be present in a multi-channel environment. It's how do we make an omnichannel experience really matter? We have one IQOS brand with one consolidated digital platform across all markets, with consistent brand experience and communication, and that's very critical. This provides for brand experience, content, the support for engagement, awareness, and understanding. We cover all this territory. It is not just about transactions. I think this is the biggest mistake. If some people are very excited, I bought the device, doesn't matter it's either eBay, buy IQOS, and then people don't understand, people don't have the proper conversations, smokers don't get the proper support. The devices land in the drawers, and neither it solves the problem from a harm reduction perspective, and definitely is economically almost impossible to sustain. iqos.com is our number one flagship store and is undergoing now its final platform consolidation, which we should be completed with by 2022, next year. It offers consumers this connectivity with offline channels. It is about digital-first approach and very often, most of us, wherever we're looking for the first place to go is not that we're strolling the streets and knocking at the door of an outlet. We're just going through Google, we're going to internet, we're doing our own research, there's the right mix, and the ease of finding, okay, in our case, IQOS, et cetera, starts playing an important role. Our infrastructure altogether, both digital and physical, enables our significant competitive advantage. You have our key numbers here, how many stores we're operating in the format. This IQOS platform, which we can leverage to deploy new products. We'll be soon talking about our entry into P4 and other platforms. This also allows us to roll the programs like, for example, lending, which I mentioned before. It also obviously serve for then the extensions of an IQOS, both vertically and horizontally. As we digitalize or establish our presence in a given geography, we're adjusting our infrastructure. You can see on this slide that by changing mix, on the slide, which is reflected when we change the mix in our format. You have less of exclusive IQOS retail touchpoints versus prior year, less of the commercial people, so demand activities. At the same time, we increase the IQOS stores, the unique outlets, penetrations, and obviously, we move a lot of activities to the truly fully served by the digital tool solution. Also, moving with in direct retail expansions drives our reach and efficiency, and this was the case when we started expanding very much in the third phase of expansion in Russia. Our better execution is obviously the critical driver in generating consumer satisfaction. IQOS brand experience increasingly speaks for itself. I mentioned number of times that it's consumer satisfactions. Earning the consumer satisfactions throughout the journey pays back at the end when we move to the advocacy. This chart shows percentage of our total user acquisition coming now in an organic way. We have Italy, with almost three-quarters of the user acquisitions coming organically. It's consumers who've heard about an IQOS, who were recommended to IQOS by already converted users. They were confronted with so-called word of mouth, et cetera, and they're coming to our infrastructure, which is waiting to serve them from any moment they come in contact with us. This is happening most significantly in Portugal, and we also have a very good progress in Russia. As we can see, user acquisition is increasingly organic, driven, as I said, by word of mouth and the general awareness of the brand. Obviously, ease of finding IQOS, and this one is physical also, infrastructure plays a role, is very important in this whole exercise. This accelerates clearly the growth and lowers our cost. Many of you are familiar with this slide as we used it during our last, at least the last investor meeting. Scale efficiency, growing organic acquisitions allow us to significantly reduce further cost per user over the last years. You are familiar with format of our slides. We use the first year on the slide as the index, as the 100, and we're showing the relative progress over the last two years. Acquisition cost per user is higher, obviously, in the early launch phase, and obviously diminished significantly over time. You can see this across our major key geographies, as is also the cost of retention. Obviously, this will vary, or it does vary across the markets, and is depending on the stage of maturity of the market, and category, and competitive environment. This is what we have achieved so far. This is again, a key support to our margin expansions, which I believe very happily Emmanuel will expand on. We're working on the category for more than five years, and clearly gave us opportunity to learn. Obviously, this is on the positive tone, which also means that we have made some mistakes. Usually, when people talk about the learnings, they look at the positive side. Sometimes you need to make mistakes. The question is not about the making of mistakes, but how quickly you stop making something wrong, how quickly you learn from the mistakes, and correct your activities going forward. We are trying to incorporate these learnings when we enter the new geographies. Here you have a three exemplary markets, Italy, Germany, and Russia. This is sort of a first cohort of the markets from a period 2015, 2016. I am adding here the cohorts of the markets from 2017 and 2018. You could see that our path to the more significant market share has been significantly shortened versus the initial group of the markets. Obviously, if I add the last wave of 2019, 2020, I think it's very well visible how we applying the learnings and how we're getting better and better over time and when opening the new geographies. Improvements in our ability to achieve success earlier is a very important component. André mentioned this drive was that initially, I do remember I was myself saying that we need about two years or so to achieve the break-even. We can now do it on the 11th month period, and we need less of the market share points, if you like, in order to achieve the break-even. Again, there are other factors at play which impact these numbers, but I just wanted to focus here only on our executional capability and its excellence. Let me now move to the next stage of growth. So far I was talking about not only success to date with IQOS, but also near-term growth opportunities. I use this example of existing markets and how we can expand in the existing markets. Let's now move to what else PMI can deliver and will deliver on its path to become smoke-free. I mentioned earlier, brand, to start with the brand is a very important component of a sustainable success. We have started from the very beginning with building the brand. This is what we had in mind from the very beginning. We have no brand fragmentation. We have strong brand identity, and we start enjoying this very hard-to-build brand equity. IQOS is by far the leading smoke-free brand across all RRP categories. We are working on taking IQOS to the next level, from functional benefits, category understanding, to brand appeal, highlighting the points of difference, and building the emotional connections. That's very essence of any brand in the world. I hope you will get a sense of where we are going with IQOS from this video. Can I have video, please? Yeah, got it. Here we go. Whoo! I IQOS. We IQOS. I IQOS. I IQOS. We IQOS. I IQOS. We IQOS. IQOS. We IQOS. I IQOS. Wait, what do you do? I- IQOS. I- IQOS. I- IQOS. IQOS. Girl, I IQOS. IQOS. For you. Moving on, keep moving on. Yeah. Okay. As you know, I IQOS as well. As we're continuing building further the brand, we're also cognizant of further opportunities lying in untapped consumer occasions, segments, and geographies. As shown before, driving awareness among legal age smoker is a key enabler. Broadening and enriching the category offers further avenues of growth. We're expanding the portfolio of the devices, but also expanding the portfolio of the consumables, and this includes the new platforms. Adding premiumizations and extending pricing coverage and segmentations allows us also for reaching more adult consumers in new and existing markets with new and existing products. I will now show you what we have in mind and what we have in plans. Before I go there, just a quick snapshot of what are the nicotine users, the product users, nicotine users today. As we know, heat-not-burn is the most compelling smoke-free category for consumers. It is obviously the most compelling from a public health and economics perspective as well. However, we have always said, and I vividly remember our investors' conference six or seven years ago when we announced that we are opening this completely new chapter in the history of this company of going smoke-free. We have already, at that time, said that there will be a place for other formats than just heat-not-burn. Okay. There will be a place for platforms which delivering or satisfying different experiences, also satisfying different taste preferences, and thus the multi-category approach is required. We have now built the IQOS brand and infrastructure that we can now leverage to address consumers looking for variety of other experiences, which heat-not-burn or IQOS in its current shape and format cannot deliver. Poly usage in the category is common, and we all know about it. Currently, there is significant poly users of RRPs and combustibles. These consumers are already in the smoke-free category, but are not fully converted, and this creates an opportunity for us. Through offering of a compelling IQOS multi-category portfolio, we can migrate these consumers over time to exclusive use of smoke-free products, and obviously offer more opportunity to start smoke-free journey, importantly, for 66% of exclusive combustible smokers, who are not at this stage interacting in any shape and form with any of the reduced risk alternatives available in the market. Now, to seize the opportunity, we need great technology. I think if you have a great technology, obviously you can translate it into the winning products, which we have demonstrated both on the development and scientific substantiation side, but also when it comes from the user experience point of view. Technology expansions, which we now have in mind, which André highlighted at the beginning, is from the blade internal heating through pin, which is our collaborations with KT&G, to internal induction technologies, and then we're going to the vapor and the nicotine pouches. We'll be focusing also on consumable technologies and innovation, allowing for different experiences and tastes. These innovations drives higher conversion and enables faster expansion at the lower incremental cost as we're leveraging, as I indicated earlier on the chart, when we had this cumulative $8 billion spent, that many of the learnings from the Platform 1 and the current executions, we can apply, quote-unquote, "free of charge" to the new platforms. Our RRP offerings provide broad choices and alternatives for legal-age smokers and support also legal-age users in all of their moments. We are moving from a single product brand to multi-category portfolio master brand. IQOS is becoming sort of an umbrella brand over the many platforms. Heat-not-burn is obviously our flagship platform and is at the forefront of our innovation for the reasons that it offers the closest experience to combustible, and hence also, backed by our excellence in execution, offers the highest conversion rates. We will be evolving from blade to induction. It is a step change in the science-based innovation, taking IQOS to the next level, I will cover this in a moment. Our aim is to extend reach also horizontally to cover all critical need spaces, and vertically to address the affordability. You could see on this chart, we're going for the very rooted ritual type of expectations, familiarity, authenticity. Similarity of the product is very important. Combustible cigarette is very important, we're going to that group, which is where there is more playground for the versatility and the discretion of use, et cetera. The same approach we follow with regards to consumables. We are expanding horizontally to cover all critical need spaces and vertically to address affordability, which we know from a combustible business it's an important component. We are reinforcing the product superiority with a premium priced enhanced indulgent taste, like HEETS Dimensions, when you see this black facing packs on the top of the charts, which is the first executions which we did in Russia. Very successful. We'll also fortify our leadership with new-to-the-world beyond tobacco propositions and some sustainability initiatives. This is in the square box on the right of your chart. Okay, now is the time to talk about the key major initiatives in front of us. I hope you will appreciate that you are literally the first public audience learning about these initiatives. Also please be forgiving that for competitive reasons, I will not be granular enough at this stage. Thank you for your understanding. Let me move to IQOS ILUMA. Here is IQOS ILUMA, is the next generation of IQOS heat-not-burn. In my opinion, and you know that I am a very good user of current IQOS, this is really amazing. This is truly amazing proposition. If a new word was to be invented to describe what it is, the word would be revolution. Trust me, this is really revolutionary what we are bringing to the market. This is still internal heating, but provides the optimum taste and satisfaction, however, delivered via SMARTCORE INDUCTION internal heating technology. This is same great taste as IQOS has today, but it should not only help us enhancing the experience, the user interface with the device, et cetera, but I think it's going to result, and I am convinced it's going to result in higher conversion rates going forward. As innovators, our job is obviously to enhance consumer delights and address the feedback. I mentioned this before. ILUMA does this relative to the very successful IQOS blade. The bar was very high for us to go and address still unmet needs. Some people may call it the pain points of what we had on IQOS blade product, but I think we delivered on the promise and expectations from consumer. By eliminating blade, obviously improve our reliability. There's no accidental blade breakage. I know that some of you are the users of IQOS. I am user of IQOS, of a blade product. Not anymore, to be very honest and frank with you. I have to tell you, that is a highly irritating factor that you cannot use your product because that blade has broken. Superior satisfactions from the first till the last puff. It brings next level of simplicity. No maintenance, no cleaning needed. It offers self-activation after stick insertion with stick recognition technology. Remember, we got these questions from you, some investors days ago, will we ever develop the stick recognition technology? Here we are. Here IQOS bring this to the interplay. Less explanations will be needed, which should further help with the time and the cost of acquisition. You know I am very excited about this whole thing because I can't wait when we will launch this product into the market. This is coming from PMI and from IQOS, obviously will be in a premium design and customization options for enhanced lifestyle appeal. We'll have three device, two in a charger and holder configuration, so it's the same as we have here. The same setup. One in mono form factor, all with consecutive use. IQOS ILUMA will be accompanied by the new broad range of consumables, as consumables between a blade and SMARTCORE INDUCTION devices are not interchangeable. You hear this from my voice. I believe, even in this virtual world, you can sense that how excited I am about this new innovation, and even more I am excited after seeing results from early user testing. Let me now move to the next thing which we have in heat-not-burn, which is lil HYBRID. We're working on broadening our offer to accelerate user acquisition and grow the category by expanding target audiences of adult smokers. Thanks to our cooperation with KT&G, we have launched lil in Russia and Ukraine and lil HYBRID in Japan last month. Yes, last month. Early market feedback confirms our assumptions that this proposition can deliver on high levels of conversion. We're talking conversion levels which we enjoy with IQOS blade product, and already started to drive new users. IQOS endorsement clearly drives awareness and credibility of that proposition, and PMI commercial engine, which I talked before, drives take-up and retention of these propositions. We will be expanding this proposition into further geographies this year. Let me now move to e-vapor. Category, as we know, is growing and slowly moving into a consolidation sort of a phase. We expect annual growth in users of this category between 7%-9%, 7%- 10% over the next five years. Albeit, concentrated in specific geography. The category offers different consumer or satisfies different consumer experience and occasions, obviously, compared to the heat-not-burn, for example, puff on-demand. Category remains low when it comes to the adoption. Okay? The conversion. This first conversions to the category is very low, and within a category is still a very low loyalty to the product or to the brand. This results in a high number of devices per user, driving up acquisition cost and obviously calls for aggressive retention program. We trying to enter this category from a completely different angle. Now, I mentioned this polyuse and the loyalty to the category and loyalty within the category, and here is example, here is the illustration. How does it translate into the user economy? What I'm showing here, this for illustration from EU, based on the selected markets, select markets from the EU region and how this category user economics looks like. While obviously brand loyalty and full conversion in e-vapor is currently low, a user switching completely to closed systems, which will hit the third bar from the left, generates a significantly better marginal contribution per user. Capturing the benefits of these differences requires scale to absorb the cost of a commercial infrastructure. We have a scale, which I believe I demonstrated to you. We also see opportunities to move dual e-vapor combustible users, so people who are mixing e-vapor and a combustible, to dual e-vapor heat-not-burn users, delivering a substantial, obviously, benefit to the consumer and with a better economics for us because we're leveraging on our presence, our infrastructure. User economics obviously is, and we said it from the very beginning, is a key consideration in our portfolio strategy and does inform us on the priorities with which products we enter first the market and the subsequent target segments, et cetera, when it comes to the introductions of the next products or the next categories. In general, obviously, we see that the smoke-free products have a superior gross profit per user. However, as I said again, the switching smokers fully to the one category and the loyalty drives the higher returns. I think it's time now for my second video, which will be essentially announcing our entry into e-vapor category. Can I have it? I hope that the quality of the video and the sound was okay. This is the whole problem with this virtual setup. You don't really know how it's being played on the other side. I'm informed that everything was okay, so I trust my colleagues here. With introduction of IQOS VEEV, we're clearly leveraging IQOS infrastructure with a bespoke go-to-market approach. We are leveraging the power of IQOS brand. We will offer premium product with superior experience to existing offers. This is backed by the unique MESH technology, delivering smooth, consistent, customized experience. There will be additional feature responsive draw, which is new in the marketplace. Obviously it will be offered with a rich taste lineup of a consumer. We see this as a potential accelerator of conversion to IQOS franchise to our other poly users and dual users with cigarette. Our plan is to launch IQOS VEEV in about 20 markets this year, leveraging again on IQOS infrastructure, including the major markets highlighted before, but also markets where it can complement IQOS heat-not-burn conversion. The very important point, the youth access prevention. As you know, it's key to the sustainability of the category and is very key to our sustainability effort. We're in the final stages of testing and preparing for scaling up the age verification technology, which works in a way the device is only activated remotely after positive age verification. You're buying a device, you open the box, and you cannot use the device unless it's connecting via the app, via the digital solutions with us. You go via the age verification process. If you positively verify, we will send the code to the device and activate your device. Pretty revolutionary, but I believe this will offer at this stage, at the highest level of protection that the product will really not go to underage people, which we all know is something which we cannot accept, tolerate, et cetera. This is also a part of our sustainability efforts, as I mentioned, and we aim as having all devices covered by this technology by 2023, as is our commitment, and we have made it very clear in our last issue of integrated report. These efforts on the using a technology to help with the age verifications is obviously in addition to our continued efforts through a good conversion practices, which I hope you remember from our earlier investors meeting. Let's now move to nicotine pouches. It is a small, concentrated, but growing category with potential to advance also harm reduction. It is still very early in category development, it's very early stages. Offers convenience, discretion, flexibility of use, satisfaction. A different sort of experience, different ritual, but may offer satisfaction. It does offer attractive economics. Operates today in the very evolving regulatory landscape, and we have a plan to enter this category still this year, later on this year. Very quickly, update on our two remaining platforms, Platform 2 and Platform 3. As you remember, Platform 2 is a heated tobacco product, which is closest to conventional cigarettes ritual and experience. We have, I think, sorted out the problems which we have with the heat source, with the tip at the beginning of this product, at the cigarette-looking product. We are ready for the new commercial test this year. On Platform 3, which is electronic-free nicotine product, which offers hygiene and the simplicity and the convenience compared to any other products that you have today in RRP technology, but does employ some complex technology. We aim to commercialize this product, not this year, but within a three years period, which we talk at this time with you. We are now in 64 markets worldwide, of which over half are outside the OECD. Over half of the markets are developing markets. We are often being asked, are we only offering the heat-not-burn of smoke-free solutions to the richer countries? No, it's not true. We're going very systematically and trying to cover a broader geographies. I do believe that with the current and future portfolio of our various platforms, brand, and the commercial engine, we are ready to be present in 100 markets in a five years period. We're starting with the 64, which we have today, 36 to go. Very convenient, this products, portfolio of our products in a different configurations will be well received and will bring the solution to combustible smoking in all of this place. I should mention a few words about the U.S., which remains clearly one of the largest opportunity outside our classical international-focused markets. You know very well that the U.S. consumers use and are interested in the smoke-free products. I think I demonstrated already today also that IQOS addresses taste and satisfaction preferences, which makes me believing that IQOS potential in the U.S. is real. We obviously have also a very well-defined regulatory environment with the very rigorous science-based regulations. If I compare actually the marketing operating environment in the U.S. compared to many other international markets, or most international markets, is actually, regulations in the U.S. offer a very clear path to talk about the benefits of this proposition. There were a number of positive IQOS regulatory developments since launch in September 2019. MRTP added obviously to the growing international recognition of IQOS from a harm reduction attributes perspective. We are continuing with FDA engagement, as with IQOS 3, to bring more the same line of the products that you have on the international to the U.S. market, and with extending the HTUs volumes. I believe you heard about ongoing U.S. expansion plans by Altria. Let me now move to the combustible part of our business. I put on this chart here, cigarette industry evolutions, only cigarette industry evolutions on the left part of this chart, and the cigarette industry evolution in the IQOS markets. Obviously, with the penetrations of RRPs, in this case, in case of IQOS, it will have a different dynamics of how the combustible, remaining combustible business is performing. Obviously, there is a distortion because of COVID in 2020, and it's fair to assume the potential rebound over the next one to two years. However, I think it is fair to expect that underlying cigarettes, combustible cigarettes, volumes, CAGRs over the next period will shortly reflect the RRP growth. Hence, underlying outlook for the combustible business is more in the 3%-4% type of territory than the 2%-3%, which we remember from the past. Again, we start seeing or reflecting here in these estimates, the further penetrations of RRPs. You all know that we had a pretty challenging, very challenging 2020. We said that there was an impact of the COVID, but where exactly did the impact of the COVID come? We had some interruptions with the supply chain, in Argentina and a few other places. These things came to act relatively at the normal of pre-COVID level. However, let's look what has happened at the consumer level. I brought here five markets as an example, but they are very sizable markets, and they also represent a very dispersed geographies. I have Turkey, Argentina, Indonesia, Italy, and Philippines. As we know, the way consumers are consuming cigarettes. There is obviously the moments when I am more alone in my home settings, et cetera, which is represented here under this name, an umbrella label of solo, the blue bar. Then obviously, they're consuming these products in some social occasion. The social occasions can be everyday occasions, on the way to the office or the way to the work. I have my morning coffee in the corner coffee shop. I enjoy my coffee, and I have my cigarette. I also enjoying this product. I also enjoying smoking and some really special social moment. This is parties, events, concerts, sport events, you name it. What we see what has happened, and this goes across the geographies, is that, yes, the fact that all our daily routines, most of us, for most of us, our daily routines were impacted during, or are continuously to be impacted during the COVID. Yes, we could compensate and use the product more in our own settings. However, the impact on the consumptions is coming from the impact that we lost this everything which was around our social life, essentially. Partially driven by the fact that many people are grounded, are essentially working from home. Obviously all your daily journeys, physical journeys, the bus stop, the smoking break, the lunch break with the colleagues, et cetera, all of these things have almost disappeared during the COVID time, and we see the impact of that consumption here, and anything special essentially disappeared as well. This makes me believing that this is fair to expect the rebound in these consumptions should our ability somehow to perform our daily routines will come back to the normal. Clearly, we are not at this stage yet, in essentially all countries, but I believe the social consumption will be a big part of the rebound coming forward. We also look how is this evolving through the price segmentations in the combustible business. We see relatively stable over the years, including the quarters of 2020, the COVID time share of the premium at 25%, 26%. Mid-segment, which is shrinking, and this is this down trading which you observe in some markets. We have seen it before in some places, some sort of acceleration. Low and super low segments in the last quarter of last year at 51%. I use for a comparison here what has happened during the economic crisis of 2008 and the years following, how the segments were evolving. You could see it's a pretty much similar situation. The premium segment was holding and over a period of time actually improved, grew, and the mid segment was under pressure, and the low price segment somehow was growing. Our share, the most important is that during this economic pressure times in the 2008 through 2011, we were managed with our portfolio at that time to actually deliver pretty strong share. Other brands contributed well to grow overall the company combustible shares. I think that once the social interactions, the social moments consumers will be allowed to perform, that rebound is going to come. We obviously is going to benefit from that. I feel confident that the portfolio which we have, not just the Marlboro, but other brands, will allow us to have a much better performance with regards to share. I look here, what is our share, how is our share of combustible performing in our top RRP markets. This is the blue and the dark blue, and the other bar shows the top 30 CC markets by ROI. You could see that actually we're doing much better with maintaining or growing actually our share of the combustibles in the markets where we have an IQOS than frankly speaking, in other markets, when barely the half of this group of 30 markets we have IQOS. You are familiar with this chart, Emmanuel had it during the earnings call. We had a big pressure in Indonesia, partially COVID, partially the situations with proliferation of the products which are being allowed to be sold at the much lower tax levels, which are not allowed to us. It's this famous loophole with the certain products below the certain annual volumes allowed to have significantly lower tax. I think portfolio-wise, we have a number of initiatives how to address this. I would expect that this year Indonesia should come with a share recovery. Duty-free, I talk about this, that's really most beyond our control. There is a group of the markets which contributed to the 40 basis points of a decline. Let's look at the Marlboro. Marlboro had a very good performance until 2019, until the pre-COVID. We grew Marlboro to historical high share, 10%. You know what's happened during the quarters of this year. Marlboro is one of these brands which is very much driven and used on this social special occasion, special moment. This occasional type of usage obviously penalized or lack of the situations penalized Marlboro. On the positive side, the Marlboro equity, Marlboro strength as a brand continues to be phenomenal. By far, I compare it again to the closest major competitor in the industry. The gap is extremely big. You know that we have a very focused portfolio, one of the most focused portfolios in the industry. We have the three other key brands, Philip Morris, Chesterfield, and L&M. You see that they continue doing very well during pre-COVID time and COVID times. These are the brands which serve us well in the mid, but very much in the low price segment. I talk about the concentration of the global brands in our portfolio. Almost 73% is our global brands. You also see here drastic reductions in the SKUs in the market, which is part of our strategy to take out from the market non-performing SKUs because the cost of maintaining them in the market is essentially prohibitive to the benefits which we can have, which then creates us also a space of a continuously where is needed, deploying or launching new products. We have significantly reduced the number of the new products in productions from 106 or even higher before to about 60-70 range. What we have delivered is of a much better strike rate. As you remember, we benchmark ourselves. The successful launch is being considered if it exceeds within 12 months after launch, 70 basis points, and we have a 57% strike rate against the historically high. This is just an example of a couple of the product introductions to the markets, which also I think we will continue in 2021, and this should further support our share recovery. This is how do we look across the key segments, new taste directions, core flavor, low-tar, and slim segment. We are number one and very strong number one with a good performance, knowing that obviously Marlboro presence in these segments put our segment share under pressure. The only segments when we are not number one, this is the super slim segment, but also is the smallest, or almost the second smallest segment. Very often I am being asked, okay, why, for example, if you want to go smoke-free, why are you still selling a combustible cigarette? Obviously, I don't want to remind everyone the economics of the combustible cigarettes. As much as we are extremely happy with 25% of the revenue coming from an RRP, 75% of our revenues are coming from a combustibles business at a very attractive margins, a very high cash conversions, the benefits of the category. While we going and supporting the business not to lose our competitive position versus the rest of the market, we obviously also looking on that portfolio from a different perspective. The fact that we're selling and continue selling the cigarettes gives us every day access to smokers. This is all about what we need in order to accelerate and make any further significant inroads with regards to the smoke-free. Obviously, these are smokers of our brands. We know the industry, we know the trade, and this is where the paths are crossing. We're using our brands also for so-called bridging type of a program, which is nothing else than with the communications to the Marlboro smokers on the pack, within a pack, et cetera, or to other brands, we inserting the informations about alternatives, because I believe also our duty that the smoker should know that the better alternatives do exist and should they seriously consider either quitting, obviously, you remember our philosophy or switching because these alternatives exist to RRPs product. We have deployed the Scanpack, which is a semi-digital solutions in 30 markets. The last year, it allowed us to reach or engage with 850,000 legal age smokers for the fact that we have an access to our brands. Obviously, I cannot execute that sort of the things on the competitive products, I can do is on my own products, on my brand. We have a huge reach, we are important partner for the trade. As we progressing with the digitalization of our relations with the trade, we're also using a trade, for example, as the lead generations for the smokers. It's nothing else that the trade partners are becoming activators or ambassadors, if you like, for promoting RRPs in a given territory. The last thing which we're doing that we're absolutely aware that there is a degree of impact of butt littering on the environment, and we all should be, and we are concerned about this whole thing. We're also leveraging our presence in this category to address another issue, which is there, which I mentioned is about this littering. We have a number of these anti-littering initiatives under the umbrella of Our World Is Not an Ashtray, where essentially we're prompting consumers to dispose of the cigarette butt in a very thoughtful manner. Put it into ashtray, put it into the bin, don't throw it on the street, don't leave it on the beach, et cetera. This is another aspect how we're leveraging the combustible portfolio, not only to continue, obviously the economics, enjoying the economics of the category, but also how to leverage this to our overarching strategic objective. I don't want to repeat too much here. I think, yes, we are focused on a combustible portfolio. We're doing this differently. I have to admit that we used to do it five years ago. We are becoming more focused. Learnings which we have, internal learnings, the way we organize, et cetera, all of this organizational learnings which we have learned in the RRP category, obviously deploying and reusing for the combustibles. Yes, COVID 2020 was a very challenging year for us, but I do think there will be recovery, and I do believe that the portfolio and the few initiatives we have behind us will help us recover the share without losing the focus on ultimately the most important objective, which is to go free. I don't need to repeat it, that the business model for the combustible cigarette is obviously for us, target at least the stable, if not growing share, net of cannibalization, and obviously overrated with the pricing. We have a decent contribution from that part of the business. With the help of the digital efficiency and productivity, this part obviously can contribute to the further margin expansion. This leads me to the last slide of my presentation. I am absolutely shocked because I see on the other screen that I have 19, 18, 7 seconds left. I think this is the first presentation in my career, which spans almost 30 years, that I deliver such a long presentation on time. I'm very proud of this. This is a summary of what we're going to do in the near term. I think this is just the repetitions. I don't think I have to read through the slides or comment on this thing. The only thing I want to ensure you that we and the entire management will work relentlessly to achieve our visions, which is to go smoke-free. Thank you very much for your attention. [Break] Welcome back to Philip Morris's 2021 Investor Day. Our next presentation will come from Emmanuel Babeau. He's our Chief Financial Officer. Emmanuel. Nick. Good morning. Good afternoon, everybody. I'm really thrilled to be with you for the next 30 minutes or so to talk about outlook for our performance. You've been hearing André and Jacek talking about strategy, about how we want to continue, and in fact, accelerate our journey to unsmoke the world. They've been mentioning all the very exciting milestone that we have ahead of us. Let's look at how it translates into outlook for performance, and let's look at what's gonna be the driver for the performance of PMI in the coming years. I think I have to start by rapidly coming back on 2020. Maybe it was not properly noticed because of the COVID crisis, that this has been an absolutely pivotal year for us. Of course, we've been facing very adverse consequences, as we all know. Despite that, we managed to generate a growth of our adjusted EPS and organic growth almost in line with the at least 8%, which was our objective until today. Of course, this is not coming from nowhere. This is clearly the success of the development of IQOS and what we managed during this year to develop. A few milestone were reached during 2020. You know them. Q4, we finished with 26% of our revenue base on our RRP business. We've been passing a number of nice milestone in term of reaching 10 country where our market share for HTU is above 10%. We have been growing our revenue by more than 30% on IQOS. We are growing rapidly IQOS within our business. As you're gonna see, this is going to have a number of very positive impact on the company in the future, although they were already visible in 2020. If you look at our performance, and here we are assuming, of course, the guidance that we've been sharing with you for 2021. Well, you can see that during this three-year period, we are actually intending to deliver very close, if not above, the guidance that we have been sharing at the beginning of the 2019 to 2021 period. In term of net revenue first, you see that we are targeting to be at 3%-4%, so we are slightly below the minimum of 5% that we are targeting despite the COVID crisis. That's really important to note. We are very nicely improving our profitability, and we target to have above 190 basis point of margin improvement over the period. We are targeting, based again on the guidance for 2021, to have an organic growth of our adjusted diluted EPS between 8% and 9%. We did maintain our objective to be between 90 billion and 100 billion HeatSticks on IQOS despite the COVID crisis. Actually, this is, of course, a testament to the strength of our IQOS model. As IQOS is growing further in the total of PMI, it enable us to further accelerate our growth and our journey toward a smoke-free world and to increase further our ambition. Here you have our new set of targets and goals for the 2021, 2023 period. You see that on net revenue, we are now targeting to be above 5% organic growth as a CAGR over that period. You see that beyond growing fast the revenue, we also want to very nicely improve the profitability of our company, and we target to deliver, on average, an organic growth of the operating margin of at least 150 basis point per year. Of course, as we are putting together nice revenue growth and nice margin expansion, we target to deliver above 9% of organic CAGR growth of the adjusted EPS over the period. That's going to be based, of course, on the very nice growth of our IQOS business. We are targeting to be, in 2023, between 140 and 160 billion stick. As you're going to see, the more we are growing the weight of IQOS in the business, as it keeps growing very fast, of course, it overall improves the growth profile, even in term of volume. We are targeting to be, over this three-year period, broadly stable, which would be an improvement versus the trend that we have been experiencing in the past few years. Last, but certainly not least, we are targeting to generate an operating cash flow over this three-year period of around $35 billion, that would be, as you can see, a nice improvement versus the 2019/2021 period. As I said, the acceleration of our RRP business and the growth on IQOS is really a strong generator of this performance and of this performance that we intend to accelerate. We're going to go through the coming years through two very important milestones for that. The first one is that by 2023, we are targeting to have revenue on non-combustible business to be around 40%. That would be a nice improvement versus the 24% of 2020. Of course, for 2025, we have this landmark ambition of becoming predominantly a smoke-free company and to have revenue above 50% corresponding to non-combustible business. That is, of course, a very nice perspective, and I can tell you it's a fantastic push for all energy within the company to get to that very important milestone. I want to be clear, it's not a kind of remote, faraway dream that we would say, one day we'll be above 50% smoke-free business. That is already in the region where we are having a significant presence with IQOS. That is already the reality or close to being the reality. Of course, there is one region where we are already above 50%, in East Asia and Australia, at 55%. In Eastern Europe, we have reached already 33%, and in the EU, we are at 25%. On average, we are at 35%, and six markets are already with revenue corresponding to non-combustible business above 50%. Let's dig a little bit further on what is the benefit of having IQOS growing. IQOS is actually a high-quality business, and when it is growing, it is having, for us, a number of positive consequences. There is no better example than to take Japan to illustrate that. In Japan, as you can see, we are already at 67% of our sales that are based on RRP. As you can see on that chart, as we were growing the percentage of revenue corresponding to non-combustible business, we were also nicely improving the margin. It's, of course, because IQOS is intrinsically a business of high quality with the potential to deliver even higher margin than the combustible business. I want really to elaborate on that and go through the various reasons why IQOS is this high-quality business I am describing and why it is having some very positive impact, I would say, throughout the P&L down to the cash flow generation. Here, we are listing all the positive impact that IQOS is going to generate. I'm going to talk, of course, about the nice impact on volume as IQOS keeps growing fast and with a bigger weight within our portfolio. We will also see that IQOS is coming with a nice impact on the revenue growth because it enjoys a higher per stick revenue. We will see that IQOS is also on the consumable, on the HTU business that is presenting a higher gross margin than the combustible business. As we are growing IQOS, we are pushing up the gross margin rate of the company. We will see that we are also, of course, progressing. IQOS is still a very young business, but we start to learn, we start to mature in some places, and we are increasing the return on our investment. We are also improving our commercial model, and we will elaborate on the full digital end-to-end model that we are developing. All these elements put together are designing a very exciting and promising outlook for growth and increased profitability for the coming years. Let's start now with looking at the volume. André has been presenting that chart already. Altogether, for the nicotine industry, we are expecting a yearly decline between -1% and -2% between 2021 and 2023. Of course, it's going to be quite differentiated between combustible, where we expect a significant continuation of the decrease, and yet has been alluding to that. In front of that, of course, we will see a very nice growth of the non-combustible. In front of the non-combustible, among the non-combustible, heat-not-burn is going to take the lion's share of the growth and should move from what it was, only 1% of the total nicotine industry in 2017, to be based on our vision, 7% of the total nicotine industry in 2023. As you can see, when it comes to revenue, it's going to be almost twice the 7% at more than 15%. That's going to be based for us, of course, and we're going to be the main contributor to this growth. We are targeting with the bracket that we are giving of 140 billion-160 billion unit. We are targeting a CAGR for our volume between 23%-28%. Here you have this very impressive, I would say, ramp-up of our growth on an IQOS and our heat-not-burn business. You see that we are targeting to double up our market share from 3%-6% between 2020 and 2023. Let's be very clear. In the country where IQOS is, I would say, meaningfully present, we are already nicely above 6%, at about 6.7% market share. In fact, the market share here is not reflecting the real impact of IQOS and our heat-not-burn business in the market where we are present. On the right-hand part of the chart, you see the very nice acceleration of our volume for IQOS, and you see this acceleration toward this new objective of 140-160 billion sticks. We've seen the very nice impact on our growth profile for volume that is coming from IQOS growing fast and of course, gathering weight in our overall portfolio. Let's move at the revenue and all the difference, the positive difference, the additional growth that we're going to be able to put on top of the volume evolution. Here again, the growth of IQOS is extremely good news. The reason why the growth of IQOS is extremely good news is that, as you can see on the chart here, we have higher revenue per stick on IQOS versus the average of our combustible portfolio. This is on average 2.4x superior. What does it mean? Well, it means that if you take $10 billion revenue, 10 billion sticks in HTU, it will have the same revenue than 24 billion sticks in the CC business. You can imagine, of course, that as we are growing fast our volume, I won't come back on the volume ambition on IQOS, that will be equivalent to a much, much stronger growth if it had been CC volume, and therefore with a very powerful impact on driving extra revenue growth versus volume growth. On the left-hand part of this slide, I would just like to draw your attention here on the excise incidence. Of course, one of the reasons why HTU is having this superior per stick revenue is the fact that it's a more premium business on average and more premium positioning than a lot of our business on CC. That is, of course, having an impact. The other reason, as we all know, is that in many countries, we are enjoying a lower level of excise duty. André explained why we believe it's going to continue to be the case on the long term. Here, what we are showing is that, actually, when you look at excise duty on HTU, it's significantly higher than e-vapor. It's about 5x higher in the market where there is a meaningful presence for the two. What does it mean? If we believe, as I think it is really the rule normally when it comes to taxation, that you put certain taxes corresponding to certain impact on society or planet. Just to take an example for the car industry, you put high taxes today on car, having a lot of CO2 emission and carbon emission is taxed. When you get to electric vehicle, most of the time you don't have any taxes. Sometimes you even have an incentive. It's because you are measuring the impact of one given product or consumption on society, and you try to put a tax attached to that. That's for the exact same reason as we know that HTU deserve a lower tax than the combustible because they have a much better impact on society and on the health of the people than combustible. E-vapor has a similar impact. One could make the case actually that HTU are actually quite high today in terms of taxation, in terms of excise duty versus e-vapor for probably a similar broadly impact on public health and maybe HTU could be lower if it was aligned on the e-vapor reference. I'm coming to the benefit of, I think, this very strong per stick advantage in terms of revenue coming from the IQOS business. What does it mean? It means that we're going to be flying now on two engines in terms of generating extra growth on revenue versus volume. Traditionally, as you all know, we were able to increase price mainly on CC, and that was still the case in 2018, where really most of the increase on the revenue versus volume was coming from price increase on CC. In the future, we're going to absolutely keep this pricing power. I think André elaborated on the short term, some headwind that we could have on the couple of market. Nothing is fundamentally changed on the long term. On top of that, we're going to add this very nice, powerful mix impact coming from the growth of IQOS. As you can see, in 2020, we were already nicely flying on these two engine almost, by the way, for more or less the same impact. The 6.9% extra growth on the per stick had been generated almost on equal part by increasing price on one side and the positive mix on the other side. Here, we want to just pause for one second to make sure that everybody understand where we are in term of price positioning for the consumable of our HeatStick. Of course, IQOS and all the consumable that are coming with IQOS is a premium business. That's very clear. The overall experience is a very premium experience. We are benefiting today, as we said, in most countries, from a lower excise duty. That is having two consequences. Well, the first one is that we managed to have, of course, a retail price that is lower for HTU than premium cigarette. That's a great way to attract new smokers to switch to HTUs. It's not that it's going to be the only reason for them to switch. It's just an additional on top of all the other benefit that IQOS is providing. What it means as well, that being a premium business, which is priced today as something which is closer to medium price positioning, again, on average. Well, that mean that if there was some excise duty increase, we also have the capacity to price up to absorb this excise duty increase. Here, I just wanted you to remember and bear in mind that, of course, we retain very nice pricing power and productivity on pricing power. Here, we are taking the example of an increase of $0.10 per pack. You have here the average retail price for a pack for the CC business and for our IQOS business. You see that $0.10 is more or less around inflation on average for country. You see that the two, of course, are delivering a very nice productivity on price when it comes to our revenue, +6.9% and +9% for IQOS. Nevertheless, the productivity on IQOS is 30% higher than on cigarettes. It's also very good news for the future. I've been talking about positive impact on volume. I've been explaining how IQOS, on top of prices, is going to contribute as well to revenue growth. I think here for the first time, we are disclosing the fact that when it comes to the consumable, to our HTUs, we are on average handling a gross margin rate for our HTUs, which is around 10 percentage points above the one on the CC business on average. What does it mean? Well, it means that each time that we are growing our consumable on IQOS, and you can see that we are growing them rapidly, we are creating a very powerful mix positive for the evolution of the gross margin. You have started to see that in 2020. We will continue to see that in the coming years. The other element when it comes to our IQOS business, of course, is the margin that we are making on the devices. Today, let's be very clear, we are having a negative margin on devices. We think that it is extremely important to put the devices in the end of the smoker to convince them to switch. Therefore, we are not targeting on the long term to have the same kind of gross margin rate on the device and on the consumable. We are certainly targeting to have a break even or slightly positive margin on the long term. As you can see, reducing the cost of our devices will be one driver to get there. Another very important element when it comes to improving our gross margin rate and our profitability overall will be to generate massive manufacturing productivity. We've been quite good at doing that in 2019 and 2020. In 2021 to 2023, we are targeting to generate another around $1 billion gross manufacturing productivity. That's going to come from procurement, that's going to come from reducing the waste, that's going to come from optimizing our manufacturing footprint. $1 billion is a very powerful gross productivity. Of course, that will allow us to more than offset, of course, inflation, investment that we could have to do for regulation or new product launch and generate a very nice net productivity. Here it mean that we have three driver to improve gross margin on the medium and on the long term. The first one is a traditional one that you have seen for many years, which is increasing price. As I said, we retain the same capacity, the same pricing power. The second one is a very nice positive mix impact that is coming from the growth of the IQOS business. The third one is the manufacturing productivity. Therefore, when we look at our ambition to generate, on average, at least 150 basis point organic improvement of our operating margin on a yearly basis, we believe that the gross margin rate improvement should contribute to more than half of this improvement. We've been talking about gross margin rate improvement. We're going to have a nice second driver to improve profitability, and this is going to be the decrease on an organic basis of our SG&A to revenue ratio. How are we going to generate that? Here again, we have a very nice, ambitious, about $1 billion efficiency program on our SG&A. The fact that we're going to be able to generate this $1 billion efficiency program will allow us to compensate inflation, of course, that we estimate to be between 2.5% and 3%, but at the same time to continue to massively invest in new growth initiative, innovation, R&D, new launches, consumer program, more digital capacity, you name them, but we are going to build this capacity while once again, still decreasing the SG&A on revenue ratio. How do we split the effort, and how are we going to generate this $1 billion saving? We thought it was important to lead you through the detail of our SG&A. Sorry for being a bit didactic here, but I hope it's going to be helpful. We are actually splitting the $7.4 billion between commercial and R&D, about $4 billion, and G&A and other $3.4 billion. On the $4 billion, one third, roughly, okay, it's of course a rough calculation. One third roughly correspond to the CC business. Two third already correspond to the RRP, and that does include R&D. 70% of this two third are fixed cost and 30% are variable. When we talk about variable, that's all the things that are linked with the volume, in term of coaches, in term of call center, and everything which is going to be influenced by the volume. On this first part, we intend to generate around $0.5 billion, and in one second, I'm going to elaborate on how we intend to do that. On the G&A, we also intend to generate around $0.5 billion of saving. Here again, I will describe that in a few slide. Starting with the commercial efficiency. The first element, of course, is that for all our costs, we're going to generate some operating efficiency. We keep improving the way we are working. We keep digitizing the way we operate. We are reviewing our processes. We are simplifying things. We are using shared services. We are working on our fixed cost to reduce them, and that's going to generate part of the $0.5 billion saving. On top of that, you should also integrate the fact that, and Jacek alluded to that, we've been making big investment to launch IQOS at the beginning. What we mean by big investment, we've been building the innovation and the product platform. We've been building the commercial infrastructure. Of course, we keep investing on all these fronts. Now that we are accelerating and scaling up our IQOS business, these costs are going to grow at a much lower pace than the IQOS business, and we're going to generate some efficiency there. The second driver to decrease our commercial cost and make our growth cheaper, if you want, is the fact that we target to develop, of course, our end-to-end digital model for commercial. We've been learning a lot, sometime under the pressure, but for that purpose, the pressure was good. We now have a commercial model that is much more efficient. We are using digital. It's not only that we intend to reduce our variable cost by 30%, I think we are also achieving through our digital customer experience, a higher level of satisfaction and efficiency in contacting the smoker to teach him about IQOS and to share about IQOS. Through the journey of the full conversion and building the loyalty for IQOS. I think that the overall customer experience is also better. Here you have the double positive impact of cheaper, but also better for our customers. That's for the commercial cost. Now let's move to the G&A, and here again, we are nicely targeting 500 million of saving. I guess it's going to be the traditional efficiency lever. We are going to simplify a lot of the things we do. We're going to kill overlaps. We digitize, so there is a lot of investment on IT. We standardize. We're going to use much more shared services to generate higher quality and more homogeneous type of work. We are becoming a fully project-based organization that is generating a lot of efficiency. Here again, with this $1 billion, we're going to be able to generate this nice organic decrease of the SG&A on revenue ratio, while of course, coping with inflation and reinvesting. When we talk about capacity to reinvest, here we talk about several hundred million dollars that we'll be able to reinvest and still deliver this reduction on the SG&A on revenue ratio in an organic manner. Just to conclude that part, we are putting together here a very nice ingredient for a strong financial performance. We talk about volume that we target to be broadly stable. We are having a nice additional growth and nice growth overall on revenue driven by the IQOS impact and by the continuation of pricing up. You have seen the two levers for profitability improvement, the gross margin with three pillars, HTU mix impact, pricing, and manufacturing productivity. The second driver for improving the profitability are the lower SG&A to sales ratio, and we'll be talking about commercial and G&A efficiency. We retain the capacity to invest for our future. Of course, all that is going to enable us to deliver on this objective to have at least 150 basis point of improvement on our operating income margin on a per year basis. This is on an organic basis. We grow fast revenue, we improve profitability. That is, of course, going to deliver a nice growth for the adjusted operating income, the adjusted EPS and the operating cash flow. Precisely rebounding on the operating cash flow. I mentioned to you that we are targeting to generate around $35 billion for the next three years. It's a nice growth versus the previous three-year period. Remind you that we still believe that the CapEx should stay broadly stable, versus what we used to do, so around $0.8 billion. When it comes to capital allocation, we have to be very clear. The main priority remain the organic investment in our business. You see the potential. We think that we can really deliver a lot of value, and so we'll continue to invest behind the IQOS business. We will invest organically as well on our Beyond Nicotine Initiative, and I'm going to come back on that in a couple of minutes. On that one, it's going to be a lot of organic investment. We just don't discount the possibility that at a certain point in time, a bolt-on acquisition to further accelerate the move could make sense. Now, when it comes to the dividend, we keep our unwavering commitment to the dividend. We absolutely maintain our progressive dividend policy. What does it mean? Well, it means that the dividend cannot be decreased. I want to be very clear on that one. On the long term, we are targeting a payout ratio of around 75% of our adjusted EPS. Now, when it comes to a buyback program, provided that the outlook for the year 2021 is confirmed as we progress through the year, our intention is to launch a three-year program of $5 billion-$7 billion in H2. To be clear, you should not expect us to be buying the same kind of amount every month. It will be much more a tactical, and I would say, opportunistic program based on what is happening in the market. One word on this Beyond Nicotine ambition. Nothing, of course, in our 2021, 2023 target guidance that we are sharing with you is taking that into account. As I said it, we think that given everything we've been doing and developing in term of life science, technology, I would say, knowledge, consumer expertise, we are legitimate on at least a couple of areas, certainly on the botanicals for lifestyle and wellbeing product, on the respiratory drug delivery. Therefore, we want to make sure that we build on this potential, on this capacity that we've been putting together. We believe that it is reasonable to target at least $1 billion in net revenue by 2025 on this Beyond Nicotine ambition. I'm going to move to what is an essential part of our performance and outlook for the coming years. I want to be very clear, delivering on our sustainability ambition is both a condition and a consequence of a successful journey in unsmoking the world. Like everybody, we want to be a best-in-class player in all the ESG parameter. That's very clear that we want to have a great impact on the environment. I will come back on some of the target that we have. We certainly want to be seen as a reference when it comes to dealing with society matters, and we want to have an impeccable governance. You should expect us to deliver a best-in-class performance on this front. Of course, we have one specificity, and I think we are very proud of this specificity, and that is, I think, animating all of us and driving us. We have a unique duty. Here we say ambition. I think we feel that as also a duty and something we need to bring to people, which is to create better product to improve people health and to allow the smokers, the 1 billion smokers of the planet, to go for better alternative for their health. When it comes to improving the society, improving the world, and of course, creating better health environment, that's a specific mission that we have. I want to be very clear, I am not dissociating for one second our financial performance and our performance on delivering sustainability. The way we're going to work on the two is totally entangled and the two are absolutely connected. Now, the way we want to do it is to start from this, I think, view that we have that to be successful on delivering with all the capacity that we have on all the sustainability dimension, we need to onboard all the stakeholders. We talk, of course, about the government, we talk about the regulators, but we also talk, of course, about investors. To onboard all these people, we need to have a very solid frame, very clear, very transparent, and where people can see very openly and follow what we are doing. We want to be clear on the why, on the what, and on the how. The why, of course, is why are we starting this journey? Why are we intending to unsmoke the world and deliver this smoke-free vision? This is our statement of purpose and what we think we can deliver through this new product. We've been sharing that, I think, in a relatively pioneering way with the outside world. That put in a very clear manner why we are starting this journey. We want to be clear on the what. What do we want to deliver through this journey? Which kind of achievement do we want to bring to the customers through the planet? What are the milestones to get there? The third element, which is how are we doing in this journey and how are we performing versus our target? We're going to do that in a very clear, consistent manner, and we think that is the way we're going to be able to have the biggest positive social impact and drive the highest shareholder return. Here, I'm sharing some of the key milestones for 2020. I'm not going to elaborate on all of them. I'm going to come back more on product in one second. Just in term of social, I would say, milestone, we indeed have been certified equal pay. I think we are very proud of that. We are also very pleased to have been included in the Bloomberg Gender Equality Index. When it comes to the environment, we are absolutely on track to deliver on the carbon neutrality for 2030. Actually, we are working on ways to further accelerate that, and we are working to see whether we can anticipate this date of 2030. When it comes to governance, we've been issuing our first integrated report that I dare to say, I believe it's already a benchmark and a reference in term of quality of the data that we share and also outlook and perspective that we are giving in term of our ambition for sustainability. This one is probably, of course, the one specific and super important for PMI. That is really how we are driving our ambition for a smoke-free world. That start, of course, by investing on innovation almost exclusively. As you can see now, we are virtually at 100% on smoke-free product. You see that today we are also really focusing our marketing cost 76% on IQOS. I've been talking about the growth in net revenue, and of course, 12.7 million people have abandoned smoking to switch to IQOS, and we're already very proud of that. Of course, there is still a lot of work to be done. It's an encouragement to continue and to accelerate. Now we are working to our 2025 and new goal, and you have it for your per usual, so you can, of course, go through it. I'm just going to take a few of them. We want to have, by 2023, 100% of our electronic device with age verification technology. We are working on this roadmap. When it comes to caring for people, we want to ensure that 100% of our partners, farmers are receiving a living income. When it comes to protecting the environment, we want, by the end of 2025, to have 100% of our smoke-free devices being eco design certified. Which of course, will be a tribute to the impact that we are having on the environment and the fact that we have been greatly improving the impact of our product on the planet. Last but not least, back on our specific mission when it comes to sustainability, we said it, we want to have more than 50% of our net revenue to be based on non-combustible business by 2025. That will mean that we are a totally different company at that time. As a conclusion, I think precisely, I really want to conclude on the fact that we are rapidly becoming a fast-growing and increasingly profitable majority smoke-free company. We're becoming a new animal. I know that we are still called a tobacco company, but I think you see on the ambition that we have, that we are evolving very rapidly in new territories. This ambition, this evolution is going to be driven by the growth of IQOS, and I've been highlighting all the benefit for that. To this IQOS growth, we're going to add up the price excellent and cost efficiency to deliver, we said it, improved volume dynamic, fast-growing revenue, enhanced profitability, the two together generating, of course, strong profit and cash flow growth. We intend to have a major positive impact on sustainability and society. By doing that, of course, we believe that we can generate strong, sustainable financial performance and generate superior return for our shareholders. That concludes my part. Thank you very much. I think we now have a short break, and we'll be back probably in 10 minutes for the Q&A session. Thank you very much. Welcome back. It's now time for the Q&A session. We've allocated a little bit more than an hour for this session. Joining André, Jacek, and Emmanuel will be three members of the senior management team, Suzanne Rich Folsom, our Senior Vice President and General Counsel, Stefano Volpetti, who's our Chief Consumer Officer, and Deepak Mishra, who's our Chief Strategy Officer. As is our practice with the quarterly results, we have invited sell-side analysts who cover PMI and other institutional shareholders to ask questions live on video or audio in an interactive session. There's also a question box on your screen on the top left-hand corner if you want to submit a question via email. I'll come back later on in the session and read several of those questions for the senior management team. At this time, I'll turn it over to Mark, who's going to moderate the Q&A session. Mark? Thanks, Nick. Welcome, everybody. As Nick just laid out, we're going to do two parts to this. One is going to be the live interactive on video, mostly, maybe a few audio. Then we'll have questions that come in from the Q&A box, which is in the upper left-hand corner, as Nick just mentioned. Those will go through by email, and those will be addressed a little bit later. I'll be moderating the raise hand feature for the analysts. We're going to start with three sell-side analysts, then move to a buy, and we'll move back and forth. First question of the day will be from Chris Growe from Stifel, and you're welcome to unmute your audio and video, and go ahead. Thank you. Thank you, Mark, good afternoon to all of you. Thank you for all the great information today. I had two questions if I could, to lead out. The first one would just be that IQOS has been very successful in broadening the number of markets it's in and the regions that are contributing to its growth. It's more balanced. As I look at your 2023 targets over the next couple of years, is there a region that you think could be a larger contributor to IQOS' volume and that should help you achieve your growth? I'm thinking the EU is an example of one area where there seems to be a broader ability to grow in that area. I'd like to understand your viewpoint on that. I could add my second question, and then I can come back to it if you forget it. Just to add to that, you have several new products, new platforms. I guess I want to understand the demographic profile of the next generation IQOS user. I guess what I'm thinking is, how does IQOS ILUMA, for example, help you attract more consumers or help you convert more consumers versus, say, IQOS DUO? Jacek, I could hear the excitement in your voice when you announced that product. Okay. I think probably Jacek could answer these questions. Yes. In the European Union, there are two geographies, sizable geographies, which I believe we should look for bringing IQOS to the higher levels, obviously France and Spain. Right? We have some progress, especially in Spain, Madrid, but this is not which satisfies us fully. There is a number of challenges which we have. One, the most predominant, is a very narrow bottleneck situation with regards to communication. France and Spain, we really don't have that much of ability to talk to consumers. I actually believe if we add IQOS ILUMA, which is the much more intuitive, almost quote-unquote, off-the-shelf type of solution, so you unbox and very intuitively, or with very minimal explanations, you know how to use it. I think we can make a more significant inroads there. Outside S&SA region, which is run by Stacey Kennedy, this is what I had in mind. It's Indonesia, Philippines, Vietnam, these places. There are a couple of interesting geographies, sizable geographies, and we're working on fine-tuning the right regulatory type of a framework so they are sort of sustainable, that we can go with a minimum sort of communications to consumer. We have opened Philippines, big word, open. I think that one almost share point in Metro Manila tells us that we got something. Most challenging, to be very frank, will be presumably Indonesia, but we're working on that as well. I don't think it's going to happen in the beginning of this three years period, but somewhere in the three years period, we'll have something more substantial in Indonesia as well. Vietnam is very interesting, if you think about it, but we need to overcome a couple of regulatory hurdles there. The other parts which are in the region, which we have Japan, Korea, et cetera, which are still restricted. Essentially, I should actually put it, smokers are not allowed to enjoy the alternative. I am cautiously optimistic we can open these geographies. It will be a very nice complement, and I do believe they will have a very strong start from the very beginning. This is where it's going to come from, the sizable geographies. The second question was about. Demographics. Demographics. Okay. Look, initially, obviously, you have a bit of these demographics, which is skewed 30 below legal age to 30, because these innovations, they're much more open to experiment with the new things. As we progress with the time and with the targeting, also geographical targeting, we do see that IQOS starts having a more substantial penetrations in the 40+ or 50+. This is where you're going to the core of the smoking population. The product is great. The customers in this age cohorts like IQOS taste. There's no questions about this. All of these things around the blade, which I mentioned in my presentations, the cleaning. It's not reliability in terms of how do we execute the device. It's the reliability around the blade that incidentally, you may damage, you may break the blade, is setting them back. Some people also forget to clean the device, that impacts the quality of the taste experience, that sort of things. I actually think that the higher technological advancement of ILUMA offer us to go to this more resistant group of smokers because we will give them essentially hassle-free sort of experience while maintaining the great taste profile. That's my assumptions. There is a substance behind these assumptions that this should work like that. I mentioned in my speech that I'm more excited when I look at the consumer feedback from the research. I know it's a research. It's not a commercial setting. Look, I've seen the research on the IQOS DUO, which really was spectacularly well-received, the 3.1 version DUO. I have to tell you, the IQOS ILUMA blew the charts. Okay. It's really there. People, it's the best of the things. It's a hassle-free almost experience. Every stick works from the beginning till the end of the six minutes experience, which, by the way, is the longest experience anybody is offering in a category today, and a consistent experience with the full satisfaction. I think if we, further technology addressed a couple of these pain points, I think we really have a wonderful asset on hand. On the demographics, just to conclude, you may recall maybe, Chris, from the past, we've been underrepresented with female audience, right? This was the initial. We have, in most of the geographies, essentially, we have closed the gap. We don't have IQOS today, by large, is almost starts reflecting. It depends on which year you are, because was the introduction. IQOS almost started resembling sort of the more natural distributions as you have on the combustibles. That's great. I think let's move on to the next question. Bonnie Herzog, I see that your camera is lit up. It looks like you're ready to go. Are you ready to ask the next question? If so, unmute yourself and go ahead. Sure. Hi, everyone. Nice to see you. I just wish it was in person. Hopefully next time. I wanted to ask a follow-on question regarding ILUMA because yes, Jacek, I think it was great to see how excited you are about this next generation IQOS. Maybe you could give us a little bit more color on where this new technology will be positioned relative to some of the existing IQOS platforms that you have in the marketplace. I guess my assumption would be that it will be premium. Then I also would love to better understand on the acquisition cost, I believe you talked about that being lower for this ILUMA. Can you help us understand how meaningful that could be? Is it quite a bit lower in terms of acquiring new users? Then, just your thoughts on how you think about incrementality from this. I assume it could cannibalize, but if it's an uptrade proposition within your portfolio, I would look at that as positive. Just any thoughts on that would be helpful. Sure. Look, yes, we'll have three variants or three versions of the device, one which is really more of the super premium. You may consider this from the device perspective as an uptrade. One which is more or less reflecting the positioning of the IQOS 3 DUO, which we have today in the market, and the main device, which will be a little bit more price accessible. We also have to see that the innovations which makes this experience very flawless, simple, also should allow us to penetrate the cohorts which are around the equivalent of the mid or below segment. Obviously, there will be a lineup, vertical lineup of a consumable. One thing I said in the remarks, the consumables for ILUMA will not work for the IQOS Blade, and IQOS Blade will not activate the ILUMA. We will for a period of time maintain the two technology in the market. You will have IQOS blade, and I believe the first group of users who is going to jump really to ILUMA, recognizing the value of the innovations are existing IQOS users. We know that this may drive them even to the better conversion than we have on an IQOS. There is a net gain, not necessarily from a price positioning, but from the even higher loyalty to the product. I do not know, Stefano is on the call. ILUMA has a few fathers. André, obviously, is the master father of this innovation. This was his idea to put the inductions into the most micro dimensions ever seen in the history. They can chip into this one. I think initially it will go to the IQOS. It's going to take the people who've tried IQOS and didn't adopt IQOS because they didn't want from this cumbersome process. We can go back after to these consumers. We can now offer them ILUMA. I think it's going to help us on acquisitions pretty soon, not from the day one. Whenever we start this year, initially you may take even up to 30% upgrade or change within existing user base, and then we'll get the incrementality from the better acquisitions. This drives the cost down because first, on the post-purchase service, handling broken blades, et cetera, reverse logistics, all of these things, we can really start scaling down in these markets fast. Second is, really doesn't require that much of a handholding during an adoption period. It's so intuitive how to put the stick in. It's so intuitive how to remove the stick after the consumption, after the experience. I mean. Yeah. Are very simple. I believe this will allow us to reduce the acquisition cost further in addition to what we have achieved already on the current IQOS going forward. I would add, that you can also get into more remote geographic areas. Can you hear me or? Yes. Okay. We can. Today you need some physical presence to explain to the consumers how to use the product, how to clean it, and so on. If the product is intuitive, a little bit like any e-vapor product, you put the pod in and it works. You need less infrastructure in the more remote geographical areas. I think we can have an easier expansion at a lower cost. I think the induction is a great technology, but as I said, we may want to keep also a blade type of heating or a pin type of heating like the lil product, or combine the two technologies and IPs into one, if we wish so. You have a leg there to go even at a different dimension of market or price positioning. With different consumables. In reality, the two products will coexist for two, three years, because we have a lot of consumers with existing devices or IQOS, and some will not trade up immediately. That's how I see it, and that's why I said, every time we innovate with a major thing, clearly the previous technology is available and may also be available for licensing to others. Okay. Because as we licensed one, I think others can license technology. That's the way I see it going forward. Okay. That was really helpful. If I may just ask one other question, and it's more of a big picture question. As I listen to all of you today, great presentation, a lot of information, exciting because the innovation pipeline seems to be stepping up again, as we look into this year and beyond. As I think about all of that and everything that you guys are trying to execute on, I'd like to ask, your confidence level of how you're able to balance all of these different, whether it's, new innovation, different initiatives, balance that with the complexities of your organization that seem to be increasing. If you could touch on that, I think that would be really helpful. Then a second part of that is, how do you mobilize your employees internally and/or incentivize them behind some of these different technologies and innovations? Thanks. Well, I can start and I'm sure Jacek will get Oops. You're there. You're okay. I can hear you. These buttons you press is terrible. I think that, first of all, our employees are very excited about the success of IQOS, and as you know, success and progress brings excitement. Secondly, we all understand complexity and handling different platforms, both at the consumer contact level, but also with trade and everything. Clearly, there is a lot of infrastructure that can be shared, but also you need dedicated teams to work on e-vapor products versus heat-not-burn. Also, because the problem, as we explained, is different. In e-vapor, you need to differentiate your product, and I would say it's more classic marketing. I don't think we have the intention to open a market to RRPs with e-vapor products because we know they don't work as well as heated tobacco products. Where we go, the category is null. It increases complexity at retail level. Okay. I think, however, that the awareness, and I would say the respect the trade now has for the success of IQOS, will help us, as this is coming from us and under the IQOS brand name, to also get access to retail easier, I would say, than a newcomer would have. We are all mindful of the complexity, and that's why also we changed and we are changing completely our ways of work. This is a project-based organization because individual functions cannot handle the complexity. We also have a lot of subject matter expertise in the company now that can handle these things, and digitalization helps. André touched on something important. We never, in the construct between earnings calls and individual meeting of investors, but even in the time constraint, investors, they like today, we never really had an opportunity to talk about the internal transformation. People take it for granted that it's very easy to put one or two or three bullet points on a PowerPoint, but this is enormous effort, right, which we're going through. I think, over the last five years, we deliver it. I have to admit that if I knew, if we knew five years ago what we know today, we would be flying in colors. We're learning. This is ours. Okay? We're already flying in colors. I have to admit, look, we had an assumptions which proven to be wrong. We learn it, the organization is behind it. As André said, the prioritizations that, in every aspect of we're doing is very important. We have a very strong governance in the company, how we reorganize ourselves, completely differently, very focused on a product, on a marketing, on the internal processes. It's a lot of initiatives, but they do have an owner, they do have a leader, they do have a sponsor, and dedicated resources to the things which really matter. Yeah. I think, look, this is not a walk in the park, okay? I think the motivation is there. Yeah. Reality is, as we said many times, Bonnie, and to the benefit of everybody, at the end of the day, technology is a good thing, but brand equity and organizational knowledge, that's where you get your competitive advantage at the end of the day. I think we are ahead of everybody in these two areas because also we started first. Okay. Thank you. You're welcome. Let's do the next question from Gaurav Jain from Barclays, and then, Robert Rampton, I see that your video's on. You're going to go after him, okay? Great. Gaurav, go ahead. Good afternoon, everyone. I have a couple of questions. Hi. Just trying to understand your guidance, over FY 2021 to 2023. You are saying that your volume growth will be flat, and you have also highlighted that IQOS leads to a positive mix shift of about 4% at that level of growth. Yet the total revenue growth that you're guiding to is only 5%. Above. What I'm asking is that, look, if pricing continues to grow on cigarettes and IQOS growth will be in E.U., which is your higher ASP region on IQOS, then aren't you looking at a 6%, 7% kind of revenue growth rather than 5%? Well, I tried to give you all the parameters when I was sitting on this algorithm for a while. Yes, we are visually about that. We are in COVID, and I don't know where the rebounds will happen. I think I gave you, which you can calculate, you can do the math your own. Okay? You know the per unit of IQOS, and you know the per unit of cigarettes. Okay? Of course, we have to assume some cannibalization is there. If we want to be conservative, we assume 40%. Okay? At the end of the day, if you do the math, you're on a 5%-6.5% based on IQOS. Okay? The whole question is, what else is going to come and when? When duty-free is going to come back, when any rebound can happen. I said that I gave the CAGRs for everyone, right? If we take cannibalization out and the COVID effects out, then you're normal business. You can assume two, 3% volume decline. We know what CAGR that gives. Pricing compensates and comes on top. If everything works well, obviously, in a rebound year, you will be well above. If it delays, we want it to be also cognizant that we are not out of the woods yet. I gave you all the parameters that can lead you to much higher if the stars align. Sure. That's very helpful. My second question is on just your 2025 ambition, that 50% + of your revenues will be from IQOS, so you will be a smoke-free company. If I look at the share in units, it will still be around 30%. From that perspective, you will still largely be a cigarette company even in 2025. You have announced a share repurchase program today. Do you think you need to go even further than that? Because we know the continuous pressure from ESG funds who are continuing to pivot away from tobacco. Based on the 2025 projection, that won't change. We didn't say or indicated that the 2025 is the end of the world and our journey to smoke-free. We just picked a moment in time, and there is no magic of 2025 other than it is a round date, right? This is how you set the milestones. I believe that 50% is aspirational but is attainable, the directions where we go. Logic obviously dictates that once we get to the 50% of the revenue, the thing's going to also have a completely different dynamics than the first 50%. I think the directions that they were, the consumer, this is not the word, this is not the industry or manufacturers. The fact that the consumers are looking and deserves and are looking for a better alternatives has been all confirmed. Okay? The science and the harm reduction strategies, I believe, finally will reconcile and will go into one direction, is closer. We are not done yet, as André and I indicated, I think with every day, every quarter, we're getting closer there. Consumer is there. Okay? Once you think that we will go to that level of penetrations, as we measure in the dollars revenue to 50%, I think the rest is just, this is not as challenging as the first 50%. I do believe that there will be smokers, we have said it from the very beginning, who will need other set of incentives or disincentives to make the final move because we will be confronted, and we know it today, with the smokers who will never, ever stop using cigarettes. We need to figure it out, other solutions, how to move the last cohort of the combustible smoking into this equation. I believe we will find together with our stakeholders the solutions which will help everyone to go smoke-free. This is how I worry. As we talk, Gaurav, about ESG, I think everybody needs to understand that, first of all, exclusion is not the solution because that's not going to convince any person to stop smoking, as it's not going to convince any person to stop using fossil fuels. I think the key thing here is to say how we can convince, to Jacek's point and everybody, people to change behavior. That's fundamentally an ESG thing. The fact that if we didn't sell cigarettes, because I get this question very often. Let's assume you dispose, you stop your business, whatever. It doesn't change anything from an impact on the planet of the fact that cigarettes do exist. Replacing is the solution. I think engagement from the ESG investors with us and understand what we're trying to do, put pressure also on our competitors to do the same, and on regulators coming in and incentivizing the industry to go in that direction. I think that's the right approach to resolve the problem. Otherwise, even if we didn't have cigarettes, somebody else would have them, so the problem is not resolved. We're trying to resolve the problem, and I think that's where we should be focused. Thank you. Thank you. Okay, Robert Rampton, UBS, are you ready to go? Yep, ready. Thank you very much for taking my question. Two questions from me. The first is, could you tell us what the margin profile looks like in Korea? If you can tell us what you did to defend margins there once the tax gap closed? That's my first question. Thank you. Want to take this? Yeah. We know the tax structures in Korea, okay? Sorry, go ahead. No, I just wanted to say that we don't enter. Yeah. The elaboration of comment on margin by market. I think we're about to say that there has been a significant reduction in the differential on excise duty between CC and heat-not-burn. The profile today is not materially different between the two, and there is no interest from the local authority today to push better alternatives. That is certainly paving the way for the CC business to be the one growing, and notably with a lot of flavor development in the country. There was a few percentage points difference between heat-not-burn taxation and the cigarette taxations. I guess the question is more about the KT&G than Philip Morris, right? To be very frank. Okay. Fair enough. Thank you very much. Just the second question, so on competition, I appreciate that in most of your markets, competition has had a negligible impact. However, peers are coming with better and better products. Can you help us understand how you're thinking about the impact of competition on the various top-line and margin drivers in the event it gets more effective? Is your assumption that your lead on all the fronts you've talked about is too big? Thank you. Competition is, I will take it, I guess André will finish with this one. Okay? Thanks for the question. It is not that we are not confronted with a competition putting really quite significant resources behind their products to compete with us. If I take Japan, if I take Russia and a few other geographies, it is not that the competition is sleeping. The competition doesn't have an impact on us, and we measure this from the fact, do I still have 80+% share of segment? And I do, right? We actually even managed to grow by about 100 basis points our share of segment. So far we're coping with competition very well, but the resources which the competition have put or essentially to competitors in some focus markets are seriously very significant. Resources are going obviously more into discounting devices. We have pretty aggressive schemes, et cetera. The gain, which makes me very happy, is the IQOS goes through these waves almost untouched. I remain the high conversion rates, and I said it number of times, that's the key to the right returns while achieving your smoke-free future. There are some competitors, and this goes beyond the damage or pressure they put on us from a classical product competition, when unfortunately, they start confusing the regulators about the categories. Okay. If I cannot achieve my commercial success, I am trying to pull all other strings in order to pull the leg of IQOS of heat-not-burn. I think personally it's extremely short-sighted because instead of focusing and grab the opportunity which consumers indicates to us, give me good heat-not-burn products or other RRPs and I will switch. I mean, some people, as I said, in the short-sighted type of an approach, are essentially pulling the regular RRPs. I think the strategy, I hope that the strategy will change because this essentially undermines the big purpose of this transformation. Actually, as we have demonstrated our side, which is good not only for the smokers, public health, but also for investors. I don't understand some of the strategies. André, I think you want to add something? You're muted, André. As Jacek said, our job is to continue innovating, building our brand, and try to be better than the competition. You have to assume the competition will continue improving their product. Okay? We are extremely cognizant of the fact that there will be increasing competition as the segment grows, and we try to be ahead. I think ILUMA is a very good example of us innovating in this category ahead of everybody else again. As I told Bonnie, I think as an organization, we've learned a lot, and that's a huge competitive advantage. We had the first-mover advantage with IQOS, and it has established credibility. I think all this, it's fair commercial gain. For the rest, as Jacek said, I think people should be careful when they go to regulators and say the dividing line in products should be whether they contain tobacco or not, when everybody knows pertinently well it's the absence of combustion that is the issue, and not tobacco or non-tobacco. By the way, that sounds like aligning positions with NGOs and the World Health Organization that are still in the '50s in terms of science. I think that's where care should be, and a long-term view should be playing. Not to shoot our foot or a company shooting their foot when being so excited. Anyways, competitors have the right to do whatever they want, and we face this situation increasingly this year, and I don't think I can point to one competitor that had a win in this area. Great. Thank you very much. Thank you. Okay, we're going to try to go to Tom Russo. Tom Russo, if you're available, you can unmute your audio and video, and we'll take a question from you. I think you have multiple questions, so if you can limit it to two, that would be great. If you're ready to go. I'm all set to go other than the video, I think, is not. Thank you for the chance to address the management team and to thank the management as well as the board for having had the capacity to suffer through $8 billion worth of investments over the past 10 years, to come to this point where you now have such an extraordinary position. My two questions are, first, just to have a chance to have André share with us maybe the role that digital has played in helping you deliver more for less, with more effectiveness, and more efficiency, across advertising, direct marketing, even auditing your outcomes broadly. The second question has to do with your priority with the United States as a market. It did not come up in the response to Chris's question about big markets because his was addressed to the E.U. Is the U.S. a big market for you? What are the steps that will be required to begin the process of realizing those values? I'll throw one last question in about the capacity to suffer. Do you have any plans to try to commercialize China going forward? Congratulations on a terrific presentation. Okay, I'll start. In terms of China, the intention is always there, progress is limited for the moment because I do not think the China National Tobacco Corporation has decided to on their domestic market deploy this product. We are always hopeful this will happen. I do not think that is going to happen in the next two, three years. I always remind people about how patient we were about certain countries in Eastern Europe opening up, and sometimes we waited 15, 20 years until they opened. Clearly on the digital, we are at the beginning, I would say, of the transformation. We hinted to both things, how we can use more digital tools, and COVID was an accelerator in all the misfortune surrounding the pandemic. At least everybody was forced, and we were forced to even accelerate and try digital tools. Overcame a little bit the reluctance of certain traditionalists, I would say, in our markets. Also, now we are standardizing much more our internal processes, as Emmanuel said. When you standardize, you can obviously digitalize. To me, this is a beginning of a journey. We are not yet a digital company, I would say, although we sell a physical good. I think, on one side, we look at acquisition and how digital facilitates and reduces cost. Also, when we start moving to retention of consumer, it becomes increasingly important as we have a very big number of consumers and competition. Obviously, CRM will take a much bigger base, much more knowledge and data on consumers that we can use, obviously, to accompany them during the journey, but also eventually offer products and services that can add revenues or loyalty of the consumers. That's where I think digital will play an important role to have much faster feedback from the market. We have it already. Improve the product and what we offer consumers, and eventually, potentially monetize in a certain way our database and digital knowledge. That's how I see it. Sorry, I forgot the third question. It was the expectations of rolling out North America. Sorry. Look, the potential of the U.S. market is very big, okay. You know that we have the agreements with Altria. Now we have the authorization for IQOS 3. Altria have announced their expansion plans, and the ball is in their camp to grow the business in the U.S. I think the potential is there, and I hope Altria, with our help, obviously, can materialize this potential as soon as possible. Okay. Thank you. Next, we're going to move on to Adam Spielman from Citi. Michael Lavery, you're going to be on deck. Thank you very much. I'd like to just follow up on that question. André, on slide 41, and I'm talking about the U.S. here, you showed how the markets you've launched in 2019, 2020 have grown so well. Yet, frankly, it hasn't worked well in the U.S. It's been, in my view, very disappointing. Can you just explain exactly why you think the growth has been so slow in Georgia, in the United States relative to Georgia in the former Soviet Union? It's difficult to answer this question because I'm not doing the commercialization and the marketing of the product, Adam. You say you work together closely with them, and they say they work with you. They do. We can only introduce the thing we think are appropriate based on our experience. Altria has to realize certain things. Reality is also that we just got the IQOS 3 authorization. I think that would be a boost. The question is always in certain markets, in how many places do you have to be present before you have the effect? You see, if you had a large country like Japan, if I use it as a proxy, Adam. Yeah. We were in Nagoya, and the brand was at 1%, 1.5%. If you are in a city or two, you don't have this feeling that this is a national brand and with big presence. Once we expanded in Japan, the brand grew very rapidly. I think you need a certain scale also, not in a city, but across the country in order to get that scale. Altria has an expansion plan. We see how this, I would say synergetic effect works. Just launching in a couple of cities, in my view, and based on our experience, is not what maximizes consumer awareness, but also comfort that this is a good product that because they don't see it everywhere. That's how I can explain in part, and you asked this question in the past, I believe the U.S., obviously once we go, Altria expands more, is probably not going to be Japan, okay? It certainly can be close to many European countries. That's my view. We need to get some scale. Okay. Thank you. Can I ask about the I suppose I'm really asking about the 250 billion+ aspiration for 2025, which you've had for a long time. You've just obviously announced a target of 140 billion-160 billion for 2023, but to me, that doesn't fit in with the 250+ aspiration for 2025, which suggests either that you don't really believe a 250+ to 2025 or the 140-160 is way too low. Well, we should not forget that we articulated this number in 2018-19. I think it's still, in my book, becomes an aspiration, and it remains an aspiration. On the other side, we also have some slowdown based on COVID. Okay. I would like to focus more on getting to 50% of revenues as a benchmark. Sooner or later, we'll get to the 250, okay? If it's a year later or a year earlier, I don't think that should be the criteria. We try to get some realistic numbers everybody can put their hands around and their head around, and then once we get to 250, hallelujah. If it's in 2026, we'll be in 2026. It also assumes in there it's not only heated tobacco units, other platforms, and there is some degree of assumption in there that regulators will do their job and allow in certain markets a little bit more communication to consumers. It's rather painful and rather expensive to try to be under tobacco law, cigarette laws, I'm sorry, and try to have rapid expansion. That's not, as I said in my intervention much, it's just the ability to talk to people, explain the product, and create some awareness and comprehension about the product. If regulators play their role, and that was the working assumption by 2025, we can accelerate even further. Can I just follow up on that? Again and again, and I completely understand it, you say you need regulators to play their part. Are there any regulators you can actually point to where things are really changing? The FDA is where it is. It's been like that for a while, well, since 2009. Is there actually any movement that you can point to that's really changed anywhere else? Not in big markets. In Germany, you can communicate with consumers, for example. It's not a big deal. There has been no movement yet in France, which is important. There has been movement in Italy. There's movement in Greece with appropriate legislation. New Zealand changed their laws, and now they authorize this product. There is movement. The key to me to have a fast impact is if the World Health Organization and the NGOs and special interests that gravitate around it, because as you know, it's the Framework Convention on Tobacco Control. It's not truly the WHO. If they change a little bit their views, because they are also influencing politically very many countries, I think we can have a major acceleration. They have to be very conscious, sorry to use rhetoric here, that by trying to restrict all these things, they perpetuate smoking, and they are accountable for that. Thank you very much. Sorry to get to three questions, but thank you. Very well. Michael Lavery, are you ready to go? Owen Bennett, if you'd be ready behind him. Yeah. Thank you. Hey, Mike. I just want to come back to some of your color on the IQOS economics. You mentioned that 10 billion sticks would have about a $650 million-$700 million, I believe that's a net contribution. Just want to understand some of the cannibalization. Excuse me? Sorry, net revenue. Yeah. Right. Exactly. Just want to understand some of the assumptions around that. You did, if my math is right, about $900 million per 10 billion sticks last year. Obviously, that's excluding a cannibalization impact. That looks like it might imply a 25% cannibalization rate. Is that around the right assumption? As we look ahead versus history, how much should we try to factor in geographic market mix dilution to pricing or any other variables that would change how you think about the next few years versus the recent past? Okay, I'll start, then others can chip in. Yeah, I can. Okay. Keep going. To me, the way to look at it is we should not forget devices. Devices don't have a positive bottom line, but they contribute to revenue. You have to add the devices to this calculation. You can do the math yourself, and you've done it. You take revenues of IQOS consumables divided by volume, you have one unit. You take cigarettes, and I even took the cigarettes in the markets we're in that are higher than the average. You can assume between 35%-40% cannibalization rates, worst case scenario. That's how you can come to the number I gave. You can add 10% to that, for devices, can be 12% as we go higher in pricing in the future with the IQOS device. Your numbers are gross correct, but you have to take out the volume impact on our own portfolio, not only the others. Okay? Down the line, as I said, if you apply a 75% margin to what remains, we are between $525-$550 on the gross profit, which is COGS excluded. Okay? Net impact to the company. Okay? Emmanuel gave you the key on how to calculate the variable versus fixed for obviously chunks of volume. That's how I would look at it. Michael, it's very beautiful. Emmanuel, can you continue? On the second part of your question, Michael, on what you should expect in terms of evolution of the 2.4x multiplier today. On the foreseeable future, in the 2021-2023 period, we don't see today a major evolution of that ratio, which is certainly influenced by the mix today. I think if we were to try to clean that ratio from the mix impact that is coming from exposure to certain markets where IQOS is bigger and where the multiplier is higher, at the group level, you would probably get ultimately to a multiplier by about two. Again, it's a difficult calculation to make because IQOS is not present in all countries, and therefore, it's a kind of rough assumption. For the next two to three years, we don't see major evolution on this 2.4x multiplier between CC and HTU per stick revenue. Michael, you can do the math because we give you the regional numbers as well. It's obvious that is better in Europe, a bit worse in Japan, and in the middle in Eastern Europe. Okay? By definition, because the purchasing powers are different. Yeah. You can do the math yourself. You look at the regions, you can. You have more. By market, we're not going to give you that, it's pretty clear. No. Really helpful detail. Thanks for all that color. I'll be sure to get to the math once we finish. I haven't had a chance to noodle through everything yet. I know even if it goes the way you're aiming for, the non-nicotine piece would be pretty small relative to the rest of the business. Just curious, some of the thinking there, maybe two parts. One is just, do you see this more as a growth opportunity sort of proactively, or is it a little bit of a defensive approach? Just how do you think about that opportunity strategically? Then I'm sure it's still far enough out, you may not be very specific. Curious, when you talk about things like sleep or calm, do you have cannabis-derived cannabinoids or biomass that you would be putting on your radar? Is that something you would consider out of the consideration set just because it may be controversial in some markets or whatever else? Yeah. Well, I see, first of all, adjacencies as an opportunity. Okay. We have Adjacency definition is either you use existing capabilities you have to expand, or you use consumer permission to give them more. I explained that part, how you monetize CRM and database, that's more our consumers. Okay. That's an opportunity we have not explored, as you offer something to consumers, you get permission to offer more, it can be partner products in which you get some margin or something the consumers benefit from. For example, I don't know, we have in Japan many thousands of restaurants that offer IQOS. If you book through our portal, consumers can get a rebate or something. The consumer benefits as you offer them something they would not otherwise have or something cheaper, that's pure CRM. Okay. If we go to the other categories that I was referring to, Emmanuel elaborated, essentially, I see opportunities in two areas. Something that is not explored by major pharmaceutical companies in this domain, which is respiratory drug delivery, we have a lot of expertise in this area. I gave the example of aspirin, which may sound like a stupid example, but this is very important. Respiratory delivery increases bioavailability and reduces side effects to the liver very rapidly. You can dose less, you have immediate access and effect, eventually less damage by using pills and so on, because the dose is much higher on the pills, without being very technical. The ambition there is not to become pharma. The ambition is we have the clinical, pre-clinical, regulatory approval capability, we can outsource or partner for anything else. We're not going to build a machine. As we learn, we may also have to make some acquisitions in all this broad area so that we can get scale. We want to use our skills at the center of the ecosystem. Now, if it's a product that goes to consumers, clearly we can use our own infrastructure. Okay? Now, I guess you referred to botanicals. I said many times, there's two ways to look at these products. The one is the therapeutical medical route, which is pure pharma. Okay? Be it CBD, be it THC, and so on. The other is anything you offer to consumers, and there you need to evaluate what are the ways of delivery, what warnings you have to give consumers, because there may be side effects, and so on. We've looked at CBD, for example. I'm talking here pure CBD. First of all, at this stage, there is no, I would say, clinical trial that has proven effects on pain, I don't know, sleep or whatever. Okay. There are also some toxicological concerns because in doses where CBD, pure CBD, has efficacy, means it binds with the cannabis receptors, then you start having issues with cytotoxicity and other problems. That's embryonic first cut. We also know from medical studies, because there is one drug for acute epilepsy that is CBD-based, and then you do have, because of usage, liver effects and other psychiatric effects. All I'm saying is the product is not purely innocuous. An appropriate warning has to be given to consumers if we have continuous or long-term use. We're evaluating all these areas, so we understand better. We said as a company, we're a science and technology-based company, not a small outfit that just passes under the regulatory radar screen and sell something. That's all I'm saying. We're looking at these areas. We also have an investment in a medical device company, which is Syqe in Israel, that have developed a device for pain relief that uses cannabis, THC, and CBD combinations. That's medical route. We're looking at both categories, but I can't say with determination we've decided to enter the sector until we have some better understanding of efficacy and side effects. Very helpful, color. Thank you so much. Nick, we have two more with raised hands. It's Owen Bennett who'll be next, and then Alan Erskine from Credit Suisse, and then maybe go to your Q&A on the toolbar, but I'm also sensitive to the time that you're thinking about. Do you want to limit them to one question each to keep it going or two? How do you want to handle it? No, let's go to those two questions, and we have a number of them that come in. Some have already been answered on the email, but I have a few to read. Yes. Terrific. Owen Bennett, Jefferies, you're next. Alan Erskine from Credit Suisse, close out this part of it. We may come back to the virtual later after Nick gets through some reading of the questions that are on the toolbox. Thank you. Afternoon, everyone. Hope all well. I had a couple of questions around vapor, please, given the extensive rollout plan during the year. First one around the vapor-specific gross margin economics that you gave, which are better than what we've seen given by certain peers. Just wondering, when you say premium price positioning, is that premium versus other current vapor products or priced the same as premium cigarettes? Also, within that gross margin, do the manufacturing costs assume full automation? The second question is just around current capacity in vapor in terms of refills, and what do you think is a realistic ambition for top-line contribution from vapor into 2023? Thank you. Jacek? You want to- When we talk about the premium positioning, we had more in mind the, definitely in mind the device. I believe putting some price which will take the consumers through the serious consideration phase rather than jumping on something which is $10 or below and not using this undermines the purpose of the exercise. The first device which we go through is really a premium device. The cartridges will be at the competitive, but on the upper end of the market. Okay? Again, we said that we're going to go to above 20 markets this year, but we actually don't want to change blindly the volumes. We'd rather want to chase the consumers from the angle of the full conversion. Either it is complementary conversion, where they are dual users between the cigarettes or users heat-not-burn on some occasions have a need to have a puff on demand, et cetera. It's a complementary to the IQOS core proposition. Yeah, this is how we want to take it. With regards to the capacity, we have developed in the process of building or developing that capacity, but it's to some extent is our own in-house capacity. Ultimately, we're going to rely on a third-party capacity for the cartridges. Obviously, a propriety to us, and this is the core of this whole thing is the, well, is the technology is one thing, the MESH technology, but the liquid and the compositions, et cetera, which goes into the product. Yeah. Last thing, Owen, to answer your margin question. The different margins you saw on the slide are, okay, you are a 50/50 dual user, then the rest is you are 100% user at 1.6 x combustibles. That assumes that you consume only one company's or one brand's consumable. That's the important thing, what I said and Jacek said, is the loyalty. If you have seven devices because they were given to you free of charge, and at the same time you use different consumables from different companies, yes, on aggregate for a pure user, you get 1.6x. Each individual company gets a fifth or a 10th or a third, and that's where the economics start not being very good. If on the margin, you are really marginal, and on top of it, you have the infrastructure and the marketing expense to support these products, it's very difficult to make money. We have the infrastructure, and our objective to Jacek's point is to bring loyalty and trust because of the IQOS brand. We will learn, okay? Then we'll take it from there. The category economics are not bad, is the fragmentation of the category and very little brand loyalty that consumers have outside the U.S., and that's where improvements can be brought, and that's where we're hopeful we can do better. That's the analysis, if you wish. I actually- Sorry. While you're at this, Owen. I actually think that there is a group of consumers where if you give them, if they haven't had heat-not-burn IQOS and an e-vape IQOS, they're essentially covering 99 if not 100% of the daily situational type of a niche. Okay? Maybe I'm wrong, this is how we see this whole thing. Obviously, you have the users who will be 100% on the heat-not-burn, 100% on the vape, and the people who still with the one leg are left in the combustibles. I think delivering something under one umbrella, which is essentially a one-stop shop, right? To solve my smoking problem, I go to the one infrastructure, is the one brand, is the one contact point, is all of these benefits that I don't have to think about where to go, whom to choose. I have a brand, it's credible, delivers on the science, deliver on the technology, delivers on the quality. I think there is a winning proposition. I think there might be a winning proposition. We'll see. We go, we will learn, we will confirm. Just one follow-up there. On the cost to produce, I remember a couple of years ago, you said once you got to scale on IQOS, the consumables were a similar cost to produce as a pack of cigarettes. I'm just wondering, when you get to scale on vapor at full automation, how would the cost on a pack equivalent basis compare to cigarettes? On a pack, it depends on. If we assume a cartridge is a pack, which is a wild assumption, okay? A cartridge can be between, if you look at all the competitive landscape, between $0.50 per cartridge and $0.80, $0.90 if you have a sophisticated product. Cigarettes are $12 per 1,000, you divide per pack by 50. Sorry, I'm doing the math with you. 12 divided by 50, what the heck that is, you know? Sorry, it's late in the day, that's the component. The difference is the high taxes on cigarettes are vastly higher, obviously. There is very limited taxes on an e-vapor, but a big chunk is the trade margin. It's 30%, 35% compared to 11% for cigarettes on average. It acts as an ad valorem component in addition to VAT if we take European country. If you sell at EUR 4, you pocket EUR 2, you take EUR 0.80 out, you make it back EUR 0.20. Okay. Still better margin than cigarette, if I can simplify it for you. Okay. Obviously- Okay. If you stay with the same technology, you will reduce the cost of the cartridges. I see an opportunity to take the absolute margins at the same level as cigarettes and not having this debilitating ad valorem. That's music of the future. Okay. Okay. Cool. Thank you very much. That was very helpful. Thank you. Alan Erskine, Credit Suisse, you're up. Good afternoon, everyone. Just one question from me, really, on the IQOS ILUMA consumables. Two parts to it. One, I think you indicated it was a unique consumable that certainly wasn't interchangeable with the blade device. My question is, does it require a specific capacity, a dedicated capacity, and if so, how much capacity do you have for this new consumable? The second part, I think you indicated that there would be some kind of activation code which meant that only bona fide consumables could be used in IQOS ILUMA. I just wanted to see if you could elaborate on that and how much protection you have around that. Thank you. Look, in terms of manufacturing, obviously, there are three parts in a cigarette factory. There is the primary, where you prepare the tobacco mixture. There is the making, where you make the sticks, then the packing. The sticks machines needs adaptation. Okay? That's clear, because it's a different process to manufacture. All the rest remains the same, all the transformational cost is in the CapEx forecast we gave. Okay? Of course, we need to build the capacity, it's not only the capacity in our factories, it's the capacity of the new device and the capacity also of what we call the susceptor, which is induction in the stick. Okay? I think we can satisfy the demand based on our launch plan, we took this into consideration. That's for the first item. Jacek, somebody else wants to answer the second one? Second one was on- The stick activation. Well- No, no. It's the age verification. Okay? We started the age verification with the e-vapor products because it's more sensitive. We are experimenting in New Zealand and in Czech Republic, I think. In New Zealand, we're experimenting. We passed the bill to experiment. The technology, frankly speaking, is comparable like you activate your smartphone. You buy the smartphone, but you need to activate it, so you need to register somewhere. A part of this registration is, in our case, the age verification. We can do it obviously in a very short period of time, so it creates a minimal type of a disturbance to the consumers. Obviously, consumers cannot just take the product off the shelf or buy it through the retailer and start using. You need to go through the verification. I believe with that technology, if we master the technology at scale, we're essentially solving the problem of all this unintended use, which might be incidental or create a much bigger problem. For us, it is very important. As you know, we have said that by 2023, we'll roll out the technology to our devices. It's not only P4 electronic cigarettes, but also to IQOS, despite the fact that so far in IQOS, we don't observe any unintentional or very minimal unintentional audience, which would be using very much the underage. This is another thing which we have not really spent the time today. Being in 64 markets and operating on the scale like this and not triggering any youth-related problems, we can execute this like this. I think if we go to the locking devices, this really gives you a 99.999% of the assurance that the devices are going into the right hands. Apologies. I think I misread you. My question, I thought you said that the ILUMA device would only work- Yeah. With consumable, because I think one of the issues or one of the opportunities within IQOS is that people can put existing competitor sticks into the product. I just wanted to understand how secure you've been able to do this to prevent that happening for ILUMA. In every stick of ILUMA consumables, you will have what André called the susceptor, which is a specially designed, developed, manufactured, obviously with the very low tolerances, piece of a metal, if you like. I oversimplify this whole thing. André, go on. It's a very sophisticated process, but I will not describe it. The reality is that when you introduce the HeatStick in the holder, the holder recognizes the specific profile of that susceptor and therefore HeatStick. No other product will work in this device because the susceptor has a very specific characteristic that operates in certain temperatures, obviously to avoid combustion, and that's the whole secret, if you wish, of the whole innovation. Competitive products will not operate. If we take an IQOS blade product like the ones we have today, the HeatSticks, they will not work with that device. That's not the problem, because consumer will understand very rapidly, doing the opposite, taking a HeatStick from the new device, ILUMA, and putting in an existing IQOS blade. That's not recommended for consumers because not only it's not going to work, it's going to mess out with their blade. That's the education we need at the beginning. From a protection, clearly, we have the protection we need from third-party device, from third-party consumer. Okay. Thank you. Okay, Nick, that concludes everybody with a raised hand, so if you want to take the Q&A from the toolbox, it's all yours. Thank you very much, Mark. Got a few questions here that if we can run through before we close today. The first one is on nicotine pouches. You've highlighted your planned entry into nicotine pouches. What is the strategy for entering this category? Is it through partnership or internal product development? It could be both. I cannot disclose. It could be a combination of partnerships and internal development. We are developing the product, and we think we can be in the market towards the end of this year. As I said, this is a growing segment, but it's still very small and very occasional. Everybody has to be also conscious about the same precautions we need to take about nicotine pouches to avoid unintended use by youth. Care in the marketing is very important, because technologically you can get to the product, but we also have to be very careful on the marketing of the product, and that's something to caution everybody in the industry about that, to avoid another problem like we had with e-vapor products in the U.S. Next question, I think it's probably for Emmanuel. Can you elaborate on your comment around the opportunistic repurchases versus equal monthly amounts? Well, I can try. What I meant by that is that companies that sometimes are going for a buyback are saying, "You split the total amount of the program by the number of months, and more or less, I'm going to be buying that quantity." I think here we're going to be more opportunistic and certainly take the benefit of weakness on the share price to be more active and more present on the market. That's why I said don't expect us to go for a kind of regular amount on a monthly basis, but much more to be watching what's happening on the market and come on the market when there will be situation where we see a good opportunity for us to buy back our share. The next question is on the litigation with BAT. Can you address what's happening in the current intellectual property litigation? How will it affect your IQOS technology? How strong is your patent and other IP protection for RRP markets? It's kind of a over-encompassing question. Yeah. Look, patent law and patent litigation, I think, is very new to our industry, but is very common in the tech industry, for example. Typically, all these cases are resolved in three possible ways, which are obvious. The one is you litigate to invalidate an asserted claim by a competitor that you are violating their patents or fragments thereof. The second is if there is actually a violation to work around and find a solution to move away from the asserted feature. The third is to find a modus vivendi between competitors. I'm stating the obvious. Clearly, what is happening is, first of all, our patents are well protected, and we have some claims, as you know, in the past, against certain use of elements of our patents by BAT in certain of their products. The crux of the issue here is what's happening in patent law, and it's new to me, is you can take an existing patent and stretch sometimes beyond imagination to prove that some features in your product are violated or vice versa, that your patent is violated by some features of your competitor. The second is take the product of your competitor, analyze it, and go and find some patent office that doesn't pay much attention and file what you call a divisional, an extension of an existing patent you have, functioning or non-functioning, and try after that, once you get the patent granted and before your competitors invalidate the patent because it's imitating their own feature, and try to get an injunction to put some pressure on your competitor. For the injunctions, typically, you're going to use unsophisticated jurisdictions that don't have a history in patent law trying to get that, and BAT is trying to do all of those. I don't think there is merit in their patents, claims, or the assertions they make. Clearly, we do have contingency plans just in case in one country something happens until we invalidate their patent. Workarounds. We feel in the long run, we will prevail, but there is always this time between a grant of a patent and the time you can invalidate it of 18 months, where there may be somewhere some vulnerability until invalidation happens. That's how the things are happening. I think it's a very aggressive strategy, but that's what BAT chose to do, and it's in the general context we were discussing previously. Very short-sighted work with regulators and governments. Yeah, we can all understand that they are not yet breaking through in the heat-not-burn segment, but that's not a reason to use these tactics. No. I think all these things will unfold in the months to come. Regarding our patents, we're very confident that people are not infringing our patents or can't infringe them. Question on P2. How important is it for the carbon tip disposable to reach lower-income consumers, especially in emerging markets? Does this significantly expand the addressable market for the IQOS portfolio? Yeah, I think it does, for more conservative consumers. Not necessarily to the lower end of the market because there is not always a correlation between low end of the market and conservative consumers. Yes, because the ritual is closer, I think there is potential of this product. Now, as we discussed in the past, we need to get the product right. We had a problem with the tip, in certain conditions, falling off. I think we fixed that problem. Now we are going to do a test market in Europe, on a larger scale, to see how consumers react and take it from there. If you remember the discussion with Bonnie, I think the potential is there, clearly, but we also need to prioritize certain things. I think TEEPS, in any significant way after the test market, is going to take 1.5 year also to build capacity before we can expand in any significant manner. We have enough on our plate with what we have today. We'll take the last question here before we go to your closing remarks, André. When you say the gross margin on HTUs is 10 percentage points higher than combustible cigarettes, is that a like-for-like comparison that reflects combustible cigarettes in your current HTU footprint? Or is it also impacted by the fact that you're not yet selling HTUs in some lower-value combustible markets? That's a difference that we observe today with the mix that we have. That's what you can see when you read our full P&L. That's where we observe this, about 10 percentage point difference. Okay. Thank you. Thank you. Well, this concludes the Q&A session. I'll now turn it back to you, André, for some closing remarks. Sorry, I don't know which button to press here. Any case, can somebody press a button to I don't know? Yeah, you don't have to do anything. Oh, good. It'll just be a blank slide. Any case, I want to thank you all for joining me today. I think that we tried to give you as much color about what our plans are, our strategies are, in order to get to our 50% ambition for 2025. We explained, I hope, as in the most detailed possible manner, the economics of the various platforms. I think the growth opportunity is real. Yes, we have the uncertainty of the COVID, certainly, the algorithm we gave you, it's a pretty strong algorithm, with more than 5% net revenue growth, more than 9% EPS, and that's before share buybacks, and a very strong cash flow of $35 billion. We're on the right path to achieve our smoke-free vision. A little bit of help from regulators, as I explained, would be very welcome because we can drastically accelerate. With the right dialogue with governments in various countries, I think there are countries in the world where we can end the sales of cigarettes in 10 to 15 years if we have the right supply and demand side measures. Thank you all, and I hope the next investors meeting is going to be with real presence of people so we can have a little bit more time with all of you. I do appreciate the fact that you joined us today. Thank you very much, André. Thank you all for joining us. This concludes PMI's 2021 Investor Day. You may disconnect now. Thank you. Thank you. Thank you. Thank you.