PMI strengthens investment in innovation and AI-led transformation, outlines expansion priorities for India: Group CFO Emmanuel Babeau

Operating in a highly regulated industry, Philip Morris International has sustained growth by accelerating its transition to smoke-free alternatives, said Group CFO Emmanuel Babeau in an exclusive interview with Times Network. Over the last decade, PMI’s strategic bet on reinvention has resulted in rising volumes, improved margins, and strong brand performance, supported by significant investments in technology, innovation, and consumer-centric product development. Babeau added that these fundamentals continue to strengthen stakeholder conviction as the company pushes forward with its long-term transformation agenda.

Starting with your personal journey as a financial professional – Three decades and that, too, in a highly regularized domain. How's the journey been so far?

During the last 25 years, I have been a CFO of several multinationals in different industries and with Philip Morris International for the past six years. It is true that it is a specific industry with a lot of regulation, which is absolutely needed. It puts very clear rules and frame on what you can do and what you cannot do. But then, at the end of the day, it doesn't really change the fact that we at PMI are obsessed with working for our consumers, making sure that we maximize the benefit of what we can do for them, developing the right alternatives to smoking, and coming up with a product that can change the life of one billion smokers globally.

Speaking about the alternatives - how has the role of CFO evolved over the years, and what new approaches are you deploying to drive business transformation at PMI?

The roles and missions of the CFO have been evolving quite significantly. Twenty-five years ago, the CFO’s primary responsibility was to produce the right numbers and ensure that key risks were managed, protecting the company’s assets. The CFO role today is that of a real co-pilot of the company’s performance. The CFO comes with a lot of data and analysis, and it is his or her mission to transform that into recommendations and actions that should be implemented by the company, really advising the ultimate decision-maker on doing the right thing.

And that starts with building the top line. It’s not just about managing cost, because very often people think about the role of the CFO only in terms of keeping costs at a minimum. The first and probably most important role is: how do we help maximise the growth of the business? That involves determining where to invest the money and where the best returns will come from. For me, this has been the biggest evolution in the role of the CFO over the last 20 years.

PMI has made a major pivot from combustible tobacco to smoke-free alternatives. How do you balance stakeholder expectations with purpose-driven strategies?

That has been the incredible visionary move that the company started 10 years ago - we believed that we have the possibility to re-invent the industry and to come with smoke-free alternatives that are going to be much better for the consumer - that was the first mission. But, also an even better business model for the employees of the company and for the shareholders. Quarter after quarter, if you look at the performance of the company, it has a very strong share price performance.

We've been succeeding in resuming growth in an industry where a lot of people were saying tobacco industry is going to decline from now on and if you look at the last five years, we've been growing volumes for the company. We are developing smoke-free alternatives that are coming with an even better margin. We made the right investment in technology, innovation, and R&D, resulting in a highly differentiated product. The consumer is ready to pay for this differentiation, and we continue to be a strong brand builder.

We're developing plenty of brands that are extremely successful and bringing a lot of benefit to the consumers and that explains why we are succeeding.

The CFO is a bridge between external stakeholders and internal reinvention. What signals do you catch that guide your capital strategy?

One of the fascinating parts of the job is that I’m talking to a lot of stakeholders — shareholders, lenders, and several regulators — and we receive continuous feedback on what they expect from us. This has been one of the reasons why we started this journey to ‘unsmoke’ the world.

Today, the message from stakeholders is centred on acceleration. Shareholders and investors tell us that what we are doing is right — that we are delivering value to a billion smokers across the planet, driving a positive societal impact, and doing it in a way that creates favourable outcomes for shareholders. Their question now is: How can we further accelerate the journey? And that is the challenge we are receiving today.

They also bring a lot of input and information, given their deep knowledge of trends and the broader economy. We try to translate these signals into clear prioritisation on where we invest and how we shape our development agenda — sometimes even increasing the pressure on the pace at which we grow. This is the bridge we build between the outside world, which is encouraging and supporting our transformation, and the internal actions required to move faster.

How do you see the long-term relevance of India in PMI’s business transformation?

India is an impressive country - The dynamism, the speed at which things are moving is very surprising. Undoubtedly, India will be the big winner in the economy in the second part of the 21st century. Today, it is probably the fastest-growing large economy, and what people were expecting from India 15–20 years ago is materialising now. For PMI, India is a priority, and we are absolutely committed to grow and invest in the country. The level of investment will, of course, depend on the opportunities we are able to identify, but there should be no doubt or question about our commitment to India.

We are there, and we want to grow our business in this country.

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