Course: Sales Management (MKT-403E)

Submitted to: Sir Kashif Rasool

Submitted by:
Abbas Mehdi
Shaikh M. Hannan 20637
Omer Nadeem
Hamza Ilyas

Dated: 12th December 2019

 ACKNOWLEDGEMENT

We would like to thank Allah Almighty for bestowing upon us his countless blessing
and making us capable of understanding with a sound mind, along with physical abilities to
perform tasks.

We would also like to surmount the efforts of our esteemed faculty, Mr. Kashif
Rasool for providing us the opportunity to work on this sales project in our Sales
Management course. This project is only possible with his tireless efforts for guiding and
instilling in us course related, sales and sales fieldwork related knowledge. He made us
capable to think intellectually with clarity and transparency of concepts. The project helped
us immensely to understand the underlying principles (sales planning, organizing, execution,
forecasting, evaluation industry insights etc.) with immense gain of the relevant topic.

We hope our hard work is reflected in the efforts we made to complete the report.

Yours Sincerely,

Shaikh M Hannan, Omer Nadeem, Abbas Mehdi & Hamza Ilyas.

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 Table of Contents

EXECUTIVE SUMMARY............................................................................................................................. 1

INTERVIEWEE’S PROFILE........................................................................................................................ 1

INTRODUCTION TO PHILIP MORRIS PAKISTAN LIMITED (PMPKL).............................................. 2

VISION ................................................................................................................................................................ 2
KEY FACTS ......................................................................................................................................................... 2
MARKET SHARE .................................................................................................................................................. 3
ORGANOGRAM .................................................................................................................................................... 3
PRODUCT PORTFOLIO .......................................................................................................................................... 4

PERFORMANCE REVIEW .......................................................................................................................... 6

FINANCIAL HIGHLIGHTS FOR LAST SIX YEARS ............................................................................... 7

RECRUITMENT & SELECTION ................................................................................................................ 8

TRAINING ..................................................................................................................................................... 8

COMPENSATION & REWARDS ................................................................................................................ 9

ETHICAL GUIDELINES .............................................................................................................................. 9

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 Executive Summary
This report investigates the effort required to conduct sales of cigarettes via a study of the tobacco
industry through insights of Philip Morris International in Pakistan. In this sales project, we have
researched on Philip Morris Pakistan Limited’s operations of selling cigarettes. This was done
through fetching relevant data via Philip Morris Pakistan Limited’s website and through a detailed
discussion with PMI’s Area Sales Manager (Karachi).

The methodology used to obtain information was through a direct interview with Mr. Usman, who has
been working at PMI for the past two years. He is currently an Area Sales Manager, well versed about
PMPKL’s sales operations, organization and strategy. He was able to guide us with the relevant
information required to complete our project.

Interviewee’s Profile
Usman Saeed
Area Sales Manager at Philip Morris International

Experience
Philip Morris International (2 years 2 months)
• Area Sales Manager
January 2019 - Present
o Managing an EZD with 20+ Sales Reps and 2000+ POS, generating an average
monthly volume of over 8.5 Million sticks per month
o Managing and developing Sales Reps through on-job coaching by Work-With Process
to ensure ICM (In-Call Mission) implementation

• Distribution Services Specialist

January 2018 - December 2018 (1 year)

 Commercial Services Executive

October 2017 - January 2018 (4 months)

RightSolution.net (1 year)

 Account Manager
October 2016 - September 2017

Education
Institute of Business Management
Bachelor of Business Administration (BBA), Marketing (2011 - 2016)

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 Introduction to Philip Morris Pakistan Limited (PMPKL)
Philip Morris Pakistan Limited (PMPKL) is public limited tobacco manufacturing company, listed on
the Pakistan Stock Exchange. PMPKL is an affiliate of Philip Morris International (“PMI”) and acts
as a subsidiary to them. They are involved in the manufacturing and sale of cigarettes and other
tobacco products. Phillip Morris’s Operational Headquarters is located in Lausanne, Switzerland,
whereas, their Corporate Headquarters is located in New York, USA. PMPKL is the second largest
tobacco manufacturer in Pakistan, falling only behind to Pakistan Tobacco Company (PTC).

PMPKL not only manufactures tobacco, but also supports a wide range of charitable projects in
communities where they source and manufacture their tobacco. These include providing economic
opportunity, empowering women and access to education etc.

Vision
• Meet the expectations of adult smokers by offering innovative tobacco products of
the highest quality available in their preferred price category.

• Generate superior returns to our stockholders

• Be a responsible corporate citizen and to conduct our business with the highest
degree of integrity.

Key Facts
PMPKL, after a strategic review of its operations and sustainable growth in March, 2019, has one
tobacco leaf threshing plant in Mardan, Khyber Pakhtunkhwa; one cigarette manufacturing factory in
Sahiwal, Punjab. It is also based by 15 Sales offices in: Karachi, Gujranwala, Sukkur, Sargodha,
Bahwalpur, Sahiwal, Faislabad, Peshawar, Multan, Dera Ghazi Khan, Quetta, Hyderabad, Jhelum,
Lahore and Islamabad.

PMPKL has a total of 739 employees on their payroll, which does not include any sales reps. Sales
reps are outsourced through various distributor agencies and are on the payroll of those agencies.

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Market Share PMPKL PTC

Philip Morris International (PMI) acquired a

majority stake in a local business in 2007 by
increasing its shareholding to 97 percent to become
Phillip Morris Pakistan Limited (PMPKL); acting
as a subsidiary to PMI. This local business acquired
was known as Lakson Tobacco Company Limited.

PMPKL currently has a 23% share in the tax payer

tobacco industry and falls second in comparison to
Pakistan Tobacco Company which boasts a 77%
share in the tax payer tobacco industry.

Organogram

PRESIDENT, SOUTH &

SOUTHEAST ASIA REGION

Director (Chairman)

Zonal Manager Zonal Manager

4 Zonal Manager Zonal Manager
(Central Punjab) (South Punjab) (North Punjab &
(Sindh)
Baluchistan)

16 Regional Regional Regional Regional

Managers Managers Managers Managers

89
Area Managers Area Managers Area Managers Area Managers

179 Third Party Distribution & Sales Representatives

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Contribution in terms of sales per region is as follows: Sindh: 24%, Central Punjab 22%, South Punjab
20%, & North Punjab/Baluchistan 34%.

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Product Portfolio
The cigarette portfolio of PMPKL includes the following brands ranked from first to last according to
their popularity and demand:

Marlboro

It is by far the best seller for PMPKL, generating the highest

demand and as result having the highest production and sales of
sticks. Marlboro is part of PMPKL’s premium range of cigarettes. It
is sold in 2 varieties: Marlboro Full Flavored Cigarettes (Marlboro
Hard) and Marlboro Gold (Marlboro Lights). Its distribution is
focused mainly in urban areas.

Morven

Morven generates the second largest demand after Marlboro, and as

a result is produced and sold the most after Marlboro. It is one of
PMPKL’s cheaper cigarettes and is pitched to the lower and middle
class mainly with a strong focus in both urban and rural areas.

Parliament

Parliament generates the third largest demand, and is a cigarette

targeted and pitched towards the middle class groups with a strong
focus in urban areas.

L&M

L&M generates the 4th largest demand, is targeted towards the middle
and lower class groups with a strong focus in both urban and rural
areas.

Red and White

Red and White generates the 5th largest demand and mainly targeted
to the lower class groups. Its distribution is focused strongly in rural
areas.

Philip Morris

Phillip Morris generates the lowest demand, and its distribution is in

urban areas only that too within a very limited scope.

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IQOS – Tobacco Meats Technology

In addition to our leading international and local cigarette brand portfolio, we’re also commercializing
smoke-free alternatives to cigarettes which we call reduced-risk products (RRPs). In this dynamic
area of RRPs, we have already introduced our heated tobacco system IQOS.

IQOS is a precisely controlled heating device into which a specially designed tobacco product under
the brand names HEETS and Heat Sticks is inserted and heated to generate a flavorful nicotine-
containing vapor. IQOS was first introduced in Nagoya, Japan in 2014. Today IQOS is available in
key cities in 51 markets across the world.

This particular product is yet to be introduced in Pakistan. Unfortunately due to lack of demand and
high rate of inflation, the product market is not attractive in this region.

Product Success

While the idea of heating tobacco (instead of burning it) has been around for more than two decades,
it took years of research and development to create a product that is satisfying to adult consumers.
Around 8.8 million consumers have already chosen to switch from cigarettes to this product: our
tobacco heating system IQOS.

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 Performance Review

FOR THE YEAR ENDED DECEMBER 31, 2018

On behalf of the Board of Directors of Philip Morris (Pakistan) Limited, (the "Company"), I am
pleased to present the Directors' Report along with the Audited Financial Statements of the Company
for the year ended December 31, 2018.

The analysis of key operating results for the year ended December 31, 2018 in comparison with the
previous year is as follows:

During 2018, the Company's gross turnover increased by 19.77% compared to 2017, mainly
attributable to normalization of trade inventory movements and partial recovery of sales volumes after
the introduction of the third excise tax tier in the 2017/18 federal budget. At the same time,
management contained inflationary pressures with operational efficiencies and effective cost
management. Overall, the Company recorded a Profit after tax of PKR 543 million for the year ended
2018, compared to a Profit after tax of PKR 191 million in 2017.

The introduction of the third excise tier arrested the exponential growth of non-tax paid cigarette
segment ("Illicit trade"), providing a more level playing field by narrowing the price gap between tax
paid and non-tax paid cigarettes. While the overall cigarette consumption has remained relatively
static, there was a gradual shift in volumes from the illicit cigarette segment towards tax paid
products. However, the Finance Supplementary bill dated September 18, 2018 imposed ~46%
increase in the excise rates for the third excise tier, which led to a tax-driven price increase and has
again widened the price gap between the tax paid and non-tax paid cigarettes.

The Company is reporting an earnings per share of Rs.1.68 in 2018 due to payment of Final Cash
Dividend of Rs.439 million paid to the Preference Shareholders of the Company.

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 Financial Highlights for Last Six Years

There has been a decrease in “fixed assets” due to the closure of the cigarette-manufacturing facility
in Kotri, Sindh. Therefore the total assets decrease in the year 2019.

The turnover shows significant decrease due to the decline in the industry. The reason for the decline
is probably inflation which has reduced the purchasing power of the buyers.

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 Recruitment & Selection
For entry level positions they hire people through their internship program Inkompass mainly, or
lateral hiring is done but to a very low extent.

Inkompass involves a rigorous process of evaluation. Candidates are mainly 3rd and 4th year university
students. They have to first apply online and give certain online tests and get selected. Once that is
done they are assigned project work like solving cases and working various tasks as an intern for the
company pre-graduation. Post-graduation candidates are hired based on their performance.

For top tier managerial positions, lateral hiring is done but to a very low extent as they look to
promote from within the organization.

Training

Training is conducted for everyone. Even for top

tier employees like regional managers all the way
down to sales reps.

Training is of 2 types; On-the-job and Off-the-job.

Off the job training is mainly held for managerial
level positions (this is held in their regional
headquarters in Hong Kong annually or more
frequently depending on the need of the hour).

On the job training is mainly held for sales reps

where the area manager who is in charge of a team
of sales reps is present on the field with them,
guides them during their daily tasks and provides
them feedback.

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 Compensation & Rewards

Permanent employees are on company’s payroll and

hence their salaries are fixed.

There are rare or inconsistent monetary bonuses for

managerial level positions which are totally based on
extraordinary performances that totally surpass the
boundaries of their job descriptions. Also, there are
inconsistent annual increments, again based on
extraordinary performance. There are also some non-
monetary rewards like recognition during the annual
conference.

Field sales representatives are third party, so they are on

the payroll of their distributor.

Ethical Guidelines

A trade letter is issued to sales teams and retailers which contains an extensive list of guidelines like:

1) A product cannot be encouraged to someone who is a

non-smoker or not interested in buying.
2) A product is not to be sold to a minor. This goes for
sales representatives interacting with retail owners.
3) Display of health warnings on all types of marketing
mediums like packaging, shelves, banners etc.
4) The product must not be marketed with in non-
business hours.
5) Advertisements are not done in compliance with
local government and international regulations.
6) Restriction on placing posters with the 500 meter
range of any educational institution.

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