Reengineering growth: Greece 2021

The Greek government has devised a five-year action plan for sustainable economic growth called Greece 2021. It represents the fundamental changes that are being made to the Greek economy, which was historically inefficient and consumption driven. The plan is based on promoting exports and developing high value- added sectors, such as real estate, information and communication technologies, energy, food, agriculture, logistics and life sciences.

It aims to achieve fair economic growth, by building a productive and specialized economy, widening production range and steering entrepreneurship to create sustainable jobs, according to Christos Staikos, Chairman of Enterprise Greece, the investment and trade promotion body responsible for driving Greece 2021.

“We chose Greece for three reasons: its geographic location that is critical for exports, its talented human capital and its proximity to tobacco.”
Christos Charpantidis, Chairman and MD, Papastratos

He says that attracting investments, leveraged by the country’s competitive advantages like its skilled workforce, geographic location and infrastructure, is an important pillar of the plan. Recently introduced reforms will also encourage investor interest, he believes, particularly a ‘Fast Track Law’, that accelerates investments licensing and the establishment of an investor ombudsman.

Papastratos, subsidiary of Philip Morris, recognized the advantages and announced in March 2017 that Greece would be the location of its new smokeless tobacco sticks factory. “We chose Greece for three reasons: its geographic location that is critical for exports, its talented human capital and its proximity to tobacco,” Christos Charpantidis, Chairman and MD of Papastratos says. “It’s a €300-million investment, in the port of Piraeus. With this factory, they are planning to have many different investment projects,” notes Stergios Pitsiorlas, Deputy Minister of Economy.

Another key to Greece 2021 is the creation of a strong brand name for Greek products, one associated with quality and innovation. Staikos says this will help his organization support businesses to reach new international markets and partners. The American- Hellenic Chamber of Commerce is also active in this area, enabling Greek companies to compete in the US through initiatives like ‘Trade USA’. President of the Chamber, Simos Anastasopoulos, believes “Greeks are great business people, very innovative and quite extroverted in reality. Given the right environment, I am sure they and the country will thrive.”

“One of our startups has been nominated for the €1.5-million European new business award.”
Constantine Michalos, President, the Athens Chamber of Commerce and Industry

The Greek people are well known for their entrepreneurial spirit and enabling new Greek entrepreneurs is a strategic priority. The government has made €260 million – which it expects to trigger a total of €1 billion – available for innovative Greek SMEs via its Fund of Funds Initiative. There is also a €120 million program for startups.

The Athens Chamber of Commerce and Industry (ACCI) is doing its part by setting up an incubator for young entrepreneurs that has helped forty-seven schemes to date. Seven are now fully-fledged businesses and two have been sold to foreign companies. “One of our startups has been nominated for the €1.5-million European new business award,” says Constantine Michalos, ACCI’s President, “a tremendous invention that reduces vehicle fuel consumption by almost 40%.” ACCI has also introduced a business angel funding mechanism, which has received interest from Greek and international investors.

Local pharmaceutical company Pharmathen, which makes 95% of its profits from exports, shows what Greek businesses are capable of. Based on a strategy of “innovation, internationalization and investments,” according to Vassilios Katsos, its President and CEO, it doubled its workforce, profitability and turnover during the financial crisis, and made investments of almost €200 million. Proof that Greek companies are becoming more internationally competitive and extrovert, and that they have the potential to come out of the crisis stronger and more fortified.

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Mr. Christos Harpantidis, Chairman and CEO of Papastratos

Papastratos is the largest manufacturer and distributor of cigarettes in Greece. Formed in 1931 by Papastratos’ family, it started co-operating with PMI in 1975 and was eventually bought by the American multinational in 2003. What are the benefits stemming from forming part of a leading international group? How did this relationship contribute to overcoming the challenging environment in Greece over the past 7 years?

Chairman: It’s true that Papastratos has a long history in Greece, that goes back more than 85 years. It is a company that is very much connected not only with the tobacco industry and producers but also with its connected societies.

Papastratos has always been a major contributor to the Greek economy. This was reinforced after the acquisition of Philip Morris International, which was actually a great and strategic step for both sides. It is beneficial both for our business, for Greek society and for the Greek economy. It is important that Philip Morris International continues to invest in Greece. We have thus been able to continue investing and supporting not only our business but the country as a whole. The bigger part of these investments was made during the economic crisis. A year and a half ago, we completed an investment of €25 million in new production lines. We renewed, twice, our agreement with tobacco producers – so as to buy more than 50% of the Greek production of oriental tobacco. Very recently, we announced the additional investment of €300 million to transform our current factory to produce the heat sticks for IQOS.

Papastratos has invested more than 700 million Euros in Greece over the past 13 years and very recently announced a landmark investment of 300 million Euros in its Aspropyrgos unit, dedicated to the production of IQOS tobacco products. What drove PMI to choose Greece as an investment destination, and what do you believe this vote of confidence means for the Greek economy?

Chairman: I would agree with your characterization that it is a vote of confidence in the Greek economy. The impact on the overall economy is multilevel: , I would say. Firstly, it contributes to employment. Through this new investment, we will hire around 400 additional employees (permanent and contracted) in the factory, while securing the existing jobs. In this environment, every little bit counts – so every position is important. Secondly, from our factory here, we will be exporting potentially to 30 markets all around the world. Third and most important, is the continuous support of the Greek tobacco production as the heat sticks for IQOS contain an increased proportion of Greek oriental tobacco. And last but not least, Greece is placed as a key player in the innovation arena of the industry across the globe.

Why did you choose Greece for this investment?

Chairman: Greece was chosen for three reasons (i) for its geographical location which is self-evident, (ii) for its human capital – Papastratos is a very capable organization with a lot of talent which is highly appreciated by our mother company – and (iii) for our proximity to the tobacco production – to the places that produce this high quality oriental tobacco.

When we sat down with Deputy Minister Pitsiorlas, he referred to the investment being greater than €300 million. What was he referring to?

Chairman: Basically, it is the multiplier effect. I think it’s the added impact the investment will have on the economy. So, €300 million is the amount we will invest to adapt the factory from cigarette production to heat stick production. We have already created over 250 jobs to support the new IQOS product in the market, but this doesn’t include the 400 people we are hiring that I referred to earlier. Also, this is a totally new way of producing, which creates new needs in the supply chain. It is an innovation and it requires different materials. The way we are supplied and the way we distribute is also quite different. We do believe that it will create several growth waves throughout the rest of the economy.

This new unit will produce IQOS products, PMI’s new innovative heated tobacco products. What role do you attribute to Papastratos in enabling the transfer of know-how and innovation in Greece?

Chairman: Let us take a step back with what is happening in PMI. It’s going to transform the industry, but in a way it will also change the world. Even the WHO has projected that by 2025 there will be over a billion smokers in the world. PMI has committed to the tobacco sector’s future. PMI has invested more than 3 billion dollars in R&D for products that will make true its vision for a smoke-free future. This investment justifies the seriousness of PMI’s focus on the R&D centre in Neuchâtel. The investments we’ve dedicated to this indicate how serious we are. It’s very important for us and for Greece that Papastratos is at the forefront of this development. Greece is one of the countries where these new smokeless tobacco products have been launched in the market. Papastratos will be the third factory in the world that is producing heat sticks – after Switzerland and Bologna. It’s the beginning of a new era where we are changing internally as a company. It indicates a big change moving forward, and shows our commitment to not have burnt tobacco anymore. In that sense, it’s important – seeing as Papastratos is leading the way – that this investment is about innovation. It’s not just innovation in terms of production, but innovation in terms of the way we commercialize the product. This helps a lot on the soft side of things in the way we see things day-to-day, and will play a significant role in the way people think. It is very important for Papastratos and its partners (to focus on innovation). It helps us think outside the box and find solutions that we did not have yesterday. It changes our way of thinking and makes things far more progressive.

You mentioned in a recent interview that Papastratos contributes 2,5% of the total revenues of the Greek State’s budget. Does this create a sense of responsibility towards the country in general? How important is the Greek market to PMI from a broader perspective?

Chairman: The “mix” of Papastratos and Philip Morris International is a fantastic one. It is one of the most successful acquisitions that has ever happened in PMI. It is very successful for Greek standards. Previously, the mentality was closed – to FDI. Our values are the same. So, Papastratos has always been present in the Greek economy and the Greek society. It was not just about taking the money somewhere abroad and living happily ever after.

Papastratos seeks to give back to the society, not because we expect benefits, but because we continue to be guided by our founders’ belief that companies too should have a higher purpose than mere economic gains. This has been done even before CSR became a common thing. They were giving back to society and they felt this responsibility that you talked about very intensely. With Philip Morris, this became even more apparent and this is what we are continuing to do. We have a commitment to continue to care about our employees, our partners, and our society. We are doing this in many ways. Especially at times of crisis, we are trying to inspire others to follow our example. We are investing in the future. This is our motto. We are trying to do things to create the circumstances for this company, this society, this country to have a bright future. In that sense, yes, we feel the responsibility. In relation to Philip Morris, the Greek market is a small one but Papastratos is very important in terms of the inheritance we have in the tobacco market and the production of tobacco. It is also very important to produce talents and to feed PMI. The decision to have the investment in Greece is relevant to that as well. There is a trust in our people – in the factory and the offices. So, numbers are not as important as moving into the future.

The Government’s Development Plan ‘Greece 2021’ focuses on enabling value added sectors, particularly those with an export potential. How would you evaluate the competitiveness of Greece’s agribusiness, and what initiatives should Greece undertake in your opinion to attract more foreign investment?

Chairman: I know the tobacco market relatively well, although I am not an agribusiness expert. Still, I believe that Greece cannot be based on a development-and-growth model of low cost expenses; and try to be competitive through low cost labour or low-cost production. We have to build on the competitive advantages that we have. Agriculture is an area that, if you select the right products and develop them in the right way, can produce high quality products.

Tobacco is a very good example of this. Tobacco is really expensive. Greek tobacco is one of the most expensive in the world, but it is of the best quality, something that the Greek economy can be based upon. Imagine if we have approximately 30,000 families living from tobacco as we speak (15,000 producing and ca 15,000 people working in the fields. Most of these fields are of single crops and for these families it is their only source of income. So, we have 30,000 families that exclusively depend on tobacco. This is very important and this has a future. Now, in order to do this, you need everyone’s commitment. This is a great example of how the private sector can help a sector to thrive in Greece. So, the fact that we have this agreement with the Greek government to buy 50% of the Greek tobacco, gives some stability to the sector. The people, the growers, can know that tough issues will be resolved at some point in time. At the same time, we are working with them to improve the way they produce, to increase productivity and improve the quality of the final product. We are working on new techniques. So, together, we are improving the way they operate. The product remains very competitive and has a future.

You are talking about the quality of Greek tobacco and we did read that Greek tobacco is considered one of the best worldwide. With the development of IQOS products, you need the best tobacco possible. What is so special about Greek tobacco?

Chairman: The oriental tobacco is very flavourful and aromatic. Because of the soil, the way our growers produce it and the knowhow, it turns out to be a big contributor to a very fine outcome in the cigarettes (regarding oriental tobacco).

In a recent interview you stated ‘We at Papastratos, a company with an 85 year history know only too well that whatever we do does not stay within the company and in the current moment, but affects the future, a future that we share with as many people as possible’. Could you elaborate on this vision, and what the role you would like Papastratos to play within the scope of the Greek society?

Chairman: If I can add to what I said earlier regarding what we are doing with the producers, we are also doing a lot of things with our employees in terms of growth and development. We have this fantastic combination of a big multinational with a strong local company – ‘the international giant with a Greek soul’. In this sense, we are really taking care of our employees in terms of compensation. We pay much higher than the market average and offer a number of benefits. We provide additional insurance, extra pension programs, allowances, development and training programs. Staff rarely leaves the company. Plus, because we are transforming currently due to the new product, we are doing a lot of things with our people. The other thing is our partners – we have distributors and these people and their employees are really connected. We are talking about 3rd generation companies who are highly connected to Papastratos. So, concerning trade with retail – we are there at any given point in time.

We have a lot of CSR initiatives. We are doing many projects for the unemployed and for the homeless to help alleviate the consequences of the crisis to these vulnerable groups. For example, last year we had a moving shower bus for the homeless. In the past, we didn’t communicate them, but nowadays we need to do this in order to inspire other companies or individuals to follow our example. To assist in creating new perspectives, we are doing a lot of things for the start-up community. Three years ago, we created a platform for start-ups which was very successful. Currently, we have undertaken a new initiative ‘Disrupt Greece’, in partnership with Fortune Magazine and Game Changers Energy Disruptors, we are working to assist start-ups.

How many SMES are you planning to get involved with?

Chairman: We expect more than 100 proposals to come in. We will trim this down to a short list of 10. They will participate in live events and of these, three will get funding (€15000, €10000 and €5000, respectively). Furthermore, there are boot camps, mentoring programs, media exposures and trips to international start-up events – to raise more funds. There is a whole platform of support in their journey to scale-up. In the previous program – 3 years ago, we had 3000 participants. It was massive. We are in this area, because we want to support the creation of opportunities in Greece. We want to make a difference.

As an executive of a multinational tobacco company, you have vast experience in branding. What will it take in your opinion to raise the profile of the Greece brand name?

Chairman: We are talking about a damaged brand name, so there is no easy solution. I believe that in order to define what we need to do with our brand, we need to define what we want to do with our country. So, someone has to state what our mission, inspiration and vision should be. We need to decide what this country should do and what this country should be. We miss this. If someone can answer this question, I would like to hear it! We need to know what role we can play in the new world. If we clarify that – and agree on that – as a nation, a society and organization – we can support this mission. If we establish these things, we can brand Greece correctly. And we can present it with strategies and actions. I see this as an absolutely necessity, because then we can adjust what we are doing as an organization to support this brand what we want to build. This has been missing so far. If we start from this, then we can work and move forward.

What would you like it to represent?

Chairman: For me, Greece has some unique advantages. Its position on the map, its people, its culture, its values of freedom and democracy. Freedom is a very important value in this highly connected world and we need a modern definition of it. I don’t know if we can represent this, but it is an area that needs some serious work. There must be an agreement at a political level so that all of society can work towards these goals. The most common thing that you hear is “let’s sit together and work together and take the country where it can go” – but it’s not happening.

You joined Papastratos before it was part of PMI and you have had a very interesting international career within the group. What did it mean to you to be appointed CEO of PMI Greece and what would you ultimately like to achieve?

Chairman: It’s a big honour for me to have this position because of everything that Papastratos represents. To lead this company in the new era in a secure and successful manner. We must continue to represent this. We must enter this big new world, stay competitive compete with these big chains and keep Papastratos at the forefront of development.