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A Tobacco Firm That Doesn’t Sell Cigarettes?

Wednesday, November 30, 2016 7:25
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The boss of tobacco giant Philip Morris International (NYSE:PM) reckons the company’s latest product could see it stop selling conventional tobacco products in the future.

Iqos, which heats tobacco rather than burning it, still gives users the same nicotine hit but significantly reduces the amount of toxins that come with cigarette smoke.

The trials, which still haven’t been externally verified, found the new cigarette had almost the same effect as quitting.

Although the company isn’t pushing this line, only claiming that Iqos can reduce harm, PMI’s boss, André Calantzopoulos, hopes Iqos will help it to “phase-out” the firm’s more traditional line of tobacco products.

“I believe that there will come a moment in time when we have sufficient adoption of this alternative product and sufficient awareness to start envisaging a phase-out period for cigarettes,” he told BBC Radio 4’s Today programme.

“I hope this time will come soon.”

Calantzopoulos might well hope that Iqos becomes the product of choice for smokers going forward, especially given that his company has invested around US$3bn into designing and refining it.

Iqos is a battery pack, not too dissimilar in shape to a mobile phone, which charges a slim cigarette holder.

Users buy a packet of ‘tobacco sticks’, stick it in the holder and then puff away.

From a quick glance at the numbers, it looks like any alternative to cigarettes would have to be extremely successful – almost unbelievably so.

Since PMI was created after Altria spun off its non-US assets almost a decade ago, the company has returned over US$80bn to investors in the form of dividends and share buybacks.

So if Calantzopoulos is serious about his desire for PMI to stop selling cigarettes, the Swiss-based firm has a lot riding on the success of Iqos.

In the meantime though, PMI will continue to promote and sell its conventional tobacco products, a stance which the chief executive has defended.

“Consumers choose to use cigarettes, I don’t think Philip Morris invented cigarettes. For us, it’s to offer our consumers the best product in a category that we all know is addictive and causes harm.

“Once we have an alternative, as we have today, we offer them the alternative and we will do everything we can to convince [smokers] to switch to these products.”

Shares were up slightly to US$90.65 in pre-market trading on Wednesday.

Story by ProactiveInvestors



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