Philip Morris International reported net revenues of $9.05 billion for the fourth quarter and net revenues of $35.17 billion for fiscal year that ended Dec. 31, 2023. On a reported basis, the figures were up 11 percent and 10.7 percent, respectively, over the comparable 2022 periods.
Performance was driven by revenue growth in both the combustible cigarette business, where pricing offset reduced volumes, and the company’s smoke-free operations, which continued to increase their share of the company’s business mix.
“We are pleased that smoke-free products reached nearly 40 percent of our total net revenues and over 40 percent of our gross profit in the fourth quarter,” said PMI CEO Jacek Olczak in a statement.
“This was led by the continued growth of IQOS, which has now surpassed Marlboro in terms of net revenues, confirming its position as the leading premium nicotine brand less than 10 years from launch. The fourth quarter also marked the first anniversary of our combination with Swedish Match, which delivered very strong results in 2023 driven by the stellar U.S. performance of ZYN.”
PMI shipped 116.3 million cans of ZYN in the fourth quarter of 2023, representing growth of 78.2 percent versus fourth-quarter 2022 Swedish Match shipments of 65.3 million cans.
“We are entering 2024 with strong momentum, and we expect it will be another year of excellent performance underpinned by an acceleration in organic smoke-free net revenue and profit growth,” said Olczak.
PMI also expects to benefit this year from a recent settlement with British American Tobacco that resolves all ongoing patent infringement litigation between the parties related to heated tobacco and vapor products. The deal allows each party to innovate and introduce product iterations.
Philip Morris International has launched IQOS Iluma in Saudi Arabia, Kuwait and Bahrain, with a goal of creating a smoke-free future in the Gulf Cooperation Council region, according to the Saudi Gazette.
“Adult smokers may be unaware of the choices they are making, largely due to the lack of information and knowledge on products that bring them harm, versus scientifically backed products that reduce the likelihood of smoking-related disease,” said Tarkan Demirbas, area vice president of the Middle East at Philip Morris Management Services (Middle East) Limited. “At PMI, we are invested in providing existing adult smokers with better alternatives through harm reduction innovations, which can help them take a step back from cigarettes toward better alternatives.”
“Smoking-related diseases today call for a pragmatic solution that places consumers at the forefront while moving away from cigarettes,” said Saim Yasin, director of marketing and digital at PMMS. “IQOS Iluma is our latest innovation in tobacco-heating systems that will accelerate our goal toward a smoke-free future. Through a growing portfolio of smoke-free alternatives, we are reaffirming our commitment to create realistic, society-wide change that can reimagine the world we are living in—without cigarettes.”
The IQOS Iluma series offers three devices: IQOS Iluma Prime, IQOS Iluma and IQOS Iluma One. All the devices use new induction heating technology but offer different designs.
Philip Morris International Oct. 20 submitted premarket tobacco product applications (PMTAs) and modified risk tobacco product applications (MRTPAs) for IQOS Iluma heated tobacco products with the U.S. Food and Drug Administration (FDA).
IQOS Iluma products are PMI’s most-innovative heated tobacco products. They deliver substantially similar reductions in the formation of harmful and potentially harmful constituents as earlier versions of IQOS products authorized by FDA
According to PMI, IQOS Iluma has demonstrated higher rates of full switching by adults who smoke and improved consumer satisfaction in many countries.
IQOS Iluma products rely on a fundamentally different heating technology from previous versions of IQOS products and contain numerous technological advancements including improved device and battery longevity.
IQOS Iluma products are currently available in 27 markets internationally
PMI’s applications are supported by a thorough scientific assessment, including aerosol chemistry, in vitro toxicology, a pharmacokinetic study, and consumer perception and behavior studies, as well as the comprehensive scientific dataset generated with previous versions of the IQOS system
The IQOS Iluma devices operate on the Smartcore Induction System that heats tobacco from within Terea Smartcore Sticks—heated tobacco sticks designed to be used only with IQOS Iluma devices
PMI has submitted applications for three Iluma devices and five variants of the tobacco sticks: Terea Blue, Terea Green, Terea Sienna, Terea Bronze, Terea Amber
Internationally, IQOS Iluma products have demonstrated how ground-breaking consumer-centric innovation can lead more adults to stop smoking. We believe that same success can be replicated in the U.S.
“Tens of millions of American adults today smoke cigarettes and will likely continue to do so. They should have a range of scientifically substantiated better alternative nicotine products to choose from, and PMI is committed to providing them with new choices,” said Stacey Kennedy, president Americas and CEO of PMI’s U.S. business, in a statement.
“Internationally, IQOS Iluma products have demonstrated how ground-breaking consumer-centric innovation can lead more adults to stop smoking. We believe that same success can be replicated in the U.S. and drive a rapid decrease in smoking rates among adults. These are strong applications, and we urge the FDA to prioritize them for review.
“Since 2008 PMI has invested more than $10.5 billion to scientifically research, develop, and commercialize smoke-free products, an investment that was further bolstered last year through our acquisition of Swedish Match. We are focused on providing adults who smoke with alternatives that can reduce their risks compared with smoking and help make America cigarette-free.”
PMI will have the full rights to commercialize all IQOS products in the U.S. as of April 30, 2024, per the terms of an agreement with Altria Group, Inc. ending the companies’ commercial relationship covering IQOS in the U.S.
Philip Morris International unveiled a zero-tobacco stick for use with its heat-not-burn device IQOS, which may help the company avoid tax and other regulations that affect its tobacco products in some markets, according to Reuters.
The new sticks, called LEVIA, do not contain tobacco but rather a “nontobacco substrate” infused with nicotine. It offers flavors including tobacco, menthol with blueberry and peppermint.
LEVIA may avoid the heavy taxes or other controls imposed on other tobacco products, according to CEO Jacek Olczak. He said it “may not be subject to flavor regulations in some jurisdictions” and that it “doesn’t fit” in existing fiscal categories.
A PMI spokesperson declined to comment on when and where LEVIA would launch or what substance replaces the tobacco.
About 2 million smokers in Italy have switched to IQOS, reports Breaking Latest News, citing a Philip Morris International representative.
“We are moving forward at increasing speed toward our goal of building a cigarette-free future by making available to adult smokers who continue to quit the best technologies made possible by years of research and development,” said Marco Hannappel, president of Southwestern Europe at PMI.
“Today, on the one hand, we are celebrating an important result: Around 2 million smokers in Italy have switched to a valid alternative without combustion and have completely abandoned cigarettes; on the other, we relaunch our commitment thanks to a new technology, designed to further simplify the transition of smokers who are more resistant to change.”
PMI recently introduced IQOS Iluma One on the Italian market.
“At the end of December, thanks to the introduction of IQOS Iluma, we saw an increase in smokers switching to IQOS for exclusive use, i.e., completely abandoning traditional smoking,” said Gianluca Iannelli, head of marketing and digital at Philip Morris Italy. “With IQOS Iluma One, we aim to convince even the most resistant smokers to change their lifestyle, thanks to an even simpler and more intuitive device.”
The products receiving marketing granted orders are Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks, and Marlboro Amber HeatSticks.
The three HeatSticks products are “heated tobacco products” (HTPs) used with the IQOS device.
Based on FDA’s review of the supplemental PMTAs, the agency determined that the marketing of these products should be authorized because, among other things, the net population-level benefits to adult smokers outweigh the risks to youth.
In 2019, FDA authorized the marketing of IQOS and several other Marlboro HeatSticks products through the PMTA pathway. Philip Morris pursued marketing authorization for these new Marlboro HeatSticks by submitting supplemental PMTAs for modified versions and line extensions of the tobacco-flavored product for which the company had previously received a marketing granted order.
A supplemental PMTA can be submitted in situations where an applicant is seeking authorization for a new tobacco product that is a modified version of a tobacco product for which they have already received a marketing granted order.
“Following FDA’s rigorous scientific evaluation of the applications, the agency determined that Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks, and Marlboro Amber HeatSticks are comparable to the previously authorized tobacco-flavored product,” according to FDA. “Like the previously authorized products, FDA has placed stringent marketing restrictions on the new products in an effort to prevent youth access and exposure.”
New data from Philip Morris Limited (PML) shows that retailers should stay stocked up on the latest technology advancements in next-generation nicotine products to keep ahead of growing consumer demand.
Kate O’Dowd, head of commercial planning UK & Ireland at PML, said that data shows that store owner competition in the heat-not-burn category is shifting the landscape, by challenging the dominance of traditional categories (such as e-cigarettes) and accelerating the pace of change.
“The race to switch adult smokers to alternative products between convenience retailers and large multiples, and the speed with which manufacturers and their brands are developing and commercializing the most innovative products to meet growing demand show everyone is feeling the heat,” she said. “For instance, if we look at heat-not-burn – a relative newcomer to the U.K. market – we see a category growing at over twice the speed of the e-cigarette category, which launched at least a decade earlier.”
O’Dowd cited data from PML’s first quarter results that found that the firm’s HEETS tobacco sticks accounted for more than 6 percent of the market share of the total industry sales volume for heated tobacco units.
PML also recently commissioned a survey, which included more than 1400 convenience retailers, to find whether retailers would forego competing with other stores if it meant they could help their community to make the swap to smoke-free options.
More than two-thirds of the respondents to the survey said they would look beyond competition with other stores to work together to help their community to go smoke-free.
Aiming to push this potential of the heat-not-burn subcategory further, PML recently rolled out its new IQOS Originals Duo heat-not-burn product, an advancement to its previous IQOS 3 Duo, the comapny said. The new device comes in a kit with a compact, lightweight holder and two packs of HEETS at an RRP of £39.
The IQOS heat-not-burn brand remains one of the most popular products in the category.
By Norm Bour
For those who have been in the nicotine industry for more than a few years, the IQOS saga is an amazing story of the ups and downs and volatility of the vapor market. If there is a real-life example of a “killer app,” IQOS changed the direction of vaping and introduced the concept of “heat-not-burn.”
First launched in Italy and Japan in 2016, IQOS was initially shot down by the U.S. Food and Drug Administration, which has been the regulatory agency’s tendency since it received the authority to regulate vaping products. Since the FDA started soliciting and accepting premarket tobacco product applications, a long and arduous approval process, it has approved just a handful of products and cost the industry hundreds of millions of dollars and countless hours of legal work and accounting.
IQOS didn’t find the process any easier.
Owned by Philip Morris International, which has billions of dollars to spend on new technologies and employs who knows how many well-connected lobbyists, none of that made a difference. Since the company has an international footprint, PMI could focus on greener pastures and jurisdictions with less challenging regulations, so the company put its efforts on “testing” IQOS outside the U.S., where it was generally well received.
PMI built its first factory in Italy, and after the initial tests in Italy and Japan proved successful, it introduced IQOS in the U.K. Over the years, PMI has partnered with several international companies and marketed IQOS under a variety of names. However, the U.S. market proved to be more challenging.
In 2020, however, the FDA agreed that IQOS “significantly reduces exposure to harmful or potentially harmful chemicals,” and PMI launched the product in the U.S. that year. After launching IQOS in a handful of states and gaining a single-digit share of the overall market, PMI suddenly found the door slammed shut on IQOS by a copyright infringement claim by BAT, the U.K.-based parent company of Reynolds American Inc (RAI).
In September 2021, the International Trade Commission (ITC) upheld an initial determination from May 2021 that IQOS infringed on two RAI patents. The ITC barred PMI’s then-partner, Altria Group, from importing PMI’s IQOS 2.4, IQOS 3 and IQOS 3 Duo products into the U.S.
Following the ITC ruling, PMI stated, “At the present time, we do not expect to have access to IQOS devices or Marlboro HeatSticks in 2022. However, we remain focused on returning IQOS to the market as soon as possible. Our teams are actively working on reentry plans, and we expect to be ready to bring IQOS back to U.S. consumers when available.”
In order to get its tobacco-heating device back on U.S. store shelves, in early 2022 PMI announced its plans to manufacture IQOS in the United States. In October 2022, PMI agreed to pay Altria Group approximately $2.7 billion for the exclusive U.S. commercialization rights to the IQOS tobacco-heating system effective April 20, 2024.
“We remain committed to creating long-term value through our vision,” said Altria CEO Billy Gifford in a statement. “We believe that this agreement provides us with fair compensation and greater flexibility to allocate resources toward ‘moving beyond smoking.’”
In an interview with Bloomberg, PMI CEO Jacek Olczak said the company had planned to manufacture IQOS in the U.S. all along. “From the very beginning of us going to the FDA, we had in mind that IQOS would one day not only be sold in the U.S. but manufactured there, if you take into consideration the size of the market and the opportunity for IQOS,” he said. “It’s just happening sooner because of the ITC decision.”
In July 2020, the FDA authorized PMI and Altria to market IQOS with certain modified-exposure claims, giving the company a leg up over its rivals. PMI has not specified where it will be manufacturing IQOS but said it plans to sell IQOS in the U.S. again in the first half of 2023.
Meanwhile, overseas, specifically in Europe, IQOS stores are some of the most beautifully designed tobacco shops in the world. The products are available in 68 international markets, and PMI claims that “13.5 million adult smokers have made the switch from tobacco.”
PMI’s heated-tobacco products (HTPs) have been launched in key cities in Albania, Andorra, Armenia, Aruba, Austria, Bahrain, Bosnia and Herzegovina, Bulgaria, Canada, Canary Islands, Colombia, Costa Rica, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominican Republic, Egypt, Estonia, France, Georgia, Germany, Greece, Guatemala, Hungary, Iceland, Italy, Israel, Japan, Jordan, Kazakhstan, Korea, Kuwait, Kyrgyzstan, Lebanon, Latvia, Lithuania, Malaysia, the Maldives, Mexico, Moldova, Monaco, Montenegro, Morocco, the Netherlands, New Zealand, North Macedonia, Norway, Palestine, the Philippines, Poland, Portugal, Reunion, Romania, Saudi Arabia, Serbia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Tunisia, the United Arab Emirates, the United Kingdom, Uzbekistan, and in some duty-free shops.
PMI has marketed several HTPs under its IQOS brand, and the most popular versions today use “blade heating technology,” a proprietary system for its HEETS, or HeatSticks. That overall methodology encompasses several versions of IQOS.
The latest generation of IQOS, ILUMA, was released in 2021 and uses induction to heat the tobacco instead of the blade technology and requires no cleaning. These devices use specific heated-tobacco units called Terea Smartcore Sticks.
In 2022, PMI launched Bonds by IQOS, along with its compatible tobacco sticks, Blends, in a pilot market in the Philippines. The company intends to further commercialize the product into 2023. Equipped with “bladeless” resistive external heating technology, Bond emits 95 percent less harmful chemicals compared to cigarettes, according to PMI.
“Bonds by IQOS represents another step forward in our ambition to replace cigarettes with innovative, science-based, smoke-free alternatives,” said Olczak. “We know that no single smoke-free product will appeal to all adult smokers. Providing a range of alternatives to continued smoking—with a variety of taste, technology, usage and price options—is imperative and helps us to address a range of preferences as diverse as adult smokers themselves—ultimately encouraging them to leave cigarettes behind.”
PMI’s ambition is that by 2025 at least 40 million PMI cigarette smokers who would otherwise continue to smoke will have switched to smoke-free products. Furthermore, the company’s aim is that more than half of its net revenues will come from smoke-free products by 2025.
In 2018, IQOS opened its first “boutique store” in one of the most fashionable, popular areas of Sofia, Bulgaria.
“I’ve been here since we opened, and it was a madhouse back then,” said the store manager, who asked to remain unnamed. “Many smokers, and even nonsmokers, had heard about the innovative smoking products and were looking for ways to quit smoking. Here in Bulgaria, we have the worse percentage of smokers in all of Europe, and even though it’s dropped, the numbers are between 30 [percent and] 40 percent depending upon age segmentation.
“Even now, four years later, many tourists visiting this area are shocked to find a store like this. Most of them are current or past smokers and are used to seeing small, ugly tobacco shops, so seeing such a classy place as this excites them.”
In November 2002, PMI launched its IQOS Iluma Prime at Dubai Duty Free. The appearance of IQOS Iluma Prime in Dubai International Airport terminals 1 and 3 follows the initial market launch in Japan and Switzerland duty-free in 2021.
“The launch of the IQOS Iluma Prime, our most refined and advanced device yet, in Dubai Duty Free further demonstrates our constant commitment to delight our legal-age consumers in travel retail with our most premium and stylish product range,” PMI vice president of Duty Free Edvinas Katilius said during the Dubai opening.
The electronic nicotine-delivery systems road is a rocky one, and it is difficult to predict what innovation may be around the next corner. For IQOS, however, market growth is on the horizon.
Norm Bour is the founder of VapeMentors and works with vape businesses worldwide. He can be reached at norm@VapeMentors.com.
China’s Intermediate People’s Court of Fangchenggang City, Guangxi has sentenced a number of people for smuggling the hardware and tobacco sticks used in heated tobacco products.
It’s the first time China has made a judgement in a heat-not-burn smuggling case, according to the Fangcheng Customs Anti-smuggling Branch of the Nanning Customs Anti-smuggling Bureau.
The defendants were found guilty of smuggling ordinary goods and articles (IQOS Heatsticks and hardware), and were sentenced to fixed-term imprisonments ranging from 4 to 12 years and fines ranging from ¥200,000 to ¥1 million. The exact number of people sentenced was not reported.
One defendant was found guilty of money laundering and sentenced to 10 months in prison, suspended for one year, fined ¥20,000 yuan, and more than ¥420,000 in money laundering illegal proceeds was recovered.
The investigation began on April 21, 2021, under the unified deployment of the Anti-smuggling Bureau of the General Administration of Customs, the Nanning and Hangzhou Customs Anti-smuggling Bureaus, in conjunction with the tobacco departments of Guangxi, Zhejiang, Guangdong, Hunan and other places, synchronized in Fangchenggang, Guangxi, Shaoxing, Zhejiang, and Shenzhen, Guangdong, according to the release.
The illicit goods were collected and seized, and three criminal gangs smuggling the illegal products were successfully detained, and about 4,500 heat-not-burn products were seized.
Philip Morris International has launched its latest heat-not-burn tobacco-heating system, Bonds by IQOS, along with its compatible tobacco sticks, Blends, in a pilot market in the Philippines. The company intends to further commercialize the product during the remainder of 2022 and next year.
Equipped with bladeless resistive external heating technology, Bond emits 95 percent less harmful chemicals compared to cigarettes, according to PMI.
“Bonds by IQOS represents another step forward in our ambition to replace cigarettes with innovative, science-based, smoke-free alternatives,” said PMI CEO Jacek Olczak in a statement.
“We know that no single smoke-free product will appeal to all adult smokers. Providing a range of alternatives to continued smoking—with a variety of taste, technology, usage and price options—is imperative and helps us to address a range of preferences as diverse as adult smokers themselves—ultimately encouraging them to leave cigarettes behind.
“Bonds by IQOS provides an opportunity to address consumer acquisition barriers for this segment, most notably up-front device costs and authentic tobacco taste satisfaction—providing further options of innovative smoke-free options to help ensure they do not go back to cigarettes. Through continuous innovation, we want to ensure that all adult smokers who would otherwise continue smoking switch and abandon cigarettes.”
According to PMI, Bonds by IQOS is designed to be used only with Blends tobacco sticks to deliver a variety of tobacco tastes. At the time of launch, Blends tobacco sticks will be available in five different flavors, including classic, menthol and aromatic. When fully charged, Bonds by IQOS delivers up to 20 uses, including three consecutive experiences. Bonds by IQOS comes in four different colors.
