- Company has launched IQOS in Japan, South Korea, New Zealand and Malaysia
- Tobacco giant hopes to increase IQOS's contribution to its market share from 2.3 per cent currently
With the launch of its heated tobacco product IQOS, Philip Morris International, the industry giant behind brands such as Marlboro and Parliament cigarettes, is betting that the global population of a billion smokers will not shrink any time soon.
In fact, the industry is expected to grow to US$1.1 trillion in the next five years, and the company wants to ready itself for the disruption alternatives to cigarettes will bring with them. The mantra behind IQOS " short for "I Quit Ordinary Smoking" " is "If you don't smoke, don't start. If you can't quit, switch".
"We are putting ourselves in a position to move out of the mainstream cigarette business, and disrupting and transforming ourselves is a big challenge to take on. But the switch to heated tobacco is just common sense and corresponds to what the consumer wants " a less harmful alternative," said Paul Riley, Philip Morris's president for East Asia and Australia.
According to the company, heating tobacco at 350 degrees Celsius (662 degrees Fahrenheit) lowers by 95 per cent on average the release of harmful chemicals such as benzene, arsenic and formaldehyde, which are linked to diseases such as lung cancer and cardiovascular disease, among others. The tobacco in a cigarette burns at temperatures exceeding 600 degrees, generating smoke that contains high levels of these harmful chemicals.
In Asia, the company has launched IQOS in four markets " Japan, South Korea, New Zealand and Malaysia. After a successful launch in Japan, where IQOS was introduced in 2015 and helped grow Philip Morris's market share by 10 percentage points to 34 per cent in four years, Riley said he was looking to convert at least half of the company's market share in each country over to the heated tobacco product.
"Our goal for this region is to stop selling cigarettes one day, as we have done all the research to show that there is better alternative," he said.
Riley admitted that IQOS's success in Japan, where it now contributes half of Philip Morris's revenue, could be attributed to friendly regulation. In Japan, e-cigarettes containing nicotine have been banned since 2000, effectively forcing smokers to use heated tobacco products if they want a nicotine alternative.
The prospects for IQOS in Hong Kong look less promising. The government is poised to push through a blanket ban on e-cigarettes and heated tobacco products, imposing a maximum penalty of six months' imprisonment and a fine of HK$50,000 on anyone convicted of importing, making, selling or promoting new smoking products.
Tobacco would long gone if anyone truly cared about China's public health
Riley pointed out that heated tobacco products were not the same as e-cigarettes, which have been linked to more than one thousand cases of illnesses and 34 deaths in the US. While in e-cigarettes, a cartridge of solution that usually contains nicotine, propylene glycol, glycerine, flavourings and other chemicals are heated up, in heated tobacco products, only a tobacco stick is involved.
In a case of acute eosinophilic pneumonia in Japan was, however, linked to heated tobacco products in a study.
Riley said regulation was key to IQOS's success. He said the US market was heading in the right direction, with the introduction of a new tobacco product review process. In April, IQOS became the first electrically heated tobacco product to qualify for sale in the US through the review process.
Philip Morris currently enjoys a 27 per cent share of the global market, and reported an operating income of US$8 billion for the first nine months, as well as net revenue of US$22.1 billion, this year. And the company hopes to increase IQOS's contribution to its market share from 2.3 per cent currently.
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