Philip Morris CEO says they may end cigarette manufacturing

Innovation in tobacco

As America’s smoking habits change, tobacco giants are looking to position themselves to take advantage of the shifting market. Philip Morris is changing their approach to traditional smoking alternatives with a new product called IQOS. IQOS allows users to heat up small amounts of tobacco and inhale them without ever setting the tobacco on fire.

This isn’t a foray into the burgeoning vaping market, whose products aren’t made from tobacco leaves. Philip Morris is marketing IQOS to tobacco smokers who are looking to reduce their exposures to health risks from smoking tobacco, but aren’t yet ready to get rid of the familiar elements of smoking a tobacco cigarette, such as the flavor and the texture. The device works by heating up mini-tobacco sticks approximately half the size of a regular cigarette, allowing the user to smoke without ever actually smoking.

Plans to take over the market

In a recent investor’s presentation in Switzerland, Philip Morris expanded on their plans for IQOS. They plan to roll out the product in 35 countries in 2017, highlighting their belief that such “reduced-risk” products as this will eventually take over the market, reducing — and eventually eliminating — the sales of traditional cigarettes.

With the recency of the developing the market towards non-traditional smoking alternatives, not only are health regulations not yet fully-developed to address the use and consumption of these types of products, but tax codes aren’t yet developed as well.

As they’re not taxed in the same way in all markets, Philip Morris has a unique opportunity to make additional revenue due to a lessened tax exposure.

The road has been traveled before

Big Tobacco has attempted to go down this route of cigarette alternatives before. In 1988, the R.J. Reynolds Tobacco Company introduced a smokeless cigarette, called the Premier, which positioned itself as a “healthier” alternative by heating tobacco flavor. Despite hopes that customers would flock to a safer smoking experience, it failed to achieve popularity. Customers complained about the charcoal-like aftertaste and the extensive instructions that came with the packs. Within a year, it was shelved. The concept was then tested in India in 2002, where it similarly failed to catch on.

In the late 1990’s, Reynolds introduced a different approach in a concept similar to Morris’ IQOS. The Eclipse used a carbon tip to heat the tobacco rather than burning it. In production until 2014, the product failed to gain significant market share, and was rebranded as Revo in 2015. Revo failed to catch on as well, leaving Morris alone to attempt this new direction in tobacco smoking, at least for the moment.

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