E-Cigarettes: Philip Morris International

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Philip Morris International (PMI) was the last of the international tobacco companies to move into the e-cigarette market. In November 2013 the company announced that it was going to produce its own e-cigarette.[1]

In December that year, PMI signed a contract including a set of licensing, supply and cooperation agreements with Altria. The two companies were combined until 2008; Altria is US-based and owns Philip Morris USA. Financial terms of the agreements were not disclosed.

Under the agreement, PMI gained the right to exclusively sell Altria's e-cigarettes outside the United States, and in return Altria now has the right to exclusively sell in the United States two "modified risk tobacco products" being developed by PMI, which heat the tobacco without burning it. The companies also said they would work together on scientific assessments and regulatory authorisations; the commercialisation of reduced risk products in the United States is subject to approval by the US Food and Drug Administration.[2] At the occasion, PMI Chief Executive Officer (CEO) Andre Calantzopoulos said in a statement:

PMI firmly believes that reduced-risk tobacco products, as well as e-cigarettes, represent an important step toward achieving the public health goal of harm reduction, a potential paradigm shift for the industry and a significant growth opportunity for the company.[3]

Heat Rather Than Burn

PMI’s CEO Calantzopoulos believes the future is in “heat not burn” products, rather than e-cigarettes. “Heat not burn” products are devices that heat up tobacco enough to release flavour and nicotine, but not enough to catch fire and make smoke. The company prefers these products over e-cigarettes because they give consumers a stronger and faster kick of nicotine, more akin to a regular cigarette. He said that “the current generation of e-cigarettes generally has a much slower delivery profile than conventional cigarettes, which, together with a weaker taste, explains limited user satisfaction and reduced adoption rates”.[4]

New Production Facilities

In January 2014, PMI announced plans to invest up to €500 million (680.4 million USD or 413.100 GBP) into its first manufacturing facility in Europe and an associated pilot plant in Italy to produce potentially “reduced-risk” tobacco products. Construction of the new facility is expected to start immediately and last about two years. The pilot plant is already near completion and will serve as the production facility for pilot and initial market launches.[5]

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Notes

  1. Rupert Hargreaves, Philip Morris Blunders into the E-Cig Market, But Is It Too Late?, The Motley Fool, InvestmentDaily.com, 17 December 2013, accessed December 2013
  2. Reuters, Philip Morris, Altria team up on cigarette alternatives, 23 December 2013, accessed January 2014
  3. Reuters, Philip Morris, Altria team up on cigarette alternatives, 23, December 2013, accessed January 2014
  4. Tom Cara, Do Smokers Really Want: E-Cigarettes, or Safer Tobacco?, Corporate Intelligence, WSJ, 10 January 2014, accessed February 2014
  5. Ben Fox Rubin, Philip Morris Investing To Produce 'Reduced-Risk' Products Factory, Pilot Plant to Employ up to 600 People, Wall Street Journal , 10 January 2014, accessed February 2014