# Is It Time to Stop Thinking of Philip Morris International as a Cigarette Company?



## fbb1964 (18/3/21)

https://www.fool.com/investing/2021/03/15/is-it-time-to-stop-thinking-of-philip-morris-inter/


*Is It Time to Stop Thinking of Philip Morris International as a Cigarette Company?*
*The global tobacco giant is working hard to convince you it means what it says.*
Rich Duprey
Mar 15, 2021 at 7:40AM

Four years ago, *Philip Morris International* (NYSEM) declared it would pursue a "smoke-free future" in which one day it will be a cigarette-less company. Although critics dismissed the claim as a smokescreen, the global tobacco giant continues proving its sincerity in the attempt.

Last month, Philip Morris told analysts at its investor day conference that by 2025, more than half of its total revenue will come from smoke-free products, well ahead of its previous guidance. That puts the tobacco company on a path to no longer being a cigarette manufacturer sooner than many believed possible, so investors need to consider the implications for its achieving that goal. 






Image source: Philip Morris International.

*Up in smoke *
On one hand, Philip Morris' effort is a matter of self-preservation. While cigarette consumption in the U.S. has been in a secular decline for decades, global markets have also turned sour and the growth opportunities for smoking that existed at the time of its spinoff from *Altria* (NYSE:MO) in 2008 are severely diminished.

The World Health Organization noted in 2019 that although worldwide cigarette usage had dropped by around 60 million people between 2000 and 2018, that was mostly due to women who gave up smoking. Female cigarette usage dropped from 346 million to 244 million, a near 30% decline.

Men, though, actually increased their usage by 4%, rising from 1.05 billion to 1.09 billion, to account for 82% of the world's smokers. However, in 2019, WHO reported the number of male smokers dropped for the first time ever, and they expected 1 million fewer smokers by the end of 2020.

Philip Morris' annual report shows that cigarette shipment volumes last year tumbled over 11%, with its most important brand Marlboro, which accounts for 37% of all cigarette shipments, down by a like amount.

*A burning drive to change*
So it's not a surprise that Philip Morris began looking for a cigarette alternative, and its IQOS heated-tobacco electronic cigarette is the vehicle expected to deliver the greatest results of the transition to being smoke-free.

CEO Andre Calantzopoulos told analysts the tobacco giant was leading the way in tobacco-harm reduction, and "the product change and switching smokers out of cigarettes into less harmful alternatives is the biggest contribution we can make to society and public health."

While IQOS still uses tobacco to deliver nicotine to users, because it heats the tobacco and doesn't burn it, it's seen as a less harmful alternative. It creates a vapor rather than smoke, and smoke is where most of the damaging chemicals are found.

Philip Morris generated $6.8 billion in revenue last year from IQOS, or almost 25% of its total $28.7 billion in net revenue. Calantzopoulos says if you just look at the three regions where IQOS is most prevalent -- Asia, Eastern Europe, and the European Union -- it represents 35% of the total.

*The next road forward*
Now IQOS has been introduced into the U.S., potentially one of the biggest market opportunities along with China, and it earned a modified risk label from the Food and Drug Administration. 

Altria, which is handling the manufacture, distribution, and sale of IQOS in the U.S., has slow-walked the rollout of the device. It's only in three markets so far, even though it's been approved for sale for a year. But with the next-gen IQOS device now available, Altria is planning on national availability this year, and Philip Morris says new innovations are coming to the device, including induction heating technology and mesh technology, which uses a metallic screen to draw tobacco flavor through.

Arguably the biggest opportunity may be in marijuana. *British American Tobacco* (NYSE:BTI) is trialing a cannabidiol (CBD) vape product in the U.K. and just signed a partnership with leading Canadian marijuana grower *OrganiGram* to develop CBD products.

Altria, of course, has had an ownership stake in *Cronos Group* for several years now.

If IQOS catches on here, and there's a good chance it will because of its modified risk designation, giving it a marketing advantage over competing products, rolling it into the growing legal weed market could be huge.

*Seeing through the fog*
What's clear, though, is that Philip Morris International is serious about its cigarette-free future, and with sales strong in almost every market it's in, the IQOS could deliver superior returns.

That should give investors the confidence this tobacco giant will be a solid investment for years to come, regardless of whether the company is seen as a cigarette company or not.

*Should you invest $1,000 in Philip Morris International Inc. right now?*

Before you consider Philip Morris International Inc., you'll want to hear this.

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_*Stock Advisor returns as of February 24, 2021_

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Reactions: Informative 5


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## zadiac (18/3/21)

Do they still make and sell cigarettes? If yes, then they are a cigarette company. If they only make and sell vape products, then they are a vape company. Simple as that.

Reactions: Like 1 | Agree 1


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## Viper_SA (18/3/21)

Well my 2c, if it wasn't for their IQOS kit I wouldn't be vaping right now again. Their kit reduced my stinkie consumption down to maximum 5 a day, and then while sorting out my cupboards I was planning on just cleaning and storing my old vape gear. Then I got to thinking, if the IQOS can cut my stinkies down that much, perhaps I should give vaping another shot. Now, I've been stinkie free since 6 March and sneaking the occasional IQOS, which is much healthier than a stinkie. I'll always be grateful that they put other systems in place to help reduce tobacco harm.

Reactions: Like 2 | Agree 1


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## fbb1964 (18/3/21)

zadiac said:


> Do they still make and sell cigarettes? If yes, then they are a cigarette company. If they only make and sell vape products, then they are a vape company. Simple as that.



Sure I agree. If it was only that simple. Hence doing this post of an article about tobacco companies and vaping published by a Wall Street investment company. Doesn't it seem a bit odd? How interesting! The title is a very provocative heading to attract interest and get investors to invest in Big Tobacco not a literal yes/no question. 

Maybe read this thread I posted to put this into context. It should be of specific interest to current vape vendors! The current vaping industry as a whole are at risk of being completely wiped out and pushed out of the market by cigarette companies. By cigarette companies selling vapes. Have a look at the vape devices they are designing to flood the market selling vapes on every street corner with cheap small vapes. With non refillable nicotine juice cartridges sold by big tobacco as well. One guess who controls the nicotine supply for these cigarette company vape devices in future. That's the facts. Big tobacco have been in this game for decades and have survived. Think they are going to sit back and get wiped out by smaller private vape vendors selling vape gear, especially nicotine juice, as we now know it? Their view is if you can't win them join them and then push them out of the vape market completely!

https://www.ecigssa.co.za/big-wins-for-big-tobacco-vaping-category-report-2021.t71362/

And why this is one of the biggest threats we as vapers, and obviously vape vendors, face looking into the future vaping as we do now using open vape devices and pre-mixed or diy nicotine juice we use now. One guess why the sudden new direction and big push for banning open vape devices starting to happen? Or UPS and most of the couriers forced via a govt ban for all vape mail. Let me answer that for you if I may.

Big tobacco are positioning themselves to be in total control and supply of nicotine. Just like they are with cigarettes. To supply their vapes and nic juice cartridges on every street corner, just like cigarettes are sold now. Funny how cigarettes have never been threatened by an outrightly permanent ban ever. And never will. But the sudden change of direction of banning open system vape devices are. And killing all competition selling vape gear and nic juice online via vape mail as well to guarantee their dominance and total control of all nicotine supply 100%. Exactly like with cigarettes. Imagine if you could buy cigarette company vape devices and their cartridge nic juice cartridges cheap and on every street corner, just like you buy cigarettes now. Would you buy vape gear and nic juice online and have it mailed to you if you don't know any better or need to as a new vaper starting out vaping using the big tobacco stuff.

The anti vape propaganda establishment have now all of sudden changed tune and are coming for the complete nicotine supply and online supply chain control (all vape mail) being banned, All courtesy of their deep pocket financiers Big Tobacco. It's always been about huge $$s and only $$s. Simple as that. Big Tobacco and Big Pharma have never and will never fight fair. Or loose a fight. Especially with the massive $$s they have at their disposal in this propoganda war. Or they will simply throw $$s at politicians, lobbyists and health? officials and get the law/guidelines changed to fit their narrative and dominance.

https://www.ecigssa.co.za/who-recommends-ban-on-open-system-vaping.t71487/

Reactions: Like 1 | Agree 1


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## zadiac (19/3/21)

fbb1964 said:


> Sure I agree. If it was only that simple. Hence doing this post of an article about tobacco companies and vaping published by a Wall Street investment company. Doesn't it seem a bit odd? How interesting!
> 
> Maybe read this thread I posted to put this into context. It should be of specific interest to current vape vendors! The current vaping industry as a whole are at risk of being completely wiped out and pushed out of the market by cigarette companies. By cigarette companies selling vapes. Have a look at the vape devices they are designing to flood the market selling vapes on every street corner with cheap small vapes. With non refillable nicotine juice cartridges sold by big tobacco as well. One guess who controls the nicotine supply for these cigarette company vape devices in future. That's the facts. Big tobacco have been in this game for decades and have survived. Think they are going to sit back and get wiped out by smaller private vape vendors selling vape gear, especially nicotine juice, as we now know it? Their view is if you can't win them join them and then push them out of the vape market completely!
> 
> ...



Yes. You are right. My answer was to the question of the first post. Is it time to stop thinking of Philip Morris as a cigarette company? The answer is NO. They still make cigarettes. No matter how many vaping devices they make. If they still make cigarettes and sell them, they are still a cigarette company. That's it.

Reactions: Like 1


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