Could America ever give up its cigarettes?
The head of Marlboro-maker Philip Morris International (PMI) drew headlines last week when he said the company wants to end the sale of cigarettes in the U.K. by 2030, in line with government goals.
"I want to allow this company to leave smoking behind," CEO Jacek Olczak told The Mail on Sunday, a U.K. tabloid. 'I think in the U.K., 10 years from now maximum, you can completely solve the problem of smoking.”
While it's not the first time he has made such a pronouncement, when it comes to ending smoking in America, the tone is a little softer.
Altria, the parent company of Philip Morris USA, takes a slightly more hedged position than PMI, a separate company it spun off in 2008.
“At Altria, we’re focused on moving beyond smoking and our 2030 Vision to responsibly lead the transition of adult smokers to non-combustible products,” company spokesperson George Parman told NBC News in an email.
“We have the ability to make significant progress on harm reduction and public health,” thanks to Altria’s assortment of smoke-free products, Parman said.
These smoke-free products include PMI’s IQOS heated tobacco device, which in early July received limited FDA approval to be marketed as a modified-risk tobacco product that reduces a person's exposure to harmful chemicals. Altria is the exclusive licensee of the device in the United States, where it will be sold by Philip Morris USA, which makes Marlboro cigarettes for the domestic market.
Both PMI and Altria have a 10-year goal to their vision statement. But while the international tobacco company explicitly says it wants to end smoking all together within that time frame, the American tobacco company allows for more wiggle room.
The gap between the two companies' visions are an expression of a difference in strategy for the target markets, reflecting differences in cultural, political, and business realities, experts say.
“Smokers in the U.S. may be more resolute in their desire to maintain the ‘freedom’ to smoke, a slightly unique American disposition that is not nearly as strong in other countries,” said Kathleen Hoke, a law professor and Director for the Center for Tobacco Regulation at the University of Maryland School of Law.
Cigarettes as emblems of independence date back at least to the 1920s. At the time there were taboos against women smoking and doing so publicly. In 1929, public relations mastermind Ed Burney paid young women to march during New York City's Easter Sunday Parade down Broadway and smoke their “Torches of Freedom!”
“I felt invincible, ridiculously invincible,” said former smoker Monica Beaky, 58, of the feeling she had when she started smoking at 13. “I wanted to be grown up… it gave me that bad-girl feel.”
After a doctor diagnosed her with a cancerous growth on her tongue at age 49, the New York City-based product apparel manager switched to vaping. Eventually she started working at a vape shop part time on new customer education. Young men and older women were easier to convince to try it, she said, but older men were harder.
For older men, “vaping is baby stuff," she said. "'I’m a man so I’m going to smoke unfiltered Camels.' It’s a macho thing, tempting fate.”
From 2014 to 2020, e-cigarette sales rose 122 percent, according to data from the Centers for Disease Control and Prevention. During that time, cigarette sales fell by at least 20 percent, continuing a longstanding decline, data from the Federal Trade Commission shows.
Attracting more smokers who are willing to try a combustion-free delivery mechanism for nicotine is the cornerstone of PMI’s new business model, starting with its IQOS device. The company told investors in February that it expects its smoke-free products to drive more than 50 percent of its net revenue by 2025. It also plans to become a majority smoke-free company by that year.
The company projects nearly a billion dollars in new opportunities in the areas of botanical wellness products and respiratory drug delivery by 2025.In July, PMI agreed to buy the UK inhaled asthma drug company Vectura Group for $1.2 billion.
Industry analysts say the company is on track to profitably convert to a smoke-free company.
“We see a strong runway of accelerating revenue and profit growth ahead, fueled by the tremendous compounding effect of IQOS,” Goldman Sachs analysts said in a research note reviewed by NBC News. Multiple models at different price points are planned, the company said.
PMI makes 2.4 times more revenue per heated tobacco stick with its IQOS device than with traditional combustible cigarettes, according to the research note. The sticks also have lower excise taxes than regular cigarettes in most countries.
“[Philip Morris] is able to leverage IQOS’ tax advantage by passing on some of the savings to consumers to be more competitive on pricing (relative to premium cigarettes), which allows it to attract new consumers," the Goldman Sachs analysts wrote. "This makes IQOS [heated tobacco units] equivalent to medium-priced cigarettes, which increases PM’s pricing power/leverage.”
Critics are skeptical of the company’s motives.
“If PMI were serious about banning combustible cigarettes within 10 years, it would strongly support strong new government action now to make cigarettes (and all similarly smoked tobacco products) less attractive, less addictive, more expensive, and otherwise less readily available to both smokers and nonsmokers, especially youth,” said Eric Lindblom, a law professor at Georgetown University. “But they have not done that.”
Plans for further rollout of the IQOS device in the U.S. are looking a little hazy at the moment.
Last week, Philip Morris USA disclosed in its second quarter earnings that it had "delayed further expansion of the IQOS and Marlboro heatsticks" due to legal uncertainty following an unfavorable ruling by the U.S. International Trade Commission when it reviewed a judge's findings in a patent infringement case brought by British American Tobacco against its rival PMI.
Philip Morris International is "in the middle of a long and multi-step legal process" before the commission, spokesman Corey Henry said in an email. The company would continue to rely on its sole U.S. distributor Altria "to take all necessary steps" to make sure the IQOS "is as successful in the U.S. as it has been globally," he said.
BAT could not be immediately reached for comment.
The World Health Organization has estimated that smoking, both through direct tobacco use and exposure to second-hand smoke, kills 8.2 million people a year globally.
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Marlboro-maker Philip Morris wants to stop selling cigarettes in the U.K. Could it ever happen in the U.S.? - NBC News
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