Philip Morris International Inc. Chief Executive Officer Jacek Olczak said the Marlboro maker’s target to get most of its revenue from smoke-free products by 2025 is probably out of reach after growth has been dented in Russia and Ukraine, two of its key markets.
(Bloomberg) — Philip Morris International Inc. Chief Executive Officer Jacek Olczak said the Marlboro maker’s target to get most of its revenue from smoke-free products by 2025 is probably out of reach after growth has been dented in Russia and Ukraine, two of its key markets.
The CEO said PMI will probably need a few more quarters to reach the goal of 50%, speaking on an investor webcast Thursday. The company reiterated its confidence in products such as heated tobacco and nicotine pouches, predicting industry growth rates for them as high as 20% and 35% respectively.
The tobacco company set a new goal to reduce the proportion of revenue from cigarettes to less than a third by 2030 as it prepares to start selling its IQOS heated tobacco product in the US next year.
Philip Morris has spent $16 billion buying nicotine pouch maker Swedish Match AB as it tries to lead the tobacco industry in a shift away from combustibles. Last year, PMI got two-thirds of its net revenue from cigarettes.
Shares of PMI rose as much as 2.1% in New York Thursday morning.
Within less than a decade, PMI’s IQOS has become a business with annual revenue of about $10 billion. The company now sells three-quarters of the world’s heated tobacco products. Nicotine pouches are also helping boost sales growth and the company’s share of that market is 36%.
That means PMI makes 50% of the world’s smoke-free nicotine products, even though the company barely has a presence in the vaping market.
Earnings per share should rise 9% to 11% a year between 2024 and 2026, the maker of Marlboro products sold outside the US forecast.
Third-quarter earnings growth excluding currency shifts has actually been better than its most recent forecast in July, but that’s been overshadowed by adverse foreign exchange movements, PMI said, warning that results will be in the lower end of the range.
This year’s growth in heated tobacco has also been set back by a later-than-expected launch in Taiwan.
US Plans
Philip Morris plans to submit an application to the US Food and Drug Administration to sell its IQOS Iluma product in that market in October. The company aims to attain a 10% share of the US market for cigarettes and heated tobacco products within five years of launching Iluma there.
The company has FDA authorization to sell an earlier version of IQOS that uses a metal blade to heat the tobacco, and PMI is preparing to sell that in just several cities in the US next year. The company is waiting to do a bigger national launch of IQOS until 2025, when it hopes Iluma, would get approval. PMI would try to enter 10 US states within the first 12 months. Iluma heats tobacco through induction and requires less maintenance.
The shift in strategy will free up resources to shift toward expanding Zyn nicotine pouches in the US in the near-term, Olczak said.
(Updates with details on US launch plans in 12th and 13th paragraphs)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.