Philip Morris to Launch IQOS Heated Tobacco Device in U.S. Despite Rivals' Doubts

Philip Morris plans to launch its heated tobacco device IQOS in the US in 2024, aiming for a 10% market share within 5 years, despite skepticism from rivals. The success of IQOS could significantly impact the tobacco industry's future direction.

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Aqsa Younas Rana
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Philip Morris to Launch IQOS Heated Tobacco Device in U.S. Despite Rivals' Doubts

Philip Morris to Launch IQOS Heated Tobacco Device in U.S. Despite Rivals' Doubts

Philip Morris International (PMI) plans to introduce its flagship heated tobacco device IQOS in the U.S. market in the second quarter of 2024, despite doubts from rivals about its potential in the vaping-dominated market. IQOS, which is already the top-selling heated tobacco device globally, is central to PMI's efforts to transform its image from a cigarette maker to a company driving the shift to healthier options.

PMI aims to secure a 10% share of the total U.S. cigarette and heated tobacco market within around five years of introducing the latest version of IQOS, which is not expected until at least 2025. This would mean switching around 2.8 million U.S. smokers to IQOS. Rival British American Tobacco has expressed skepticism about the potential for heated tobacco in the U.S., where vaping is dominant.

However, analysts and investors believe PMI's goals for IQOS in the U.S. are achievable, citing the company's track record of success with the device in other markets. The U.S. Food and Drug Administration has authorized PMI to market IQOS as reducing exposure to harmful chemicals compared to cigarettes, which could give it an advantage over vaping products.

Why this matters: The introduction of IQOS in the U.S. represents a significant step for PMI in its transition away from traditional cigarettes and towards potentially less harmful alternatives. The success or failure of IQOS in the vaping-dominated U.S. market could have major implications for the future direction of the tobacco industry.

PMI plans to use a similar strategy to promote IQOS in the U.S. as it has in other markets, including the use of sales people, IQOS stores, and pop-up kiosks. The company reported strong revenue and profitability growth in the first quarter of 2024, driven in part by the performance of IQOS. Analysts, such as Bonnie Herzog of Goldman Sachs, remain bullish on PMI's stock, with a 24% upside target over the next 12 months.

"With an estimated $20 billion profit pool at stake and no cigarette revenues to protect, PMI is poised to aggressively push for IQOS success in the U.S. market," said Herzog in a recent research note. The introduction of IQOS in the U.S. marks a major milestone in PMI's ongoing transition towards smoke-free products, which now comprise 39% of the company's international revenue.

Key Takeaways

  • PMI plans to launch its IQOS heated tobacco device in the US in Q2 2024.
  • PMI aims for a 10% share of the US cigarette and heated tobacco market within 5 years.
  • FDA has authorized IQOS as reducing exposure to harmful chemicals vs. cigarettes.
  • PMI's IQOS revenue and profitability grew in Q1 2024, analysts remain bullish.
  • IQOS launch marks a milestone in PMI's transition to smoke-free products.