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Philip Morris To Go Smoke-Free In The UK: A Necessity Or A PR Stunt?

Philip Morris International ( PM ) recently placed an advertisement in newspapers in the UK claiming its ambition to "stop selling cigarettes" in the region, as part of its commitment to achieving a "smoke-free future." The Marlboro maker has also written to UK's Prime Minister Theresa May asking for permission to provide information on quitting and switching to safer alternatives on its cigarette packs. However, this has been described as a publicity stunt by many anti-smoking campaigners. This is because the company has not specified any timeline for the ceasing of sales of traditional cigarettes in the region. Meanwhile, the company has in the past stated that it can't immediately stop the production, marketing, and sale of cigarettes as its competitors would easily step in to fill the gap. On the other hand, the government in the region has made a concerted effort itself to make England smoke-free in the next few decades. Hence, the question that arises is whether Philip Morris has undertaken this step just to promote its so-called "safer alternatives" or whether it is a necessity, since the UK is inevitably moving toward a smoke-free future.

Developing Cigarette Alternatives

When a cigarette combusts, it burns tobacco leaves to generate smoke, which contain nicotine, naturally found in tobacco, as well as many harmful chemicals. According to PM, it is these harmful chemicals, and not the nicotine, in cigarette smoke which is the primary cause of smoking-related diseases. It is for this reason that the company is developing alternatives to cigarettes, products without the smoke, but with nicotine and taste that can satisfy the existing smokers. In this regard, the company has a two-pronged focus; one is to heat tobacco to generate a nicotine-containing vapor while reducing the level of harmful chemicals, and the other way is to produce a nicotine-containing vapor without using tobacco.

The company's momentum continues to grow behind a full-scale effort to market smoke-free products that can ultimately replace cigarettes, after a successful iQOS launch, its most advanced smoke-free alternative, which has converted over two million adult smokers to it. According to Tony Snyder, Vice President of Communications, adult smokers are looking for products "that offer the satisfying taste, ritual, and pleasure they get from cigarettes , but with far lower amounts of the harmful compounds found in smoke." PM has hired over 400 scientists and experts, along with an investment of more than $2.5 billion in research, product development, and scientific substantiation.

Laboratory tests on the aerosol of iQOS have shown significantly lower levels of harmful and potentially harmful constituents (HPHCs), and reduced toxicity than cigarette smoke. Furthermore, one 90-day study in the US and one 90-day study in Japan reported that smokers who switched completely reduced their exposure to selected HPHCs, approaching those observed in people who quit smoking for the duration of the studies. IQOS is currently present nationwide or in key cities in 31 markets worldwide, including Japan, Canada, Germany, Italy, and the UK. The company has also filed a Modified Risk Tobacco Product Application (MRTPA) for the product with the US FDA.

Necessity In The UK

The objectives of the Tobacco Control Plan laid out by the Department of Health in the UK in July of last year include reducing the smoking rate among adults in England from 15.5% currently to 12% or less by 2022. The sales of cigarettes have already been on a decline in developed countries as a result of tax hikes, an introduction of plain packaging, bans on tobacco marketing and smoking in public places, and growing awareness among the consumers. Furthermore, the new initiative, of considerably reducing the smoking rate in the future, means that the government will proactively take further tax hikes and other steps to make a smoke-free future a reality. This would imply that the cigarette volumes of tobacco companies will continue to get pounded. In the face of such issues, having a reduced risk product in the portfolio will help guarantee long-term success.

Philip Morris has recognized the serious health risks posed by cigarettes and other tobacco products. Hence, accordingly, they claim to feel an obligation to develop and market products responsibly. Success in the cigarette business has given them the resources to pursue this ambitious vision. According to the company's filings, while switching to its Modified Risk Product (MRP) iQOS is not as beneficial as quitting, it is still a considerable improvement to smoking traditional cigarettes. Hence, it would help in improving public health if the product manages to attain a high adoption rate.

We have a $119 price estimate for Philip Morris, which is higher than the current market price.

See Our Complete Analysis For Philip Morris International

Have more questions on Philip Morris? See the links below:

  • Why Is Korea Easier To Conquer For iQOS Than Europe?
  • Philip Morris: Focusing On A Smoke-Free Future
  • Philip Morris Falls On A Weak Third Quarter
  • iQOS- A Product Of Innovation Or Necessity For Philip Morris?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking and encourages readers to comment and ask questions in the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Philip Morris International .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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