The Strategist

Philip Morris expects end of cigarettes while BAT grows sales

11/30/2016 - 14:33

Swiss tobacco giant Philip Morris may stop selling cigarettes, said André Calantzopoulos, CEO and Director of Philip Morris International Inc. in an interview with BBC.

Markus Spiske
Markus Spiske

"I believe that there will come a time when I will declare that we have alternative products", - he said, noting that he hopes to work with governments to begin phasing out the cigarette.

"I hope that this will happen in the nearest future", - added Calantzopoulos.

Earlier, in 2016 Philip Morris introduced IQOS - smokeless cigarettes, tobacco in which is heated by a special blade. The device, similar with charging unit on a small mobile phone, allows smokers to receive the usual dose of nicotine without smoke inherent to traditional cigarettes.

Now, new product of Philip Morris is sold in more than ten countries, including Russia, Japan, Switzerland and Italy. Studies on IQOS are still being conducted, but Philip Morris claims that the novelty does less harm than a normal cigarette.

In the interview with BBC, Calantzopoulos also said that Philip Morris is aware of damage caused to human health by its products. According to him, now the company's mission is to find and introduce less harmful product. 

Meanwhile, a serious competitor to convenient cigarettes is gaining ground on the market. According to Shane MacGuill of Euromonitor International, number of vapers will exceed number of traditional smokers by 2040. In fact, he believes that the Western world can completely quite smoking in the second half of the 21st century.

So far, according to results of 2015, electronic cigarettes occupy only 1.1% of the global tobacco market, that is, $ 8 billion against 698.5 billion dollars of convenient cigarettes’ turnover. The United States were the largest market in the world at the beginning of 2016. 

Meanwhile, group of companies British American Tobacco (BAT), one of the leaders on the global market for tobacco production, for the first nine months of 2016 increased volume of cigarette sales worldwide by 2.2% yoy, to 497 billion pieces.

Organic sales growth amounted to 0.9% of cigarettes. The company explains such dynamics by particularly high rates in Russia, Bangladesh, Vietnam, Turkey and Ukraine. At the same time, BAT increased market share of its Kent cigarette brand by 0.1 percentage points thanks to Russia, Turkey and Japan.

The greatest growth of BAT cigarette sales was achieved in Western Europe - by 10.1%, to 89 billion pieces. In Eastern Europe, the Middle East and Africa (the EEMEA) cigarette sales increased by 5.1%, to 175 billion pieces, the Asia-Pacific Region (APR) - by 0.6%, to 149 billion pieces. In North and South America, the indicator fell by 7.4%, to 84 billion pieces.

At the same time, sales of BAT cigarettes in the third quarter did not change in comparison with the same period last year, amounting to 165 billion pieces. An increase was recorded only in Western Europe (up 8.4% year on year, to 32 billion pieces) and in the EEMEA countries (by 2.5%, to 61 billion pieces). In North and South America and in the Asia-Pacific region, sales fell (by 9.2%, to 28 billion units, and 2.8% to 44 billion pieces, respectively).