Philip Morris International Marks a Decade of IQOS—a Milestone in the Journey to a Smoke-Free Future

Rhea-AI Summary

Philip Morris International (PMI) celebrates the 10th anniversary of IQOS, its leading smoke-free product. Since IQOS's launch in Japan in 2014, the country has seen a 46% decrease in cigarette-smoking prevalence, dropping from 19.6% to 10.6% in 2022. IQOS now generates over $10 billion of PMI's annual net revenues and is available in over 70 markets with 30.8 million adult users. Smoke-free products account for 38% of PMI's net revenues in Q3 2024, up from nearly zero in 2014. The company has invested over $12.5 billion in developing and commercializing smoke-free products since 2008.

Positive

• IQOS generates over $10 billion in annual net revenues
• Smoke-free products represent 38% of total net revenues, up from ~0% in 2014
• Product adoption reached 30.8 million adult users globally
• Expanded market presence to over 70 markets worldwide
• Successful market penetration in Japan with 46% reduction in smoking rates

Negative

• Still heavily dependent on traditional cigarette sales (62% of revenues)
• Significant ongoing investment requirements in smoke-free technology

Insights

Market Research Analyst

The 10-year milestone of IQOS reveals significant market transformation and business model evolution for Philip Morris International. The product now generates over $10 billion in annual net revenues and represents 38% of PMI's total revenue, showcasing successful diversification from traditional cigarettes. The Japan case study is particularly compelling - a 46% reduction in smoking prevalence from 19.6% to 10.6% demonstrates strong market penetration and consumer adoption.

With 30.8 million adult users across 70 markets and $12.5 billion invested in smoke-free product development, PMI has established a clear leadership position in the smoke-free segment. The acquisition of Swedish Match and expansion into wellness further solidifies their strategic pivot. The transformation from a traditional tobacco company to a science and technology-focused enterprise represents a fundamental shift in business model and future growth trajectory.

Financial Analyst

The revenue diversification towards smoke-free products represents a significant de-risking of PMI's business model. With smoke-free products now contributing 38% of net revenues, up from nearly zero in 2014, the company is successfully executing its transformation strategy. The $12.5 billion R&D investment and Swedish Match acquisition demonstrate strong commitment to long-term growth through innovation and strategic M&A.

The IQOS success in Japan provides a blueprint for other markets, suggesting substantial growth potential. The $10 billion annual revenue from IQOS alone indicates strong unit economics and pricing power. This shift towards higher-margin, next-generation products should support improved profitability metrics and multiple expansion as the company becomes viewed more as a technology-driven consumer products company.

Japan, where IQOS was first launched in 2014, has experienced a 46% drop in smoking nationwide

STAMFORD, CT--(BUSINESS WIRE)-- Philip Morris International Inc. (PMI) (NYSE: PM) marks the 10th anniversary of the introduction of its leading smoke-free product, IQOS. The launch of this smoke-free innovation was a breakthrough moment toward achieving the company’s commitment to a future without cigarettes.

In Japan—the first market where IQOS was launched in 2014—newly released public health data by the National Health and Nutritional Survey (NHNS),ⁱ an annual nationwide health examination survey conducted since 1948 by the Japanese Ministry of Health, Labour and Welfare, shows a 46% decrease in cigarette-smoking prevalence since 2014, dropping from 19.6% of all adults to 10.6% in 2022.

This decline correlates with the introduction of heated tobacco products and their subsequent widespread adoption by millions of adults who smoke in Japan. The country continues to have the highest number of heated-tobacco-product users, and tobacco prevalence has not increased since they were introduced. Not only has the total tobacco use prevalence continued to decline, but the introduction of heated tobacco products in Japan appears to have helped many adult smokers transition away from cigarettes to less harmful alternatives, leading to a reduction in the number of adults smoking cigarettes.

A decade after it was launched in Japan, IQOS now generates over $10 billion of PMI’s annual net revenues, the product is available in over 70 markets worldwide, and 30.8 million adultsⁱⁱ use it.

PMI CEO Jacek Olczak said: “With the debut of IQOS, we launched PMI’s vision of a smoke-free company, creating an opportunity to solve the problem of smoking. Every day, IQOS demonstrates its potential for this, as evidenced by the approximately 22 million adults around the world who have fully switched to it and stopped smoking. IQOS is the world’s leading smoke-free product, and we are committed to continuing to lead the way to a future where better alternatives have completely replaced cigarettes, while moving forward to become a predominantly smoke-free company by 2030. Today, PMI employs over 80,000 people, and I would like to mark this anniversary by thanking them and their predecessors—all who made this transformation possible.”

With PMI transforming into an industry-leading science and technology company, smoke-free products account for 38% of the company’s net revenues in Q3 2024, up from practically 0% in 2014.

Philip Morris International: Delivering a Smoke-Free Future

Philip Morris International (PMI) is a leading international tobacco company, actively delivering a smoke-free future and evolving its portfolio for the long term to include products outside of the tobacco and nicotine sector. The company’s current product portfolio primarily consists of cigarettes and smoke-free products. Since 2008, PMI has invested over $12.5 billion to develop, scientifically substantiate, and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes. This includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies. In 2022, PMI acquired Swedish Match—a leader in oral nicotine delivery—creating a global smoke-free champion led by the companies’ IQOS and ZYN brands. The U.S. Food and Drug Administration has authorized versions of PMI’s IQOS devices and consumables and Swedish Match’s General snus as Modified Risk Tobacco Products and renewal applications for these products are presently pending before the FDA. As of June 30, 2024, PMI’s smoke-free products were available for sale in 90 markets, and PMI estimates that 36.5 million adults around the world use PMI’s smoke-free products. The smoke-free business accounted for approximately 38% of PMI’s total first-nine-months 2024 net revenues. With a strong foundation and significant expertise in life sciences, PMI announced in February 2021 its ambition to expand into wellness and healthcare areas and aims to enhance life through the delivery of seamless health experiences. References to “PMI,” “we”, “our,” and “us” mean Philip Morris International Inc., including its subsidiaries. For more information, please visit www.pmi.com and www.pmiscience.com.

ⁱ Set up as a cross-sectional study, the NHNS relies on household interviews of randomly selected participants to acquire information on physical health, dietary habits, and lifestyle choices of Japanese citizens. The NHNS has enabled the annual recording of smoking prevalence in Japan for over half a century (surveys were not conducted during the covid pandemic in 2020 and 2021).

ⁱⁱ Estimated number of IQOS users (June 30, 2024)

View source version on businesswire.com: https://www.businesswire.com/news/home/20241127763854/en/

Philip Morris International

David Fraser

T. +41 (0)58 242 4500

E. david.fraser@pmi.com

Source: Philip Morris International

FAQ

What is the current revenue contribution of IQOS to Philip Morris (PM) in 2024?

IQOS generates over $10 billion of PMI's annual net revenues, with smoke-free products accounting for 38% of the company's net revenues in Q3 2024.

How many users does IQOS have globally in 2024?

As of 2024, IQOS has 30.8 million adult users worldwide and is available in over 70 markets.

What impact has IQOS had on smoking rates in Japan since its 2014 launch?

Since IQOS's launch in Japan in 2014, cigarette-smoking prevalence has decreased by 46%, dropping from 19.6% to 10.6% in 2022.

How much has Philip Morris (PM) invested in smoke-free products?

Since 2008, PMI has invested over $12.5 billion to develop, scientifically substantiate, and commercialize innovative smoke-free products.