Philip Morris International (PMI) is the biggest tobacco company outside the United States and China, with a portfolio which includes global titans Marlboro and L&M - the #1 and #3 cigarette brands worldwide - as well as Chesterfield, Philip Morris, Parliament and Bond Street and numerous local brands including Indonesia's Sampoerna and Dji Sam Soe. Operating in around 180 countries, it is the overall global #2 (after CNTC of China). Excluding the US and China (where it has no operations), PMI had over 28% global share of the tobacco sector in 2018. Nevertheless, the company has vowed to work towards the gradual elimination of conventional cigarettes in favour of less harmful smoke-free alternatives. Key to this goal is the roll-out of the hybrid electronic device IQOS, first launched in Japan and selected European cities in 2015, and expanded to 44 countries by the end of 2018. This claims to reduce the harmful by-products of traditional tobacco products by 95%, by heating rather than burning the dried leaf to create a nicotine vapour. IQOS uses tobacco units marketed under the Heets brand, including as Heets Marlboro. PMI is now a standalone company, spun off from parent group Altria in 2008, and entirely separate from Philip Morris USA which manages Marlboro and other brands in the United States. Under the terms of its separation from Philip Morris USA, PMI is prohibited from establishing a presence in the United States. However, it can conduct business elsewhere in North America, and in 2008 agreed to acquire Rothmans of Canada, giving it more than one-third share of the tobacco market in that country. Net revenues (after excise) for 2018 were $29.6bn (or $79.8bn including excise tax), with net income of $7.9bn, a still-healthy 27% margin. Revenues from IQOS and other so-called reduced risk products were almost $4.1bn, up 13%. The EMEA region accounts for more than half of sales, and the EU alone for almost a third. Marlboro accounted for 36% of total cigarette volumes, which fell 3% to 740.3bn units in 2018. Heated tobacco volumes rose 14% to 41bn units. André Calantzopoulos is CEO.
Capsule checked 29th August 2019
Who are the competitors of PMI? See Tobacco Sector for other companies
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Adbrands Daily Update 25th Sep 2019: Talks between Altria and Philip Morris International to re-unite the two companies' tobacco businesses ended without agreement. According to reports, PMI withdrew from negotiations as a result of the sharp backlash in the US against vaping products in general, and especially the Juul business in which Altria has a large minority stake. PMI investors had already expressed unhappiness over getting dragged back into the highly litigious US market. Those fears were confirmed by the scale of the crackdown on vaping products over recent weeks following several deaths and hundreds of hospitalisations that have been linked to e-cigarettes. Several US cities or states have now banned flavoured e-cigs, while Massachusetts today announced a temporary ban on all vaping devices. The two companies will continue to work together on the US roll-out of PMI's IQOS system - which uses a different form of technology from other vaping devices.
Adbrands Daily Update 29th Aug 2019: Philip Morris International confirmed it is in advanced talks with former parent Altria to reunite the two separate Philip Morris tobacco businesses. These were split in 2008 to insulate the company's international operations against potential litigation in the US. A decade later, though, the risks of litigation have reduced and both companies are separately struggling to deal with the continuing decline in traditional tobacco consumption, while also aggressively marketing their own smoke-free "reduced risk" alternatives. PMI markets the iQOS heated tobacco system in international markets. Altria/Philip Morris USA owns the MarkTen vaping brand, acquired a large holding in high-profile e-cig brand Juul last year, and also recently gained FDA approval to begin marketing PMI's IQOS in the US under license. Any re-merger is likely to be an all-stock affair, with shareholders in PMI - the larger of the two by market value - gaining around 59% of the combined business. In all other respects, though, this would be presented as a merger of equals. Even so, neither company's investors welcomed the announcement of a possible merger, prompting a sharp sell-off of both sets of shares.
Adbrands Weekly Update 8th Dec 2016: In one of the most startling turnaround announcements for years by a major marketer, the head of the world's biggest international tobacco company has vowed to work towards the gradual elimination of conventional cigarettes in favour of less harmful alternatives. Launching the new IQOS smokeless ecig in the UK, Philip Morris International's CEO Andre Calantzopoulos told the BBC "I believe there will come a moment in time where I would say we have sufficient adoption of these alternative products to start envisaging, together with governments, a phase-out period for cigarettes. I hope this time will come soon." The IQOS system heats - but doesn't burn - actual tobacco to create a vapour, a process which appears to reduce toxins by 90% compared to conventional cigarettes. Other ecig products use a liquid derived from tobacco rather than the plant itself.
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