Dive Brief:
- Philip Morris International has agreed to buy the full U.S. commercialization rights to its IQOS product from Altria Group of Richmond, Virginia, for $2.7 billion.
- IQOS is a smokeless tobacco product that heats the tobacco to release the nicotine and flavor without burning it. The agreement would return control to Philip Morris by April 30, 2024.
- The two companies have been fighting an import ban on IQOS since 2021, when the International Trade Commission issued a cease-and-desist against them after British American Tobacco alleged patent infringement.
Dive Insight:
As consumers continue to seek out alternatives to traditional cigarettes, having greater access to the most popular heated tobacco brand could be a boon to retailers.
Philip Morris is acquiring the rights to IQOS even as it continues to fight the import ban and pursues domestic manufacturing of IQOS devices to avoid the ban entirely. The company said in a February earnings release that it “hopes to be able to resume U.S. supply in the first half of 2023.”
Despite the ban, Philip Morris reported its market share in the heated tobacco space rose slightly to 7.7% in the most recent quarter, showing continued strong demand for the product. That represents 19.5 million users, up 22% year over year.
“This agreement gives PMI full U.S. commercialization rights to IQOS within approximately 18 months and provides a clear path to fulfilling the product’s full potential in the world’s largest smoke-free market,” said Jacek Olczak, CEO of Phillip Morris, in the release on the Altria agreement.
IQOS is the leading heated tobacco brand in the U.S., according to Tobacco Tactics. The global market size is expected to reach almost $78 billion by 2025.
In addition to the IQOS agreement, Philip Morris has raised its offer to buy Swedish tobacco company Swedish Match, which would aid its manufacturing goals. However, as Olczak said in the latest earnings report, “Should the offer fail, we are well prepared to proceed autonomously to develop IQOS and the rest of our smoke-free portfolio in the U.S.”
