Can Philip Morris Sustain the Big Shift in Global Smoking Landscape?

Abstract

André Calantzopoulos, CEO of the world’s largest publicly traded tobacco company Philip Morris International (PMI) was all set to launch the company’s breakthrough Heated Tobacco Product (HTP) iQOS (I quit ordinary smoking), in the US market. PMI had introduced iQOS as an alternative to traditional smoking products, given the growing risk and health hazards associated with them. HTPs were PMI’s future business products, and the company worked on these products for several years before launching iQOS in Japan in 2014, where the product was highly successful. In the next five years the product was sold in 38 countries around the world. But the US market was a different ball game altogether, as federal agency related to health and human services Food and Drug Administration (FDA) had to approve the product before the launch. iQOS got approval from FDA after several laboratory tests, after it was proved that it reduced harm and the risk of tobacco-related disease among individual tobacco users and had low impact on passive smokers. But observers pointed out that only selective toxins were subjected to lab testing and several substances which were potentially more harmful than the constituents of combustible cigarettes were ignored. These claims could make it difficult for PMI to market its products in the USA. For the company, success of these products was highly important. For several years, it had been advocating people to quit smoking, and discouraged the use of traditional cigarettes. But in the process PMI cannibalized its own traditional combustible cigarettes. But the decline in demand for traditional cigarettes was not set off by the rise in the alternatives, which had hit the company’s profitability. André Calantzopoulos had a huge challenge ahead of him. He not only has to come out with a plan to introduce a new technology into the market, but has to also address the growing concerns about the harmful side effects of the ingredients. Competitors were not far behind many of them have their own HTPs in the making, and were just waiting for the right time to enter the US market. At this juncture, André Calantzopoulos needed to steer the company in the right direction, while the future of its future product was itself ambiguous.