http://www.economist.com/news/business/21697275-philip-morris-health-company-smoke-signals
TOBACCO companies specialise in contradiction. They herald the decline of smoking among youngsters, for example, then flaunt their sales to callow puffers. The most skilled contortionist in the industry may be Philip Morris
International, the world’s biggest tobacco firm. To date, any good news for shareholders has been bad news for lungs. But the firm now says it wants to improve profits and health alike.
It may seem an odd goal for a company that last year sold 850 billion cigarettes. But it boss, André Calantzoupolos, insists Philip Morris is on the verge of a revolution. He touts “reduced-risk products”: on April 19th the firm said its top offering in this category, iQOS, accounted for one in 30 cigarette sales in Tokyo, a test market.
The new product resembles a pen. A user inserts a cigarette-lookalike called a HeatStick; iQOS then warms the stick’s tobacco, but doesn’t burn it. That produces an aerosol that carries a traditional cigarette’s taste but, the company hopes, eliminates much of the nasty stuff that comes with combustion. “For the first time in history,” Mr Calantzoupolos declared recently, “we have products with the real potential to both accelerate harm reduction and grow our business.”
This is hardly the first time tobacco firms have peddled healthier-seeming goods. Some have dubious benefits. Consumers have long bought “light” cigarettes to lower their risk of disease, despite evidence they do nothing of the kind.
E-cigarettes are less risky than traditional ones, but bring their own challenges. Some fear they will reduce the stigma around smoking. Debate rages over whether e-cigarettes help smokers quit. What is more, many smokers simply don’t like them. Complaints range from faulty batteries to poor taste—e-cigarettes deliver vapour with nicotine, but no tobacco. Their share of the cigarette market remains tiny: 0.4% last year, estimates Euromonitor, a research firm.
Philip Morris’s new products might have broader appeal. Its research staff now includes some 300 scientists, many poached from pharmaceutical and medical-device companies. The company has several alternatives to combustible cigarettes, but iQOS is its most prominent. Bonnie Herzog of Wells Fargo estimates that by 2025 the product could displace 30% of cigarette sales in rich markets.
Philip Morris says that early evidence is promising. It reports that the vapour created by iQOS contains just one-tenth as much “harmful or potentially harmful” chemicals as a standard cigarette.
So far iQOS has been launched in only a few places, including parts of Japan and Italy. There are plans to expand quickly. That will eat into Philip Morris’s cigarette sales, but evidence from Japan suggests consumers might switch not just from the firm’s own brands, but from cigarettes made by rivals too. All in all, iQOS could be a boon: Wells Fargo expects combined profits for iQOS and traditional cigarettes in 2025 to be nearly 50% higher than they would have been for traditional cigarettes alone.
Sales could rise even further if Philip Morris can sway health officials. The company will soon ask American regulators to designate iQOS as a “modified risk tobacco product”. Such a title would let the firm’s partner in America, Altria, hawk iQOS’s claimed lower risks. But regulatory approval is by no means assured. Katie McMahon, a policy expert at the American Cancer Society’s advocacy arm, is sceptical of tobacco firms as allies, given their history of misleading the public. After decades of distrust, it can be hard to know when a tobacco company is advancing health and when it is blowing smoke.