Philip Morris Invests Billions in Smoke-Free Future, Expands into Wellness

Philip Morris International (PMI) has made a significant $12.5 billion investment in smoke-free products since 2008, signaling a major shift in its business strategy. The acquisition of Swedish Match in 2022 has further solidified PMI's position as a global smoke-free champion, with popular brands like IQOS and ZYN now under its umbrella.

Why this matters: This significant investment in smoke-free products marks a significant shift in the tobacco industry's approach to public health, potentially leading to a reduction in smoking-related illnesses and deaths. This significant investment in smoke-free products marks a significant shift in the tobacco industry's approach to public health, potentially leading to a reduction in smoking-related illnesses and deaths. As a major player in the industry, PMI's move could influence other companies to follow suit, contributing to ahealthier global population.

PMI's smoke-free products have gained significant traction, with availability in 84 markets worldwide as of December 31, 2023. The company estimates that approximately 33 million adults globally now use its smoke-free offerings. This rapid adoption has translated into impressive financial results, with smoke-free business accounting for 37% of PMI's total full-year 2023 net revenues.

Building on this success, PMI has set its sights on expanding into the wellness and healthcare sectors. In February 2021, the company announced its ambition to leverage its strong foundation and expertise in life sciences to venture into these new areas. Through its Vectura Fertin Pharma business, PMI aims to enhance lives by delivering seamless health experiences to consumers.

PMI's Q1 2024 results demonstrate the company's continued momentum in its transformation progress. Total revenues rose an impressive 9.7% year-over-year to $8.8 billion, with growth across all segments. The Combustibles division saw increased revenues despite a slight decline in shipment volumes, leveraging the inelastic nature of cigarettes to raise prices. Meanwhile, Heated Tobacco products experienced rapid adoption, with shipment volumes surging 20.9% compared to the previous year, reaching 33.1 billion units.

The Oral Nicotine division also witnessed significant growth, with nicotine pouches and Snus volumes rising by 79.3% and 10.5%, respectively. These impressive results have prompted management to revise its guidance upwards, forecasting another year of record earnings. Adjusted EPS is now expected to be between $6.55 and $6.67, indicating a year-over-year increase of 9% to 11%.

PMI's commitment to a smoke-free future is evident in its upcoming presentation at the 2024 Jefferies Virtual Reduced Risk Seminar on May 7, 2024. Gizelle Baker, VP Global Scientific Engagement, will discuss "The Science of Smoke-Free Products & Nicotine," while Stefano Volpetti, President Smoke-Free Inhalable Products & Chief Consumer Officer, will present "Leading & Transforming Through Innovation in Smoke-Free Products." The webcast of these presentations will be available at www.pmi.com/2024jefferiesrrp.

As PMI continues to chart its course through the evolving tobacco industry, its substantial investments in smoke-free products and expansion into wellness and healthcare demonstrate a strategic shift towards a more sustainable and health-focused future. With the company's smoke-free offerings consistently garnering increasing consumer appeal and its strong financial performance, PMI appears well-positioned to lead the charge in shaping the industry's future.

Key Takeaways

• PMI invests $12.5B in smoke-free products since 2008, shifting business strategy.
• Smoke-free products available in 84 markets, used by 33M adults globally.
• Smoke-free business accounts for 37% of PMI's 2023 net revenues.
• PMI expands into wellness and healthcare, leveraging life sciences expertise.
• Q1 2024 results: 9.7% revenue growth, with growth across all segments.