In a move that would see his company’s main product outlawed, the CEO of Philip Morris International (PMI) has called on the UK government “to ban cigarettes within a decade”, says Zoe Wood in the Guardian. According to Jacek Olczak, cigarettes “should be treated like petrol cars, the sale of which is due to be banned from 2030”. Such a move would end the “confusion” felt by smokers, some of whom still think the alternatives to cigarettes are even more deadly than the traditional product.
Even if a ban isn’t brought in, PMI has promised to stop selling conventional cigarettes in the UK within a decade, says Jonathan Eley in the Financial Times. While this may sound radical, it is a reflection of how the industry is coming under pressure from consumers, investors and government policy. A combination of high taxes, increasingly stringent regulations such as plain packaging, and changing social mores have ensured that smoking rates in the UK “are already comparatively low”. Around 14% of the population smoke and the government has pledged to reduce the figure to 5% by 2030.
Smoke and mirrors?
The declining rate of smoking and looming regulation is clearly “a problem” for the entire cigarette industry, but PMI is hardly “folding up shop”, says Al Root in Barron’s. The move only applies to Britain, which is “only one market”. PMI’s biggest market is the EU, which account for just under 40% of its sales, while Asian markets also remain strong. PMI is also focusing on the “smoke-free” market: 25% of its sales already stem from products such as IQOS, an e-cigarette-like product that heats tobacco rather than burning it, which is supposed to be less harmful than traditional cigarettes. It is slightly different from vaping, whereby the device heats a flavoured liquid that contains nicotine.
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The idea that IQOS and other alternative products are going to compensate for lost sales of conventional cigarettes may be overly optimistic, says Alex Ralph in The Times. Although IQOS generates sales of $6.8bn a year for PMI, there are signs that it is “struggling to gain traction in the UK”. The group has decided to close its IQOS stores, “having spent millions on a failed retail strategy”. While PMI argues that online and supermarket sales mean that it no longer needs the shops, “it’s still a big U-turn to close your retail footprint in the UK after just 18 months of operation”.
Whatever happens, most of PMI’s competitors are betting that cigarettes and related products will be around for years, says Oliver Gill for The Sunday Telegraph. Having got rid of its related businesses, Big Tobacco has largely returned to its roots, “with an arsenal of vaping, heated tobacco and nicotine-pouch products”. This may not be a bad bet, given that “the number of global smokers – roughly one billion – has remained static for some time”. The sector also continues to make “big profits” with “eye-watering margins”.
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