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Philip Morris Expands Lobbying Efforts for IQOS Launch in the United States

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Philip Morris International (PMI) has registered new lobbyists in 19 US states this year, with plans to add more in the coming weeks, as it prepares to launch its heated tobacco device, IQOS, in the United States. PMI is the world’s largest cigarette maker by market value and is seeking to expand its lobbying efforts in order to establish its presence in the US vaping market. State-level lobbying registers have indicated that PMI’s activities will focus on heated tobacco products, as well as broader topics such as tobacco policy, taxation, business, and commerce.

IQOS heats up ground tobacco without burning it, which PMI claims reduces health risks compared to traditional smoking. The US Food and Drug Administration (FDA) has authorised PMI to market IQOS as offering reduced exposure to harmful chemicals. PMI, which was spun off from Altria in 2008, has not sold any products in the US until its acquisition of oral nicotine company Swedish Match last year. The company aims to transform its image and become a leading advocate for healthier alternatives.

PMI has invested the majority of its $10.7 billion in “reduced risk” products into the development of IQOS. The success of IQOS in the US market is significant due to its size. The non-combustible industry in the US accounts for over half of the global market. PMI believes that IQOS can capture a 10% share of US tobacco and heated tobacco unit volume by 2030, and investors are closely watching which states PMI will choose for the initial launch. The company typically adopts a slow and steady approach, launching in major cities before expanding nationwide.

Corey Henry, PMI’s director of US communications, stated that the company is expanding its government affairs capability across the US as part of its regular business operations. The lobbying efforts could relate to PMI’s Swedish Match business or involve general engagement around smoking rates. PMI plans to add lobbying capacity in four more states over the next two weeks, targeting states where the majority of smokers and the US population reside.

PMI has hired more than a dozen firms or individuals for its lobbying efforts, some with high-level connections in legislatures. These include Park Strategies LLC in New York, a firm founded by former US Senator Alfonse M. D’Amato, and Daniel Hodge, former chief of staff to Governor Greg Abbott in Texas. PMI has not disclosed specific details about the lobbyists’ roles.

According to market research company Euromonitor International, US nicotine sales, excluding nicotine replacement therapies, were valued at $143.6 billion last year. Although cigarettes accounted for the majority of sales, Euromonitor predicts a 30% decrease in their value by 2027, while vapes, heated tobacco products, and other alternatives are expected to rise by 36% over the same period. PMI’s rival, British American Tobacco, has shifted its focus from heated tobacco products to more established categories in the US market.

PMI aims to prove the success of IQOS in the US after encountering challenges in other markets with similar dynamics. The company estimates that 19.4 million adults worldwide have switched to IQOS and quit smoking, and it is confident it can replicate this success in the United States. PMI is likely considering factors such as smoking rates, openness to innovation, and income levels as it selects states for IQOS’ launch. The relatively high cost of IQOS compared to vapes or oral tobacco may deter price-sensitive consumers. However, the device may appeal to those seeking a more similar smoking experience, especially if PMI can offer it at a lower cost than heavily taxed cigarettes.

IQOS has a significant advantage as the device and its tobacco sticks have been awarded “modified risk tobacco product” (MRTP) status by the FDA. This means that in some states, products with MRTP designation are taxed at a lower rate than traditional cigarettes. The FDA has also taken steps to regulate flavored vapes due to concerns about youth usage. Disposable vapes, particularly those with sweet flavors, have gained a significant share of the US e-cigarette market.

In conclusion, PMI’s registration of new lobbyists in multiple US states reflects its strategy of expanding into the American vaping market. The company aims to establish IQOS as a leading heated tobacco product and win a significant share of the US market. PMI’s lobbying efforts will focus on heated tobacco products and broader tobacco-related topics, as it seeks to reshape its image from a cigarette maker to a promoter of healthier alternatives. The success of IQOS in the US is crucial due to the market’s size, and PMI is carefully selecting states for its initial launch. The company faces competition from established vaping products and must demonstrate IQOS’ viability in the US market.

More detail via Reuters here… ( Image via Reuters )

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