Can Philip Morris Sustain the Big Shift in the Global Smoking Landscape?
| Case Code: BSTR634 Case Length: 16 Pages Period: 2014-2019 Pub Date: 2022 Teaching Note: Available |
Price: Rs.500 Organization : Philip Morris International Industry : Tobacco Industry Countries : United States Themes: Business Level Strategies, Leadership and Change Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Cigarettes - A Dying Business
Cigarette smoking had been on a steep decline from the early 2000s. Owing to government campaigns, rising health consciousness among people, and heightened wariness against tobacco products, there had been a steep fall in the number of smokers. In the decade between 2007 and 2017, the USA – the fourth largest producer of tobacco – had witnessed a significant fall in the number of cigarettes..
PMI’s Future Smoking Products
In tandem with its peers, PMI, the world’s largest tobacco company, had also predicted an industry-wide slump in cigarette volumes. These adverse business developments had pushed PMI into developing healthier alternatives with fewer or no toxicants, generally referred to as Harmful and Potentially Harmful Constituents (HPHCs). Calantzopoulos was of the view that the best strategy for achieving a ‘smoke-free world’ was by offering smokers a healthier alternative rather than imposing regulatory restrictions..
HTP Variants
PMI had zeroed in on HTPs as its future business products. It had been working on several variants of the HTPs. Out of the 4 product platforms, Platform 1 was for testing two of its electrically heated tobacco products. Both the products were run by an electronic system that heated the tobacco within a controlled temperature range not exceeding 350 °C..
FDA Approval
For branding and promotional purposes, PMI named its HTPs iQOS, which stood for ‘I Quit Ordinary Smoking’. iQOS was touted by PMI as a safer alternative to the combustible cigarette. iQOS was launched in Japan in 2014, and by 2019, it was being sold in 38 countries across the world..
Challenges
The iQOS was not PMI’s maiden attempt to make an MRTP. In 1998, PMI had launched Accord – its first ever MRTP product. However, Accord proved to be a failure. Accord was launched in the US as well as in global markets like Japan, which was the biggest market for tobacco products. It was assumed that as Japanese consumers valued cleanliness more than other markets, Accord would strike a chord with them..
Summing Up
At the juncture of the massive strategic inflexion point that the smoking industry was facing, the future of PMI was surrounded by numerous challenges. While PMI had kick-started the ambitious mission of commercializing iQOS, it was self-victimizing its combustible cigarettes business by raising campaigns like “Quit Smoking” and “Hold My Light”..
Exhibits
Exhibit I: Philip Morris International – Selected Financial Data
Exhibit II: PMI Shipment Volume by Region
Exhibit III: iQOS User Growth
Exhibit IV: Advertisement in Japan
Exhibit V: Heat-not-Burn Product Ownership in Japan
Exhibit VI: Heat-not-Burn Tobacco Product Market – Key Players
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