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  • PMI Execs Speak at CAGNY

    PMI Execs Speak at CAGNY

    Yesterday, Philip Morris International participated in the Consumer Analyst Group of New York (CAGNY) conference in Orlando, Florida. Chief Executive Officer Jacek Olczak and Chief Financial Officer Emmanuel Babeau spoke about the company’s work toward a smoke-free future, current financial models, and future opportunities.

    (Some quotes were edited for brevity and clarity.) Highlights included:

    Jacek Olczak

    Working toward a smoke-free company

    “We have been quite successful for the first 10 years of the transformations and our quest to become predominantly a smoke-free company. A way to look at what we achieved is [comparing] Marlboro International, which is by far the biggest premium brand in the category. Two years ago in 2023, IQOS for the first time surpassed the revenues of Marlboro and last year exceeded $11 billion. If we take this from that perspective, it took Philip Morris International about 60 or 70 years to get Marlboro to that level, and IQOS, our heat-not-burn brand, has managed to get to that level of performance in roughly 10 years.”

    “What does it mean for us when we set this aspirational target of having two-thirds of our revenue come from smoke-free products by 2030? Obviously, it’s a nice number that looks very nice on a PowerPoint, but the reality is that unless we become a majority smoke-free company, country-by-country, market-by-market, while we operate… the miracle will not happen at the group consolidated level.”

    “There are some countries in the world that despite the science and knowledge and evidence about the new products in terms of the risk profile versus cigarettes, they will not ban cigarettes. But they [essentially] will ban the smoke-free product by allowing cigarettes to continue.”

    ZYN, the company’s acclaimed oral nicotine pouch

    “ZYN in the U.S. is essentially approaching $2 billion in revenues. However, it’s especially exciting for us that ZYN today is the No. 4 nicotine brand as of last quarter, and definitely is the No. 1 smoke-free brand on the U.S. market.”

    Nicotine and the FDA

    “The FDA and others should finally start clarifying what is nicotine. Maybe we don’t wait for FDA clarification. This is what we say about nicotine, and I am not saying what we know, we are just repeating what is known to the public health organizations including the FDA and many other reputable institutions: Nicotine is addictive and, obviously, is not risk-free, but it’s not the primary cause of smoking-related diseases.”

    “Everything else that you find in tobacco smoke is bad, but it’s not the nicotine. Now historically, because we only knew that nicotine can be consumed from cigarettes, nobody had to pay attention to the details or accuracy of the language and whether you call it nicotine or cigarette or smoking, there was not much difference. But over the last 10 years, this has become the fundamental difference.”

    “The most important thing, and I will be repeating this until we succeed, nicotine doesn’t cause cancer. And this is not PMI research. This is research that was done over the last 60 or 70 years when any public authority in the world was looking into cigarettes and the harm caused by cigarettes. And nobody has come up with any conclusion even close that nicotine causes harm and definitively not causes cancer. So that’s the starting point and the industry, and definitely PMI, is going in that direction.”

    “[Nicotine products] have no reason to be given to kids. So we, and Swedish Match, stand very strongly behind responsible sales practices, which go into the product design flavors, et cetera.”

    Future of the industry

    “I think the future will be more complicated, but it will actually create more opportunities. The smokers will not go away. They’re actually looking at these products from the repertoire perspective, because all of these products deliver a different opportunity.”

    “I think the best strategy one can have is to actually keep on with the pace of developing these products and offering them to the consumers without spending too much time [wondering which] one category will win one versus the others.”

    Emmanuel Babeau

    Revenue growth

    “Let me start with a summary of our best-in-class growth and return. The first element is we are a strong growth company in terms of top-line with three drivers. The first one we talk about is growing volumes. If we achieve our objective of growing volume again in 2025, it will be five years in a row of growth in volume. It’s a total change of paradigm for the nicotine industry. Second is price increase, and you have seen over the last two years we’ve been growing and increasing our prices. First on combustible of course, but also on the smoke-free portfolio where we have started to post some nice price increases. Third is the very positive mixed impact that is coming from the growth of our smoke-free portfolio.”

    “What I think is super important is the mix impact and understanding of why the growth on smoke-free products is a very positive element for our growth, both at the top-line level and at the margin progression as well.”

    “Today we are spending a lot of time on AI and what AI can mean for us in terms of notably saving on our back-office cost. We believe that AI is pervasive to the organization. To be clear, AI will have a lot of impact in the way we connect with the consumer and in the way we develop our marketing activity. It’s also going to have a very positive impact on cost, in terms of standardization, in terms of automatization, and we’re going to leverage that.”

    Smoke-free products

    “Look at IQOS versus combustible cigarettes. IQOS reaches $80 per thousand in revenue, which is around 2.2 times higher than the average of our combustible portfolio. Therefore, when we grow IQOS, not only do we come with volume growth, but we accelerate the revenue growth with this positive mix effect on revenue. The level of gross profit is $54 per thousand. This is around 2.4 times higher than a combustible cigarette.”

    “Maybe the most spectacular impact in terms of positive contribution is the U.S. ZYN number. The revenue per thousand is about 6 times the average of our cigarette business. And at this level, the gross profit is $185, which is about 8 times the profit that we make on average for our combustible business.”

    “So obviously, when we grow IQOS and ZYN, we are growing very nicely in volume, remember close to 14% growth in volume for our smoke-free portfolio in 2024.”

    For more than 50 years, CAGNY has been connecting investors, management teams, and the media dedicated to the consumer industry. It asserts to be “the largest not-for-profit of its kind” and hosts various events throughout the year, highlighted by the CAGNY conference in Boca Raton, Florida.

  • Altria CEO Talks Markets, FDA

    Altria CEO Talks Markets, FDA

    Altria Group, Inc., today (Feb. 19) participated in the Consumer Analyst Group of New York (CAGNY) conference in Orlando, Florida. Billy Gifford, Altria’s Chief Executive Officer, and Sal Mancuso, Altria’s Executive Vice President and Chief Financial Officer, presented and discussed, among many topics, how the company’s traditional tobacco business supports future strategies, long-term growth aspirations, and the general state of the industry.

    Gifford offered the following thoughts:

    On the evolution of the U.S. nicotine market:

    “The potential for tobacco harm reduction in the U.S. is significant, and we believe the opportunity remains in its early stages. Of the nearly 55 million nicotine consumers in the U.S., we estimate that only a third exclusively use a smoke-free format today. However, consumers are transitioning to smoke-free alternatives at a faster pace than ever before.”  

    “Nicotine consumer preferences are rapidly changing. Today’s nicotine consumers want smoke-free products that offer the potential of reduced harm and social friction, and are available in a variety of flavors. In fact, with more products in the market, coming closer to meeting those needs, nicotine volumes increased for the second consecutive year in 2024. And grew by a compounded annual growth rate of about 2% over the past 5 years.”

    “Smoke-free volume growth is now more than offsetting cigarette industry volume decline, demonstrating that consumers are seeking alternatives to cigarettes rather than leaving the nicotine space entirely. The growing adoption of smoke-free products is encouraging and directly aligned with our vision and the growth aspirations of our smoke-free businesses.”

    “Research supports that no single product format or flavor will satisfy all nicotine consumers. To advance harm reduction our strategy is to deliver a portfolio of products across today’s most promising innovative smoke-free platforms: oral nicotine pouches, heated tobacco, and e-vapor.”  

    The oral nicotine market:

    “The oral tobacco category continues to grow, led by nicotine pouches. We estimate that industry volume grew 8.5% last year and included nearly 8 million consumers. In the last 3 years, nicotine pouch consumers have more than tripled and now comprise 3.5 million of those 8 million consumers.”

    “Since 2019, the oral tobacco products segment saw an increase of 2.4% CAGR.”

    Altria’s oral nicotine pouch, On!

    “We’re encouraged by On!’s ability to retain loyal purchasers and expand the consumer base at a higher retail price. Consumer loyalty for On! continues to build. At the end of last year, 800,000 consumers regularly purchased On!, an increase of more than 40% versus the prior year.”

    Smokers switching from combustibles:

    “We believe the science is compelling. Evidence from a large consumer-use study among adult smokers not planning to quit showed that nearly 75% of those who used Ploom had meaningful reductions in cigarette consumption, with nearly one-third completely switching from cigarettes.  

    “We observed that menthol-flavored sticks had a higher switch rate relative to tobacco-flavored sticks. Consumers who switched from combustible to Ploom significantly reduced their exposure to harmful chemicals. Given the low risk of underage use and the strong benefits of switching for adults, we believe Ploom presents a compelling case for authorization by the FDA and we remain optimistic about its potential in the U.S.”

    E-vapor:

    “Our data show consumers transition from cigarettes to e-vapor at over three times the rate of transition from other smoke-free categories. This is an encouraging sign and consistent with our belief that most smokers are looking for satisfying, inhalable alternatives to cigarettes.”

    “Today’s vapors are seeking products that are flavored, come in a convenient form, and offer high-value for a reasonable price.”

    The illicit market:

    “In the absence of FDA authorization of flavored product choices, consumers have turned to the illicit flavors disposable market. We estimate that the e-vapor category grew by about 30% in 2024, driven entirely by illicit products that now represent more than 50% of the category. As we’ve said repeatedly, illicit product growth is concerning. It’s the primary source of underage usage, and with no control of how products are marketed or sold, it is attracting unintended audiences to the nicotine category. In fact, 40% of new entrants to the category in 2024 we not prior smokers. At the same time, the category’s growth is proof that a smoke-free future is possible. Most consumers and society expect a marketplace consisting of an array of FDA-authorized products led by responsible players throughout the value chain. We need a regulatory system that fosters innovation, not one that stifles and slows innovation to the advantage of the illicit market.”

    Altria’s Vision program:

    Achieving our Vision requires four critical elements:

    1. Underage tobacco use continues to decline or remain low
    2. Consumers require accurate information about nicotine
    3. The entire industry operating within a fully enforced, science-based regulatory environment
    4. A variety of satisfying, FDA-authorized products available for adult consumers

    FDA regulation and reported staffing cuts:

    “We need more authorization. The adult cigarette consumer, about half are ready to move to smoke-free if they can find a product that they enjoy and find satisfying. Only 2% of the products have authorization.”

    “We have a good working relationship with the FDA, but as you know they’ve been slow. We hope with a reduction in headcount they will look at their process and make them more efficient. As you see in e-vapor, the consumer is looking for products. They want to go to smoke-free alternatives and we think that’s important for harm reduction to succeed in the U.S. We need more authorizations and at the same time, we need enforcement.”

    “It may slow it down temporarily but at the same time, we would hope the increased efficiency and processes would improve.”

    Click here to view the entire presentation.

    For more than 50 years, CAGNY has been connecting investors, management teams, and the media dedicated to the consumer industry. It asserts to be “the largest not-for-profit of its kind” and hosts various events throughout the year, highlighted by the CAGNY conference in Boca Raton, Florida.

  • PMI to Present at CAGNY

    PMI to Present at CAGNY

    Philip Morris International announced its participation in the 2025 Consumer Analyst Group of New York (CAGNY) conference, where CEO Jacek Olczak and CFO Emmanuel Babeau will present on February 19, 2025, at 1 p.m. EST. The presentation will be accessible via live audio webcast at www.pmi.com/2025CAGNY or through the company’s investor relations app at www.pmi.com/irapp.

    The company executives are expected to talk about PMI’s transformation toward a smoke-free future, having invested more than $14 billion since 2008 in developing and commercializing smoke-free products. Following its acquisition of Swedish Match, 39% of PMI’s annual net revenue now comes from the smoke-free segment with brands like IQOS and ZYN.

    For more than 50 years, CAGNY has been connecting investors, management teams, and the media dedicated to the consumer industry. It asserts to be “the largest not-for-profit of its kind” and hosts various events throughout the year, highlighted by the CAGNY conference in Boca Raton, Florida.

    The webcast replay will be available at the same link until March 21, 2025.