Just days after selling the U.S. rights to IQOS to PMI, Altria partnered with JTI to jointly market the Ploom device. These maneuvers for sharing the heated tobacco market testify to the agreements between these companies which are in principle competitors.
Altria and Japan Tobacco International announced on October 27, 2022 their plan to jointly market the Ploom heated tobacco device in the U.S.[1]. Their subsidiaries Philip Morris USA (PM USA) and JT Group will operate this license through Horizon Innovations, which is 75% owned by PM USA and 25% owned by JT Group.
As Ploom patent holder, JTI will supply the Ploom devices, while Altria will produce sticks under the Marlboro brand, to which it holds the US rights, and provide its own distribution network. Other smokeless products are expected to be marketed by this entity later.
Heated tobacco, a favorite product of tobacco companies
“We believe this report could accelerate risk reduction for adult smokers worldwide” said Billy Gifford, CEO of Altria since 2020[2]. The argument put forward is that smokers would prefer to rediscover the taste and sensations of tobacco in this way.
This position seems contradictory with the development of heated tobacco capsules, where the sticks are equipped with capsules capable of releasing specific aromas. Like the capsule cigarettes, from which it is inspired, this type of product is particularly appreciated by young people and women, especially in South Korea, precisely because it reduces the bitterness and masks the taste of tobacco.[3]. Many heated sticks of tobacco are also flavored, so the taste of the tobacco is often masked to appeal to a larger, younger audience. Altria and JTI have in mind the high margins they generate on heated tobacco products and prefer this system tied to that of e-cigarettes, for which the price remains a competitive criterion.
Negotiations between Altria and PMI on IQOS
This deal between Altria and JTI comes just days after the announcement of Altria’s sale to Philip Morris International (PMI) of the exclusive rights to exploit IQOS in the United States, for US$2.7 billion. Following the demerger of Philip Morris Companies Inc. in 2008 to share the Marlboro market, Altria and PMI considered merging again, but this project was buried in September 2019, each company pursuing its own development.
PMI, which marketed the IQOS heated tobacco device in partnership with Altria, was fired in October 2021 in a patent proceeding opposing RJ Reynolds, a subsidiary of British American Tobacco (BAT) in the United States. The import and sale of IQOS products was then banned in the United States, although PMI has attempted to obtain a waiver of those bans.[4]. The latter has indicated its intention to market this brand again in early 2023.[5].
A sector that combines fierce competition and understanding between the players
Although the tobacco market, and by extension that of heated tobacco, remains highly competitive, this sector is regularly the subject of agreements between its main players. In most countries, the conditions for accessing the market for tobacco products are so restrictive that only established groups keep their place, as it is almost impossible for new entrants to arrive. Furthermore, this sector experienced strong concentration from the 1990s to the end of the 2000s, reducing the players to a handful of multinationals.
Linked to the production and world of tobacco, heated tobaccos are essentially the work of tobacco multinationals, while other companies have entered the markets for other nicotine products. The small number of tobacconists therefore favors common strategies when it comes to opposing new regulations. It also facilitates some alliances, while the traditional cigarette market is progressively shrinking.
Keywords: Heated Tobacco, Ploom, IQOS, Altria, JTI, PMI, BAT, United States
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[1] Ianni M, Thanks to the partnership with Altria, Japan Tobacco International makes a “significant” breakthrough in the American marketAGEFI, published on 2 November 2022, consulted on 14 November 2022.
[2] Altria and JTI Announce Strategic Partnership for Heated TobaccoTobacco Business, published October 27, 2022, accessed November 14, 2022.
[3] Cho YJ, Thrasher J, Heating sticks for aroma capsules for heated tobaccosTob Control 2019;28:e158–e159.
[4] Britannia B. Philip Morris asks the US Court of Appeals to lift the import ban on IQOS tobacco devicesReuters, published October 3, 2022, accessed November 14, 2022.
[5] Altria sells US IQOS rights to Philip Morris for $2.7 billion, Reuters, published 20 October 2022, accessed 14 November 2022
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