World Tobacco Development Report 2024 (Part III)

Core information:

·Philip Morris International (PMI) continues to consolidate its leading position, widening the gap with its competitors. The company has seen growth in both net income and profits (although net profits decreased due to special projects), with strong growth in its smoke-free business (IQOS, ZYN nicotine pouches). IQOS revenue has surpassed Marlboro for the first time, and ZYN has performed well in the U.S. market. PMI has achieved rare growth in cigarette sales volume and is actively expanding in the U.S. market, including independent promotion of IQOS and expanding ZYN production capacity, while also divesting its health and medical business. 

·British American Tobacco (BAT) has seen a decline in performance, with decreases in both net income and profits, only seeing growth in its nicotine pouch (Velo) business. Its cigarette, e-cigarette (Vuse), and heated cigarette (glo) sales all face challenges, impacted by factors such as illegal products and market exits. The company is still exploring areas beyond nicotine and optimizing research and development. 

·Japan Tobacco Inc. (JTI) has performed well, with its sales of combustible tobacco products and total sales surpassing British American Tobacco. The company has seen growth in net income, but a significant decrease in net profits. Its flagship combustible tobacco brand has performed strongly, while reduced-harm products (Ploom) have grown rapidly but mainly rely on the Japanese market. Importantly, JTI significantly increased its market share in the U.S. through the acquisition of Vector Group. 

·Imperial Brands has shown some improvement in performance, with a slight increase in net income. Traditional tobacco remains its main source of income and profits, while next-generation products (NGP) are still in a loss-making stage, but the company is making progress in some markets and implementing a cautious expansion strategy for NGP. 

·Altria Group is focused on the U.S. market and faces increased competition. Net income has slightly decreased, with profits also declining. Cigarette sales continue to decline, and its smoke-free products (such as NJOY e-cigarettes, on! nicotine pouches) face challenges, failing to effectively achieve early goals due to factors like illegal disposable e-cigarettes. 

·KT&G's tobacco business has achieved growth in profits. While the domestic market has low sales volume share, it contributes mainly to income and profits, with its heated tobacco products leading in the South Korean market. Its international market share is relatively high in sales volume but low in profit contribution, with international expansion of next-generation products highly dependent on cooperation with Philip Morris International (PMI). 

By 2024, multinational tobacco companies continue to differentiate in their development, with the market landscape evolving. Philip Morris International (PMI) maintains its lead over competitors, while Japan Tobacco has surpassed British American Tobacco in combustible tobacco product sales, overall combustible tobacco product and heated cigarette sales.

Philip Morris International (PMI)

1.Financial performance

In 2024, the company's main products saw an increase in both quantity and price, achieving good operating performance. Net income increased by 7.7% to $37.88 billion, with net income from combustible tobacco products business and smokeless business reaching $23.22 billion and $14.66 billion respectively, representing a year-on-year increase of 4.0% and 14.2%. The company's goal is for smokeless business net income to account for two-thirds of the company's total net income by 2030. The company's profit was $13.40 billion, a year-on-year increase of 16.0%; net profit was $7.50 billion, a year-on-year decrease of 9.3%.

2. Main Products and Brands

In 2024, the total sales volume of cigarettes and heated cigarettes reached 15.13 million boxes, with a year-on-year increase of 2.5% and an increase of 0.4 percentage points compared to the previous year.

Cigarettes. Cigarette sales reached 12.337 million cases, an increase of 0.6% year-on-year, marking the first positive growth since 2012 when sales peaked at 18.541 million cases and then declined for 11 consecutive years. The growth was mainly driven by the Russian and Turkish markets. The average cigarette price increased by 8.7% year-on-year. In 2024, Marlboro brand cigarette sales increased by 3.7% to 4.978 million cases, accounting for 40.3% of the company's total cigarette sales; Marlboro, Parliament, Chesterfield, L&M, and Philip Morris brands together accounted for over 80% of the company's total cigarette sales.

Heated tobacco products. In 2024, sales of heated tobacco products reached 2.794 million boxes, a year-on-year increase of 11.5%, but the growth rate has been falling for five consecutive years. The increase in sales volume mainly comes from the markets of Japan, Russia, and Germany. Net revenue of IQOS products reached 11 billion US dollars, surpassing the cigarette brand Marlboro for the first time. Five new markets are opened up, expanding the market coverage to 76 countries and regions. The number of IQOS users increased by 3.4 million, reaching 32.2 million.

The VEEV brand e-cigarette has entered 14 new markets, expanding its market coverage to 40 countries and regions. In 13 markets in Europe including France, Germany, Greece, and Poland, it has ranked in the top three in local e-cigarette sales, with a user base of 1 million people.

Nicotine pouches. Nicotine pouch sales reached 640 million cans, a year-on-year increase of 52.9%. The ZYN brand nicotine pouch is sold in 37 countries and regions, with net revenues exceeding $2.1 billion. In terms of net revenue, ZYN has become the largest smokeless tobacco product brand in the United States.

3.Business restructuring adjustments

Sale of core assets in the health medical department. The company has been expanding into the health medical sector through a series of mergers and acquisitions since 2021 with the goal of achieving net revenues of at least $1 billion by 2025, surpassing the "beyond nicotine" products. However, the business has not been performing well, with net revenues in 2024 only reaching $330 million. The company has sold inhalable drug manufacturer Vectura Group Ltd. for less than 300 million pounds (approximately 1 pound is equivalent to 9.7 RMB), which is less than a third of the price it was acquired for in 2021.

Optimizing business layout. The company has over 170 markets, with the top ten markets such as Indonesia, Turkey, and Russia contributing nearly 60% of cigarette and heated tobacco sales. In order to better adapt to market changes and improve operational efficiency, they restructured and integrated four regional departments and two independent business units. They dissolved the independent business unit of Swedish Match and merged it into the four regional departments, while the health care business was integrated into the European division.

Strengthening control of the Egyptian market. Following the establishment of the joint tobacco company UTC in 2022 (with Philip Morris International (PMI) and Egyptian Eastern Company holding 76% and 24% respectively), breaking the production monopoly of the Egyptian Eastern Company in the Egyptian market, Philip Morris International (PMI) continues to increase its control over the Egyptian market. In May 2024, Philip Morris International (PMI) indirectly acquired 49% of the shares of the UAE Global Investment Holdings Company, thereby holding 14.7% of the shares of the Egyptian Eastern Company. The purpose is to further strengthen its presence in the Egyptian market and advance the "smoke-free future" strategy in Egypt.

4.Expansion of the US Market 

The company estimates that the total profits of the American nicotine industry are over $25 billion. They consider the United States to be the most important growth market, expecting the US market to become their most profitable market in terms of net income within 3 to 5 years.

Obtained approval from the US Food and Drug Administration (FDA). The company's traditional oral tobacco, nicotine pouches, two heated tobacco products, and cigarettes have received FDA market clearance. The traditional oral tobacco, two heated tobacco products, and cigarettes have received FDA modified risk product certification.

Philip Morris International (PMI) independently promoted IQOS. In 2013, the company reached an agreement with Altria Group, granting Altria Group exclusive rights to the intellectual property and commercialization of IQOS in the United States, but progress was not satisfactory. After the collaboration agreement expired on April 30, 2024, PMI began independently expanding its heated tobacco business in the United States.

Expand the production capacity of nicotine pouches. ZYN brand nicotine pouches account for 65.9% of the total sales volume and 72.4% of the total retail sales in the U.S. nicotine pouch market. Due to production capacity constraints, the sales growth rate of ZYN brand nicotine pouches is expected to decrease by 2024. To address this, the company is investing $600 million to build a nicotine pouch manufacturing plant in Colorado, USA, and an additional $230 million to expand a nicotine pouch manufacturing plant in Kentucky. The company anticipates that by the second half of 2025, the production capacity and supply of ZYN brand nicotine pouches will improve, with sales in the U.S. reaching between 780 million and 820 million cans in 2025.

The company plans to sell its cigar business. With the continuous decline in the performance of the US cigar market, the company announced a strategic evaluation of its US cigar business in 2024 and is currently exploring the sale of its US cigar business.

British American Tobacco

1. Financial Performance

In 2024, the company reported a net income of 25.867 billion pounds, a decrease of 5.2% compared to the previous year. Among all categories, only the net income for nicotine pouches increased by 46.6% year-on-year, while the net income for cigarettes, e-cigarettes, heated tobacco, traditional oral tobacco, and other tobacco products all decreased by 6.4%, 5.0%, 7.5%, 6.1%, and 1.1% respectively. The combined net income for smokeless tobacco products such as e-cigarettes, heated tobacco, and nicotine pouches accounted for 17.5% of the company's total net income, an increase of 1 percentage point from the previous year. One of the company's strategic goals is to have at least 50% of its net income coming from smokeless tobacco products by 2035. The company achieved a profit of 2.74 billion pounds in 2024, a significant decrease from the profit levels before 2023.

2.Main Products and Brands

Cigarettes. In 2024, a total of 10.1 million boxes of cigarettes were sold, a decrease of 8.9% compared to the previous year. Sales in 2025 may drop to below 10 million boxes. The main reasons for this decline are the exit from the markets in Russia and Belarus, as well as the ongoing contraction of the cigarette market in the United States. Last year, cigarette sales in the US fell below one million boxes for the first time to 940,000 boxes. In 2020, the company's market covered approximately 180 countries and regions, but by 2024, it had exited nearly 50 markets.

The Vuse brand e-cigarette is sold in 63 countries and regions, with sales volume decreasing for the first time to 6.16 billion units annually, down 5.9% year-on-year and accounting for 40% of the global legal e-cigarette sales volume, a decrease of 1.2 percentage points year-on-year. The company believes that the decline in sales is mainly due to the proliferation of illegal disposable e-cigarettes in the United States and unfavorable factors such as flavor bans in Quebec, Canada. The United States is the largest market for British American Tobacco's e-cigarettes, with the company having obtained FDA approval for 22 e-cigarette products, accounting for 60% of the FDA-approved e-cigarette products on the market.

Glo brand heated tobacco products sold 418,000 cases, a decrease of 11.6% year-on-year, the largest decline among the company's various products. The company calculated its global market share to be 16.7%, a decrease of 0.4 percentage points compared to the previous year. The company has improved its heated tobacco products to narrow the gap between Glo and Philip Morris International's (PMI) IQOS. Additionally, they have launched their first tobacco-free heated tobacco product brand VEO, which has entered 20 markets.

Nicotine pouches. The Velo brand's nicotine pouches have entered 10 new markets, expanding to 44 countries and regions. Nicotine pouch sales reached 8.3 billion pouches, a year-on-year increase of 55.0%, but the price structure decreased by 2.9% year-on-year. The company's nicotine pouches maintain a leading position in the markets of 21 countries in Europe. In the United States, sales of Velo brand nicotine pouches increased by 234% to 990 million pouches, thanks to upgrading the Velo brand image and launching the nicotine pouch brand Grizzly, which has the same name as traditional oral tobacco. A new factory was built and opened in Italy to expand nicotine pouch production capacity, and the company acquired a series of smokeless synthetic nicotine pouch patents owned by the US company Beni Oral Nicotine for $30 million. The company expects the global nicotine pouch market to be comparable to e-cigarettes and heated tobacco products by 2030.

Traditional smokeless tobacco. Sales decreased by 8.2% to 122,000 boxes year-on-year, with 90% of sales volume and revenue coming from the U.S. market.

3.Continuing to Expand Into Areas Beyond Nicotine

The company has always been committed to seeking opportunities beyond nicotine, and its venture capital firm, BTV (Btomorrow Ventures), is a key player in non-nicotine investments. Since its first investment in 2020 until the end of 2024, BTV has completed 28 investments, with the majority of the initial £150 million investment fund already deployed. In 2024, a new £200 million fund was launched for the second phase. BTV continues to support companies in its portfolio, making multiple follow-on investments in 2024.

4.Optimize Research and Development Innovation Organization

Optimizing innovation ecosystem. The company is restructuring and upgrading its research and development ecosystem in order to better adapt to future changes in consumer demand. This includes one global research and development headquarters and innovation ecosystem hub, three research centers, three innovation centers focusing on new product categories such as smoke-free tobacco products, two product centers, two strategic partners, over 50 development partners, and several open innovation partners.

Establishment of a Smoke-Free Research Data Public Platform. The company has established a data platform called Omni, which aggregates its innovative concepts and research results in smokeless tobacco products, collects smokeless tobacco product data from 82 markets, publishes 265 peer-reviewed papers and over 8,200 authorized patents, and includes 614 related articles from research outside the company. All of these achievements collected by Omni are openly shared for use by researchers, regulatory agencies, and the general public.

Japan Tobacco Inc.

1.Financial Performance

In 2024, the company reported net revenue of JPY 3.15 trillion (approximately RMB 0.05 per yen), a year-on-year increase of 10.9%. Tobacco business revenue reached JPY 2.9 trillion, up 11.8%, accounting for 93.9% of the company’s total revenue. Of this, domestic revenue in Japan comprised 21.2%, while international revenue made up 78.8%. Profit stood at JPY 320 billion, down 51.9% year-on-year, with net profit at JPY 180 billion.

2. Product and Brand Development

Both combustible products (cigarettes, roll-your-own tobacco, mini cigars) and reduced-risk products (heated tobacco, capsule-type devices) showed positive growth trends, with both volume and pricing improving. Total sales volume of combustibles and heated tobacco products surpassed that of British American Tobacco.

Combustible Products: In 2024, combustible product sales reached 11.058 million cases, a 2.0% increase year-on-year. Sales grew in over 60 countries and regions, and market share rose in more than 50 markets. The company's flagship cigarette brands have become increasingly concentrated, consolidating from 9 brands in 2018 to 4, with their share of total combustible product sales rising from 58.6% in 2019 to 74.7% in 2024. The four flagship brands sold a combined 8.092 million cases, up 3.8% year-on-year. Winston rose 4.4% to 4.184 million cases; Camel increased 7.9% to 2.172 million cases. The average pricing of combustibles improved by 8.0%.

Reduced-Risk Products (RRPs): Although RRPs remain a smaller segment, their market presence is expanding rapidly. The Ploom brand has entered 24 countries and regions. In 2024, sales reached 218,000 cases, up 24.2% year-on-year, driven largely by a 33.0% increase in Ploom X sales in Japan. The RRP segment remains highly dependent on Japan, which accounted for 82.6% of total sales.

3.Market Highlights

Russia remained the largest market by sales volume with 1.616 million cases. Turkey was the fastest-growing market with a 9.5% increase, while the UK saw the steepest decline, down 17.4%.

4.Acquisition of the Fourth-Largest U.S. Tobacco Company

In a rare move within the combustible tobacco sector, the company acquired Vector Group, the fourth-largest cigarette manufacturer in the U.S., for $2.4 billion in 2024. Vector, founded in 1873, holds a 5.6% market share in the U.S. and focuses on the budget segment. In 2023, it sold 176,000 cases of cigarettes, generating $1.42 billion in net revenue and $330 million in profit, with total assets of $930 million. Post-acquisition, the U.S. has become one of the company’s top ten markets, with its U.S. market share jumping from 2.3% to 8.0%, including two of the top ten cigarette brands in the country.

Imperial Brands

1. Financial Performance

In the fiscal year ending September 30, 2024, Imperial Brands continued its consumer-centric transformation strategy, with net revenue rising 1.8% to £9.66 billion. Tobacco revenue totaled £8.16 billion, accounting for 84.47% of total revenue. Traditional tobacco contributed £7.83 billion, while next-generation products (NGPs), including e-cigarettes and heated tobacco, brought in £300 million. Tobacco segment profit increased 4.3% to £3.24 billion, accounting for 91.1% of company profit. Net profit was £2.75 billion. Traditional tobacco profit was £3.32 billion, while NGPs incurred a loss of £80 million.

2.Product and Market Performance

Combustibles: In 2024, sales of combustibles (cigarettes, cigars, roll-your-own) reached 3.8 million cases, down 4.0% year-on-year. However, this was a 6.4 percentage point improvement in decline rate compared to the previous year. Average pricing increased 7.8% year-on-year. Volume breakdown: Europe 45.6%, Americas 10.0%, AAACE (Africa, Asia, Australasia, Central & Eastern Europe) 44.4%; revenue distribution: Europe 39.7%, Americas 35.7%, AAACE 24.6%. Despite declining volumes, the Americas, especially the U.S. and Canada, remain a major revenue and profit source. Volume fell 7.7% in the Americas, compared to 3.7% and 3.5% declines in Europe and AAACE, respectively. Market share increased in the top five priority markets. In the U.S., market share rose for the sixth straight year to 10.9%. Germany's market share edged up to 18.3%, reversing a decade-long decline. Spain and Australia also saw market share growth for five consecutive years, reaching 26.6% and 32.2%, respectively. The UK market share fell by 0.5 percentage points to 37.9%.

NGPs: Imperial Brands has taken a cautious approach, entering markets with established NGP demand and strong distribution. It now operates at scale in over 20 European markets. In 8 markets (e.g., Greece, Italy), NGPs account for over 20% of local tobacco revenue. Zone nicotine pouches drove growth in the U.S., while blu bar (disposables and kits) fueled e-cigarette growth in Europe. The Pulze heated tobacco platform supported growth in AAACE markets. The company also launched non-tobacco tea-based iSenzia heated products in Italy, Greece, Czechia, and Poland.

Altria Group

1. Financial Performance

In 2024, Altria Group posted net revenue of $20.44 billion, down 0.3% year-on-year. Combustible products (cigarettes and cigars), oral products (traditional oral tobacco and nicotine pouches), and other products (including e-cigarettes) generated $17.74 billion, $2.67 billion, and $38 million, respectively, accounting for 86.7%, 13.1%, and 0.2% of total revenue. Profit came in at $11.24 billion, down 2.7% year-on-year.

2.U.S. Market Landscape

Altria operates exclusively in the U.S. It estimates there are 55 million adult nicotine users: 50.9% use combustibles only, 32.7% use smokeless products, and 14.5% are dual users. Total U.S. market for combustibles, e-cigarettes, and oral tobacco is 6.88 million cases. Altria, BAT, Imperial, and JT share this market.

The U.S. is the world’s largest market for oral tobacco and nicotine pouches. Traditional oral tobacco is declining, while pouches are rapidly expanding. The combined market size is 2.07 billion cans.

3.Key Products and Brands

Altria is accelerating its shift to smokeless products amid intensifying competition, though progress has been uneven: JUUL investment failed, IQOS exclusivity was withdrawn, and a heated tobacco partnership with JT has seen limited traction.

Cigarettes: Sales continued to decline, down 10.2% to 1.372 million cases in 2024. Market share fell by 1 point to 45.9%. Marlboro, which represents 91.3% of Altria's cigarette volume, declined 9.0% to 1.252 million cases, with market share at 41.7%, down 0.5 points. However, it gained 0.4 points in the U.S. premium segment to 59.3%. Other brands (Basic, Benson & Hedges, L&M) fell 20.4%.

Cigars: Black & Mild, which accounts for 99.8% of cigar sales, sold 1.75 billion sticks, down 1.5%.

Oral Products: Total sales were 770 million cans, down 1.0%. Traditional oral tobacco declined in both volume and share. Nicotine pouch brand on! grew 40.2% to 160 million cans, raising its U.S. market share to 8.3%, up 1.5 points. Altria is expanding on! and on! PLUS internationally via e-commerce and select retail in Sweden and the UK.

E-cigarettes: NJOY device sales rose 284.6% to 5 million units. Four menthol-flavored NJOY products received FDA authorization in 2024—the first non-tobacco flavored e-cigarettes approved. Altria lost its patent battle with JUUL; the U.S. ITC sided with JUUL. Altria says it is seeking resolution for the affected products.

4.Progress Toward Smokeless Goals

Altria’s 2028 targets include a 35% increase in smokeless volume from 2022 and doubling revenue to $5 billion, including $2 billion from innovative smokeless products. In 2024, smokeless volume reached 820 million units, up just 2.2% from 2022. Revenue reached $2.8 billion, with only $300 million from innovative products. Altria blamed the widespread presence of illegal disposable vapes and weak enforcement for hindering its progress and plans to reassess its targets.

KT&G (Korea Tobacco & Ginseng Corporation)

1. Financial Performance

In early 2024, KT&G’s new board and executive team reversed a four-year profit decline in the tobacco business. Tobacco revenue reached KRW 3.9 trillion (approx. RMB 0.005 per won). Cigarette revenue was KRW 3.1 trillion, with 53.2% from domestic sales and 46.8% from international markets. Profit from tobacco rose 10.7% to KRW 1.1 trillion.

2.Domestic Market Performance

Though domestic volumes are smaller, they generate higher revenue and profit, making the market a strategic focus. In 2024, domestic cigarette volume declined 2.9% to 790,000 cases, generating KRW 1.65 trillion. Heated products grew 7.7% to 123,000 cases, with revenue of KRW 560 billion.

Domestic market share rebounded due to new product launches that cater to consumer preferences, including low-smell and slim cigarettes. Low-tar (under 2mg) and premium (over KRW 4,500 per pack) segments increased, pushing market share up to 66.7% in 2024.

KT&G led Korea’s heated tobacco market with 68% device share and 46% stick share. PMI held 43% stick share with 114,000 cases; BAT held 9.9%, and JT’s Seoul-only sales were under 1%.

3.International Market Expansion

KT&G aims to become the world’s fourth-largest multinational tobacco firm. International volume is high, but revenue and profit lag behind. Per-case revenue for cigarettes (USD 837.3) was just 59.2% of the domestic level (USD 1,414.2); for heated products (USD 913.4), it was only 29.7% of the domestic level (USD 3,076.9).

KT&G’s international operations include the Overseas Division and regional HQs for Asia Pacific and Eurasia, comprising 5 offices and 13 teams. It runs 11 subsidiaries in Indonesia, Russia, Turkey, etc., and has branches in Mongolia and Europe.

The company uses a dual approach of exports and overseas manufacturing, combining direct subsidiaries with indirect distributors. It expands distribution networks, develops market-specific strategies, complies with local regulations, and launches products like clove, flue-cured, and capsule cigarettes. Since 2015, international volumes have exceeded domestic sales, hitting a record high in 2024. While consolidating its presence in the Middle East and CIS, KT&G has expanded into Asia Pacific, Africa, and Latin America. It is also building factories in Indonesia and Kazakhstan.

KT&G’s international rollout of next-gen products is closely tied to PMI. In July 2024, KT&G and PMI signed an MOU to jointly promote a new KT&G heated tobacco product in the U.S. and seek FDA authorization. The product is now available in 34 countries, including Russia, Japan, and Italy. However, major shareholders are frustrated that KT&G’s products remain overshadowed by IQOS in global markets.