According to a report from Yahoo Finance on March 29th, tobacco giant Philip Morris International is preparing to launch its flagship heated tobacco device IQOS in the capital city of Texas, Austin. This indicates that Austin will be the first city in the United States where the company will pilot this product.
Investors are watching to see if Philip Morris International (PMI) can create a heated tobacco market in the United States, where e-cigarettes currently dominate. The country provides PMI with a large base of new users and potential new sources of revenue. IQOS may bring about a transformation as it aims to generate more income from products other than cigarettes.
According to reports, PMI has announced plans to launch the device in four cities across two states in the United States. The first city is expected to be targeted in the second quarter of this year, with a more extensive rollout possibly happening by 2025. However, the company has not disclosed further details, including the specific cities and states they are targeting. However, a job advertisement on LinkedIn has revealed that the company is preparing for the release of IQOS in Austin, Texas.
PMI is projected to spend the majority of its $10.7 billion tobacco alternative budget between 2008 and 2022 on the development of IQOS. However, this has not allowed IQOS to lead in the U.S. market. It is expected that by 2030, IQOS will account for 10% of tobacco and heated tobacco unit sales in the United States.
Up to now, besides IQOS managed by PMI's former parent company, Altria, and another product offered on a small scale by British American Tobacco, there have been basically no heated tobacco products in the US market.
PMI paid $2.7 billion to acquire the rights to sell IQOS in the United States in 2022 from Altria. British American Tobacco expressed doubt about the potential of this category in the country, as e-cigarettes and other alternatives have already matured in the market.
Brett Cooper, managing partner and analyst at stock research firm Consumer Edge, stated that Texas offers an interesting test market due to its wide-ranging population demographics, from very rural to highly urbanized. He added that diverse cities like Austin, Houston, and Dallas provide opportunities to reach a broad range of consumer groups.
According to data from the Appeals and Centers for Disease Control and Prevention (CDC), Texas has relatively low tobacco taxes. The data shows that in September 2023, the cigarette consumption tax rate in Texas was $1.41 per pack, much higher than Missouri's 17 cents, but also much lower than New York's tax rate of over $5 per pack.
In January, Texas implemented a new law regarding e-cigarettes, restricting devices that resemble candies or fruit juices, or contain symbols or images of celebrities targeted at minors, or depict cartoon characters or fictional characters.
Prior to the release of IQOS, the company also established its lobbying power nationwide in the United States. The company aims to have two-thirds of its revenue come from "smoke-free" products.
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