Philip Morris Confident in Cigarette-Free Tobacco Industry

Source from:  Investopedia 04/10/2017

　　While tobacco and cigarette players have generated solid returns and dividends over the recent period, industry leaders are gearing up to hedge against a declining core industry as cigarette volumes continue to fall over the decade.

　　As government regulation increases and global health awareness causes consumers to turn away from smoking, multinational tobacco giants have poured investment into research and development (R&D) for alternative tobacco products “across the harm spectrum.”

　　From Cigarettes to Heat Sticks

　　After series of moves to double down on alternative products, New York City-based Philip Morris International Inc. (PM) has announced plans to invest 300 million euros, or about $324 million, to convert a traditional cigarette factory in Greece into an iQOS production plant. The Piraeus-based smoke-free tobacco product plant will have the capability to produce 20 billion tobacco sticks annually.

　　The maker of Marlboro cigarettes will add its new facility with two existing iQOS production plants in Italy and Switzerland. Moving forward, we can expect PM to boost production with more plant openings as the company demonstrates its confidence in the alternative tobacco product through a $3 billion investment on R&D for the technology. The company has been awaiting FDA approval for its electronic iQOS product in order to hedge against mounting competition by marketing its products as “reduced risk.”

　　“Our ambition is that one day potentially les harmful, smoke-free products replace cigarettes to the benefit of smokers, public health and society at large,” Philip 　　　　　　　　Morris said in a statement. While alternative tobacco products stand to save industry leaders from falling smoking rates, investors should remain wary of the fact that government regulation remains a risk. Philip Morris’ stock has rallied about 30% since a drop off in mid-November, closing at a price of $133.45 on Tuesday.  Enditem