Philip Morris International (PMI) is poised to introduce its IQOS heated-tobacco device in Austin, Texas, marking a significant step in the company’s re-entry into the U.S. market. This move comes after PMI resolved an intellectual property dispute with British American Tobacco (BAT), clearing a path previously obstructed by an International Trade Commission import ban on IQOS in the United States.
The city of Austin is set to serve as a test bed for IQOS, as part of PMI’s broader strategy to launch the product in four cities across two U.S. states, starting with one city in the second quarter, before expanding further in 2025. While PMI has been tight-lipped about the specifics of their launch plan, recent LinkedIn job advertisements hint strongly at Austin being the launch city. These postings, seeking to fill roles such as field sales representatives, territory managers, and retail sales advisors, underscore the company’s commitment to establishing a foothold in the U.S. market.
The potential for IQOS in the U.S. is significant, given that total nicotine sales, excluding nicotine-replacement therapies, amounted to $143.6 billion in 2022, according to Euromonitor. With cigarettes currently dominating sales, there is a forecasted shift towards smoking alternatives such as e-cigarettes and nicotine pouches, expected to see a 36 percent increase in value by 2027, contrasted with a 30 percent drop in cigarette sales.
Investors and industry watchers are keenly observing PMI’s efforts to carve out a market for heated-tobacco products in the U.S., a market where vaping is currently prevalent. Texas, with its broad demographics and cities like Austin, Houston, and Dallas, presents an interesting trial market that offers access to diverse consumer groups. Brett Cooper, managing partner and analyst at Consumer Edge, highlights the appeal of Texas for testing such products, especially given the state’s relatively low tobacco taxes – the excise tax rate on a pack of cigarettes was $1.41 as of September 2023.
In a move towards regulating the e-cigarette market, Texas introduced new laws in January, targeting products that appeal unduly to minors, including those resembling food or featuring symbols, celebrities, or cartoon-like fictional characters.
PMI is optimistic about IQOS’s prospects, aiming for a 10 percent share of the U.S. tobacco and heated-tobacco unit volume by 2030. As PMI navigates the complexities of the U.S. market, the launch of IQOS in Austin could mark a significant milestone in the company’s efforts to promote alternatives to traditional smoking.
