Philip Morris International aims for 'reduced risk' products

Tobacco's new product line: CEO
Tobacco's new product line: CEO   

Philip Morris International is encouraging the world's 1.3 billion smokers to use products that it claims reduce the risks of smoking, CEO Andre Calantzopoulos said Thursday.

The new products, called heat-not-burn, are different than e-cigarettes—which Philip Morris also markets—because they contain tobacco rather than just liquids with nicotine. However, they do not combust like traditional cigarettes. Philip Morris introduced them in Nagoya, Japan and Milan, Italy, last winter.

"If new smokers start with this product—if they decide to start with nicotine products—I think that's a good thing to start with this product," he told CNBC's "Squawk Box" in an interview. "But my objective is to get growth from the existing smokers."

Philip Morris wants the so-called reduced risk products to surpass combustible products as soon as possible, Calantzopoulos said. Increasing the products' share of the company's business to 10 to 15 percent in five to 10 years may not be unreasonable, but the company believes "bigger is better," he added.

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Until Philip Morris achieves scale and experience, the new products will continue to cost roughly double the price of making and selling the same capacity of traditional cigarettes, he added.

In 2008, Altria Group retained Philip Morris USA and split off Philip Morris International into a separate company.

The long beleaguered tobacco industry is facing new challenges in some of its biggest markets. The Philippines introduced a so-called "sin tax" that impacted Philip Morris's business a few years ago. The company has also sued the government of Uruguay for $25 million for increasing the size of graphics that flag the health hazards of smoking on packets of cigarettes.

Critics of cigarette alternatives also worry that the products will attract underage smokers. The Centers for Disease Control and Prevention found in its annual youth tobacco survey that e-cigarette use among middle and high schoolers tripled between 2013 and 2014.

Calantzopoulos acknowledged that regulation is necessary within the tobacco industry, even as it transitions to new types of products.

"Even if they are reduced risk, these products, they're still not zero risk, and also they contain nicotine," he said.

—CNBC's Katy Byron contributed reporting to this story.

Correction: This version corrects Calantzopoulos's characterization of the potential of so-called reduced risk products. It also drops an incorrect reference to Altira's marketing area.