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Philip Morris outlines its plan for IQOS' introduction in the US

  • The Food and Drug Administration is reviewing Philip Morris International's proposal to sell IQOS and another to allow it to be marketed as a product that is less riskier than conventional cigarettes.
  • Approval could come as early as February, and Altria's Philip Morris USA is preparing accordingly.
  • PM USA will try to build on the brand's recognition and promote IQOS' Marlboro-branded heat sticks.
A man smokes a Philip Morris International Inc. iQOS electronic cigarette.
Akio Kon | Bloomberg | Getty Images
A man smokes a Philip Morris International Inc. iQOS electronic cigarette.

IQOS isn't for sale in the U.S. yet, but Philip Morris USA is already planning its rollout.

The Food and Drug Administration is reviewing Philip Morris International's proposal to sell IQOS and another to allow it to be marketed as a product that is less riskier than conventional cigarettes. If approved, the Altria unit will have sole distribution rights to market PMI's IQOS in the U.S.

IQOS heats tobacco instead of burning it, which is said to be safer than conventional cigarettes because it prevents combustion and the production of most of the harmful chemicals. Philip Morris International already sells IQOS in key cities in 31 markets outside the U.S.

"IQOS is a unique product, protected by intellectual property, and will provide significant first-mover advantage to Altria with the world's leading heated tobacco product," Altria CEO Marty Barrington said Thursday at the company's investor day.

Approval could come as early as February, and Philip Morris USA is preparing accordingly. It has identified the market it will launch IQOS, as well as those it plans to expand into, Sarah Knakmuhs, Philip Morris USA's vice president of heated tobacco products said in a presentation Thursday.

She didn't disclose the location of IQOS' launch market, though she did say they will be focused in major metropolitan areas. The criteria revolve around the adult smoking population, ideally those who have rejected e-cigarettes, the strength of retail partnerships, as well as the legislative and regulatory environment.

PM USA, which sells Marlboro cigarettes in the U.S., will try to build on the brand's recognition and promote IQOS' Marlboro-branded heat sticks. It will market the device as a way to get similar taste and satisfaction of traditional tobacco products without the smell and ash that offends some.

PM USA plans to open IQOS-focused stores and mobile units at select retail partners' stores and events. The company is still considering multiple formats, though the idea is that consumers can sample the IQOS device and heat sticks with the help of trained salespeople and buy the device or opt for a trial period.

Retailers have already expressed interest in stocking IQOS, Knakmuhs said, but PM USA will still build a sales team to promote the brand. The devices will also be sold online.

"Of course, financial performance will also be important," Knakmuhs said. "We expect to learn a lot about this from our initial markets, including IQOS pricing dynamics, volume and competitive sourcing. As you can imagine, we've done extensive scenario planning to assess potential financial performance across several variables and assumptions."

Shares of Altria fell 1.2 percent on Thursday. They've fallen 5.5 percent this year. The FDA's plan to reduce nicotine in cigarettes spooked investors, even though action could be years away.