Philip Morris International is unveiling two new versions of its smokeless tobacco device, iQOS, in the more than 40 markets around the world where iQOS products are already available.
The company is also introducing a less expensive line of expensive tobacco insert for the devices, called HEETS, in Japan as it tries to fend off competition and boost sales in key markets.
iQOS, a device that heats tobacco instead of burning it, is a crucial part of what PMI bills as its future beyond cigarettes. Launched nationwide in Japan in the spring of 2016, iQOS is now available in 43 markets around the globe. Sales this year have increased in some places while stagnated in others.
PMI is now launching an updated version, iQOS 3, and a new device, iQOS 3 Multi. They are expected to be available in Japan and South Korea the next few weeks and in Europe by mid-November. The company will also introduce a less expensive line of heatsticks, or sticks of tobacco inserted inside the devices, in Japan to attract new consumers to the category.
Big Tobacco companies are turning to heated products as a source for other revenue streams as smoking rates decline. They say these products are less risky than conventional cigarettes because they warm tobacco until it's hot enough to release nicotine but not quite hot enough to cause combustion, the chemical process that releases toxins.
These new products accounted for $823 million of PMI's revenue during the third quarter, or 11 percent of its $7.5 billion total revenue. Conventional cigarettes accounted for the other $6.68 billion. Across the category, worldwide heated tobacco sales reached $5.82 billion last year and are expected to reach $18.66 billion by 2022, according to market research firm Euromonitor International.
The iQOS 3, an updated version of its original iQOS device, is more compact than the previous model. A case that charges the device now opens on the side instead of on top. The latest version also has a side door to insert heatsticks instead of one on top. Executives say consumer feedback drove these changes.