United States: Manufacturers seek to share the heated tobacco market

A few days after its sale of the rights to IQOS in the United States to PMI, Altria has entered into a partnership with JTI to jointly market the Ploom device. These maneuvers to share the heated tobacco market are evidence of the agreements between these companies, which are supposedly competitors.

Altria and Japan Tobacco International announced on October 27, 2022, plans to jointly market the Ploom heated tobacco device in the United States.[1]Their subsidiaries Philip Morris USA (PM USA) and JT Group will operate this license via the company Horizon Innovations, owned 75% by PM USA and 25% by JT Group.

As the patent holder for Ploom, JTI will supply the Ploom devices, while Altria will produce tobacco sticks under the Marlboro brand, for which it holds the rights in the United States, and will provide its distribution network. Other smokeless products are expected to be marketed by this entity in the future.

Heated tobacco, a product favored by cigarette manufacturers

"We believe this relationship can accelerate harm reduction for adult smokers around the world." said Billy Gifford, Altria CEO since 2020[2]The argument is that smokers would prefer to rediscover the taste and sensations of tobacco.

This position seems contradictory to the development of heated tobacco capsules, where the sticks are provided with capsules that can release specific aromas. Like the capsule cigarettes from which it is inspired, this type of product is particularly popular with young people and women, especially in South Korea, precisely because it reduces bitterness and masks the taste of tobacco.[3]. Many heated tobacco sticks are also flavored themselves, so the taste of tobacco is often masked to appeal to a wider, younger audience. Altria and JTI are more focused on the high margins they generate on heated tobacco products, and prefer this captive system to that of e-cigarettes, for which price remains a competitive criterion.

Negotiations between Altria and PMI around IQOS

The deal between Altria and JTI came just days after Altria announced its sale of exclusive U.S. rights to IQOS to Philip Morris International (PMI) for $2.7 billion. The company, which spun off Philip Morris Companies Inc. in 2008 to share the Marlboro market, considered merging again for a time, but the plan was shelved in September 2019 as each company pursued its own development.

PMI, which marketed the IQOS heated tobacco device in partnership with Altria, was dismissed in October 2021 in a patent procedure opposing RJ Reynolds, a subsidiary of British American Tobacco (BAT) in the United States. The importation and sale of IQOS products had then been banned in the United States, although PMI had attempted to obtain an exemption from these bans[4]The latter has indicated its intention to market this brand again in early 2023.[5].

A sector that combines fierce competition and understanding between players

While the tobacco market, and by extension that of heated tobacco, remains highly competitive, this sector is regularly the subject of agreements between its main players. In most countries, the conditions of access to the tobacco products market are so restrictive that only established groups retain their place, the arrival of new entrants being almost impossible. In addition, this sector experienced, from the 1990s to the end of the 2000s, a strong concentration, reducing the players to a handful of multinationals.

Linked to the production and the tobacco universe, heated tobacco products are mainly the work of tobacco multinationals, while other companies have taken a place on the markets of other nicotine products. The small number of tobacco players thus favors common strategies, when it comes to opposing new regulations. It also facilitates certain alliances, while the market for traditional cigarettes is gradually shrinking.

Keywords: heated tobacco, Ploom, IQOS, Altria, JTI, PMI, BAT, United States

©Tobacco Free Generation

M.F.

 [1] Ianni M, Japan Tobacco International Makes 'Significant' Inroads Into U.S. Market By Partnering With Altria, L'AGEFI, published on November 2, 2022, consulted on November 14, 2022.[2] Altria and JTI Announce Strategic Heated Tobacco Partnership, Tobacco Business, published October 27, 2022, accessed November 14, 2022.[3] Cho YJ, Thrasher J, Flavor capsule heat-sticks for heated tobacco products, Tob Control 2019;28:e158–e159.[4] Brittain B, Philip Morris asks US appeals court to overturn import ban on IQOS tobacco devices, Reuters, published October 3, 2022, accessed November 14, 2022.[5] Altria sells US IQOS rights to Philip Morris for $2.7 bln, Reuters, published October 20, 2022, accessed November 14, 2022National Committee Against Smoking |