Philip Morris seeks bigger Japan share with cheaper heat-not-burn tobacco

TOKYO (Reuters) – Philip Morris International Inc will sell cheaper versions of its IQOS “heat not burn” products in Japan from Tuesday and introduce new upgraded products next month to expand market share, its chief executive said.

As regular e-cigarettes with nicotine-laced liquid are effectively banned in Japan, the country has become the main market for “heat not burn” (HNB) products, which emit less smoke and smell less than conventional cigarettes.

Philip Morris, maker of Marlboro cigarettes, was first to start selling HNB products in Japan in 2014, but it faces heated competition from British American Tobacco and Japan Tobacco Inc and its market share has stagnated in recent quarters after rapid growth last year.

The companies cut prices of heating devices earlier this year.

Philip Morris currently sells a pack of 20 HeatSticks, tobacco rolls used with IQOS devices, at 500 yen ($4.43). CEO Andre Calantzopoulos told Reuters that from Tuesday a new “HEETS” line priced at 470 yen a pack will be available.

“Clearly, for some people, spending 30 yen more, 40 yen more per day is expensive,” he said in an interview in Tokyo on Monday.

In mid-November, the company will also release upgraded versions of its “IQOS 3” and “IQOS 3 MULTI” devices. Calantzopoulos said the existing versions will still be available at current prices.

“We want to cater to the entire population. From a pricing perspective, that will help product perception,” Calantzopoulos said.

Philip Morris, the world’s largest publicly traded tobacco company, has seen weaker-than-expected growth in IQOS recently, after building a leading position in the global HNB market.

Japan accounts for about 85 percent of the $6.3 billion HNB market, according to Euromonitor.

Philip Morris says IQOS has a 15.5 percent share in Japan’s overall tobacco market, including conventional cigarettes, but market share has stabilized.

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“I think it’s natural in any category that you have slowdowns,” Calantzopoulos said. “We have people who adopted earlier and people who are more conservative,” he said.

Philip Morris has also made a marketing application to the FDA for IQOS, which would allow the company to sell it with a claim of reduced risk.

PMI was spun off from Altria Group Inc, nearly a decade ago, and Altria will commercialize IQOS in the United States.

Calantzopoulos said the companies would not wait for reduced risk claim approval to launch the product, as separately, permission for commercialization would come “hopefully before the end of the year.”

He said Altria was “ready to launch whenever they get (commercialization) approval.”

A Reuters report in December identified shortcomings in the training and professionalism of some of the lead investigators in the clinical trials submitted to the FDA by Philip Morris.

On Monday, Philip Morris drew accusations of hypocrisy after using a four-page newspaper advertisement to urge smokers to quit cigarettes.

Reporting by Taiga Uranaka; Editing by Susan Fenton

Article source: http://feeds.reuters.com/~r/reuters/topNews/~3/d0juDxoJi_8/philip-morris-seeks-bigger-japan-share-with-cheaper-heat-not-burn-tobacco-idUSKCN1MX06E

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