A World-Class Case of Corporate Self-Cannibalization May Save Millions of Lives

 

Heat-not-burn (HNB) tobacco products – mainly IQOS from Philip Morris (PMI) – are eroding cigarette sales in Japan, as I recently noted.  Prevalence estimates from the Japanese Health and Nutrition Survey confirm the consumption numbers. 

Because the Japanese survey only began tracking new products in 2018, no trend can yet be discerned, but HNB product use is impressive, as shown in the chart at left.  Depending on how dual users are counted, HNB accounted for 20 to 27 percent of all tobacco use in 2019.   

The highly credible Japanese Health and Nutrition Survey is the world’s oldest nutrition survey, implemented by Allied Forces after World War II.  Participants include adults age 20+ years; questions on smoking and HNB use are included in the lifestyle section. 

The HNB-driven Japanese harm reduction miracle has been ignored by most of the world, but Motley Fool just published an intriguing article, “Is It Time to Stop Thinking of Philip Morris International as a Cigarette Company?”

The answer is a resounding “Yes!”

There are two standout quotes in the article.

“Philip Morris' annual report shows that cigarette shipment volumes last year tumbled over 11%, with its most important brand Marlboro, which accounts for 37% of all cigarette shipments, down by a like amount.”

PMI risked its core cigarette business when the company launched the multi-year, multi-billion-dollar IQOS research and development effort.  Five years ago, it rolled the dice again when it marketed the products in Japan.  Leadership had no guarantee that IQOS would preferentially erode only other companies’ cigarette sales.  This may end up as a world-class example of self-cannibalization that ultimately saves millions of lives that would otherwise be cut short by smoking.  

“Philip Morris generated $6.8 billion in revenue last year from IQOS, or almost 25% of its total $28.7 billion in net revenue. [PMI CEO Andre] Calantzopoulos says if you just look at the three regions where IQOS is most prevalent -- Asia, Eastern Europe, and the European Union -- it represents 35% of the total.”

Naysayers have dismissed the Japanese miracle because there is no e-cigarette/vapor market there.  However, there is no doubt about the success of IQOS across 67 countries around the world.  IQOS might now find similar public health success in the U.S.  As Altria broadens distribution here, tobacco prohibitionists should give smoke-free tobacco products the opportunity to cancel smoking and advance public health.

 

 

 

IQOS Continued to Drive Down Japan Cigarette Sales in 2020; U.S. Cigarette Sales Steady

 

Japan is experiencing an unprecedented decline in cigarette consumption.  Japan Tobacco International reports (here) that cigarette sales dropped 8% in 2020, largely due to sales of reduced-risk products.  The dominant such product in Japan is Philip Morris International’s IQOS heat-not-burn HeatSticks.

U.K. veteran tobacco harm reduction advocate Clive Bates opined: “The only mystery is why the skies over Tokyo are not dark with chartered planes bringing officials from WHO, FDA, Truth Initiative, the Campaign for Tobacco-Free Kids, the European Commission and others on an emergency mission to learn about this most extraordinary shift.  What is the secret they would find? ‘Do nothing, stay out of the way....’  There was very little involvement from tobacco control – the demise of cigarettes in Japan has been driven by the market and consumer preference.” 

Meanwhile, the U.S. FDA finally authorized IQOS as a reduced exposure alternative to cigarettes on July 7, 2020, greenlighting these claims:

“AVAILABLE EVIDENCE TO DATE:

• The IQOS system heats tobacco but does not burn it.
• This significantly reduces the production of harmful and potentially harmful chemicals.
• Scientific studies have shown that switching completely from conventional cigarettes to the IQOS system significantly reduces your body’s exposure to harmful or potentially harmful chemicals.”

The FDA advised that its approval “is expected to benefit the health of the population as a whole.”

The Covid-19 pandemic is hurting U.S. IQOS marketing and sales.  PMI’s retail program requires smokers to visit an IQOS store to get educated about the system and purchase the hardware.  After that, smokers can buy the heat sticks in convenience stores and other outlets.  PMI’s program aims to suppress teen adoption, but the added inconvenience has slowed adoption by adult smokers.  The Wall Street Journal reports that the decades-long decline of cigarette sales has ended. One hopes the trend line will improve again as the pandemic comes under control and smokers make the effort to learn about this new smoke-free alternative.

 

Japan’s IQOS Experience Suggests Product Could Reduce U.S. Cigarette Consumption

An FDA advisory committee this week will vote whether to recommend that the FDA grants modified risk status to Philip Morris International’s IQOS heat-not-burn tobacco product (here).  A positive vote would acknowledge that the product poses a lower risk and/or lower exposure to toxins than cigarettes.

The committee’s activity is garnering considerable media attention, but the larger issue is: Will the FDA permit IQOS sales in the U.S.?  In order for that to happen, the agency must approve the company’s premarket tobacco application (PMTA).

IQOS is already available in 31 countries, with Japanese sales initiated in 2016.  The chart at left shows that Japanese consumption of IQOS heat sticks (green) in 2017 coincided with a 14% annual decline in cigarette consumption (red), compared with 2-3% decline in cigarette sales over the previous 5 years.

The Japanese experience suggests that IQOS MRTP designation by the FDA could have a significant downward effect on American cigarette consumption.