2Firsts Interview with Former Executive of Philip Morris International: Details of IQOS Growth and Future Prospects

2Firsts Interview with Former Executive of Philip Morris International: Details of IQOS Growth and Future Prospects

Recently, Philip Morris International held a global celebration to commemorate the 10th anniversary of its heated tobacco product IQOS. 2Firsts had a conversation with an insider (Cem Ozguven) who played a key role in the development and commercialization of IQOS. Ozguven shared IQOS's major breakthroughs, technological evolution, global market performance, and underlying reasons. Ozguven pointed out that the transition to smoke-free products is a long-term battle, as the industry is changing rapidly and Philip Morris International has advantages but does not guarantee ultimate victory.

Philip Morris International held a global celebration in Tokyo on October 19th to commemorate the 10th anniversary of its flagship heated tobacco product IQOS. According to the official website of Philip Morris International, since its launch in 2014, IQOS's net sales have surpassed Marlboro, becoming the world's leading nicotine brand and driving accelerated decline in tobacco sales in multiple countries. As of September 30, 2024, FiMo International's smoke-free products have entered 92 markets, with 36.5 million adults worldwide choosing to use them. Currently, smoke-free products contribute 38% of PMI's quarterly revenue of $10 billion.

To commemorate this milestone, 2Firsts had a conversation with Cem Ozguven, former global head of finance, strategy, business development and planning, and harm reduction products at Philip Morris International, who played a key role in the development and commercialization of IQOS. Now, he has founded Tobacco Insider, a consulting firm specializing in providing advice on the tobacco industry and its transformation to large institutional investors. Ozguven reviewed the key breakthroughs of IQOS and shared his insights on the future development of heated tobacco.

Cem Ozguven's special IQOS version celebrates the sale of 10 million devices. Image source: Cem Ozguven

Here are Cem Ozguven's key insights on Fimo International and IQOS:

Major breakthrough: Achieving aerosols with a taste and satisfaction comparable to traditional tobacco is a key technological milestone in the development of IQOS. Philip Morris International has invested heavily in developing miniaturized heating tobacco devices, combining advanced battery and chip technology with specially designed cigarettes, to achieve a satisfactory consumer experience. The success of the Nagoya pilot market marks a turning point for IQOS, not only proving its market potential, but also providing confidence for Philip Morris International to first promote nationwide in Japan and then expand to the global market.

Technological Evolution: Fimo International's heating technology has evolved from early circular heating to internal blade heating, and now to induction heating technology, with each upgrade enhancing the user experience. In terms of consumables, the product portfolio has expanded from traditional tobacco and menthol flavors to more diverse flavors, complex flavors, and new structural components such as capsules. In the future, heating devices may evolve into aerosol delivery systems, extracting various active substances from different substrates.

Global market performance: Philip Morris International plans to sell 140 billion IQOS cigarettes worldwide, accounting for approximately 5% of the global market share. In markets such as Japan and South Korea, IQOS has a high penetration rate, but its acceptance in the UK and France is relatively low. These differences are mainly influenced by factors such as the availability of alternative products in different markets, consumer preferences, demographic characteristics, and regulatory environments.

Regulatory framework: IQOS cigarettes are classified as tobacco products and are subject to regulations similar to traditional tobacco. However, tax policies play a crucial role in its financial returns. Tobacco companies must invest heavily in research and marketing, while encouraging consumers to adopt new products through price incentives. Currently, some countries are gradually aligning the tax rates for heating tobacco products with traditional tobacco tax rates, which has a significant impact on their growth prospects and financial returns.

Smoke free Future Vision: The transformation towards smoke-free products is a long-term battle, not a sprint. Although Philip Morris International is ten years ahead of its competitors in this transformation, this advantage may not necessarily guarantee its ultimate victory. This competition is still undecided. The tobacco industry, once characterized by stability, has now become a rapidly changing field.