Opinion: After a landmark decade, IQOS is ready to return to the US market

Opinion: After a landmark decade, IQOS is ready to return to the US market

In 2024, the global nicotine industry faces significant challenges and opportunities due to technological innovation, stricter regulations, and continued competition from illegal products in many markets. On January 9, 2Firsts released the top ten news about new tobacco products in the world in 2024. One of the highlights is the 10th anniversary of IQOS, the iconic heated tobacco product of Philip Morris International (PMI). Taco Tuinstra looks back on this extraordinary milestone while discussing IQOS's preparations to re-enter the world's most profitable nicotine market - the United States.
Author: Taco Tuinstra, Global Editor-in-Chief of 2Firsts

This article only represents the author's personal views.

After successfully launching the IQOS heated tobacco system in many countries, Philip Morris International now sets its sights on the biggest target - the United States. It is well known that the United States is one of the most challenging markets for nicotine products, but if operated properly, it will bring considerable benefits. It will be worth watching whether the multinational company can successfully bring IQOS back to the world's most profitable tobacco market on its second try.

Figure: Taco Tuinstra comments at the Two Supreme New Tobacco Global Compliance Seminar

IQOS's preparations for its return to the U.S. market come at a critical time. In 2024, the iconic heated tobacco product celebrates its tenth anniversary. This smoke-free innovation not only represents a technological breakthrough, but also accelerates smokers' transition from deadly burning cigarettes to less harmful nicotine consumption methods.

Japan is IQOS's first market. According to survey data from the Ministry of Health, Labor and Welfare of Japan, in 2014, the smoking population in Japan accounted for 19.6% of the total population; by 2022, this proportion had dropped to 10.6%. Although cigarette sales have long been declining in Japan, a 2019 study by researchers from the American Cancer Society showed that after the launch of IQOS, cigarette sales in Japan fell five times faster than before.

Japan remains the country with the largest number of users of heated tobacco products in the world, but IQOS has also gained acceptance in many other markets. Since its launch in Japan in 2014, IQOS has expanded to about 80 countries. Since its launch, IQOS has helped more than 22 million people around the world switch from cigarettes to this less harmful nicotine product, according to Philip Morris International.

IQOS has not only contributed to tobacco harm reduction, but has also significantly boosted Philip Morris International's earnings. Currently, IQOS generates more than $10 billion in net revenue for the company each year, surpassing the company's flagship product Marlboro. In 2024, London brand evaluation agency Brand Finance ranked IQOS as the world's fourth most valuable tobacco brand, surpassing well-known traditional cigarette brands such as Winston and Camel. According to the Financial Times, heated tobacco products have maintained steady growth worldwide. In 2024, the global retail market value of IQOS and similar products is expected to reach $38.9 billion.

Despite IQOS's significant achievements in important markets such as Japan, Italy and Germany, Philip Morris International still hopes to reintroduce the product to the United States. Previously, IQOS was forced to withdraw from the US market due to patent infringement lawsuits. The FDA first approved the sale of IQOS products in 2019. A year later, Philip Morris International also obtained permission to sell IQOS as a "modified risk tobacco product" (MRTP), allowing it to explain to consumers that by heating rather than burning tobacco, the production of harmful chemicals can be significantly reduced.

At that time, IQOS was piloted by Altria Group, a partner of Philip Morris International, in some southeastern markets in the United States. Despite the good performance in the early stages of the pilot, IQOS had to withdraw from the US market two years later due to a patent lawsuit filed by Reynolds Tobacco Company.

Subsequently, Philip Morris International and Reynolds Tobacco Company resolved the legal dispute, clearing the way for IQOS to re-enter the US market. In October 2022, Philip Morris International regained the commercialization rights of IQOS in the United States and stated that Altria failed to meet certain milestones stipulated in the agreement.

In November 2024, Philip Morris International held several events in Austin, Texas, to warm up for the re-listing of IQOS in the United States. Prior to the launch, the company offered existing nicotine users aged 21 and over who live in designated areas of Austin the opportunity to join a waiting list so that they could be the first to experience IQOS.

Emmanuel Babeau, Chief Financial Officer of Philip Morris International, said that the large-scale launch of IQOS will take place after the FDA approves its latest model, IQOS Iluma, which the company expects to obtain in the second half of 2025. Compared with previous versions, IQOS Iluma has several upgrades, including slightly different heating technology and a unique tobacco stick design. IQOS Iluma is currently available in more than 20 markets outside the United States.

Philip Morris International has submitted the Pre-Market Tobacco Product Application (PMTA) and Modified Risk Tobacco Product Application (MRTP) for IQOS Iluma in October 2023. Before obtaining FDA marketing authorization, Philip Morris International will only sell the existing IQOS3 model in a few cities in the United States to optimize the strategy and prepare for the national promotion of IQOS Iluma.

Once FDA approval is obtained for IQOS Iluma, PMI plans to adopt its proven marketing strategies in international markets while adapting them appropriately for the U.S. market. This includes engaging with consumers, creating a dedicated sales team, and setting up direct sales outlets. While most U.S. nicotine users are familiar with e-cigarettes, heated tobacco products are still new to many, meaning there will be a learning curve for consumers. Pricing will also be a key factor, as cigarette prices in the U.S. are relatively low compared to other developed markets, in part due to lower tax levels.

IQOS's planned return to the U.S. market has attracted significant attention from investors and tobacco harm reduction advocates. Investors expect the product to deliver significant financial returns, while advocates hope that IQOS can help smokers transition from burning cigarettes to less harmful heated tobacco products. If IQOS is successful in the U.S., it will not only further boost PMI's revenues, but will also provide U.S. nicotine users with a new option to reduce their exposure to deadly tobacco smoke.