In Marlboro country, a big-money race for the new smoke
So far, Philip Morris has spent over $3 billion on its post-cigarette push
You want a trip to Philip Morris International Inc. to feel like a visit to Marlboro Country. But the company’s Swiss research centre, aka the Cube, just won't play along.
Perched above crystalline Lake Neuchatel, southwest of Zurich, the glass hexahedron holds secrets to a future when, Philip Morris says, the world will be blissfully smoke-free.
That’s right: Philip Morris, of all companies, is telling smokers to quit. Here, beyond the sun-dappled reflecting pool, scientists in lab coats are searching for the Big Tobacco’s magic bullet: cigarette substitutes that will sell, but won’t kill.
The push gained new urgency last Friday with news that British American Tobacco Plc was offering $47 billion to buy out Reynolds American Inc., a move that would topple Philip Morris as the world’s largest publicly traded tobacco company.
The stakes could scarcely be higher. Tobacco claims more than six million lives every year. With smoking on the decline around, tobacco giants are racing to find new, supposedly safer products to feed nicotine addiction, even as they lean on old-fashioned cigarettes to sustain their profits.
Can Big Tobacco really kick cigarettes? More to the point, can it afford to?
“We can’t stop cold turkey,” says Andre Calantzopoulos, chief executive officer of Philip Morris International. A crucial test could come in 2017 when his next big hope — an iPhone-esque contraption that heats tobacco inside a cigarillo-size tube — potentially hits the US. Quitting old-fashioned smokes won’t be easy for tobacco companies or their stakeholders. Philip Morris turned out 850 billion cigarettes last year, generating net revenue of about $74 billion. All that tobacco pays off handsomely for investors: Counting dividends, the company’s stock has returned roughly 70 per cent over the past five years.
What’s happening inside the Cube goes well beyond popular alternatives like electronic cigarettes, which exploded onto the scene in the late-2000s and made “vape” the Oxford Dictionaries 2014 word of the year.
Philip Morris’ four-pronged strategy starts with something called iQOS, pronounced, EYE-kose.
Flip open the white- or blue-coloured plastic iQOS case and you’ll find a heater that looks like a stubby pen. Into one end you insert what amount to munchkin-size cigarettes, called HEETS. The iQOS — which some have said is an acronym for “I quit ordinary smoking” — gently heats the tobacco without burning it, producing a warm, nicotine-laced aerosol.
After HEETS comes TEEPS, a heatnot-burn product that looks pretty much like an old-fashioned cigarette. Here again, Philip Morris is relying on tobacco. But instead of lighting up the old way, users ignite a carbon tip that heats the tobacco. The taste and nicotine intake of iQOS and TEEPS are closer to that of ordinary cigarettes than ecigarettes, the company says, a stab at fixing smokers’ No. 1 complaint about early vapour products.
A third device, STEEM, is a twist on a medical inhaler: It combines nicotine and a weak organic acid to produce nicotine salt, which is absorbed without vapour. A fourth, called MESH, is a more conventional e-cigarette using flavoured nicotine liquid.
So far, Philip Morris has spent over $3 billion on its post-cigarette push.
Whatever the concerns about cigarette substitutes, many agree e-cigs and the like are safer than ordinary smokes. But there are fears that all these new products may ultimately drive people back to conventional cigarettes — or get non-smokers hooked on the habit.