�Thomas Mulier, Sam Cham­bers, and Dan Lief­green

Bloomberg Businessweek (North America) - - Companies/ Industries - By Kyle Stock

An­a­lysts say it could be more suc­cess­ful be­cause it gives a bet­ter nico­tine buzz than an e-cig­a­rette and imit im­i­tates the rit­ual of smok­ing. Sales of e-cig­a­rettes are only about 1 perc per­cent of the $863 bil­lion to­bacco ma mar­ket, ac­cord­ing to re­searcher E Euromon­i­tor In­ter­na­tional. An­a­lysts at Wells Fargo pre­dict t that Philip Mor­ris’s Heatsticks c could dis­place as much as 3 30 per­cent of cig­a­rette sales in de­vel­oped mar­kets by 2025. Bri­tishBri Amer­i­can To­bacco aims to start sell­ing a sim­i­lar prod­uct in the se­cond half of 2016; Reynolds Amer­i­can is de­vel­op­ing a heat­ing de­vice, though it re­ported that one tested in Wis­con­sin last year didn’t meet per­for­mance ex­pec­ta­tions; and Ja­pan To­bacco is in­tro­duc­ing a va­por­izer called Ploom Tech. But Philip Mor­ris is far ahead of the com­pe­ti­tion, says James Bush­nell, an an­a­lyst at Ex­ane BNP Paribas. “This is the clos­est yet that the in­dus­try has got to the holy grail of a com­mer­cially suc­cess­ful ‘safe’ cig­a­rette,” he wrote in a re­cent re­port.

In Ja­pan more than 100,000 smok­ers have switched to IQOS, and Philip Mor­ris says Heatsticks ac­counted for 2.4 per­cent of the Tokyo cig­a­rette mar­ket in Jan­uary. Philip Mor­ris says it will sell IQOS in about 20 coun­tries this year, and it plans to sub­mit an ap­pli­ca­tion to the U.S. Food and Drug Ad­min­is­tra­tion to call the de­vice a mod­i­fied-risk to­bacco prod­uct, though the FDA hasn’t yet given the go-ahead to sim­i­lar re­quests.

Philip Mor­ris cre­ated the “em­bassies” to pro­mote IQOS, given bans on to­bacco ad­ver­tis­ing in many coun­tries. Rem­i­nis­cent of Nestlé’s Nespresso shops, the em­bassies or­ga­nize events for IQOS users to so­cial­ize and spread the word. “We’re ex­pand­ing our mar­ket­ing tool­box,” Miroslaw Zielin­ski, head of the to­bacco com­pany’s “re­duced-risk” busi­ness, said in a we­b­cast in Fe­bru­ary. “This has been un­de­ni­ably a much more com­plex un­der­tak­ing than cig­a­rette mar­ket­ing.”

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