Earlier in 2021, Philip Morris acquired Fertin Pharma A/S, Vectura Group plc. and OtiTopic, Inc. Last year, the company consolidated these entities, and it now reports its sales in a separate segment - Wellness & Healthcare.
Philip Morris International is a leading international tobacco company with a wide range of premium, mid-price, and low-price brands, comprised of international as well as local brands. Until the spin-off in March 2008, Philip Morris International was an operating company of Altria Group. The independent Philip Morris International sells tobacco products in international markets, while Altria maintains its operations in the U.S.
PM's cigarettes are sold in many countries, and it has a market share of at least 15% in more than 100 markets. Their portfolio of international and local brands is led by Marlboro, the world’s best-selling international cigarette, which accounted for approximately 10% of the international cigarette market in 2022. Marlboro is complemented in the premium-price category by Parliament. The other leading international cigarette brands are Bond Street, Chesterfield, L&M, Lark, and Philip Morris. The company also owns a number of important local cigarette brands, such as Dji Sam Soe, Sampoerna A, and Sampoerna U in Indonesia; Fortune and Jackpot in the Philippines; Belmont and Canadian Classics in Canada; and Delicados in Mexico.
In addition to the manufacture and sale of cigarettes and other tobacco products, PMI is engaged in the development and commercialization of Reduced-Risk Products (“RRPs”). RRPs is the term PMI uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking traditional cigarettes.
The six divisions of Philip Morris International consist of the following four regional segments and two new businesses:
Most tobacco and cigarette businesses today follow a Price-Profit First Strategy and enjoy significant room for strong net pricing and margin expansion. With declining cigarette sales, Philip Morris International's revenues and profits are maintained through higher pricing, which is a key driver of its performance.
Philip Morris International benefits from significant geographic diversification, with good exposure to emerging markets, which have high growth, and developed markets, which have higher operating margins.
PM's leading RRP brand, IQOS, is a precisely controlled device into which a specially designed heated tobacco unit is inserted and heated to generate an aerosol. The company markets its heated tobacco units under the brand names HEETS, HEETS Marlboro, and HEETS FROM MARLBORO, defined collectively as HEETS, as well as Marlboro HeatSticks and Parliament HeatSticks.
The volume of tobacco products has been declining due to growing health consciousness among people about the extreme health risks of smoking. Governments have also been discouraging tobacco consumption through high excise duties and legislative controls such as bans on public smoking and strict restrictions on the advertising and marketing of tobacco products and compulsory health warnings.
Tax regimes, including excise taxes, sales taxes, and import duties, can disproportionately affect the retail price of cigarettes versus other tobacco products, or disproportionately affect the relative retail price of their cigarette brands versus cigarette brands manufactured by certain competitors. Because their portfolio is weighted toward the premium-price cigarette category, tax regimes based on sales price can place the company at a competitive disadvantage in some markets. State and local governments tax tobacco products for both revenue and public health purposes. Such excise taxes are at times as high as 30-80% of revenues for cigarettes in different countries. Regular excise tax increases or unfavorable changes in the tax structure lead to increases in cigarette prices and a fall in demand.
Governments also resort to anti-tobacco legislation and anti-smoking laws to discourage tobacco and cigarette consumption. Legislation, like banning smoking in public places, leads to a reduction in cigarette sales. Proposed bills for disclosure in different countries and those mandating plain (generic) packaging for tobacco products result in the expropriation of tobacco companies' trademarks.
Significant regulatory developments have taken place in recent years in most of the markets, driven principally by the World Health Organization's Framework Convention on Tobacco Control (“FCTC”). The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation. The FCTC has led to increased efforts by tobacco control advocates and public health organizations to reduce the palatability and attractiveness of tobacco products to adult smokers.