Up in Smoke: Tobacco CEO Predicts an End to Cigarettes

Much like CEOs in the auto industry, tobacco executives are confronting digital disruption with a mix of strategies that involve either acquiring smaller, innovative competitors or developing new products in-house.

New York-based Phillip Morris has responded to the challenge by developing a smokeless product, which it launched in the UK this morning following a previous release in Japan.

Unlike e-cigarettes, which heat a nicotine-infused liquid, Phillips Morris’ iQOS heats raw tobacco enough to produce a vapor without burning it. The lack of combustion reduces the amount of toxins produced by 90%, the company claims.

“I believe there will come a…time where…we have sufficient adoption of these alternative products to start envisaging, together with governments, a phase-out period for cigarettes,” Phillip Morris CEO Andre Calantzopoulos told the BBC in a radio interview. “I hope this time will come soon.”

The iQOS comprises a small battery pack, retailing in the UK for £45 ($56), that resembles an early-model cell phone. It charges a plastic cigarette holder than can be loaded with tobacco sticks, which cost £8 for a pack of 20.

British American Tobacco, meanwhile, has taken a slightly different approach. In 2013, it became the first big tobacco company to launch its own e-cigarette best products, Vype, and recently acquired smaller e-cigarette competitors, including British-based Ten Motives and Poland-based Chic Group. It has just started testing a tobacco-heating product to rival iQOS, called iFuse.

“As we always said, we are enthusiastic about the opportunity in next generation products, and believe that all three categories—vapor, tobacco heating products and licensed medicinal products—offer great potential,” CEO Nicandro Durante said in July.

Still, he said traditional cigarettes will still make up the bulk of the company’s business for many years to come. Indeed, Calantzopoulos this morning cited a World Health Organization prediction that more than a billion people will still be smoking traditional cigarettes worldwide in 2025.

About 10% of 9,766 American adults surveyed in May used e-cigarettes, according to a poll by Reuters and Ipsos. The percentage was unchanged from a year earlier as people continued to question the devices’ safety.