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Philip Morris (PM) Fuels Smoke-Free Offerings With IQOS ILUMA

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Philip Morris International Inc. (PM - Free Report) has been strongly focused on expanding in the smoke-free products realm. Moving on these lines, the company announced the launch of IQOS ILUMA, which strengthens its smoke-free portfolio. This innovative offering is likely to be another option, which will be of help for users who have been looking to make the switch from smoking cigarettes or using nicotine products.

IQOS ILUMA marks the brand’s first ever tobacco-heating system that will offer an induction-heating technology without using any blade and needing no cleaning. These devices heat tobacco from the core in a cleaner manner — without burning it. Importantly, these bladeless devices generate no smoke and combustion, and offer a more consistent and enjoyable experience.  

IQOS ILUMA series comprises IQOS ILUMA PRIME and IQOS ILUMA devices in Japan. Both of these devices operate through the new induction-heating technology, while offering diverse designs to help adult users choose the device as per their preference.

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Focus on Smoke-Free Future

Philip Morris’ launch of IQOS ILUMA represents another step undertaken by the company toward its goal of seeing a world where cigarettes are replaced by smoke-free choices. To this end, it has introduced a number of generations of IQOS heated tobacco system, thereby solidifying its portfolio with constantly enhanced science-backed solutions, which use technology and cater to consumers’ changing needs.

Certainly, focus on innovation has been largely driving Philip Morris toward its goal of becoming a majority smoke-free company by 2025. The company is progressing well with its business transformation, with 13.5% of shipment volumes and 30% of net revenues coming from smoke-free products as of the end of second-quarter 2021.

Philip Morris’ IQOS, a heat-not-burn device, counts amongst one of the leading RRPs in the industry. In the United States, the IQOS was launched in 2019, through a commercial deal with Altria Group (MO - Free Report) that was approved by the U.S. Food and Drug Administration (FDA). These next-generation devices are backed by substantial scientific insights and research. Management anticipates such advanced and high-quality products to aid adult smokers to switch from traditional cigarettes to smoke-free options. In fact, total users of IQOS as of the end of the second quarter were estimated to be about 20.1 million, including roughly 14.7 million users, who have shifted from smoking to IQOS.

Management earlier noted that since the onset of the pandemic, the switch from smoking to reduced risk products (or RRPs) has been trending positively. Strong growth in IQOS boosted revenues in the RRPs category, which increased 41.7% to $2,276 million in the second quarter. Moreover, heated tobacco unit shipment volumes of 24.4 billion units rose 30.2% year over year. The company expects consistent growth in the heated tobacco category, and therefore, has been committed toward expanding these products. The company remains on track to achieve its 2021 goal of 95-100 billion of heated tobacco shipment volume. Total cigarette and heated tobacco unit shipment volume growth is likely to be between flat to an increase of 2% in 2021.

Among other initiatives, Philip Morris announced a partnership with South Korea’s KT&G in January 2020, in order to commercialize the latter’s smoke-free products outside the country. In February 2021, the company revealed plans of generating at least $1 billion in annual net revenues from "Beyond Nicotine" products by 2025. The initiative leverages its expertise in life sciences, inhalation technology and natural ingredients, among others.

Shares of this Zacks Rank #3 (Hold) company have rallied 7.7%, in the past three months, compared with the industry’s growth of 0.6%.

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