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LONDON, Sept 28 (Reuters) – Philip Morris International (PMI) on Thursday signalled a slower than anticipated U.S.
roll out of its IQOS heated tobacco device,
a choice analysts said was positive for its competitors in the short term.

The New York-listed Marlboro maker also said it aims for more than two thirds
of its net revenues to come from “smoke-free” products by 2030,
up from 50% in 2025, as it tries to transform its image from a cigarette purveyor to a driver of the shift to healthier alternatives.

Investors have been closely watching IQOS’ entry into the U.S., the world’s largest
market for nicotine products, and had been expecting it from
May 2024 next year. Reuters reported on Wednesday
that PMI is hiring lobbyists across a host of key U.S. states ahead of the
launch.

Chief Executive Jacek Olczak said review iqos iluma one
would launch in four cities in two unnamed U.S.
states from 2024, but a national launch would only come after PMI receives approval to sell
the latest version, known as IQOS ILUMA.

The company was planning to apply for approval in October and expected it from 2025, he continued.

“We need to warm up the tyres,” he said of the initial launch, which would help PMI fine
tune its approach.

A national roll-out of ILUMA would follow but in phases,
he continued, adding launching in 10 states in the first year would
make sense.

Meaningful traction for PMI’s heated tobacco products in the U.S.
“now looks delayed until ILUMA,” Owen Bennett, equity analyst at Jefferies, said in a
note, adding this was a positive for PMI’s rivals.

Olczak also signalled that PMI’s push into non-nicotine products was
no longer a priority. It recently scrapped an ambition for $1 billion in net revenues to come from
sales of such products by 2025.

Instead, PMI will focus its resources on IQOS and nicotine pouch brand ZYN,
Olczak said, adding it had been too optimistic around acceptance
of big tobacco companies operating outside of nicotine.

PMI also announced updated medium-term targets including for revenue and earnings per share, and ambitious volume targets
for IQOS and ZYN.

ZYN and other oral nicotine products in the U.S.
would help drive an expected $2 billion in revenues
there in 2024, even before IQOS ILUMA, executives said.

PMI shares were up 1.5% on Thursday. (Reporting by Emma Rumney in London and Granth Vanaik in Bengaluru; additional reporting by Ananya Mariam Rajesh in Bengaluru; Writing by Emma Rumney; Editing by Elaine Hardcastle
and Josie Kao)

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