E-cigarettes assuage some smokers' health concerns and ease social stigmas attached to tobacco.
Electronic Marlboro
Marlboro maker Philip Morris
International <PM.N> says its e-cigarette has rapidly captured
close to 3 percent of Japanese tobacco sales, making inroads into a
market Japan Tobacco (JT) <2914.T> relies on for 40 percent of its
profit.
In what may be an early vindication of
Philip Morris's e-cigarette strategy, the iQOS accounted for 2.2 percent
of Japan's tobacco sales in the quarter ended June 30, a company
spokesman said.
That share had climbed to 2.7
percent by the end of June after Philip Morris rolled out the 9,980 yen
($98.53) electronic smoker in late April accompanied by "HeatSticks",
which cost the same as regular cigarettes.
"The
figures clearly show that iQOS is stealing a chunk of the rolled tobacco
market," said Masashi Mori, analyst at Credit Suisse Securities in
Tokyo. Japan's overall cigarette sales in June shrank 5.2 percent.
On Friday, JT said revenue from July cigarettes sales in Japan dipped by 3.4 percent to 53.4 billion yen.
Unlike
conventional e-cigarettes that vaporize a nicotine infused liquid, iQOS
produces a smokeless aerosol by heating tobacco leaf packed into stubby
cigarettes inserted into the device.
So far it
has tested the gadget in seven countries including cities in Switzerland
and Italy. Japan, which has suppressed e-cigarette "vaping" by
regulating nicotine liquids under pharmaceutical laws, is the only
country where it is sold nationwide.
Demand for
iQOS, which is made in Malaysia, has outstripped demand, leaving Philip
Morris unable to make the most of its early entry into Japan. Some
limited-edition IQOS models are selling online for as much as 80,000
yen.
"When Philip Morris can supply enough to meet demand then its push in to the market is very likely to accelerate," UBS Securities Japan analyst Naomi Takagi said.
E-cigarettes
assuage some smokers' health concerns and ease social stigmas attached
to tobacco. Tobacco firms are battling to take an early lead in the
emerging market as overall cigarette sales shrink globally.
Sales
of e-cigarettes, however, are booming, growing five times to $8 billion
in 2014 from 2010, according to research company Euromonitor. The
market in 2020 is likely to be 20 times the 2010 level, predicts
Euromonitor. Global cigarette revenue is about $750 billion.
Philip Morris plans to widen sales of iQOS to 20 countries by the end of the year.
Former
state tobacco monopoly Japan Tobacco, which has 60 percent of its
domestic market, is struggling to counter the challenge with its own
device. JT's electronic cigarette stick, dubbed the Ploom TECH, creates a
vapor from a liquid that is passed through granulated tobacco.
Yet
the world's No. 3 cigarette maker has so far been unable to match
iQOS's nationwide launch, with no clear indication yet when it will have
sufficient production output to do so.
"It doubtful JT will manage a wider launch before the end of the year," Takagi at UBS Securities said.
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