Philip Morris International (NYSE:PM)
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3 Years : From Aug 2012 to Aug 2015
--Philip Morris this year will kick off round of studies for new tobacco products
--Consumers showing greater willingness to try alternatives to conventional cigarettes
--U.S.-focused Altria also developing new products
By John Kell
Philip Morris International Inc. (PM) is kicking off a round of clinical studies this year for new tobacco products, with plans to commercialize those products as soon as 2016.
In June, the maker of Marlboro and L&M cigarettes sold in markets outside the U.S. began to tout the development of next-generation products that can offer new ways to consume nicotine. The initiative comes as consumers are showing a greater willingness to try alternatives to conventional cigarettes, including snus and e-cigarettes.
"We are initiating eight clinical studies this year in different locations and with different population groups and plan to expand the testing in 2014," said Chief Financial Officer Jacek Olczak during a presentation at the Consumer Analyst Group of New York conference in Boca Raton, Fla.
Mr. Olczak said an exploratory clinical study launched last year yielded top-line results that were in line with the company's expectations and modeling. He said Philip Morris will also begin behavioral research to determine how smokers understand the new products Philip Morris is developing. That research will be used for marketing purposes.
To manufacture those products, Philip Morris is weighing sites in Europe and could build one or two facilities for the initiative. Philip Morris expects to spend EUR500 million to EUR600 million over a three-year period.
Analysts have said Philip Morris has a good track record when it comes to new-product development, pointing to success the company has had selling capsule products.
The new-product development comes as industrywide cigarette volume has slumped in the European Union, in particular southern European countries, where unemployment is high. Philip Morris has sought to increase exposure to emerging markets, especially in Asia, where adult populations are rising.
Altria Group Inc. (MO), which sells Marlboro and L&M products exclusively in the U.S., on Tuesday told analysts that domestic tobacco consumers were also looking to alternative products. The domestic market has seen stronger demand for smokeless tobacco and cigars in recent years, while shipments of traditional cigarettes have declined.
"We are closely monitoring adult tobacco consumer interest in alternative tobacco products, and our companies are working internally and through partnerships to develop innovative new products for them," said Altria Chief Executive Marty Barrington.
Shares of Philip Morris were up 0.9% to $92.11 in recent trading, while Altria is up 0.5% to $34.94. Both stocks have outperformed the broader market in 2013.
Write to John Kell at email@example.com
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