Philip Morris International (NYSE:PM)

Philip Morris International (NYSE:PM) Why IQOS and not Marlboro heated tabaco products?

PMI’s management team has two options to fully utilize its cash on hand:
increase shareholder returns through dividends or double down “foolishly” in pursuit of
its heated tobacco products. Quite simply, PMI’s current approach to the
heated/vaporized tobacco market is ineffective and not in touch with new smoker
preferences. With the recent “success” of JUUL Lab’s JUUL product, investors should
recognize that the marketing business of tobacco has changed. Thoroughly
documented by J. Huang, the lifestyle marketing on tobacco has moved to social media.
In the process of doing so, JUUL has “flipped” the marketing to a brand that is actively
displayed in its virtual community. Unlike the managed image of cowboys, PMI is now
tasked with adapting to the virtual lifestyle of new/nontraditional smokers. Overall, I
would closely watch PMI’s efforts to gain regulatory approval as a reduced risk product,
increased spending in product development/marketing (that will pressure short term
earnings metrics) and an overall emergence of a compelling IQOS advertising
campaign that will satisfy the world’s need for sin (with an addiction that will keep us
hooked).

Desert Island Question

Sell. While it may currently be an attractive price for an industry leading player, I
am skeptical of PMI’s ability to fully develop, market and deploy IQOS as a PMI branded
experience. Marlboro man was not available for comment*