The world’s largest tobacco companies, including Philip Morris and BAT, have been transitioning to smoke-free and sustainable models. The drivers behind these shifts include regulatory pressures, changing consumer preferences, public health initiatives, and the potential for higher margins in alternatives like vaping and heated tobacco products.
British American Tobacco (BAT) has just announced that it is on course to meet its 2024 fiscal year objectives, attributing success to strategic investments that align with its vision for sustainable growth. CEO Tadeu Marroco highlighted key drivers for second-half performance improvement, including innovation in new product categories, strengthened U.S. market strategies, and adjustments in wholesaler inventory dynamics.
Committed to becoming smokefree by 2035
During an October capital markets event held at BAT’s Innovation Centre in Southampton, Marroco emphasized the company’s scientific and innovative accomplishments. He reiterated BAT’s commitment to achieving a predominantly smokeless portfolio by 2035, highlighting how innovation and strategic focus drive long-term value for stakeholders.
With the foundational plans completed, BAT is now focusing on refining execution and expanding its presence in areas like modern oral products. Marocco emphasized that the company also continues to advocate for effective regulation and enforcement of new categories, including vaping products, in the U.S. and Canada, saying that these regulatory efforts are vital for ensuring a sustainable future. While acknowledging that challenges remain, the CEO expressed confidence in BAT’s strategic choices and investments.
Meanwhile, BAT’s competitor Philip Morris International (PMI), the manufacturer of the infamous Marlboro brand, maintains its ambition to become smokefree by 2030. In 2021 PMI had announced plans of phasing out traditional cigarette sales in the UK within ten years. CEO Jacek Olczak has said that the company aims to completely leave smoking behind, a transition which includes the disappearance of the Marlboro brand from British markets.
Strategic but sustainable moves
Like BAT, PMI has long stated that it intends to shift away from cigarettes, focusing instead on smoke-free alternatives such as its IQOS heated tobacco system, and aiming for a majority of its net revenues to come from smoke-free products by 2025. Recent data indicated that the company’s cigarette shipment volume has dropped from 915 billion units in 2011 to 613 billion units in 2023, with an annual decline recorded every year for the past 10 years.
PMI’s aim aligns with the broader goals of public health initiatives. In 2019, the British government announced its ambition to make England smoke-free by 2030, setting the stage for a significant transformation in the tobacco industry. In turn, as tobacco companies move toward a smoke-free future, they are influencing global trends in tobacco use, potentially accelerating the decline of combustible cigarettes worldwide.
Tobacco harm reduction experts have been underlining that this shift toward non-combustible products by big tobacco, despite likely profit-driven motives, is undeniably a win for public health. Reduced exposure to harmful toxins in smokeless alternatives could lower smoking-related diseases. While intentions may be strategic, the transition aligns with harm-reduction goals, benefiting consumers and advancing public health outcomes. Ultimately, these strategies align with global sustainability and harm-reduction goals.
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