In accordance with a Bloomberg report yesterday Philip Morris International Inc., the world’s biggest tobacco company, announced about its plans to create a new type of cigarette that has lower health risks by 2017.
The tobacco company is creating three products that would be featured under existing cigarette brand Marlboro. The new “safer” cigarette appears to heat tobacco rather than burn it, said Andre Calantzopoulos, chief operating officer.
Louis Camilleri, chief executive officer, stated that this would be a paradigm shift for tobacco industry.
He added that new cigarettes have “the very real potential to not only be a game-changer, but also be the method to display some hitherto virgin territories, particularly the huge Chinese market.
Cigarette manufacturers have spent much time to create a safer alternative to smoking, together with a 1988 test of Premier, a heated-tobacco smokeless cigarette that its producer, now called Reynolds American Inc. (RAI), decreased in nearly a year, according to the report.
In accordance with Erik Bloomquist, an analyst at Berenberg Bank, Philip Morris International is far more developed than he thought.
PMI that is based in New York City said that the “most promising” products with lower risk would heat tobacco or produce aerosol that smokers inhale. The heated-tobacco device should pass clinical testing and then producing of lower-risk cigarettes would start in 3 to 4 years, Calantzopoulos said.
There is another product that is going to be developed. That cigarette would be lit with a lighter, and a third one uses a chemical interaction to make an aerosol.
Philip Morris has the possibility to be a major tobacco company in the world, but its growth potential is still decreased in certain areas. Nowadays, the Chinese tobacco market would be a leader. The Chinese population is considered to smoke a lot and that is a mark for lots of potentially new customers.
Today, 45% per cent of Philip Morris’s stock price goes from Asian consumers. It has a 27 per cent exposure to the European Union which could be worrisome in some degree because of the awful conditions in the region at the time. Eastern Europe, Middle East and Africa compose 22.3 per cent of the share price of tobacco manufacturer. Finally, Latin American and Canada compose only 7 per cent.
Tobacco stocks that have a tendency to be more recession-resistant as smoking people are prone to smoke more when they are in stress condition and current conditions call for higher stress. Philip Morris is major in the tobacco industry with a lot of growth potential left in the stock.