Philip Morris International to enter electronic cigarette market

A person poses with an electronic cigarette, or e-cigarette, Wednesday June 12, 2013. (AP / Tim Ireland)

RICHMOND, Va. -- Philip Morris International Inc. said Wednesday it plans to enter the growing electronic cigarette business late next year and accelerate the launch of its reduced-risk products.

The seller of Marlboro and other cigarette brands overseas is joining many tobacco companies venturing into smokeless tobacco and other nicotine products to diversify beyond the declining traditional cigarette business as tax increases, health concerns, smoking bans and stigma cut into demand.

Electronic cigarettes are battery-powered devices that heat a liquid nicotine solution, creating vapour that users inhale. The category has grown from thousands of users in 2006 to several million worldwide.

Philip Morris International's first foray into the electronic cigarette business will be similar to current products on the market but will offer an "an improved taste," CEO Andre Calantzopoulos said Wednesday at the Morgan Stanley Global Consumer Conference in New York. Calantzopoulos said the company is entering the market to get first-hand understanding of the category and help shape the regulatory debate.

Company executives in July had dismissed electronic cigarettes, saying they aren't a product that's very close to a traditional cigarette and said it was "much more the phenomena of the price than anything else."

While the future of e-cigarettes should be an attractive category for adult consumers, the company believes its next-generation products will be more attractive to cigarette smokers, Calantzopoulos said.

The company is developing products that heat tobacco in a cigarette with a controlled heating mechanism or an aerosol nicotine-delivery system. It plans to pilot test its next-generation products late next year and launch a product that heats tobacco instead of burning it in 2015, ahead of its previously expected launch between 2016 and 2017.

"Our first objective is the development of a series of reduced-risk products that provide adult smokers with the taste, sensory experience, nicotine delivery profile and ritual characteristics that match as close as possible those of cigarettes," Calantzopoulos said, adding that the company recently conducted a consumer test in Asia that showed broad appeal for different adult smokers in term of price and taste.

Philip Morris International, based in New York and Switzerland, is the world's second-biggest cigarette seller behind state-controlled China National Tobacco Corp.

Altria Group Inc. in Richmond, Va., the owner of Philip Morris USA, spun off Philip Morris International as a separate company in 2008. Altria is the largest U.S. cigarette seller.