Electronic Marlboro sucks Japanese

smokers away from tobacco

TOKYO: Marlboro maker Philip Morris International says its e-cigarette has rapidly captured close to 3 percent of Japanese tobacco sales, making inroads into a market Japan Tobacco (JT) relies on for 40 percent of its profit.

In what may be an early vindication of Philip Morris's e-cigarette strategy, the iQOS accounted for 2.2 percent of Japan's tobacco sales in the quarter ended June 30, a company spokesman said.

That share had climbed to 2.7 percent by the end of June after Philip Morris rolled out the 9,980 yen ($98.53) electronic smoker in late April accompanied by "HeatSticks", which cost the same as regular cigarettes.

"The figures clearly show that iQOS is stealing a chunk of the rolled tobacco market," said Masashi Mori, analyst at Credit Suisse Securities in Tokyo.

Japan's overall cigarette sales in June shrank 5.2 percent. On Friday, JT said revenue from July cigarettes sales in Japan dipped by 3.4 percent to 53.4 billion yen.

Unlike conventional e-cigarettes that vaporise a nicotine infused liquid, iQOS produces a smokeless aerosol by heating tobacco leaf packed into stubby cigarettes inserted into the device.

So far it has tested the gadget in seven countries including cities in Switzerland and Italy. Japan, which has suppressed e-cigarette "vaping" by regulating nicotine liquids under pharmaceutical laws, is the only country where it is sold nationwide.

Demand for iQOS, which is made in Malaysia, has outstripped demand, leaving Philip Morris unable to make the most of its early entry into Japan. Some limited-edition IQOS models are selling online for as much as 80,000 yen.

"When Philip Morris can supply enough to meet demand then its push in to the market is very likely to accelerate," UBS Securities Japan analyst Naomi Takagi said.

E-cigarettes assuage some smokers´ health concerns and ease social stigmas attached to tobacco. Tobacco firms are battling to take an early lead in the emerging market as overall cigarette sales shrink globally.