A few days ago, Philip Morris International announced it’s getting into the e-cigarette business, after dismissing the product in July according to The Washington Post. The tobacco giant will start selling e-cigarettes which directly compete with its tobacco product, since nicotine vapor is gaining popularity as an alternative to smoking by a growing number of Americans.
The world’s biggest tobacco company is spending $100 million to develop e-cigarettes that could destroy its 160 year legacy in the tobacco business.
There are three main reasons why Philip Morris is getting to the vapor smoking market:
- Competitors are already making e-cigarettes. A few of Philip Morris’s competitors have either developed their own e-cigarette or bought startups in the fast-growing electronic smoking market.
- Tobacco cigarettes are already disappearing. Fewer Americans are smoking than ever before, according to Gallup. Tobacco has been lucrative for well over 100 years, but companies are accepting the fact that products are facing a long-term decline. They have no choice but to develop a new product.
- The international tobacco market is slowing down. Philip Morris has always had strong name recognition, deep market penetration and the addictive nature of its tobacco cigarettes has made it internationally popular. 30 percent of its market share has been primarily in Southeast Asia. But the “cash-generating machine,” as Morningstar has referred to it, has started to fail in sales.
The key reasons Philip Morris wants a piece of the e-cigarette market is that the product doesn’t have many of the social and health challenges tobacco smoking faces but still deliver nicotine that users crave.