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Seeing the Rise of New Tobacco from the Strategic Transformation of Foreign Giants

Under the Global Framework Convention on Tobacco Control, the traditional cigarette market has stabilized and gradually declined; according to Euromonitor data, the compound growth rate of traditional cigarettes in the past five years has been about 1%; cigars and other combustible tobacco categories have also declined.

The speed of new tobacco represented by atomization and HNB has increased significantly: according to Euromonitor data, the market size has grown by more than 21% in the past five years; the proportion of new tobacco in the global tobacco market has increased from 2.42% in 2007 to 7.25% in 2021. The proportion has increased significantly; among them, atomized cigarettes account for about 33% of new tobacco, HNB accounts for 44%, and new categories such as oral nicotine are also growing rapidly.

The four major tobacco companies dominate overseas markets, and the international tobacco giants represented by Philip Morris International and British American Tobacco have a clear transformation strategy to new tobacco, leading the development direction of the tobacco market.

Philip Morris International has made a firm transition to new-type tobacco with clear goals, and clearly put forward the strategic goal of completely replacing traditional cigarettes with new-type tobacco. HNB products represented by IQOS are leading the world. Since 2011, Philip Morris International has strategically deployed new-style tobacco, and in 2014 Launched the first IQOS product in Japan and Italy in 2011, with obvious first-mover advantages.

Comparing with traditional cigarettes, Philip Morris International is committed to building a multi-series product matrix system. Relying on five major R&D platforms, it has a layout in new tobacco categories such as HNB, atomization, and nicotine pouches; at the same time, through continuous iteration and innovation of products, it launched IQOS DUO, IQOS ILUMA and other diversified product series meet the needs of multi-level consumers.

R&D investment is active. Since 2008, the cumulative investment in new tobacco has exceeded 9 billion US dollars. In recent years, new tobacco has accounted for more than 99% of the R&D investment. New tobacco is a clear strategic direction for the company.

Multi-dimensional transformation of supply chain, operation, commercialization, etc., in line with the expansion of the new tobacco market, from supplier selection, to factory construction, to market expansion, the company's all-round transformation supports the transformation of new tobacco.

The goal of new tobacco transformation is firm. The industry is the first to propose new tobacco to completely replace traditional cigarettes. Philip Morris plans to take the lead in realizing a "smoke-free society" in Japan within 10 years, and other countries and regions will withdraw from the field of combustible tobacco within 10-15 years; 2021 , Philip Morris International also proposed the "Beyond Nicotine (Beyond Nicotine)" strategy, clearly expanding to the health and medical fields.

British American Tobacco vaping and HNB have two-way efforts, independent research and development, extension and mergers and acquisitions, and the strategic transformation process leads the industry. Among the four major tobacco giants, British American Tobacco vaping and HNB have the most balanced layout in the two directions, and they are both in a relatively leading position; 2021 The annual British American Tobacco atomization and heated tobacco revenues were 927 million pounds and 853 million pounds, respectively, accounting for 3.6% and 3.3% of the company's revenue.

Active in external M&A and rapid expansion of the new tobacco market: After the strategic development of new tobacco in 2011, it has successively acquired CN Creative, CHIC, Reynolds America and other new tobacco companies, especially the acquisition of Reynolds has established its leading position in the field Global leadership; at the same time, with the help of the existing channel network of traditional tobacco, quickly complete market expansion and layout.

The direction of British American Tobacco's transformation is also clear, gradually transitioning while maintaining the stability of traditional tobacco: British American Tobacco proposes that the sales revenue of non-combustible new products will reach 5 billion pounds in 2025, and the number of consumers of non-combustible tobacco products will reach 50 million in 2030; products, marketing, Channels and other multi-dimensional efforts drive the expansion of the new tobacco market.

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