Philip Morris Promises a New E-Cig in 2014
As many of the tobacco industry’s biggest players rush to join the e-cig market, Philip Morris has been hesitant to make a move. In fact, a few months ago the company criticized e-cigs for questionable manufacturing standards and lack of taste. However, something has changed for the tobacco giant because they recently announced a new plan to release their own version of the electronic cigarette in 2014. With such a drastic change from their previous repulsion to e-cigs, it looks like this company is making the decision based on financial need.
If you take a look at the stock market, you quickly see that Philip Morris International is struggling. In fact, it has been one of the worst performing stocks in the S&P 500 with a seven percent decrease in shares. Perhaps a little desperation is what drove this company to finally embrace the idea of an e-cig, despite the fact that Lorillard, Reynolds American, and Altria have already become quite active and successful in the ecig market.
Following the public release of October’s earnings and a 5.7 percent decrease in cigarette volume this quarter, Philip Morris moved to cut guidance for the year. Reynolds American also had a slight drop of 4.3 percent, but Altria and Lorillard both reported gains for the recent quarter. In light of the current situation, profits are projected to only hit 6-8% in 2014, easily falling short of prior projections of 10-12%. Philip Morris is even expecting a decrease in international sales thanks to stricter tobacco regulations in the EU.
In a final effort to turn the situation around, Philip Morris seems to be retracting prior criticisms of e-cigarettes and launching their own line of vaping products after all. Perhaps the success of competitor Lorillard convinced them to make the move. After all, Lorillard has continually seen good numbers since acquiring Blu Ecigs. The time is right for big tobacco companies to embrace the electronic cigarette movement. While tobacco products are facing higher taxes and stricter regulations, e-cigs are still offering a free market without any federal regulation.
In 2014, the FDA is expected to release new regulations for e-cigarettes and some have speculated that e-cigs could be treated as tobacco products with the same taxation and public usage bans. If that’s the case, e-cigs will lose their edge in the market and Philip Morris might be a little too late to reap the biggest benefits from the vaping industry.
Despite the uncertainty with federal regulation, Philip Morris plans to move forward with plans to create a line of electronic cigarettes. After producing the popular Marlboro cigarettes, many of their loyal fans might be willing to try e-cigs if they are marketed under the Philip Morris brand.
Did Philip Morris wait too long to enter the e-cig market or will they yield big success from this surprising endeavor?