Philip Morris USA Prepares to Bring IQOS to Second Lead Market

RICHMOND, Va. — Philip Morris USA (PM USA) is preparing to roll out its latest tobacco product innovation to a new area this month.

PM USA, an operating company of Altria Group Inc., is expanding IQOS to its hometown of Richmond. A new IQOS store will open in the Carytown district of the city, according to Altria Chairman and CEO Howard Willard.

As he explained during the company's third-quarter 2019 earnings call on Oct. 31, Altria has "a sizable employee base enrichment and deep connections with the [Richmond] community that could accelerate early adoption of IQOS."

In addition to the Carytown store, the tobacco company expects to distribute its IQOS heat sticks to roughly 150 retail outlets within the market. It will deploy a similar marketing strategy to the one it implemented in Atlanta, the product's lead market.

PM USA introduced IQOS to the U.S. market when it launched the product in Atlanta in September. After opening the first IQOS store in Lenox Square, the company rolled out additional retail touchpoints, including a mobile pop-up unit and "IQOS Corners" located within select stores. It recently opened a second IQOS boutique in the Mall of Georgia.

"The performance of IQOS in Atlanta and other lead markets will be an important input to our future commercialization plan for the brand," Willard said. "The primary goals of the lead markets are to determine how best to communicate with adult smokers and how to scale our efforts." 

IQOS is an electronic device that heats tobacco-filled sticks wrapped in paper to generate a nicotine-containing aerosol. Under an exclusive licensing agreement with Philip Morris International (PMI), PM USA is commercializing IQOS in the U.S. with Marlboro Heatsticks.

PMI has filed a Modified Risk Tobacco Product application for IQOS with the U.S. Food and Drug Administration (FDA); the application is pending.

"We are optimistic about the prospects of IQOS receiving this modified risk authorization," Willard said. "Additionally, we are encouraged that the FDA's draft PMTA [Premarket Tobacco Product Application] rules include a special pathway for technological changes to previously authorized products, which could support bringing newer versions of the IQOS device to market."

Based in Richmond, Altria's wholly owned subsidiaries include PM USA, U.S. Smokeless Tobacco Co. LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Ste. Michelle Wine Estates Ltd., and Philip Morris Capital Corp. The company holds equity investments in Anheuser-Busch InBev SA/NV, Juul Labs Inc. and Cronos Group Inc.