--Philip Morris this year will kick off round of studies for new
tobacco products
--Consumers showing greater willingness to try alternatives to
conventional cigarettes
--U.S.-focused Altria also developing new products
By John Kell
Philip Morris International Inc. (PM) is kicking off a round of
clinical studies this year for new tobacco products, with plans to
commercialize those products as soon as 2016.
In June, the maker of Marlboro and L&M cigarettes sold in
markets outside the U.S. began to tout the development of
next-generation products that can offer new ways to consume
nicotine. The initiative comes as consumers are showing a greater
willingness to try alternatives to conventional cigarettes,
including snus and e-cigarettes.
"We are initiating eight clinical studies this year in different
locations and with different population groups and plan to expand
the testing in 2014," said Chief Financial Officer Jacek Olczak
during a presentation at the Consumer Analyst Group of New York
conference in Boca Raton, Fla.
Mr. Olczak said an exploratory clinical study launched last year
yielded top-line results that were in line with the company's
expectations and modeling. He said Philip Morris will also begin
behavioral research to determine how smokers understand the new
products Philip Morris is developing. That research will be used
for marketing purposes.
To manufacture those products, Philip Morris is weighing sites
in Europe and could build one or two facilities for the initiative.
Philip Morris expects to spend EUR500 million to EUR600 million
over a three-year period.
Analysts have said Philip Morris has a good track record when it
comes to new-product development, pointing to success the company
has had selling capsule products.
The new-product development comes as industrywide cigarette
volume has slumped in the European Union, in particular southern
European countries, where unemployment is high. Philip Morris has
sought to increase exposure to emerging markets, especially in
Asia, where adult populations are rising.
Altria Group Inc. (MO), which sells Marlboro and L&M
products exclusively in the U.S., on Tuesday told analysts that
domestic tobacco consumers were also looking to alternative
products. The domestic market has seen stronger demand for
smokeless tobacco and cigars in recent years, while shipments of
traditional cigarettes have declined.
"We are closely monitoring adult tobacco consumer interest in
alternative tobacco products, and our companies are working
internally and through partnerships to develop innovative new
products for them," said Altria Chief Executive Marty
Barrington.
Shares of Philip Morris were up 0.9% to $92.11 in recent
trading, while Altria is up 0.5% to $34.94. Both stocks have
outperformed the broader market in 2013.
Write to John Kell at john.kell@dowjones.com
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