PMI is adjusting its consumer value proposition without changing prices.
– IQOS remains a significant growth driver for PMI despite regulatory challenges.
– The company is focusing on marketing its products as lower-risk alternatives.
– PMI emphasizes dividends as a primary method of returning cash to shareholders.
– There is cautious optimism about growth in the smoke-free product category.
▸ Full transcript
and back on the growth. So I'm very optimistic about this and potential this year and beyond. We're adjusting obviously the value proposition to the consumers. We're going from a 15 to 20, not adjusting the price per can. So there is extra value to the consumers, but also reacting to the current market dynamics and market situations. Let's remember when we bought with this match four years ago. Zin was essentially the only or a lone player in the category. I mean, today you have other market participants, so you need to adjust your commercial and marketing strategy. But again, I think this is one of the best acquisitions PMI has done in its history. On the marketing strategy, is there any, I saw that the FDA has actually given in that modified risk order to kind of basically legally tell potential buyers that this is a lower risk nicotine product. Are you going to highlight that in your campaigns? Because I was taking a look at, you know, some of the, when it clicks, which just seems to be more lifestyle based, doesn't really get into some of the health issues. Is there a deliberate reason why you're not leaning more into trying to sell maybe the relative health differences of these smokeless products relative to cigarettes? Yeah, I guess you know it's irrelevant information obviously to smokers, not the questions, you know, through each channels and etc. You want to deliver this. I mean, I think also it's have normalization of the new category and the further incentive for those who very much you know using still combustible products to consider and try and move to this category. So give me a sense here about IQOS. It has done pretty well overseas. This is obviously the heated tobacco product. But there's still some concerns about how the excise tax is and some of the increasing regulation on some of those products might affect sales both internationally as well as any potential rollout here in the United States. Yes, so, you know, I cause is obviously today the growth engine of our smoke free propositions. I mean, it's a key contributor to us achieving more than a 40, 42% of revenues coming from a smoke free. Continuous growth in the majority of geographies. We have a particular situation this year in Japan and there was quite a heavy, if you like, excise increase, which obviously followed by the price increase. So category has temporary slowdown. It's growth, I guess, return it, sure. But so far, so good. And I believe once we put the 26 behind us, we're going to 27. I guess we'll resume. It's a past strong growth. Give me a sense here as to what you're waiting for to hear from the FDA to either be able to sell alumna here or... is for the dividends. And I think we have demonstrated since 2008 when we become the independent company that dividends is for us the most important avenue of generating returns to investors. Now, obviously it is a highly cash-generated business with the very high attractive gross margins and the net margin. So obviously once your balance sheet is into, you know, comfortable space. I mean, absence of ideas of how to allocate the capital and the buy-back is, you know, becoming a point on the agenda. But as I said, I mean, for us, the most preferred way of returning cash to shareholders for the division. Yatso Golchuk there, the group CEO for Philip Morris International, talking about that company's continued expansion. Now while that stock is up there are some two big catalysts coming up after the bell tonight. Oracle and Adobe expectations are high but as you can see the stocks are low. We're going to catch up with Ana Rock-Brona when we come back after the break as part of our stock of the hour and to set you up for that earnings report. This is Bloomberg. from the home of Active ETFs. in Bloomberg Insight. Join us. Bloomberg Power Players New York, September 10th, 2026. Some see heroes. Others only egos. We see the era of billionaire athletes. A fad to some, the future of money to others. We see cryptos trillion dollar swings. The end of jobs, or the end of human struggle. We see the endless funds fueling the AI hype. While others follow the noise, we follow the money.
Analysis
Philip Morris International (PMI) is optimistic about growth, adjusting its value proposition to consumers without changing can prices, reflecting a response to market dynamics. The company highlights the importance of its smoke-free products, particularly IQOS, which is a key revenue driver despite regulatory challenges in certain markets like Japan.
Smart money should note PMI's strategic focus on marketing its products as lower-risk alternatives to combustible tobacco, which could attract smokers looking for healthier options. Additionally, the company's commitment to returning cash to shareholders through dividends indicates a strong cash-generating business model, positioning it favorably in the current market environment.