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On the Call: Philip Morris Int'l CFO Olczak


Tobacco companies including Philip Morris International Inc. have ventured into smokeless tobacco and other nicotine products as tax increases, health concerns, smoking bans and stigma cut into demand for cigarettes.

The seller of Marlboro and other cigarette brands outside of the U.S. purchased the rights to a technology that lets users inhale nicotine without smoking in 20111 and is developing several other next-generation products, and "modified-risk" tobacco products that can reduce the health risks for consumers, as alternatives to conventional cigarettes.

Many other tobacco companies in the U.S. and abroad also have invested in cigarette alternatives, including electronic cigarettes, battery-powered devices that heat a liquid nicotine solution, creating vapor that users inhale. But Philip Morris International hasn't been sold on the fast-growing e-cigarette category.

The company has said it expects to launch the first of its next-generation products between 2016 and 2017, which could include one that heats tobacco in a cigarette with a controlled heating mechanism or an aerosol nicotine-delivery system.

In a conference call with analysts on Thursday regarding Philip Morris International's second-quarter earnings, Chief Financial Officer Jacek Olczak commented on electronic cigarettes:

It's not a product which is very close to the conventional cigarette and I think the consumers are looking for something which is at least similar. ... But it's a new category so everyone is working on how to improve it. Years from now the situation may be different but today I don't think that the product is performing well on the taste side. ... I don't think the consumer really has the confidence if what they're buying is something which they'd like to use. Today it's much more the phenomena of the price than anything else.


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