In what may be an early vindication of Philip Morris's e-cigarette
strategy, the iQOS accounted for 2.2 percent of Japan's tobacco
sales in the quarter ended June 30, a company spokesman said.
That share had climbed to 2.7 percent by the end of June after
Philip Morris rolled out the 9,980 yen ($98.53) electronic smoker in
late April accompanied by "HeatSticks", which cost the same as
"The figures clearly show that iQOS is stealing a chunk of the
rolled tobacco market," said Masashi Mori, analyst at Credit Suisse
Securities in Tokyo. Japan's overall cigarette sales in June shrank
On Friday, JT said revenue from July cigarettes sales in Japan
dipped by 3.4 percent to 53.4 billion yen.
Unlike conventional e-cigarettes that vaporize a nicotine infused
liquid, iQOS produces a smokeless aerosol by heating tobacco leaf
packed into stubby cigarettes inserted into the device.
So far it has tested the gadget in seven countries including cities
in Switzerland and Italy. Japan, which has suppressed e-cigarette "vaping"
by regulating nicotine liquids under pharmaceutical laws, is the
only country where it is sold nationwide.
Demand for iQOS, which is made in Malaysia, has outstripped demand,
leaving Philip Morris unable to make the most of its early entry
into Japan. Some limited-edition IQOS models are selling online for
as much as 80,000 yen.
"When Philip Morris can supply enough to meet demand then its push
in to the market is very likely to accelerate," UBS Securities Japan
analyst Naomi Takagi said.
E-cigarettes assuage some smokers' health concerns and ease social
stigmas attached to tobacco. Tobacco firms are battling to take an
early lead in the emerging market as overall cigarette sales shrink
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Sales of e-cigarettes, however, are booming, growing five times to
$8 billion in 2014 from 2010, according to research company
Euromonitor. The market in 2020 is likely to be 20 times the 2010
level, predicts Euromonitor. Global cigarette revenue is about $750
Philip Morris plans to widen sales of iQOS to 20 countries by the
end of the year.
Former state tobacco monopoly Japan Tobacco, which has 60 percent of
its domestic market, is struggling to counter the challenge with its
own device. JT's electronic cigarette stick, dubbed the Ploom TECH,
creates a vapor from a liquid that is passed through granulated
Yet the world's No. 3 cigarette maker has so far been unable to
match iQOS's nationwide launch, with no clear indication yet when it
will have sufficient production output to do so.
"It doubtful JT will manage a wider launch before the end of the
year," Takagi at UBS Securities said.
($1 = 101.2900 yen)
(Writing by Tim Kelly; Editing by Stephen Coates)
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