In the ever-evolving global tobacco landscape, two major players—Philip Morris International (PMI) and Altria Group—remain the key bellwethers, with every strategic decision they make shaping the trajectory of the industry. As both companies recently disclosed their 2024 financials, it becomes crystal clear that while the giants are still deeply rooted in traditional tobacco products, they are aggressively pivoting toward smoke-free innovations that are not only catching consumer attention but also reshaping the market.
This shift comes as consumer behavior and regulatory pressures evolve, and it’s clear that the companies’ future growth lies in the development of harm-reduction alternatives to traditional smoking. By analyzing their latest annual reports, we get a glimpse into how these heavyweights are carving out a path forward by adapting to new trends and technological advances. Here’s a closer look at the 2024 performance of PMI and Altria and what that means for the future of the industry.
PMI Sees a Robust 9.8% Increase in 2024 Revenues
Philip Morris International, one of the world’s largest tobacco companies, reported an impressive 9.8% growth in its 2024 total revenue, hitting $37.9 billion. This growth is attributed to the company’s continued success in non-combustible products like IQOS and ZYN, which are helping PMI stay ahead of evolving regulatory challenges and changing consumer preferences.
In the fourth quarter, PMI’s revenue grew 7.3% to $9.71 billion, surpassing analysts’ expectations. This strong quarterly performance was driven by increased demand for PMI’s smoke-free products. To put it simply, the future is looking smokeless for PMI.
But let’s not ignore the power of traditional products just yet—while smoke-free alternatives are on the rise, traditional cigarettes still play a major role in PMI’s revenue. However, their growth trajectory suggests that PMI is carefully preparing for a future where smoking may be a thing of the past.
Smoke-Free Products: The Secret Sauce to PMI’s Growth
The real star of the show, though, is PMI’s expanding portfolio of smoke-free products. In 2024, PMI’s non-cigarette business accounted for 39% of its total net revenue, with particularly strong performances in markets like Japan and South Korea, where the company’s IQOS and ZYN products have found their niche. IQOS alone now holds a market share of more than 29% in Japan—proving that consumers are warming up to the idea of smoke-free alternatives.
During the first quarter of 2024, PMI’s smoke-free business grew 13.6%, with a 15.6% boost in gross profit, reflecting strong demand for its heat-not-burn products and nicotine pouches. As of the third quarter, PMI shipped close to 40 billion units of smoke-free products across 92 markets. With 36.5 million adult users of its products globally, PMI is clearly positioning itself as a leader in the new, smoke-free tobacco space.
The company’s fourth-quarter performance showed a continued rise in sales, with heated tobacco products up by 5.1%, and nicotine pouches like ZYN seeing a massive 22% increase. The robust growth in these categories not only demonstrates PMI’s innovation prowess but also signals a fundamental shift in consumer demand toward products perceived as less harmful than traditional cigarettes.
Altria’s Solid 2024 Performance with a Focus on Vaping
On the other side of the Atlantic, Altria Group, a major U.S.-based tobacco company, reported a slightly lower annual net revenue of $24.02 billion in 2024, down 1.9% from the previous year. However, the company’s vape and smoke-free segment continues to be a bright spot, with a noticeable uptick in demand for its Nicotine Pouch product “on!” and other alternatives in the North American market.
Altria’s quarterly report for Q4 showed a slight increase in revenue, reflecting positive performance in its smokeless and vape segments. The company has doubled down on developing its vape line and products like its “on!” nicotine pouches, which saw a 40.2% rise in shipment volume over the year. Even though traditional cigarettes remain a significant part of Altria’s portfolio, it’s clear that smoke-free alternatives are gaining momentum.
Like PMI, Altria is actively reshaping its future with a heavy focus on innovation, particularly in the e-vapor space. The acquisition of NJOY, a major vaping company, underscores Altria’s commitment to diversifying its portfolio and staying ahead of regulatory hurdles while keeping consumer preferences at the forefront.
The Smoke-Free Revolution: New Growth Engines for the Industry
It’s increasingly clear that new forms of nicotine delivery, including heated tobacco and vaping products, are emerging as the primary growth drivers for tobacco companies. For PMI, its smoke-free products now account for 40% of the company’s total revenue, generating $14.7 billion in income—a 14.2% increase year-on-year.
Similarly, Altria’s investment in nicotine pouches and vapes has proven to be a lucrative strategy. PMI’s IQOS and Altria’s NJOY vapes continue to expand, not just in the U.S. but also in international markets, signaling that consumers are increasingly inclined to move away from traditional smoking and towards alternatives that offer fewer health risks.
Interestingly, this shift comes in the face of rising awareness about the dangers of smoking, with more and more people opting for alternatives like vapes and nicotine pouches. As these products provide nicotine without combustion, they cater to the growing demand for healthier tobacco alternatives.
Traditional Cigarettes: A Steady Decline
Despite the impressive growth of smoke-free products, traditional tobacco remains a significant revenue source for both PMI and Altria. PMI’s traditional cigarette business, particularly in emerging markets and parts of Europe, saw continued strength in 2024. However, both companies are grappling with the long-term decline in global smoking rates.
Altria, in particular, has faced a continued drop in its U.S. cigarette business, with a 1.9% decline in net revenue from traditional products. The overall trend is clear: while cigarettes continue to generate significant income, their days as the primary driver of growth for tobacco companies are numbered.
Government regulation, public health initiatives, and a shift in consumer behavior are all contributing to this decline. This makes the pivot to smoke-free products not just a strategic decision but a necessary one for survival in an increasingly health-conscious world.
R&D and Innovation: The Future of the Industry
Both PMI and Altria understand the importance of innovation in staying competitive. PMI has invested over $14 billion in research and development for its smoke-free products since 2008, a move that underscores its commitment to maintaining a leadership position in the evolving market.
Altria has similarly ramped up its R&D spending, focusing on enhancing the quality of its vape products and developing new nicotine delivery systems that meet the demands of the modern consumer. The company’s acquisition of NJOY, along with its investment in flavor-rich vape products, showcases Altria’s strategy to diversify and innovate in the face of regulatory challenges.
As both companies have demonstrated, a focus on innovation is crucial for keeping up with market trends. As the demand for smoke-free products grows, ongoing R&D efforts will play a central role in ensuring that tobacco companies maintain consumer loyalty and stay ahead of competitors.
Consumer Behavior Shifts: Health Awareness on the Rise
What’s clear from both companies’ reports is that consumer behavior is shifting toward healthier, less harmful alternatives. Consumers—especially younger generations—are increasingly aware of the health risks associated with smoking, leading to a growing demand for products like vapes and nicotine pouches.
This change in consumer preferences has pushed tobacco companies to accelerate their investments in harm-reduction products. PMI’s IQOS and Altria’s NJOY vapes are prime examples of how these companies are capitalizing on the growing trend of health-conscious nicotine consumption.
Despite these advancements, the rise of illicit tobacco products and the increasing regulation of the industry are still major hurdles. For example, both PMI and Altria are dealing with the impact of flavor bans and tighter regulations on vape products in various markets. Yet, the companies continue to push forward, focusing on innovation and market adaptation to keep pace with these changes.
Global Strategy: Expanding Reach and Mitigating Risks
PMI’s global strategy has proven highly effective in mitigating risks associated with relying too heavily on any one market. By expanding its presence in 95 countries and increasing its number of smoke-free users to 38.6 million globally, PMI has reduced its dependency on any single region and positioned itself as a formidable player in global tobacco.
Altria, while more focused on the U.S. market, has similarly worked to strengthen its position in the North American smoke-free sector. Through acquisitions and strategic partnerships, Altria is building a stronger portfolio in vaping and nicotine alternatives, ensuring that it can compete with both domestic and international players.
The Road Ahead: Navigating the Challenges
The future of the tobacco industry is undoubtedly tied to the success of smoke-free products. However, as the industry evolves, it faces significant regulatory and competitive challenges. Flavor bans, age restrictions, and increasing regulation on e-cigarettes and vapes are just a few of the hurdles tobacco companies must navigate.
For PMI and Altria, the key to success will be innovation, strategic acquisitions, and a relentless focus on meeting consumer demand for healthier alternatives. By continuing to lead the way in developing smoke-free options, they are not only ensuring the longevity of their businesses but also shaping the future of the tobacco industry as a whole.
In the coming years, as consumers become more health-conscious and regulators ramp up their oversight, the industry will likely continue to shift toward harm-reduction alternatives. This will be the ultimate test for these tobacco giants: can they continue to innovate and lead the market, or will they be left behind in the smoke? Only time will tell.
