Philip Morris International (PMI) gave its earnings outlook a positive bump after “sustained momentum for its popular Zyn pouch brand powered its profit and revenue higher in the first quarter,” reported the Wall Street Journal. For the first three months of the year, the company recorded a quarterly operating profit of $3.5 billion, up 16% from a year earlier.
In an earnings call earlier this week, PMI said sales of its smoke-free products now account for 42% of total net revenues and 44% of total gross profit.
“We remain confident in our ability to deliver superior results, despite an uncertain and volatile global economic environment,” Chief Executive Jacek Olczak said.
Shipments of Zyn topped 200 million cans, a 70 million increase year over year, “blasting past the company’s initial expectations as it brought more production capacity online,” said the Associated Press. PMI stated that “this represents 53% growth, exceeding our initial expectations, as production capacity increased ahead of schedule in the latter part of March, enabling some initial replenishment of distributor inventories, and demand remained strong.”
On the call, Emmanuel Babeau, PMI CFO, stated that “with category offtake growing at around plus 30% to 35% while the leading brand is supply constrained, we expect ZYN offtake to gradually accelerate in the coming months as in-store availability improves and we reactivate commercial and marketing initiatives. We remain excited about the growth prospects of this dynamic category and its potential to switch legal-age consumers from cigarettes and other traditional forms of tobacco.”
In Q4 2024, PMI saw quarterly shipments of HTU and oral smoke-free products exceeding 40 billion units for the first time, driving its smoke-free business to a “superior performance,” with full-year net revenues increasing by 14.2%. PMI said it has 38.6 million estimated adult users of its smoke-free products (up by 5.3 million versus December 2023).
Last month, PMI began selling its IQOS heated tobacco device in Austin, Texas after a successful pilot. IQOS also posted strong results internationally, “driving the growth of the global heat-not-burn category, where we hold approximately 77% volume share.” In Japan, IQUS in-market sales grew by an estimated 9.3%, according to PMI, and in Europe the figure was 7.4%.
In March, Bloomberg reported that PMI was planning to sell its U.S. cigar business as part of its move towards smoke-free products. That is on hold now, according to the company. “For U.S. cigars, following a thorough review and evaluation of strategic options taking the current environment into consideration, we have decided not to pursue a sale or separation of the business at this time,” the company stated.
Read more about the growth of smokeless tobacco in the January 2025 issue of NACS Magazine feature “Seeing Through the Smoke.”