Altria Assembles Team for iQOS Commercialization

RICHMOND, Va. — Altria Group Inc. continues its innovation journey as it assembles a team to work on the commercialization of iQOS in the United States.

Altria is working with Philip Morris International (PMI) to bring the heat-not-burn product to the U.S. In early December, it submitted a Modified Risk Tobacco Product (MRTP) application for its electronically heated tobacco product with the Food and Drug Administration's (FDA) Center for Tobacco Products, as CSNews Online previously reported.

The leading tobacco companies in the U.S. and on the international scene initially paired up to establish a framework to commercialize reduced-risk products and electronic cigarettes in late 2013.

According to Altria President and CEO Marty Barrington, the Richmond-based company's Philip Morris USA operating company is developing U.S. plans for iQOS, as PMI simultaneously readies to file the premarket tobacco product application during the first quarter.

"A commercialization team is now dedicated to preparing for the launch of iQOS in the U.S., including working closely with PMI, as it gains trade and consumer insights from other markets," Barrington said during Altria's earnings call on Feb. 1.

In addition to consumer insights, Altria is going to look at each market and any parallels, and extract trade insight as well, he added.

"For example, if one goes to Italy, as you know, it's quite a dark market. And because iQOS requires a fair amount of exposition to the consumer to understand what it is, I think that PMI would be the first to tell you that Italy's been a bit more challenging," Barrington detailed. "There are other markets that are more open in terms of the ability to communicate with the consumer. You see the results in Japan and you know the regulatory situation there."

PM USA's task is to read all the data and, combined with its expertise in the U.S. market, "weave that into a plan that will meet our goals," he noted.

"What we're going to try to do is to introduce adult smokers to the product, try to explain what it is and its attributes and to give them an opportunity to see if it's for them," the chief executive explained. "And we've got very good plans coming together on that and many of which, I think, are drawn from the international market experience."

Any commercialization, though, will have to wait until the FDA rules on the iQOS applications.

"The object is to make sure that we get the product to adult smokers and explain how it works and what its attributes are so that they can make a choice about whether it's for them. And there's a whole range of activities that you can use to do that," Barrington said, declining to lay out details for competitive reasons.

"We're well underway. We have a crackerjack team on it. We're very excited about the technology. We're working closely with PMI. So from my read, I think all the signals from a commercial point of view are in the right direction and we're just going to have to work through the FDA process," he added.

And given the company's success with its Marlboro mobile app, digital could be one path to reach adult tobacco users, he acknowledged. 

"We have a strong digital marketing team and I'm really proud of the work they're doing on the core business," he said, adding if you're trying to communicate and educate consumers about products that digital is the way to go. 

"It has to be done empirically and responsibly of course and I don't think anybody would be surprised to learn that we're considering that and others," he said.

Barrington added that Altria has "a significant competitive advantage" in its sales force.

"It's large, they're very talented, they're very well led and so naturally we would be thinking as we go to market about how we can use that to help iQOS be successful. I think we have excellent relationships with our trade partners. That's another area that's going to require a lot of thinking about how we take iQOS to market and working with our trade partners," he explained.

"So those are all areas of inspection. And you're thinking about it the right way, which is, what is it that we have that we can use to the best effect to make iQOS a big success," the chief executive noted.

Altria is the parent company for Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Co., Nu Mark and Ste. Michele Wine Estates. The brand portfolios of Altria's tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, MarkTen and Green Smoke.