November 20, 2013 / 7:09 PM / in 4 years

Marlboro maker Philip Morris to enter e-cigarette business

(Reuters) - Philip Morris International Inc (PM.N) plans next year to enter the electronic cigarette business, a $2 billion-plus global market identified by the maker of Marlboro cigarettes as its “greatest growth opportunity”.

A Marlboro cigarettes pack, a brand of Philip Morris Tobacco, lies next to an empty coffee cup at a cafe in central Sydney June 27, 2011. REUTERS/Daniel Munoz

Speaking to investors in New York, Philip Morris Chief Executive Andre Calantzopoulos said the company would enter the e-cigarette business in the second half of 2014 to tap fast-growing demand for a less harmful alternative to cigarettes.

The world’s largest listed tobacco company will launch a new range of products, called “Reduced-Risk”, Calantzopoulos said at a conference. The company, which sells to countries outside the United States, will also spend more on research and development.

“2014 will be a key investment year behind our Reduced-Risk products, our greatest growth opportunity in the years to come,” he said.

Market consultant Euromonitor estimates the world market for electronic cigarettes was more than $2 billion last year, with the United States accounting for a quarter of that.

The market is growing at breakneck speed. Some analysts predict e-smokes could outsell conventional cigarettes within a decade, particularly as Big Tobacco grapples with declining sales due to government regulation and health-aware consumers.

Yet e-cigarettes - battery-powered metal tubes that turn nicotine-laced liquid into vapor - are far from universally accepted as a public health tool.

Regulators are agonizing over whether to restrict them as “gateway” products to nicotine addiction and tobacco smoking, or embrace them as treatments for would-be quitters.

A big issue is the lack of long-term scientific evidence to support the safety and effectiveness of e-cigarettes, prompting critics like the British Medical Association (BMA) to warn of the dangers of their unregulated use.

CELEBRITY E-SMOKERS

Celebrity endorsements from Courtney Love, Leonardo DiCaprio and others have provided further inducement to the makers of iconic cigarette brands to invest.

Imperial Tobacco Group IMT.L, the world’s No. 4 international tobacco company, has announced plans to launch two electronic cigarettes in fiscal 2014.

Lorillard LO.N, known for its Newport and Kent cigarette brands, paid $135 million to acquire Blu Ecigs in 2012 and last month acquired Britain-based e-cigarette maker SKYCIG.

Other leading tobacco companies, including British American Tobacco (BATS.L) and Camel cigarette maker Reynolds American RAI.N, are also placing their bets on e-smokes.

Philip Morris said on Wednesday it estimated the retail sales value of the eight largest e-cigarette markets worldwide at around $2.5 billion, with nearly half outside the United States and China.

Philip Morris also raised its full-year earnings forecast to $5.37-$5.42 per share from $5.35-$5.40, citing a reduced impact from unfavorable exchange rates.

Analysts on average were expecting Philip Morris to earn $5.39 per share, according to Thomson Reuters I/B/E/S.

The company’s shares were down 2.5 percent at $89.18 on Wednesday afternoon on the New York Stock Exchange.

Writing by Robin Paxton; Editing by Kirti Pandey and Saumyadeb Chakrabarty

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