Last updated: April 2019
Suggested citation: Greenhalgh, EM. 18C. Heated tobacco (‘heat-not-burn’) products. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2019. Available from: http://www.tobaccoinaustralia.org.au/chapter-18-harm-reduction/indepth-18c-non-combustible-cigarettes/18c-1-the-heated-tobacco-product-market
Heated tobacco products were first introduced to the market by tobacco companies in the 1980s; however were initially commercially unsuccessful.1 Present-day heated tobacco products are also predominantly manufactured by tobacco companies, with Japan serving as the focal market to test the potential of such products as a cigarette alternative. Philip Morris International first introduced its iQOS (‘I Quit Ordinary Smoking’) brand in select Japanese cities in November 2014,2 and throughout 2016, manufacturers marketed several brands nationwide, including Japan Tobacco’s “Ploom TECH” device, Philip Morris International’s “iQOS”, and British American Tobacco’s “Glo” device.3 iQOS was also released in Italy and Switzerland in 2015.4 As of June 2018, heated tobacco products have been marketed in over forty countries, and it is likely that the products will continue to be introduced into new markets.1, 5
Euromonitor International estimates that the heat-not-burn market will account for 45% (US15.4 billion) of the tobacco alternatives industry by 2021.6 It is estimated that globally, nearly four million people are trying IQOS and around 8,000 smokers are converting to IQOS daily.7 The heat not burn global market grew to USD6.3 billion dollars in 2018,8 and is forecasted to grow at a compound annual growth rate of 24.39% during the next five years.9 The Asia Pacific (APAC) region led the market in 2017 with close to 86% of the global market share,10 led by Japan which accounts for approximately 85% of the global market.8
In Japan, heated tobacco products accounted for 23% of the overall tobacco market in 2018, nearly double the 12% share reported for 2017. iQOS also leads the heated tobacco market in that country with an estimated 5.4 million users representing around 76 % of the market share for the heated product category.11 However, Phillip Morris’ decline in first-quarter earnings for heated products in 2018 suggests that demand for its iQOS has waned as it has captured all of the early adopters of the iQOS and now it faces the prospect of convincing older, more conservative smokers to switch.12
South Korea has been identified as the market with the next-biggest potential for heated products. Phillip Morris reported that as of mid- 2018, the company had sold 1.9 million units of iQOS since the device launch in 2017.13 Also, the market share of Heets, tobacco sticks exclusively for IQOS use, was reported at 7.3 % in the first quarter of 2018, placing it in the top five tobacco brands in South Korea.
Phillip Morris received clearance from the US Food and Drug Administration (FDA) in April 2019 to sell their iQOS in that market.14 The FDA has not yet approved Phillip Morris’ application to market the iQOS as a Modified Risk Tobacco Product. Phillip Morris previously estimated that if the application request to market the iQOS was approved, up to 15% of US daily smokers will switch completely to iQOS, translating to about 6 million users over a seven to ten-year period.15 That figure does not include smokers who might use iQOS in addition to cigarettes.
1. McNeill A, Brose L, Calder R, Bauld L, and Robson D, Evidence review of e-cigarettes and heated tobacco products 2018. A report commissioned by Public Health England. London: Public Health England; 2018. Available from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/680964/Evidence_review_of_e-cigarettes_and_heated_tobacco_products_2018.pdf.
2. Caputi T, Leas E, Dredze M, Cohen J, and Ayers J. They're heating up: Internet search query trends reveal significant public interest in heat-not-burn tobacco products. PLoS ONE, 2017; 12(10):e0185735. Available from: http://www.ncbi.nlm.nih.gov/pubmed/29020019
3. Du L and Huang G. Fight for new cigarette substitute heats up Japan: Quicktake q&a. Bloomberg Politics, 25 June 2017. Available from: https://www.bloomberg.com/news/articles/2017-06-25/fight-for-new-cigarette-substitute-heats-up-japan-quicktake-q-a
4. Jenssen BP, Walley SC, and McGrath-Morrow SA. Heat-not-burn tobacco products: Tobacco industry claims no substitute for science. Pediatrics, 2018; 141(1). Available from: https://www.ncbi.nlm.nih.gov/pubmed/29233936
5. World Health Organization. Heated tobacco products (HTPs) information sheet. 2017. Available from: http://www.who.int/tobacco/publications/prod_regulation/heated-tobacco-products/en/
6. Euromonitor International. Latest research: What the 2017 edition tobacco data is telling us. 2017. Available from: https://blog.euromonitor.com/2017/06/latest-research-tobacco-2017-edition-data.html
7. Selby A. Could 'safer' new smoking device that heats up tobacco instead of burning it replace traditional cigarettes? Mirror, 2018. Available from: http://www.mirror.co.uk/news/world-news/could-safer-new-smoking-device-11809515
8. Uranaka T and Ando R. Philip Morris aims to revive Japan sales with cheaper heat-not-burn tobacco. Reuters, 2018. Available from: https://uk.reuters.com/article/uk-ecuador-assange-exclusive/ecuador-no-longer-to-intervene-with-uk-for-wikileaks-assange-foreign-minister-idUKKCN1MY02N
9. No authors listed. Heat-not-burn tobacco products: Global markets to 2022 featuring key players Japan tobacco, PAX labs, Philip Morris intl, and vapor tobacco manufacturing - researchandmarkets.Com Business Wire, 2018. Available from: https://www.businesswire.com/news/home/20180820005508/en/Heat-Not-Burn-Tobacco-Products-Global-Markets-2022-featuring
10. No authors listed. Global heat-not-burn tobacco products market 2018-2022 to post a CAGR of 24% over the next five years| technavio 2018. Available from: https://www.businesswire.com/news/home/20180813005318/en/Global-Heat-Not-Burn-Tobacco-Products-Market-2018-2022-Post
11. No authors listed. Can Philip Morris provide some positive IQOS news in the second quarter? Forbes, 2018. Available from: https://www.forbes.com/sites/greatspeculations/2018/07/17/can-philip-morris-provide-some-positive-iqos-news-in-the-second-quarter/#5262930c2780
12. Duprey R. Maybe Philip Morris' IQOS e-cig won't be a big hit after all. Yahoo Finance, 2018. Available from: https://finance.yahoo.com/news/maybe-philip-morris-apos-iqos-133000173.html?guccounter=1
13. No authors listed. More impressive news regarding iqos in Philip Morris' fourth quarter. NASDAQ, 2018. Available from: https://www.nasdaq.com/article/more-impressive-news-regarding-iqos-in-philip-morris-fourth-quarter-cm919448
14. Food and Drug Administration (FDA). FDA permits sale of IQOS tobacco heating system through premarket tobacco product application pathway. 2019. Available from: https://www.fda.gov/news-events/press-announcements/fda-permits-sale-iqos-tobacco-heating-system-through-premarket-tobacco-product-application-pathway.
15. Clarke T. Philip Morris sees six million US smokers switching to IQOS device if cleared. Reuters, 2018. Available from: https://uk.reuters.com/article/us-health-tobacco-pmi/philip-morris-sees-six-million-u-s-smokers-switching-to-iqos-device-if-cleared-idUKKBN1FD2Z1