Philip Morris Says It's Killing Cigarettes. Its Cigarette Revenue Is Still Growing.

In November 2014, Philip Morris did not launch IQOS to the world. It launched it to a single Japanese city. A heated-tobacco device that warms a stick instead of burning it went on sale in Nagoya, with a simultaneous pilot in Milan, and national Japanese rollout only the following year.⁴ This is not how a confident company behaves when it believes it has the future of nicotine in its hand. It is how a company behaves when it is testing exactly where, and only where, the rules will let it sell something new.

The official story is that the world's largest tobacco company decided to kill its own product. PMI says it is engineering its own decline - deliberately cannibalizing cigarettes with smoke-free alternatives. Smoke-free products reached roughly 39% of 2024 net revenue, with an estimated 38.6 million adults using them across 95 markets.¹ By any normal reading, that is one of the most aggressive acts of self-cannibalization in corporate history. The trouble is that the cigarette business it is supposedly cannibalizing kept growing.

The business it claims to be killing is up 4%

Here is the number that breaks the narrative. In full-year 2024, while smoke-free products climbed to 39% of revenue, PMI's combustible net revenue grew 4.0% - and 5.9% organically. In the fourth quarter, combustibles grew 6.2% organically.⁶ Cigarette volumes are softening, yes, but the dollars are rising, pushed up by price. A company genuinely destroying its core product does not report its core product as a growth engine. The cannibalization framing makes PMI sound like it is sacrificing the present for the future. The results say it is being paid twice: a maturing cigarette business that still raises prices faster than it loses smokers, and a smoke-free business growing on top of it.

So if it isn't cannibalization, what is it? The real mechanism is geographic, not generational. IQOS thrives where regulators permit heated tobacco - Japan most famously, where the device found a culture and a rulebook ready to receive it. In markets where IQOS cannot be sold, cigarette volumes and pricing stay robust: PMI's own Q4 2024 results attributed combustible revenue growth explicitly to "growing industry volumes in markets where smoke-free products are not allowed, including Turkey, India, Brazil and Vietnam."⁶ PMI isn't destroying its cigarette business so much as arbitraging the gap between markets that allow smoke-free products and markets that don't. Where the new product is legal and accepted, it migrates smokers. Where it isn't, the old product keeps printing. The company collects the spread.

ZYN was the future PMI bought, not the one it built

The other half of the smoke-free pivot is a small white pouch you tuck under your lip, and it is worth being precise about its parentage. ZYN was developed and owned by Swedish Match AB long before PMI was in the picture. PMI did not invent it; it acquired it, through a public cash offer for Swedish Match that opened at SEK 106 a share in May 2022, was raised to a best-and-final SEK 116, and closed on November 25, 2022 - valuing the target at roughly US$16 billion.³ This matters because the conventional telling treats ZYN as proof of PMI's innovation engine. It is better read as proof of PMI's checkbook. When the company could not build the future fast enough, it bought a company that already had.

And the purchase is performing. In Q4 2024, U.S. ZYN shipments hit nearly 165 million cans, up almost 42% year-over-year, while full-year oral smoke-free volume rose nearly 28%.² The trajectory steepened into 2025: Q1 U.S. ZYN shipments reached 202 million cans, a 53% jump year-over-year.¹⁰ PMI's full-year 2025 guidance called for 780 to 820 million cans - representing growth of 34% to 41% versus 2024.⁷ Those are the curves of a company that found, rather than created, its second act - and timed the acquisition to ride it.

But Japan's cigarette sales really did fall off a cliff

The strongest objection to all this is Japan, and it is a fair one. After IQOS arrived, the country's per-capita cigarette decline went from a gentle slide to a collapse: the annual decline rate accelerated from −1.5% in 2011–2015 to −10.5% in 2015–2018, the very window of rapid heated-tobacco growth, with cigarette sales down 52.7% from 2011 to 2023.⁵ That looks like clean substitution - smokers switching, cigarettes dying, exactly the story PMI tells. If self-cannibalization is a myth, Japan is the inconvenient counter-evidence.

Except the cleanest part of the story is the part the evidence can't support. A 2026 scoping review in Nicotine & Tobacco Research notes that those sales analyses 'do not distinguish the role of cigarette prices, prevalence versus quantity purchased, or dual cigarette-HTP versus exclusive cigarette use.'⁵ In plain terms: we don't know how much of the cigarette decline was IQOS converting smokers, how much was tax-driven pricing, and how many people simply use both. Independent work has found considerable dual-use - multiple studies document IQOS users who continue smoking cigarettes concurrently, with some researchers characterizing HTPs as complements to cigarettes rather than substitutes.⁹ A leaked 2019 Philip Morris Japan strategy document, analyzed by the watchdog STOP, showed the company planning to lobby for IQOS use in smoke-free spaces and favorable taxation while sustaining its cigarette market position - the two products as a portfolio, not a relay race.⁸ Japan didn't prove cannibalization. It proved a regulatory environment that let one product grow without forcing the other to die.

PMI deserves real credit: the smoke-free pivot is financially validated, accretive to gross margin, and not a vanity project. But the word 'cannibalization' flatters it. A cannibal eats its own to survive. PMI is doing something colder and smarter - selling the future where the future is legal, and the past everywhere else, and counting both. The genius was never killing the cigarette. It was discovering that in a world of mismatched rulebooks, you never have to.