Philip Morris to Build EU Facility
Tobacco maker Philip Morris International Inc. (NYSE:PM) has announced the construction of a €500 million ($679.5 million) manufacturing facility in the European Union. The production plant, first of its kind in Europe, will be situated near Bologna, Italy and produce reduced risk tobacco products called ‘Next Generation Products’ (NGPs).
The construction of the plant, expected to become operational by 2016 and employ 600 people, will begin shortly. The investment in the facility with a production capacity of 30 billion units marks Philip Morris’ initiative to shift focus toward the growing alternative tobacco product category to counter dwindling cigarette shipments volumes.
The tobacco industry is facing difficult conditions owing to the ongoing anti-tobacco campaigns. Governments around the world are hiking excise taxes on cigarettes and imposing packaging and advertising restrictions on cigarette makers.
To combat the headwinds, tobacco biggies are resorting to alternative tobacco products. Philip Morris is scheduled to launch a set of NGPs in 2016, which aims to attract adult consumers while reducing the risks related to tobacco products. These products will help reinforce and expand Philip Morris’ position in the field of conventional tobacco. Moreover, in Nov 2013, Philip Morris announced that it would foray into the e-cigarette business in late 2015.
On Dec 20, 2013, Philip Morris and Altria Group Inc. (NYSE:MO) entered a strategic agreement under which the former will market the latter’s MarkTen e-cigarettes internationally. Additionally, Altria will distribute two of Philip Morris’ heated tobacco products in the United States. The heated tobacco products are claimed to be less harmful than conventional ones as they heat the nicotine instead of burning it.
Altria and Philip Morris have also decided to partner on a regulatory engagement related to the products. The two companies will also work on gaining shares as well as improving existing versions for the products. Such collaboration is encouraging as it will help the companies maintain market share amid declining volume and growing awareness against tobacco products.
Other Stocks to Consider
Philip Morris carries a Zacks Rank #5 (Strong Sell). Some better-ranked tobacco companies include Lorillard Inc. (NYSE:LO) carrying a Zacks Rank #1 (Strong Buy). Another consumer staple company worth considering is Green Mountain Coffee Roasters Inc. (NASD:GMCR) which carries a Zacks Rank #2 (Buy).
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