Marlboro Isn't Going Out of Business, Cigarette Company Shifts Gears

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Jul. 26 2021, Published 10:45 a.m. ET

Publicly traded tobacco company Philip Morris International Inc. (NYSE:PM) has a market cap above $150 billion and most of that is thanks to Marlboro. The cigarette brand is the parent company's most widely known and best-selling product.

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Is Marlboro going out of business? Not quite. However, Marlboro plans to restructure in a major way over the next decade.

Marlboro to stop selling cigarettes in the U.K.

Marlboro has sold cigarettes in the U.K. for more than a century, but that legacy is coming to an end. Over the next 10 years, it will phase out Marlboro cigarettes on U.K. shelves. Philip Morris CEO Jacek Olczak is working to lobby against his own products in an effort to align the company with modern views on tobacco.

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Much to consumers' surprise, Marlboro has hopes of transforming itself into a health and wellness company. This seems to juxtapose its core business of cigarette and tobacco sales, but that isn't stopping Marlboro from making the move.

What will Marlboro sell instead?

How does it make sense for Marlboro to close out its core products? It has to do with the brand's shift in commerce.

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In lieu of cigarettes, Marlboro will focus on alternative devices. This primarily includes e-cigarettes, vapes, and other heated tobacco options.

Research is conflicted about whether these alternative products are actually safer than cigarettes. Stricter regulation could ensure that unhealthy chemicals stay out of the products, but an e-cigarette is still a type of cigarette. While they are considered to be less harmful, the fact remains that less harmful doesn't equal safe.

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It's hard to trust a cigarette company when it comes to health safety research, so external data will be crucial to Marlboro's pivot.

Will Marlboro stop selling cigarettes everywhere?

If you grew up in the era of the Marlboro Man—or during a time when the cigarette company gifted loyal (addicted) customers with branded gear like beach towels and blow-up boats—Marlboro can feel integral to American culture.

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With the company planning to halt all cigarette sales in the U.K. over the next 10 years, you might wonder if that trend will extend across the pond. 

For now, Marlboro will continue to sell cigarettes in the U.S., but that reality could be short-lived given the fact Olczak himself says cigarettes should be banned.

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How Philip Morris (PM) stock is responding

Marlboro's parent company Philip Morris has been publicly traded since 2008. Despite the fact that it isn't eligible for ESG involvement or other thematic criteria that bans cigarette stocks, the shares have managed to rise 25 percent over the last year.

Philip Morris shares are down marginally on July 26. Marlboro's announcement of its U.K. exit hasn't caused PM stock to make any dramatic moves. Investors are likely waiting to see what Marlboro plans to do in order to execute their long-term plan of getting cigarettes off of shelves.

Whatever the case, Philip Morris's shift was inevitable. One can only thrive so long on legacy when modern standards are pushing back.

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