Tobacco giant Altria Group Inc. is planning a wider rollout of the IQOS device, an alternative to conventional cigarettes, even as the COVID-19 pandemic seems to have slowed a long-term decline in cigarette smoking.
Henrico County-based Altria, the parent company of cigarette maker Philip Morris USA, is planning a larger rollout of IQOS, a device that heats tobacco instead of burning it.
Earlier this month, the U.S. Food and Drug Administration allowed the company to sell IQOS as a “modified risk product,” meaning the company can communicate to consumers that IQOS offers reduced levels of harmful and potentially harmful chemicals.
The company has been selling IQOS in the Atlanta and Richmond markets since last year. The store in the Richmond area is in Carytown.
Last week, Altria introduced IQOS in Charlotte, N.C.
William F. “Billy” Gifford, Altria’s chief executive officer, said Altria plans to introduce the product in four more markets — for a total of seven — over the next 18 months. Altria has an exclusive agreement with its former subsidiary company, Philip Morris International, to sell the device in the U.S.
Altria also on Tuesday reported profit for the second quarter of 2020 of $1.94 billion, down about 2.7% from the second quarter of 2019.
The company’s cigarette shipment volumes declined by 8.8% in the second quarter of 2020 and fell 1.9% for the first half of the year, but those declines were at a slower pace than expected.
Altria now expects U.S. cigarette unit sales to fall by 2% to 3.5% this year, compared with a previous projection of a 4% to 6% decline.
Increased cigarette sales seem to have been supported by federal government stimulus checks that have gone to U.S. households, along with enhanced unemployment benefits including an extra $600 per week for jobless people.
“While the pandemic led to historic unemployment rates, federal government efforts through stimulus checks and increased unemployment benefits helped to ease economic hardship for low- and middle-income Americans,” Gifford said in a conference call with industry analysts on Tuesday. “These efforts have likewise benefited adult tobacco consumers.”
Smokers also may have more money to spend on cigarettes because social distancing rules means people are traveling less and spending less on entertainment, he said. “We also believe fewer social engagements allowed for more tobacco usage occasions,” he said.
The company also has noted a trend of more smokers over the age of 50 switching back to conventional cigarettes from electronic cigarettes — commonly known as vaping products — in recent months.
Gifford said the company believes that growth in the e-vapor category “may encounter a pause in the next several years” because many products in that category could be removed from the market. Manufacturers are facing a requirement to submit products to the FDA for review by Sept. 29.