Philip Morris, Altria Deal Seen as Public Health ‘Nightmare’

(Bloomberg) -- Philip Morris International Inc. and Altria Group Inc.’s potential remarriage has public-health groups concerned about one behemoth dominating the most popular products used to get a nicotine fix.

The potential combined tobacco group with a market value of nearly $200 billion would create a patchwork family consisting of the three leading brands in cigarettes, vaping and heated tobacco.

“It would be the worst nightmare for public health if they were to join forces,” Matt Myers, president of the Campaign for Tobacco-Free Kids, said in an interview Aug. 5, three weeks before the merger talks were announced. “It would bring Marlboro, IQOS and Juul under one company that would dominate all three markets. They won’t care what people use as long as they use one of them.”

Big Tobacco has been facing a decline in cigarette sales in the developed world while dealing with the rise of smoking alternatives and a flurry of regulations. Philip Morris already owns the world’s most popular heated-tobacco product, IQOS, and enjoys almost 80% global market share in that category. The company has repeatedly said over the past year it’s trying to lead a move to a smoke-free world and that it’s developing products that are a better option than cigarettes.

Myers, in a phone interview Wednesday, said that reuniting the companies would give the new entity additional power to oppose and undermine government policy.

While the creation of a huge tobacco company wouldn’t hinder anti-smoking efforts in England or other countries with comprehensive strategies, it could affect them elsewhere, according to Deborah Arnott, chief executive of Action on Smoking and Health, a London-based advocacy group.

“In the many places where tobacco consumption is still on the increase, particularly in low- and middle-income countries, this merger could make it more, not less, difficult for governments to implement strict anti-smoking regulations like ours,” she said.

Philip Morris has invested billions of dollars in IQOS, and Altria has the right to start selling the device in the U.S. this year, and will start with a store in Atlanta next month. Altria has also invested about $13 billion in Juul, which could speed up its expansion worldwide with Philip Morris’s help. About 8 million smokers have switched to IQOS products, according to the company.

“We would strongly prefer these companies remain separate,” said Cliff Douglas, vice president of tobacco control at the American Cancer Society. If they merge, “they would have every incentive to use their strengthened position to ensure that e-cigarettes are designed and marketed in a way that constitutes no real threat to cigarettes.”

Philip Morris declined to comment, while Altria didn’t respond to a request for comment.

Investors have occasionally speculated about a remerger over the past several years as U.S. cigarette lawsuits have subsided and the number of possible acquisition opportunities in the industry declines.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, Lisa Wolfson

©2019 Bloomberg L.P.