Philip Morris International (PM) is a global tobacco manufacturer with 6 of the world’s top 15 international brands, including Marlboro, the number one cigarette brand worldwide by volume. PM was spun off from Altria on 28 March 2008. In 2019, PMI held around 26% of the total international cigarette market excluding the US & China. PM’s sales exposure in 2019 was 33% to the EU, 11% to Eastern Europe, 14% to Middle East & Africa, 17% to South & Southeast Asia, 18% to East Asia & Australia, and 7% to Latin America and Canada.
Recent news reports suggest the Biden administration is considering stricter regulations on tobacco products, including a ban on menthol-flavored cigarettes and a reduction in nicotine content to nonaddictive levels.
While these reported initiatives have yet to be confirmed, such amendments to tobacco regulations could take several years. We therefore think that, for the time being, tobacco companies will continue to generate strong cash flows and profits and be able to maintain their current investment status.
Longer-term investors will benefit from a performance pickup given the regulatory uncertainties in the US and the market’s growing ESG focus, which both are short-term concerns.