IQOS ILUMA is the flagship (latest & greatest) IQOS model, first launched in Japan, the world’s largest heated tobacco market, on August 17, 2021. Philip Morris International (PMI) will launch IQOS at-scale in the US (i.e. in an extended geography with full-scale investment) only after the authorization of IQOS ILUMA by the US FDA – which is not expected before the second half of 2025. Assuming that PMI kicks off the IQOS ILUMA commercialization in the US as quickly as possible after the US FDA authorization, we project IQOS to reach nationwide distribution only in 2027 (i.e. in 18 months, even based on an optimistic scenario). Thereby, most American smokers will have access to IQOS ILUMA five full years after the Japanese.
Timing is not the only limitation for the American smokers. They will also be offered a much limited portfolio of tobacco sticks. Only the specially designed tobacco (nicotine) sticks are used with IQOS ILUMA devices and TEREA is the largest heatstick brand for IQOS ILUMA (- ahead of SENTIA, DELIA and LEVIA). In Japan, PMI offers a range of more than 20 TEREA stick variants. These variants cover a wide range of flavors (e.g. tobacco, fifty shades of menthol, fruity & floral notes, aromatic menthol, botanicals) as well as crushable capsule options for an extra blast of menthol or aromas. Moreover, PMI is constantly launching limited editions of TEREA to test the appeal of innovative flavor dimensions – which are incrementally moving away from the traditional tobacco taste. In the US, PMI will be able to launch only the variants authorized by the US FDA based on the burdensome PMTA process. Considering US FDA’s stance of freeing tobacco (nicotine) products off the sweet, fruity & floral aromas, TEREA product range for IQOS ILUMA USA is likely to be very narrow (“boring”): a few tobacco (rich or mellow) and menthol (high or low) variants.
In terms of manufacturer’s suggested retail price (MSRP), we expect the IQOS ILUMA PRIME to retail at US$120, IQOS ILUMA at US$80 and IQOS ILUMA ONE at US$60 in the USA. However, in order to facilitate product trial (- to which device cost acts a barrier), PMI is likely to run massive price promotions in the form of user registration discounts and device & tobacco stick bundle offers. We believe US consumers are likely to get on hold of IQOS ILUMA ONE starter kit (i.e. device plus 4 packs of tobacco sticks) as low as $29.
