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Re: PM annual investors dayFound the time to listen to the complete 6 hours of presentations at PM's investor day yesterday. I highly recommend it for anyone that wants to truly understand what IQOS is really all about, and why PM is converting their company and staking their whole future on it. The Japan situation and evolution is very instructive. Many investors think that because BAT and JTI introduced their devices Glo and Ploom, that PM now will face roughly equal competition. But that is not the case. PM's Heetstick technology is still far better than Glo & Ploom, as it is the closest to replicating the smoking experience. The true crown jewel is the Heets, not the devices. Consumers love the Heets to the extent they are buying them and actually using them in the Ploom & Glo devices. Meanwhile Glo-sticks and Ploom-sticks face the same problem that vaping products do everywhere; they provide a largely unsatisfactory experience for existing smokers. With the right marketing and incentives, JTI and BAT can get smokers to try them, but smokers do not fully convert to them like they do with Heets. However, as Rice1 pointed out when he tried IQOS in London, the current IQOS device has several design and user experience negatives that disappoint users. BAT and JTI used those device weaknesses to introduce devices that had more of the features customers wanted. But that is not a long term advantage, as PM is already making those changes and adding those features to new versions of the device (IQOS 2.4 and IQOS 3.0) that they are releasing in the next quarter. So why did PM not have better IQOS devices from the start? Partly because of lack of knowledge of what customers would want, but also because they have always intentionally prioritized its safety and performance. So even though the design and features were substandard, the quality was high. As a result. they have not had battery explosion problems like Ploom has. Furthermore, as a smoking cessation device, they wanted to be absolutely sure there was no way the device could deliver any substances other than the claims they are making it does. So what has Ploom & Glo actually accomplished so far in Japan? With a cheaper price on their devices of $30 versus IQOS at $70, plus admittedly better design features (but poorer quality), they have gotten people to try them. But their sticks are still inferior to Heets, so they don't keep and fully convert those consumers in any meaningful way. People that have previously tried IQOS experience recognize the difference, and tend to go back to Heets, even if they are still disappointed by the IQOS device features. But for customers that had never previously tried IQOS, it does have a negative impact on the overall HNB market. As can be expected, those people sour on the entire concept of Heat Not Burn. It becomes harder to convince them that IQOS is better, and get them to "try again" and buy IQOS this time. In addition, as previously stated, older smokers are harder to get to trial any new product, which is why the growth rate slowed in Japan earlier this year. But nevertheless, the more PM gets people to try IQOS and Heets, in every geography around the world, the more they gain fully converted customers. That all is to illustrate why management is still so bullish on IQOS. Yes, they have to improve the devices. Yes, the foot dragging of public health and government regulations slows adoption in parts of the world. Yes, their are ideologues that will fight them despite the science that it is safer than cigarettes. Yes, from time to time competitors like JUUL and Glo and Ploom will introduce inferior products and use marketing ploys to temporarily disrupt markets. Yes, someday someone may invent a product that truly is better that IQOS and then they will have to truly compete and/or adapt. But they believe they have by far the best product in Heets. They have the only product that fully converts former smokers. They are the only company that has the scientific data to prove their claims. They have the only brand, IQOS, which they will be able to leverage and use for all their next generation products and platforms. And maybe most importantly, they are converting their business, to a business to consumer organization that works to delight customers (ala Amazon), which should prove to be a sustainable advantage. If you listen to the presentation, it really is a compelling long term case. |
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Msg # | Subject | Author | Recs | Date Posted |
12273 | Re: PM annual investors day | Rice1 | 1 | 10/3/2018 3:29:09 PM |