Tobacco Industry’s Next Steps: Adapting After Cigarettes
The tobacco industry has a long history of adapting to challenges. Over the years, it has successfully navigated through lawsuits, advertising restrictions, tax hikes, and stricter regulations. Despite these obstacles, it has remained one of the most profitable sectors globally. Now, the big question is: what comes next after traditional cigarettes?
Recent reports from the top four publicly traded tobacco companies—Philip Morris International (PMI), British American Tobacco (BAT), Altria, and Imperial Brands—reveal that they each have different strategies for the future. While all of them believe in the continued demand for nicotine, they are pursuing unique paths to reach their goals. BAT, for example, estimates that there will be 20 million fewer adult smokers by 2028.
PMI: A Focus on Smoke-Free Products
Among these companies, PMI seems to be leading the charge towards a smoke-free future. In 2025, smoke-free products made up 41.5% of their total revenue, largely thanks to their IQOS heated tobacco devices, ZYN nicotine pouches, and VEEV vaping products. PMI has shifted its focus to treat these products as key components of its business, rather than just side ventures. They reached 106 markets by the end of 2025 and attracted around 43.5 million adult users, even as traditional cigarette sales saw a small decline. PMI aims to transition into a mainly smoke-free operation, although they recognize that regular cigarettes still play a significant role in their business.
BAT: A Diverse Product Offering
British American Tobacco is striving to build a diversified business. In addition to its established cigarette lines, BAT invests in Vuse vaping products, glo heated devices, and Velo nicotine pouches. Their strategy emphasizes becoming a “multi-category” nicotine company, where smokeless options are expected to grow in importance. BAT’s long-term goal is to ensure that over 50% of its revenue comes from smokeless products by 2035. Although conventional cigarettes still represent a major part of their income, they are using the revenue to fund their expansion into newer categories.
Altria: Focused on the U.S. Market
In contrast, Altria mainly targets the U.S. market. While its Marlboro brand continues to generate significant profits, Altria embraces a strategy called “Moving Beyond Smoking.” This strategy aims to help adult smokers transition to smoke-free alternatives while exploring new opportunities both nationally and internationally. Investments in NJOY electronic vapors and on! nicotine pouches show that Altria recognizes the changing preferences of consumers. However, they are still in the earlier phases of this transition compared to PMI.
Imperial Brands: A Balanced Approach
Imperial Brands views itself as a challenger within the industry. The company’s 2030 strategy focuses on two main goals: generating ongoing profits from traditional tobacco while building its presence in next-generation products. Instead of viewing newer offerings as mere alternatives to cigarettes, Imperial considers them essential for future growth, working to balance their traditional and modern portfolios.
Investor Interest Persists
Despite declining smoking rates in many countries, the tobacco sector continues to attract long-term investors. An investment analysis noted that the tobacco industry’s economic strength is notably resilient, with robust brands and high pricing power. This allows companies to maintain profits despite falling sales volumes. The strict regulations surrounding the industry further protect established companies from new competition, helping them to retain their market position.
The Illicit Trade Challenge
As the tobacco industry navigates its transformation, it faces a distinct challenge in places like South Africa, where illegal cigarette trade has grown significantly. A recent investigation revealed that illegal cigarettes have become a lucrative business, costing the government billions in lost tax revenue. Estimates indicate that around 70% of cigarettes sold in South Africa could be illicit, contributing to issues such as organized crime and corruption.
The Public Health Perspective
On the other side of the industry lies a serious public health concern. According to the World Health Organization (WHO), tobacco use leads to over seven million deaths each year, with many more affected by secondhand smoke. There are approximately 1.2 billion tobacco users worldwide, primarily in lower-income countries. The WHO emphasizes that all forms of tobacco use carry risks and promotes measures to reduce consumption globally. Early nicotine use can lead to long-term dependence and increase health risks, particularly concerning cardiovascular health.
As the tobacco industry repositions itself for the future, it faces both exciting opportunities and significant challenges. The balance between financial growth and public health will continue to be a pivotal aspect of its evolution.
