RICHMOND, Va. (AP) — Overseas Marlboro maker Philip Morris International Inc. said Friday it is investing up to 500 million euros (about $680 million) for two plants in Italy to make new tobacco products.
The world's second-biggest cigarette seller behind state-controlled China National Tobacco Corp. said the facilities near Bologna will produce its so-called "reduced-risk" products that heat tobacco instead of burning it.
Companies are venturing into smokeless tobacco and other nicotine products to diversify beyond the declining traditional cigarette business as tax increases, health concerns, smoking bans and stigma cut into demand.
Philip Morris International said the pilot plant will make products for testing and market launches, and is nearing completion. Construction of a larger plant is expected to begin immediately and last about two years. Once finished, it will employ up to 600 people.
The company, based in New York and Switzerland, said it expects annual production to reach up to 30 billion units by 2016.
Philip Morris International is developing products that heat tobacco in a cigarette with a controlled heating mechanism or an aerosol nicotine-delivery system. While two of the technologies heat tobacco instead of burning it, one uses an electronic heater and the other uses a carbon heat source. It plans to pilot test its next-generation products later this year and launch a product that heats tobacco instead of burning it in 2015.
"The development and commercialization of reduced-risk products represents a significant step toward achieving the public health objective of harm reduction (and) a potential paradigm shift for the industry," CEO André Calantzopoulos said in a news release.
Last month, Philip Morris International and Altria Group Inc. said they agreed to share their technology for electronic cigarettes and other new alternatives to traditional cigarettes.
Under the agreement, Altria will provide Philip Morris with a license to sell its newly introduced electronic cigarette products internationally. In turn, Philip Morris will provide Altria with two of its next-generation products that heat tobacco instead of burning it. Both companies have noted the potential for these products to be less risky than traditional cigarettes.
Though it expects e-cigarettes to be popular, Philip Morris International has said it still believes its next-generation products will be more attractive to cigarette smokers.
Altria Group Inc. in Richmond, Va., the owner of Philip Morris USA, spun off Philip Morris International as a separate company in 2008. Altria is the largest U.S. cigarette seller.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .