Thank you Devin! As always your article is clear and enjoyable to read.
I need to give credit where credit is due: PMI managed to create a brand from scratch (IQOS). They could have piggybacked on Marlboro. Now IQOS doesn’t have any association to cigarettes, and PMI will be able to use the brand in the US.
Their M&A has been excellent, especially compared to Altria. They managed to buy Swedish Match for a very small premium, and as you point out ZYN’s growth in the US continues to be impressive. Plus they’ll presumably be able to use SM’s sales force and distribution network for IQOS. Their wellness M&A so far hasn’t panned out, but it’s a drop in the bucket compared to SM. So kudos to them!
The building of IQOS brand equity has been incredible -- perhaps need a piece covering strictly that. Worth noting, the core concept of IQOS was initially developed while PM was still part of Altria. Decades and lots of $$$ spent leading to PM's breakout success.
They definitely made a great deal on Swedish Match. I got over how furious I was about it as a shareholder and have been rolling the proceeds over to PM on dips.
While I can sympathize with those wishing Swedish Match remained a standalone company, hard to argue that PMI is not the 'best owner' with its global distribution and immense legal resources. Has a much better shot of a successful global rollout.
I know!! Same here! PMI paid the smallest premium they had to, knowing no one else could bid more (BTI had too much debt, IMB didn’t have the financial capacity, MO would have run into antitrust issues, etc.) As a SWMA shareholder I was frustrated, but if I had been a PMI shareholder I would have been delighted.
While nothing is off the table *technically*, PMI management has stated the dividend is 'sacrosanct' and will only be going up. Likely no issue managing and reducing debt levels as majority of ILUMA transition lapses and cash from ops grows. Plus, lower total reduction needed as denominators of debt ratios grows.
Zyn amazes me, anecdotally a few of the podcasters and influencers I follow have them on show in videos and talk about them unprompted, presumably without compensation. You can just feel the momentum behind that brand in the US
Very true - I've observed many similar anecdotes. Will be interesting to see how regulation continues to unfold for the category and if/when competitors gain PMTA authorization for new/European versions.
Such in-depth quality. It's a pleasure to read.
Thanks, SB! Glad you enjoy it.
Thank you Devin! As always your article is clear and enjoyable to read.
I need to give credit where credit is due: PMI managed to create a brand from scratch (IQOS). They could have piggybacked on Marlboro. Now IQOS doesn’t have any association to cigarettes, and PMI will be able to use the brand in the US.
Their M&A has been excellent, especially compared to Altria. They managed to buy Swedish Match for a very small premium, and as you point out ZYN’s growth in the US continues to be impressive. Plus they’ll presumably be able to use SM’s sales force and distribution network for IQOS. Their wellness M&A so far hasn’t panned out, but it’s a drop in the bucket compared to SM. So kudos to them!
The building of IQOS brand equity has been incredible -- perhaps need a piece covering strictly that. Worth noting, the core concept of IQOS was initially developed while PM was still part of Altria. Decades and lots of $$$ spent leading to PM's breakout success.
They definitely made a great deal on Swedish Match. I got over how furious I was about it as a shareholder and have been rolling the proceeds over to PM on dips.
While I can sympathize with those wishing Swedish Match remained a standalone company, hard to argue that PMI is not the 'best owner' with its global distribution and immense legal resources. Has a much better shot of a successful global rollout.
I know!! Same here! PMI paid the smallest premium they had to, knowing no one else could bid more (BTI had too much debt, IMB didn’t have the financial capacity, MO would have run into antitrust issues, etc.) As a SWMA shareholder I was frustrated, but if I had been a PMI shareholder I would have been delighted.
thanks for the write up!
IRRs of "low-double-digit to mid-teen range" ... is that just dividends + buy backs? Or multiple expansion, too?
Simply capital returns (majority dividends) and growth reflected at constant current multiple.
that's pretty good!
Great analysis! Thanks! What are the odds, in your opinion, that PMI will cut dividend for a period to trim a bit its debt?
While nothing is off the table *technically*, PMI management has stated the dividend is 'sacrosanct' and will only be going up. Likely no issue managing and reducing debt levels as majority of ILUMA transition lapses and cash from ops grows. Plus, lower total reduction needed as denominators of debt ratios grows.
Thanks Devin!
Zyn amazes me, anecdotally a few of the podcasters and influencers I follow have them on show in videos and talk about them unprompted, presumably without compensation. You can just feel the momentum behind that brand in the US
Very true - I've observed many similar anecdotes. Will be interesting to see how regulation continues to unfold for the category and if/when competitors gain PMTA authorization for new/European versions.