According to reports, the performance of the four major multinational tobacco(heated tobacco products) companies in 2021 will be “increasingly loud”, which can be said to be eye-catching. It is not easy to be able to perform like this when the Covid-19 is raging. However, observation cannot be limited to appearances. We must not only see the common logic behind the “rising”, but also different sustainability.

After a decade of development, the original strategic investment has reached the harvest season. Although the proportion of operating income still lags behind traditional tobacco products, it is undeniable that new tobacco products(heatsticks) have become a new economic growth point for major multinational tobacco companies. Under the circumstance that the growth of the traditional tobacco market is slowing down or even declining, the development of new tobacco products is becoming an important content affecting the financial statements of multinational tobacco companies. From the continuous mergers and acquisitions in the traditional tobacco field to focusing on the next generation of tobacco products, companies have continuously increased their investment in new tobacco products in the past 10 years.

Furthermore, Philip Morris International’s success is no accident. It is the first multinational tobacco company to implement and give up the diversification strategy. Since 1998, they have been focusing on the research and development of heated cigarette products, successively launching Accord, Heatbar, and finally, IQOS which sells well in the world. Judging from the situation in 2021, its IQOS consumers increased by 3.6 million to 21.2 million. We can probably conclude that its sales growth is largely driven by the increase in the number of consumers.

Meanwhile, British American Tobacco, Japan Tobacco, and Imperial Brands all entered the e-cigarette(heat not burn products supplier) market around 2014. Different from Philip Morris International’s long-term focus on heating cigarettes through independent technological innovation, they all entered the e-cigarette market through acquisitions, and they have continued to increase investment in e-cigarettes. In the category of heated cigarettes, they launched products relatively late.

In addition to that, the biggest uncertainty is the development of the situation in Russia and Ukraine. Judging from the investment situation, Japan Tobacco has the largest investment in the two countries. Since 2007, JTI has been the undisputed largest FMCG company in Russia. In the past 20 years, it has invested more than 4.6 billion US dollars. In 2020, its tax payment accounted for 1.4% of the Russian Federation’s budget.

As well, Russia and Ukraine are important markets that Philip Morris International cannot ignore. In 2021, Philip Morris International’s sales in Russia and Ukraine will account for about 12% of its total sales, and sales revenue will account for about 8% of its total revenue. In addition, British American Tobacco and Imperial have large investments and factories in both countries. Imperial Brands employs 2,100 people in total. British American Tobacco employs 2,500 people in Russia alone and has invested more than $1 billion.

From the current point of view, the sanctions faced by Russia are not only expanding in scope but also prolonged. In the face of the impact of the epidemic, the international tobacco supply chain has been under great pressure. Not only are there difficulties in the supply of cross-border tobacco leaves but also the supply of electronic cigarette spare parts. Coupled with economic sanctions and war interference, it is foreseeable that Russia’s tobacco production supply chain will face greater pressure and it will be difficult for multinational tobacco companies’ factories in Russia to operate normally.

To sum up, although the four major multinational tobacco companies performed well in 2021 in general, they will face more uncertainty in 2022, and the pressure to maintain the momentum in 2021 will undoubtedly be greater. The factors that have made them successful in the past, it may become a drag on its development in 2022.