Recently, global tobacco giant Philip Morris International (PMI) announced that it has halted the launch of novel tobacco products and related investments in Spain, pending the issuance of a Royal Decree by the Spanish Ministry of Health. The decree will address regulatory issues related to products such as nicotine pouches, one of PMI’s key investments in alternatives to traditional tobacco.

I. Background of Novel Tobacco Regulation in Spain

1. Revision of Royal Decree

In December 2024, the Spanish Ministry of Health concluded a public hearing on revising Royal Decree 579/2017, which aims to introduce regulations for nicotine pouches. Previously, Spain had aligned its regulations with EU directives, unifying legislation for heated tobacco and traditional cigarettes, banning flavor additives, and requiring health warnings on packaging.

2. PMI’s Suspension of Activities

Due to regulatory uncertainty, PMI has decided to suspend the launch of novel tobacco products and investments in Spain, awaiting clarity from the Royal Decree. This decision reflects the company’s cautious approach to the evolving policy environment.

II. Current State of Spain’s Heated Tobacco Market

1. Market Performance

According to PMI’s financial data released at the end of 2024, the company’s heated tobacco product sales in Spain increased by 18.7% year-on-year, while traditional cigarette sales declined by 3%. Despite this, traditional cigarettes still hold a market share nearly 10 times that of heated tobacco.

2. Anti-Smoking Plan

The Spanish Ministry of Health’s Anti-Smoking Plan, approved last year, highlights that heated tobacco products aim to attract consumers by emphasizing their lower harm compared to traditional cigarettes. This plan may further impact the development of the heated tobacco market.

III. PMI’s Global Strategy and Goals

1. 2030 Target

PMI has set a goal for 66% of its sales to come from alternatives to traditional cigarettes by 2030. As of the end of 2024, this proportion has reached 40%.

2. Challenges in the European Market

PMI executive Hannapel noted that while Europe is making faster progress in alternative products and is likely to be the first region to achieve the 2030 target, regulatory differences among the 27 EU member states remain a significant challenge.

3. Strategic Transformation and Investment

PMI announced its strategic transformation in 2015, reducing reliance on traditional cigarettes. In 2016, the company established a factory in Crespellano, Bologna, Italy, to produce Terea brand heated tobacco products, supplying 50 countries worldwide, including all of Europe and Japan. Since its launch, the company has invested €1.3 billion in the factory’s construction and development.

IV. Policy Impact and Industry Outlook

1. Impact on the Spanish Market

• Short-Term Impact: PMI’s suspension of investments may slow the growth of Spain’s novel tobacco market.
• Long-Term Impact: Clear regulatory policies will provide a stable environment for the healthy development of novel tobacco products.

2. Implications for the Global Market

• Regulatory Consistency: Regulatory differences among EU member states may impact multinational companies’ market strategies.
• Corporate Response: Companies must closely monitor policy changes and adapt their product portfolios and investment plans flexibly.