The tobacco industry has demonstrated an ability for constant transformation, surviving decades of lawsuits, advertising bans, tax increases, and stricter regulations, while remaining one of the world's most profitable consumer sectors. A new challenge now faces it: defining the future beyond cigarettes.
Recent annual reports from the four largest publicly traded tobacco companies—Philip Morris International (PMI), British American Tobacco (BAT), Altria, and Imperial Brands—show that there is no single solution. Each company is confident in maintaining nicotine as a global business, but each pursues a different path to achieve this goal. For instance, BAT forecasts a reduction of 20 million adult smokers by 2028.
PMI: Betting on a smoke-free future
PMI appears to be the most advanced in the transition process. In 2025, smoke-free products accounted for 41.5% of the group's net revenue, driven by IQOS heated tobacco devices, ZYN nicotine pouches, and VEEV vaping products. PMI views these products not as secondary ventures but as primary growth drivers alongside its traditional cigarette portfolio.
By the end of the year, smoke-free products were available in 106 markets and were used by an estimated 43.5 million adult consumers, while cigarette sales volumes fell by 1.1% in 2025. The company continues to declare a long-term goal of becoming predominantly a smoke-free business, while acknowledging that conventional cigarettes remain an important part of its operations.
BAT: Building a multi-category business
British American Tobacco employs a broader approach. In addition to its established cigarette brands, the company continues to invest in Vuse vaping products, glo heated tobacco devices, and Velo nicotine pouches. Its strategy aims to become a 'multi-category' nicotine business, with the share of revenue from smoke-free products expected to grow over time.
In its 2025 annual report, BAT stated: 'We will leverage our global multi-category portfolio to actively encourage adult smokers—who would otherwise continue smoking—to switch to better nicotine products, and continue seeking long-term opportunities outside of nicotine in wellness and stimulation, realizing the multifaceted benefits of a Better Tomorrow.' BAT also noted that its 'commitment is demonstrated by the ambition to become predominantly a smoke-free business, with over 50% of revenue from smoke-free products by 2035.' Nevertheless, conventional cigarettes remain the group's largest segment and continue to generate the funds necessary to support investments in new categories. The local illegal cigarette market forced the company to close its Heidelberg facility, resulting in the loss of 35,000 direct and indirect jobs.
Altria: Rethinking the domestic market
Unlike its global competitors, Altria focuses almost exclusively on the United States. The Marlboro cigarette business continues to dominate profit generation, but the company has repositioned itself around a strategy it calls 'Transition Beyond Smoking.' 'Transition Beyond Smoking' is a registered trademark.
In its vision annual report, the company stated: 'We have a leading portfolio of tobacco products for US tobacco consumers aged 21 and older. We are transitioning beyond smoking, responsibly guiding adult smokers toward a smoke-free future, aggressively competing for existing smoke-free nicotine consumers, and exploring new growth opportunities—outside the United States and outside of nicotine.'
Investments in NJOY e-cigarette products and on! nicotine pouches reflect the company's view that adult nicotine consumers are increasingly seeking alternatives to traditional cigarettes. However, this transition is at an earlier stage compared to PMI.
Imperial: A unified strategy
Imperial Brands, positioning itself as a market challenger, presented perhaps the clearest vision for the industry's development. Its 2030 strategy is based on two principles: continuing to derive sustainable value from combustible tobacco and scaling up in next-generation products. Instead of presenting new products as a direct replacement for cigarettes, Imperial offers them as a second engine for future growth while maximizing revenue from its traditional tobacco portfolio.
In its 2025 annual report, the company noted: 'Our strategy is built on the simple idea that, being the smallest of the global tobacco and nicotine enterprises, we achieve the best results by acting as a market challenger.'
Investors Remain Attentive
Despite declining smoking rates in many developed countries, tobacco companies remain favorites among many long-term investors. In an early investment note titled 'Look Through the Smoke,' Allan Gray argued that the industry's economy has historically been characterized by exceptional resilience. Strong brands, significant pricing power, and high barriers to entry have allowed major tobacco companies to continue growing profits even as cigarette sales volumes decline.
The note pointed out that 'among the companies we are researching, the tobacco industry has some of the best structural foundations. Tobacco consumption is relatively inelastic to price, meaning that price increases can offset falling sales volumes.'
Strict regulation has also hindered the entry of new competitors into the market, strengthening the dominance of established global players. These characteristics continue to shape the current transition.
Although the four companies have different strategies, none of them suggest that traditional cigarettes will disappear overnight. Instead, combustible tobacco remains the financial foundation from which each invests in new nicotine products.
The Threat
While the global tobacco industry focuses on transformation, South Africa presents a different problem. The local market has become one of the world's starkest examples of how illicit trade can reshape an industry. An IOL investigation last year revealed that smuggled cigarettes have turned into a multi-billion rand business, depriving the treasury of billions in tax revenue, fueling organized crime, and exploiting weaknesses in regulation and law enforcement.
According to a parliamentary response by Finance Minister Enoch Godongwana, up to 70% of cigarettes sold in South Africa may be smuggled, leading to annual tax losses exceeding 27 billion rand. The investigation also highlighted how the illegal cigarette trade extended beyond tax evasion. Security research institutes stated that the revenues from this trade are linked to organized crime, corruption, and other illicit activities.
The Other Side
The commercial history coexists with a completely different public health issue. According to the World Health Organization (WHO), tobacco kills more than seven million people annually, with over 1.6 million deaths linked to secondhand smoke exposure. The organization estimates that there are about 1.2 billion tobacco consumers worldwide, most of whom live in low- and middle-income countries.
The WHO insists that all forms of tobacco use are harmful and continues to advocate for measures aimed at reducing tobacco consumption globally. The organization stated: 'All forms of tobacco use are harmful, and there is no safe level of tobacco exposure. Cigarette smoking is the most common form of tobacco use worldwide. Other tobacco products include waterpipe tobacco, cigars, cigarillos, heated tobacco, hand-rolled tobacco, pipe tobacco, bidis, and kreteks, as well as smokeless products.'
The organization added that 'early nicotine use can increase the likelihood of long-term dependence and future use of other nicotine and tobacco products. Nicotine use also increases cardiovascular risk.'