Philip Morris says it has doubled supply of iQOS tobacco device in Japan

TOKYO (Reuters) - Philip Morris International said on Thursday it has more than doubled the stock of its popular iQOS tobacco device in Japan, but demand continues to outstrip supply even as competition intensifies over smokeless products.

A customer tries a Philip Morris' "iQOS" smokeless tobacco e-cigarette at an iQOS store in Tokyo, Japan on March 3, 2016. REUTERS/Toru Hanai/File Photo

Philip Morris said it has so far sold more than 3 million iQOS, a battery-powered device that heats tobacco leaves packed in cigarette shape. The company began nationwide sale in Japan in April last year after test marketing in major cities.

The product has become an instant hit and a severe supply shortage has persisted. It is priced at 9,980 yen ($88.30), but traded at 12,000 yen or more on Internet auction sites.

Paul Riley, president of Philip Morris Japan, told reporters the company has more than doubled its supply of iQOS since February and is ramping up the production to meet the demand.

“But the question is what is the demand? We continue to increase the production but they get sold out as soon as they hit the stores,” he said.

Philip Morris, known for Marlboro, Lark and Parliament cigarettes, has said its market share in Japan rose 1.7 points to 27.1 percent in 2016, helped by the popularity of iQOS.

Marlboro HeatSticks, cigarette-like tobacco used for iQOS, accounted for 7.6 percent of Japan’s cigarette market in January, the company said. It said it will add two flavors in March to existing four.

iQOS is currently sold in 20 markets, including most notably Japan, and will be in as many as 30 by the end of this year, Philip Morris has said.

Global tobacco companies see Japan as a fertile test ground for “Heat but not burn” tobacco products, since e-cigarettes, which use nicotine-laced liquid, are not permitted under the country’s pharmaceutical regulation.

British American Tobacco (BAT) has said initial results were very encouraging for a new tobacco heating device called glo it launched in Sendai, Japan in December, which takes aim at iQOS.

Japan Tobacco Inc, which commands over 60 percent share in domestic cigarette market, said last month it expected its domestic cigarettes sales volume to decline by 9.6 percent this year partly because of the growing popularity of tobacco e-cigarettes.

Japan Tobacco has said it will begin selling Ploom Tech tobacco-based electronic cigarettes in some parts of Tokyo from June.

Reporting by Taiga Uranaka