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Item 1. Business

2026-02-06 compared with 2025-02-06 · 72 added, 63 removed, 159 unchanged (46% of the section changed)

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Securities and Exchange Commission (the "SEC").

We are a leading international tobacco company, actively delivering a smoke-free future and evolving our portfolio for the long term to include products outside of the tobacco and nicotine sector.

Our current product portfolio primarily consists of cigarettes and smoke-free products.

We are a leading international consumer goods company, actively delivering a smoke-free future and evolving our portfolio for the long term to include products outside of the tobacco and nicotine sector.

Our current product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, nicotine pouch and e-vapor products.

Since 2008, we have invested over $16 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes.

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In November 2022, we acquired Swedish Match AB ("Swedish Match") – a leader in oral nicotine delivery – creating a global smoke-free combination led by the companies’ IQOS and ZYN brands.

As of April 30, 2024, we hold the full rights to commercialize IQOS in the U.S.

after reaching an agreement to end our U.S.

commercial relationship covering IQOS with Altria Group, Inc.

Following a robust science-based review, the U.S.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Through our acquisition of Swedish Match in 2022, with its leading nicotine pouch franchise in the U.S.

under the ZYN brand name, we acquired a market leader in oral nicotine delivery with a significant presence in the United States market.

The Swedish Match acquisition has been a key milestone in PMI’s transformation to becoming a smoke-free company.

The Swedish Match product portfolio is complementary to our existing portfolio, permitting us to bring together a leading oral nicotine product with the leading heat-not-burn product.

By joining forces with Swedish Match, we expect to accelerate the achievement of our joint smoke-free ambitions, switching more adults who would otherwise continue to smoke cigarettes to better alternatives faster than either company could achieve separately.

In 2022, we reached an agreement with Altria Group, Inc.

to end our commercial relationship in the U.S.

covering IQOS as of April 30, 2024.

PMI now holds the full rights to commercialize IQOS in the U.S.

For further details, see Item 8, Note 3.

Acquisitions and Divestitures .

In 2021, we began our long-term growth ambitions beyond nicotine in wellness and healthcare given our strong foundation and significant expertise in life sciences.

Our Wellness and Healthcare business strategy currently focuses on developing and commercializing oral and inhaled consumer health and wellness offerings and inhaled prescription products for therapy areas that include pain management and cardiovascular emergencies.

This includes medical and pharmaceutical cannabinoids, and non-recreational cannabinoid products (including CBD), in line with applicable regulatory requirements, though any revenue related to cannabinoids is expected to be negligible in the near to medium term.

With a strong foundation and significant expertise in life sciences, PMI has a long-term ambition to expand into wellness areas.

The business strategy of our wellness unit, Aspeya, currently focuses on developing and commercializing primarily oral consumer wellness offerings.

This includes medical and non-recreational cannabinoid products (including CBD), in line with applicable regulatory requirements, though any revenue related to cannabinoids is expected to be negligible in the near to medium term.

Smoke-Free Business ("SFB”) is the term PMI uses to refer to all of its smoke-free products.

SFB also includes wellness and healthcare products, as well as consumer accessories, such as lighters and matches.

SFB also includes wellness products, as well as consumer accessories, such as lighters and matches.

Smoke-free products (also referred to herein as "SFPs") is the term PMI uses to refer to all of its products that provide nicotine without combusting tobacco, such as heat-not-burn, e-vapor, and oral smokeless, and that therefore generate far lower levels of harmful chemicals.

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Our smoke-free products are designed for, and directed toward, current adult smokers and adult users of nicotine-containing products.

We put significant effort to restrict access of our products from non-smokers and youth.

We put significant effort to restrict access of our products from underage persons.

We believe regulation must include measures designed to prevent youth initiation;

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It uses a precisely controlled heating device into which a specially designed and proprietary tobacco unit is inserted and heated to generate an aerosol.

Heated tobacco units ("HTUs") is the term we use to refer to heated tobacco consumables, which include our BLENDS , DELIA , HEETS , HEETS Creations (defined collectively as " HEETS "), SENTIA , TEREA, TEREA CRAFTED and TEREA Dimensions, as well

as the KT&G-licensed brands, Fiit and Miix (outside of South Korea).

HTUs also include zero tobacco heat-not-burn consumables ( LEVIA ).

IQOS was first introduced in Nagoya, Japan, in 2014.

IQOS and ZYN are the leading brands in our SFPs portfolio.

IQOS, ZYN and VEEV are the leading brands in our SFPs portfolio.

As of December 31, 2025, our smoke-free products were available for sale in 106 markets.

With regard to nicotine pouches, we increased our presence to 37 markets.

With regard to modern oral pouches, we increased our presence to 56 markets.

Our cigarettes are sold in approximately 170 markets, and in many of these markets they hold the number one or number two market share position.

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Marlboro is complemented in the premium-price category by Parliament .

Our other leading international cigarette brands are Chesterfield, L&M , and Philip Morris.

Our other leading

international cigarette brands are Chesterfield, L&M , and Philip Morris.

These five international cigarette brands contributed 81% of our cigarette shipment volume in 2025.

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Description of Business

Following the combination and the progress in 2023 toward the integration of the Swedish Match business into PMI's existing regional structure, PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into the four existing geographical segments.

Our four geographical segments are as follows:

Following the sale of Vectura Group Ltd.

on December 31, 2024, we updated our segment reporting in January 2025 by including the ongoing Wellness results (previously referred to as Wellness & Healthcare) in the Europe segment.

In addition, we renamed our “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025.

As a result of this change, our segment that includes our duty free business was renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).

As of December 31, 2025, our four geographical segments were as follows:

• Europe Region is headquartered in Lausanne, Switzerland, and covers all the European Union countries, Switzerland, the United Kingdom, and also Ukraine, Moldova and Southeast Europe;

it also includes our Wellness business;

• South and Southeast Asia, Commonwealth of Independent States, Middle East and Africa Region ("SSEA, CIS & MEA") is headquartered in Dubai, United Arab Emirates.

It covers South and Southeast Asia, the African continent, the Middle East, Turkey, as well as Israel, Central Asia, Caucasus and Russia;

• East Asia, Australia, and PMI Duty Free Region ("EA, AU & PMI DF") is headquartered in Hong Kong, and includes the consolidation of our international duty free business with East Asia & Australia;

• East Asia, Australia, and PMI Global Travel Retail ("EA, AU & PMI GTR") is headquartered in Hong Kong, and includes the consolidation of our global travel retail business with East Asia & Australia;

• Americas Region is headquartered in Stamford, Connecticut, and covers the United States, Canada and Latin America.

Our Wellness and Healthcare ("W&H") segment, which includes the operating results of our Wellness and Healthcare business, remained unchanged in 2024.

Following the sale of Vectura Group Ltd.

on December 31, 2024, we will update our segment reporting by including the remaining Wellness & Healthcare results in the Europe segment.

In addition, we will be renaming our “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025.

As a result of this change, PMI's segment that includes our duty free business will be renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).

As communicated in the fourth quarter of 2025, with our smoke-free business now operating at scale across our regions, including substantial growth from our U.S.

business, we have implemented an evolved organizational model with two primary business units:

International and U.S.

The updated organizational structure is designed to enhance our agility and to support our journey to become a smoke-free company under the leadership of Jacek Olczak, Group CEO of PMI.

This change was implemented effective January 1, 2026, and as a result we realigned our reportable segments accordingly.

The four geographic segments have been replaced with three new reportable segments:

International Smoke-Free, International Combustibles, and U.S.

As of the first quarter of 2026, our reporting will reflect these changes.

Our total shipment volume, including cigarettes and heated tobacco units, increased by 2.5% in 2024 to 756.6 billion units, with shipment volume of heated tobacco units reaching 139.7 billion units in 2024, up from 125.3 billion units in 2023.

Shipment volume of our principal cigarette brand, Marlboro , increased by 3.7% in 2024.

References in this Form 10-K to total international market, defined as worldwide cigarette and heated tobacco unit volume, excluding the United States, total industry (or total market) and market shares, are our estimates for tax-paid products based on data from a number of internal and external sources, and may, in defined instances, exclude China.

Our shipment volume in 2025, including cigarettes and smoke-free products (in equivalent units) were as follows:

Full-Year 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

Total Shipment Volume

(equivalent units in billions)

786.5 179.1 155.1 20.7 3.3 607.4

1.4% 12.8% 11.0% 18.5% +100% (1.5)%

Oral smoke-free products conversion:

(i) nicotine pouches (units):

15 pouches per can in the U.S.

and approximately 20 pouches per can outside the U.S.;

(ii) snus products:

weighted average 21 pouches equivalent per can;

(iii) moist snuff products:

weighted average 17 pouches equivalent per can;

(iv) tobacco bits products:

weighted average 30 pouches equivalent per can;

(v) chew bags products:

weighted average 20 pouches per can.

E-vapor products conversion:

one milliliter of e-vapor liquid equivalent to 10 units.

References in this Form 10-K to total international market, defined as worldwide cigarette and heated tobacco unit volume, excluding the United States, total industry (or total market) and market shares, are our estimates for tax-paid and Global Travel Retail products based on data from a number of internal and external sources, and may, in defined instances, exclude China.

Past reported periods may be updated to ensure comparability and to incorporate the most current information for industry and market share reporting.

Unless otherwise stated, references to total industry (or total market), our shipment volume and our market share performance reflect cigarettes and heated tobacco units.

Unless otherwise stated, references to total industry and our market share performance reflect cigarettes and heated tobacco units.

Key data regarding total market and market share were as follows:

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Sum of share of market by product categories might not foot to total due to roundings

We have a market share of at least 15% in approximately 100 markets, including Algeria, Argentina, Australia, Austria, Belgium, Brazil, the Czech Republic, Egypt, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Israel, Italy, Japan, Kazakhstan, Kuwait, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, the Slovak Republic, South Korea, Spain, Switzerland, Turkey and Ukraine.

We have a market share of at least 15% in approximately 100 markets, including Algeria, Argentina, Australia, Austria, Brazil, the Czech Republic, Egypt, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Italy, Japan, Kazakhstan, Mexico, the Netherlands, the Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, the Slovak Republic, South Korea, Spain, Switzerland and Turkey.

Distribution & Sales

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higher absolute prices and larger gaps between retail price categories;

and product regulation that diminishes the ability to differentiate tobacco products, restricts adult consumer access to truthful and non-misleading information about our SFPs, or disproportionately impacts the commercialization of our products in relation to our competitors.

and product regulation that diminishes the ability to differentiate products, restricts adult consumer access to truthful and non-misleading information about our SFPs, or disproportionately impacts the commercialization of our products in relation to our competitors.

Competitors in our industry include Altria Group, Inc., British American Tobacco plc, Japan Tobacco Inc., Imperial Brands plc, new market entrants, particularly with respect to innovative products, several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises, principally in Algeria, Egypt, China, Taiwan, Thailand and Vietnam.

Some competitors have different profit, volume and regulatory objectives, and some international competitors may be less susceptible than PMI to changes in currency exchange rates.

Certain new market entrants in the non-combustible product category may alienate consumers from innovative products through inappropriate marketing campaigns, messaging and inferior product satisfaction, and without scientific substantiation based on appropriate R&D protocols and standards.

Some of our competitors have different profit, volume and regulatory objectives, and some international competitors may be less susceptible than PMI to changes in currency exchange rates.

Some market participants who sell products that directly compete with ours are circumventing applicable regulations or adopting regulatory interpretations that, in the absence of regulatory intervention and/or enforcement, could lead to an unfair competitive environment in certain markets where we operate.

Certain SFP competitors may alienate consumers from innovative products through inappropriate marketing campaigns, messaging and inferior product satisfaction, and without scientific substantiation based on appropriate R&D protocols and standards.

The growing use of digital media could increase the speed and extent of the dissemination of inaccurate and misleading information about our SFPs, all of which could have a material adverse effect on our profitability and results of operations.

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Our water stewardship strategy includes guidance for applying a landscape approach to water optimization projects, protecting natural resources and recharge areas, and improving the efficiency of irrigation systems to integrate better farm water management.

These business practices are intended to mitigate the risk that climate change could influence weather patterns in ways that negatively impact the quality or cost of the agricultural products used to manufacture our products.

In addition to tobacco leaf, we purchase a wide variety of direct materials from a total of approximately 500 suppliers.

In 2024, our top ten suppliers of direct materials combined represented approximately 60% of our total direct materials purchases.

In 2025, we purchased a wide variety of direct materials from a total of approximately 350 suppliers.

The four most significant direct materials that we purchase are printed paper board used in packaging, acetate tow used in filter making, fine paper used in the manufacturing of cigarettes and heated tobacco units, and susceptors used for TEREA and other consumables.

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For our oral smoke-free products, direct materials include plastic cans and lids for nicotine pouches and traditional snus products, nicotine salt or nicotine premix for nicotine pouches, pouch material for individual pouchmaking and additives.

Our devices are made by various electronic manufacturing services providers ("EMS").

In 2025, our top ten suppliers of direct materials combined represented approximately 60% of our total direct materials purchases.

Additionally, we purchase electronic devices, which are made by various electronic manufacturing services providers ("EMS").

The components used in the assembly of these devices can be made by the EMS or purchased from other suppliers.

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As described in more detail in “ Distribution & Sales ” above, in many of our markets we sell our products to distributors.

In 2024, sales to a distributor in the Europe Region and a distributor in the EA, AU & PMI DF Region each amounted to 10 percent or more of our consolidated net revenues.

In 2025, sales to a distributor in the Europe Region and a distributor in the EA, AU & PMI GTR Region each amounted to 10 percent or more of our consolidated net revenues.

See Item 8, Note 11.

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We believe that none of our business segments is dependent upon a single customer or a few customers, the loss of which would have a material adverse effect on our consolidated results of operations.

In some of our markets, particularly in the Europe, SSEA, CIS & MEA, and EA, AU & PMI DF Regions, a loss of a distributor may result in a temporary market disruption.

In some of our markets, particularly in the Europe, SSEA, CIS & MEA, and EA, AU & PMI GTR Regions, a loss of a distributor may result in a temporary market disruption.

Human Capital

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Collaborative Culture .

We are proud of the global reach of our company, which operates in approximately 170 markets with employees representing more than 130 nationalities.

We are proud of the global reach of our company, with approximately 170 markets where we have sold our products, and with employees representing more than 130 nationalities as of December 31, 2025.

We reflect the demographics of the countries, communities, and consumers we serve, which is key to the variety of thought, innovation, and consumer-centric approach that enables us to deliver a smoke-free future.

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We discuss our regulatory environment in Item 7, Business Environment .

The regulatory landscape related to sustainability matters is rapidly evolving.

The regulatory landscape related to environmental matters is rapidly evolving.

We closely monitor these developments and implement initiatives addressing PMI’s priorities in line with our sustainability strategy.

In particular, we are subject to international, national, and local environmental laws and regulations in the countries in which we do business.

We have specific programs across our business units designed to meet applicable environmental compliance requirements and reduce our carbon footprint, wastage, as well as water and energy consumption.

We report externally about our climate change mitigation strategy, together with associated targets and results in reducing our carbon footprint, through CDP (formerly known as the Carbon Disclosure Project), the leading international non-governmental organization assessing the work of thousands of companies worldwide in the area of environmental impact, including climate change.

Our environmental and occupational health and safety management program includes policies, standard practices and procedures at all our manufacturing centers.

Furthermore, we have engaged an external certification body to validate the effectiveness of this management program at our manufacturing centers around the world, in accordance with internationally recognized standards ISO 14001 and ISO 45001 for safety and environmental management.

Furthermore, we progressively certify our manufacturing centers against AWS (Alliance for Water Stewardship) and Carbon Neutrality, requiring improvement actions year on year.

We have specific programs across our business units designed to meet, and where required, report on, applicable environmental compliance requirements.

Our environmental and occupational health and safety management program takes into account our policies, standard practices and procedures at our manufacturing centers, and, where required, we obtain external third party certification to validate the effectiveness

of our management programs.

Our subsidiaries expect to continue to make investments in order to drive improved performance and maintain compliance with environmental laws and regulations.

We assess and report to our management the compliance status of all our legal entities on a regular basis.

Based on current regulations, the management and controls we have in place and our review of climate change risks (both physical and regulatory), environmental expenditures have not had, and are not expected to have, a material adverse effect on our consolidated results of operations, capital expenditures, financial position, earnings or competitive position.

As discussed in more detail in Item 1A.

Risk Factors , our financial results could be significantly affected by regulatory initiatives that could result in a significant decrease in demand for our brands or by climate-related regulations that increase our cost of operation.

More specifically, any regulatory requirements that lead to a commoditization of tobacco products or impede adult consumers' ability to convert to our SFPs, as well as any significant increase in the cost of complying with new regulatory requirements could have a material adverse effect on our financial results.

Further, tightened climate-related regulation may lead to additional carbon taxation or energy price increases impacting our cost of operation.

These shifts in regulation and other market trends could, amongst others, impact current deforestation rates.

Availability of deforestation-free materials could be impacted by increased demand for alternative energy sources and low-carbon fuels, such as biomass, which could result in increased sourcing costs.

We discuss additional information regarding regulatory matters relating to climate change in Item 7, Climate Change Laws and Regulations.

We assess and report to our management the compliance status of our legal entities on a regular basis.

Based on current regulations, the management and controls we have in place and our review of environmental risks, expenditures related to such matters have not had, and are not expected to have, a material adverse effect on our consolidated results of operations, capital expenditures, financial position, earnings or competitive position.

Risk Factors , we provide additional details related to risks that could significantly affect our financial results, including regulatory initiatives that could result in a significant decrease in demand for our brands or increase our cost of operation.

We discuss additional information regarding regulatory matters relating to environmental matters in Item 7, Environmental and Social Laws and Regulations.

Information About Our Executive Officers

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On February 1, 2024, Philip Morris Products S.A., an indirect, wholly-owned subsidiary of PMI, and Nicoventures Trading Limited, an indirect, wholly-owned subsidiary of British American Tobacco p.l.c., entered into a settlement agreement (the “Settlement Agreement”) for an eight-year term, under which, among other things:

(i) certain pending legal proceedings (the “Proceedings”) between them concerning certain of their respective products were dismissed with prejudice, subject to certain limited exceptions, and

without admission of liability;

(i) certain pending legal proceedings (the “Proceedings”) between them concerning certain of their respective products were dismissed with prejudice, subject to certain limited exceptions, and without admission of liability;

(ii) the Limited Exclusion Order and Cease and Desist Order issued by the International Trade Commission on September 29, 2021, prohibiting the importation of certain heat-not-burn products by PMI and its affiliates into the United States was rescinded;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business