Philip Morris shuts down its final German manufacturing facility as of July's end
Philip Morris Shuts Down Last German Cigarette Factory, Embraces Smoke-Free Future
Philip Morris International (PMI), the world's second-largest tobacco company, has announced the closure of its last German cigarette factory in Dresden by the end of July 2025. The move marks a significant shift in PMI's business strategy, as the company focuses on smoke-free and reduced-risk products.
The Dresden factory, historically a major tobacco manufacturing hub, has been processing cut tobacco for self-rolled cigarettes. With its closure, 274 employees will be affected. The Berlin factory, which produced expanded tobacco for the manufacture of cigarettes, stopped production on June 30, 2025.
PMI's decision to exit manufacturing in Germany is driven by a combination of factors. The company is actively transitioning from traditional cigarette products to a portfolio focused on smoke-free and reduced-risk products such as IQOS, ZYN, and VEEV. These products have become a significant and growing part of PMI's revenue, accounting for 41% of net revenue as of Q2 2025.
Regulatory pressures also play a role. Germany imposes a tax surcharge on heated tobacco products, which presents a regulatory headwind in the market, affecting tobacco product sales and profitability in the region.
Moreover, the closure aligns with PMI’s broader operational strategy to optimize production and reduce costs amid changing market demands and declining combustible cigarette volumes globally, even as other segments remain resilient.
PMI sees the future in heated tobacco products, which are sold under brands like IQOS. By 2030, the company aims to generate the majority of its revenue without traditional cigarettes.
The company operates globally but does not have any other production facilities in Germany apart from the closed Dresden and Berlin factories. It is unclear what will happen at the Munich headquarters.
Despite this exit from manufacturing in Germany, PMI remains committed to the German market. The company employs around 82,000 people worldwide, with brands under its umbrella including Chesterfield, L&M, f6, and the most well-known brand, Marlboro.
The closure in Dresden and the company's withdrawal from Germany are due to significantly decreased demand for cigarettes in Europe. According to recent statistics, around 20% of adults in Germany currently smoke, with a slight downward trend. This trend, coupled with increasing regulatory pressures and changing consumer preferences, has made the European market less favourable for traditional tobacco companies.
In summary, Philip Morris is exiting manufacturing in Germany as part of its global transition and cost optimization amid shifting consumer preferences and regulatory environments, while continuing to grow its smoke-free product portfolio worldwide.
The closure of Philip Morris' last German cigarette factory in Dresden, as part of its shift towards a smoke-free future, is a strategic move that impacts 274 employees and aligns with the company's broader operational strategy to optimize production and reduce costs, while continuing to generate revenue from smoke-free products like IQOS and ZYN. This change in the company's employment and business policies is driven by reduced demand for traditional cigarettes, finite regulatory advantages, and a growing preference for smoke-free alternatives in the finance sector.
