Machinery suppliers are developing new technologies to manufacture next-generation products.
By George Gay
Success usually comes with some excess baggage. Take heat-not-burn (HNB) devices; they are meeting with success on a number of markets and with what can be described only as phenomenal success in Japan. In fact, I wouldn’t dare say what share of the combustible cigarette (hereafter, cigarette) market the consumable elements of these devices (hereafter, HNB sticks and capsules) have taken in Japan because my figure would certainly be out of date by the time this story is published—possibly by the time it is finished. Suffice to say that in presenting its results to the end of September, Japan Tobacco (JT), which has a stable 61 percent share of the local market, had revised its estimate for full-year 2017 cigarette volume to 92 billion. That’s 13.4 percent down on its 2016 volume.
Of course, it was to be expected that cigarette volumes would have been cannibalized by the new products because, in the main, manufacturers of HNB sticks insist they are aimed only at smokers. Clearly, however, the extent of this switch from traditional to new products came as something of a surprise or shock because it has brought with it capacity headaches.
I take it that when HNB sticks were first being developed, they were made on minimally modified existing machinery within factories built to produce cigarettes. After all, the structure of some of them is not far removed from that of cigarettes, and they would have had to have gone through a number of iterations before commercial versions were developed. But the demands of efficiency and the need to eliminate cross-contamination clearly mean that, as volumes increase, manufacturers are and will be switching to higher-capacity machines running within dedicated factories.
For instance, Philip Morris International (PMI) said in July that it was planning to invest about €490 million ($570 million) in transforming its cigarette production factory near Bucharest, Romania, into a high-technology facility for manufacturing Heets, the HNB sticks used with the electronic tobacco heating device iQOS. The conversion of the factory into a Heets production facility had already started and was expected to be fully operational by 2020, the company said.
Romania will join a growing list of countries where PMI manufactures HNB sticks for iQOS. Also in July, the company announced plans to install two new high-tech production lines in Neuchatel, Switzerland, to produce Heets. In June, it announced it would expand capacity at its HNB sticks manufacturing facility in Bologna, Italy, and that it would build a new facility for manufacturing Heets in Dresden, Germany. In addition, PMI is thought to be in the process of converting its cigarette factories in Greece and Russia.
Meanwhile, JT is on record as saying that next year its capsule capacity will more than quadruple as high-capacity production is introduced. With the installation of high-capacity machines, JT believes that output will be expanded quickly from the start of 2019, by which time it expects to be marketing its Ploom Tech device nationally.
Of course, there is more to the market for HNB devices and sticks than iQOS and Ploom Tech. British American Tobacco has its Glo device, while R.J. Reynolds Tobacco, now part of the BAT stable, has the Eclipse, for which it has lodged with the U.S. Food and Drug Administration a substantial equivalence application for an improved version. In fact, there are a number of other devices out there—and any number of others in development. Indeed, iQOS is one of what PMI refers to as its four scientifically substantiated smoke-free product platforms under development.
New machinery
Interestingly, what most of these devices have in common is that they are different from each other—either subtly different or substantially different. Compare that with the industry most of us have been involved in up to now, where cigarettes are all more or less the same. And this means, I assume, that unless one HNB product type comes to dominate the market—and that cannot be ruled out—up to a point the future must look bright for traditional tobacco machinery suppliers, especially in respect of those products whose structure most closely resembles that of cigarettes. And even though the importance of the relationships built up over decades between tobacco product manufacturers and machinery suppliers cannot be overstated, some space must have started to appear for other companies, including those specializing in bespoke machinery, especially given that some of the new products being developed will come from companies other than the major tobacco manufacturers.
Certainly, traditional tobacco-machinery suppliers must be feeling better than they were when it looked like e-cigarettes were going to win the day—something that, of course, still might happen, or at the very least might happen in some markets. E-cigarettes, despite their name, mark a cleaner break with cigarettes than do HNB devices, and this clean break certainly snaps off at the level of machinery.
Of course, when PMI became serious about iQOS, it set up facilities in Bologna, Italy; so it has to be assumed that G.D has played and is playing a major part in the development of high-capacity HNB sticks machinery. But I believe that at least one other major supplier of traditional-cigarette machinery is developing such machinery. And given the fragmentation of the market that might occur, others might be following along at a distance governed by the perceived level of risk that this new generation of products might still go belly-up.
In fact, one other machinery maker is in front of the game. Aiger Engineering offers a complete make-pack production line for the consumable elements of HNB products. Aiger’s business development director, Arek Druzdzel, told Tobacco Reporter in October that his company offers a flexible system that allows it to meet the requirements of at least two types of HNB specifications: those for use with iQOS-like sticks and those for use with Eclipse-like systems.
The existence of such machinery might seem surprising because it is easy to get into the way of thinking that assumes that manufacturing sticks is all very new. But when asked what the future holds for tobacco machinery suppliers given that the industry seems to be moving at some speed toward electronic nicotine-delivery/vapor products, Druzdzel issued a reminder that it was about 10 years ago that multinational tobacco manufacturers realized that the cigarette, which had been around for more than a century, was coming to the end of its natural life. And they knew that this meant their future products would have to be very different from those cigarettes.
Since then, the pace of development of next-generation products (NGPs) had been accelerating every year, he said. E-cigarettes came along, which were devices that didn’t necessarily need tobacco, while novel HNB products needed far less tobacco than was used in a cigarette: tobacco whose desired volatile compounds were released when heated—not burned—to a temperature in the 100–300 degree C range.
When considering sticks manufacture, it is easy also to concentrate on the secondary department, as often happens in the case of cigarettes, but all areas of processing and production are affected—though, again, the changes required for different products vary considerably. HNBs and tobacco-free nicotine-delivery products, Druzdzel said, required alternatively processed tobaccos and practically no standard cut rag. This implied the end of standard, traditional primaries: large tobacco-processing plants, producing tons of cut rag per hour. Some of the next-generation tobacco products required new primary processes handling sheet tobaccos, special casings and heat/pressure-treated tobaccos. Others required micronization/granulation processes that produced tobacco pellets of controlled porosity and/or permeability, nicotine extraction and powder/liquid fine-dosing.
In the future, Druzdzel said, tobacco-containing components would be delivered through modular plants, complying with pharmaceutical-like containment standards and performing production processes already known in the pharmaceutical and food industries. And new types of machinery, such as that for the pre-forming and extrusion of tobacco, charcoal, and bioactive (herbal) sheets and pellets would be needed, along with more sophisticated controls.
Substantial modifications
The cigarette make-pack departments of today would see a similar evolution, said Druzdzel, driven in part by the changes that would occur in respect of manufacturing materials. For instance, noncombustibles and nicotine vaporizers would require changes to the traditional function and specification of a filter. Standard monoacetate filters would be gradually replaced by specialty combined filters, selective filtration membranes and/or filtration tablets similar in length to the shortest segments used in combined filters nowadays. Leading products would call for more biodegradable and sustainable components, and hence demand alternative, eco-friendly materials and adapted production methods.
Certainly, this novel product-driven change would require the abandonment or substantial redesign of the manufacturing machinery currently used and, in the long run, demand a new generation of production machinery.
Also, packing machinery would be subject to substantial modifications. In the next few years, said Druzdzel, packing speed would be less important than would be the flexibility to pack new shapes into increasingly complex pack specifications. Packing flexibility, quick format change and, certainly, packing quality would remain decisive factors differentiating packing machinery suppliers.
Lastly, in respect of packing-related machinery, the industry would have to ditch well-known rod-handling and logistics setups. The NGPs were, in fact, a variety of different products, requiring more complex and careful handling than the industry had been used to. The new products would drive design changes and customization of the new-products’ handling machinery. And, as usual during a transition period, only the most advanced and dedicated suppliers would, using their acquired knowledge and established machinery, take up the challenge of supporting the industry.
Over the next few years, in the transition period, modified filter makers and cigarette makers would be used for HNB production, giving machinery suppliers sufficient time to come up with new, faster and more flexible designs, complying with NGP specifications. In time, Druzdzel said, a new generation of make-pack machinery would be supplied, customized for particular products once they were defined by their manufacturers. More assembly robotics, more direct communication between collaborating machines and production modules, and more parameters controlled and processed on-line (in real time) would shape the production plant manufacturing standard products of the future.