Cigarette filter manufacturers are increasingly focusing on sustainability and new nicotine products.
By George Gay
As you grow older, you come to realize that it is often better to be wrong than it is to be right. There are, of course, exceptions. You want to have been right as you come away from the tote with the Racing Times tucked in your back pocket, and you would want to have been right when you picked which side you were on in a lethal conflict.
But such instances aside, even young people, I think, harbor this idea, though it might only appear occasionally in the periphery of their thought processes. Look at like this: If I say that a thing is A, and you say that no, it is B not A, and it turns out that you are right and I am wrong, I have learned something new, but you have learned nothing. I have gained but you have not. As the Israeli poet Yehuda Amichai wrote, “From the place where we are right / flowers will never grow / in the spring. / The place where we are right / is hard and trampled / like a yard.”
Given this, I am grateful to Seng Keong Low, the marketing manager of Essentra Filters. I had always assumed that the switch by consumers from traditional tobacco cigarettes to electronic cigarettes—but not heat-not-burn cigarettes—meant a complete loss of business for those producing filter materials, but I was wrong. Seng Keong told me in a July email that cellulose acetate tow (CAT), the main material in filter production, can be used in e-cigarettes to prevent leakage of e-liquids.
Market drivers
In my approach to Essentra, I had listed cigarettes, roll-your-own (RYO) products, cigars, heat-not-burn sticks, pipes and shisha as products that used filters of one sort or another and had asked whether there were others. Seng Keong mentioned e-cigarettes and went on to say that Essentra offered a wide variety of filters that can be customized as required for each of the categories.
Especially given the inclusion in the mix of e-cigarettes, it is not surprising that, asked what the main factors driving the markets for the filters that Essentra offers are, Seng Keong described them as the need among tobacco industry customers for innovative products and the evolving regulatory environment. It is often the case that innovation and regulation go hand-in-hand. Regulation will give rise to innovation and innovation to regulation. And this is fertile ground at the moment. The traditional tobacco market is the subject of new and sometimes burdensome regulations while those producing new nicotine products are operating on what are often confusing markets where regulations, for better or worse, are evolving, sometimes at glacial speeds.
“Innovative filters such as capsulated and visually attractive filters are driving the global markets,” Seng Keong added. “Consumers are increasingly demanding new and innovative flavors, leading to opportunities for manufacturers to introduce exotic-flavored filters to cater to the consumers. Specialty filters, such as super slims and shaped filters, are also becoming more popular, especially in China and South Korea. With the rise of tobacco-heating products (THPs), filters catering to THPs will also be a key focus for innovations.”
Turning to regulations and consumer aspirations, Seng Keong said that, currently, biodegradability and sustainability were in the forefront of many consumers’ minds and that these consumers were expecting companies to invest in new technologies and products to address these issues. “Essentra has introduced filters that use paper, hemp and ochre as their base material as well as a proprietary processing technology called ‘BiTech,’ all of which increases the biodegradability factor of filters,” he said. “Essentra’s latest offerings, such as Groove Sensation, Corinthian Sensation, the ground-breaking Fine Wall Filter and the recently unveiled hemp filter, are there to address the constantly shifting market trends.”
Of course, the core questions are whether the markets for these and other filters are expanding or contracting, by how much, and why—to which Seng Keong responded that, according to Euromonitor International, global cigarette consumption in 2018, at 5.5 trillion sticks, was down by 1 percent from the previous year. This decline, he added, was mainly due to the growing demand for alternative tobacco products and next-generation products, which included e-cigarettes and THPs.
Seng Keong wouldn’t be drawn on whether Essentra’s volumes had increased or decreased, by how much, and why, but in response to similar questions about the value of the company’s sales, he said that, as reported in Essentra’s annual report for 2018, revenue had decreased by 6.3 percent (-2.9 percent at constant exchange) to £260 million ($324 million). Good progress had been made with independent customers, notably those in China, India and the Middle East, but this had been offset by the volatile nature of certain projects, which was characteristic of the tobacco industry.
Product differentiation
So what are the in-demand filters currently, especially those favored in the markets where Essentra is making good progress? “In China, there is a growing trend in specialty filters such as super slims and shaped filters,” said Seng Keong . “Meanwhile, there has been strong performance by flavor-capsule filters in India and Dubai. Cigarette manufacturers are using more sophisticated filters in their premium ranges to provide differentiation and unique smoking experiences for consumers. There is increasingly more variety, such as the recently launched ‘black tea’ flavor, because consumers continue to look out for ever-more new and interesting flavor experiences.”
This is interesting. It has long been speculated that the sorts of cigarette flavors favored in the West are unsuitable for markets where consumers typically consume more spicy foods. Perhaps we are starting to see smoking trends more closely aligning with a nation’s traditional cuisine. Certainly, Seng Keong said that with the presence of specialty filters providing differentiation, monoacetate filters were experiencing a steady decline and were now estimated to account for about 74 percent of the global filters market, again according to Euromonitor International data.
A lot of people will welcome Seng Keong ’s response to a question about what Essentra believes are the up-and-coming filters. “With the rising focus of biodegradability and sustainability, manufacturers are looking into filters with alternative materials to improve on degradability,” he said. “Essentra research and development is focusing on these alternative materials to find a successor to CAT that offers the same value proposition while being more environmentally friendly.”
And, of course, Essentra has shifted some of its innovation focus to emerging smoking product categories. “The market for THPs is on a fast-growing trajectory,” Seng Keong said. “Opportunities for THPs have expanded, and tobacco companies are all aiming for a share of this emerging segment. Increasing innovations into THP heat sticks is expected, and filters will play a significant role in helping to achieve the best consumer experience for THPs.”
Research and development
While some of Essentra’s research and development is outlined above, it is easy to forget that the company has an R&D capability that takes it beyond filters, though filters are still very much its focus, as Seng Keong described. “Essentra continuously experiments with new materials both internally and through high-level discussions with customers to meet their dynamic demands and regulations across different markets,” he said. “In addition to filter research, Essentra is also taking the lead in driving the standards for laboratory testing of tobacco products and coming up with brand new testing methods to meet increasingly strict regulations on tobacco chemical constituents. Essentra offers a complete solution to our partners through research of alternative materials, creative design of filters and cutting-edge laboratory testing of products.”
Still on the question of research, I asked whether any progress has been made in designing filters that might be seen as helping to reduce the health risks posed by tobacco products, but Seng Keong said that Essentra’s focus in filter design remained with alternative materials and tobacco-heating products.
At the same time, the illegal trade in cigarettes is a focus for tobacco manufacturers, and I asked what part filters could play in reducing this trade. “Unique features such as markings can be imprinted on filters, allowing enforcement representatives to easily differentiate an illicit product and a legal cigarette,” said Seng Keong .
And in answer to the vaguely connected question of what part filters can play in boosting brand awareness, Seng Keong said that Essentra’s portfolio included filters that offered visual differentiation through shapes and colors. “By designing filters that represent a specific brand, this enables consumers to identify and resonate with the brand immediately upon opening the pack,” he said.
So the question arises, where are these consumers? Where geographically are the main markets for filters, and where are the up-and-coming markets? Well, with the countries of Asia Pacific accounting for about 3.4 trillion—or about 62 percent—of the 2018 global cigarette consumption of 5.5 trillion, it is not surprising that this is where the main demand for filters is coming from. “China, Indonesia and Japan are within the top five countries for cigarette consumption, accounting for 51 percent of global cigarette sales,” said Seng Keong . “Within Asia Pacific, innovative filters are prevalent in countries such as South Korea and China, which provides for opportunities to develop and market special filters.
“In addition, the growing market for THPs has also opened up more opportunities to new variants. In 2018, the volume of heat sticks was approaching 53 billion sticks, more than double the previous year. The top three markets for heated-tobacco products are Japan, South Korea and Russia, where the Asia region accounts for the majority of volumes—more than three quarters of the global volume.”
Without necessarily expecting an answer, I asked Seng Keong whether Essentra had made any fundamental changes to the way that it manufactured filters, but he did say that with the increasing demand for alternative materials in the market, new proprietary methods to process these materials in a cost effective and efficient manner were in development.
This answer seemed to suggest that Essentra was looking to the future, so how does it see the future for the filters sector? “Although the traditional cigarette industry is under pressure with consumers switching to [next-]generation products and regulations becoming stricter across the world, opportunities abound as tobacco manufacturers shift their focus to THPs and sustainability,” said Seng Keong . “Innovations to support these initiatives through alternative materials and filter design will be the key to success in the future.”