Suzanne Wise

Suzanne Wise, senior vice president of corporate affairs and communications at Japan Tobacco International (JTI), considered the question of how to achieve sustainable growth.

Understanding consumers is the key to success, she said—but the way people consume is changing rapidly and accelerated by the Covid-19 crisis. To meet the challenge, JTI has been moving from a highly centralized model to a more decentralized one. This allows the company not only to increase speed to market but also helps it put the consumer at the center of its transformation.

She cited the example of Germany, where JTI sells Winston-branded tobacco in buckets for make-your-own (MYO) consumers. Mindful of consumers’ increasing sensitivity about plastic waste, JTI reengineered its packaging. The Winston bucket now uses 16 percent less plastic than before without comprising on convenience or consumer appeal.

While 16 percent may not sound impressive, it translates into 78 tons of plastic that has been taken out of the packaging of one product line in one country every year, according to Wise. “It’s a big deal,” she said.

Wise noted that JTI’s ability to achieve meaningful and sustainable growth relies on three pillars: its ability to innovate, a sensible regulatory environment and consumer acceptance of new products. Data and behavioral insights confirm that while some consumers are interested in reduced-risk products (RRPs), the majority still want to buy traditional tobacco products. Despite the rapid growth of next-generations products, cigarettes still accounted for 86 percent of total global tobacco sales by value in 2019. “That means we must innovate for both RRPs and combustibles,” said Wise.

In 2019, JTI ranked among the Top 100 companies for European patent applications filed. While many filings were for RRPs, 60 filings focused on combustibles, covering areas such as packaging, filters and flavorings. The company has also invested in agronomy, developing new seed varieties to increase crop productivity, lower the levels of certain undesirable constituents and benefit growers, for example.

Wise then stressed the importance of a balanced regulatory framework, one that protects consumer choice, encourages rigorous quality standards while maintaining a level and competitive playing field. “Less regulation can lead to more innovation but also encourages inappropriate risk-taking,” she said. “When that comes at the cost of quality and safety, the negatives outweigh the positives.”

She cautioned that in the absence of a robust regulatory framework, there was no place for short-term opportunism. “Otherwise, we risk putting off consumers, destabilizing the industry and attracting knee-jerk regulation to counterbalance the actions of those looking for a quick return,” she said. Wise pointed to California, which recently became the second U.S. state to ban flavored tobacco and vapor products—a political decision with no scientific basis that risks fueling illegality, she said.

The industry’s ability to innovate is tempered by consumer acceptance of new products, Wise noted. She cited several innovations, including early smokeless cigarettes in the late 1980s, which, for a variety of reasons, failed to take off. She stressed the importance of consumer choice and the ability of adult consumers to make informed decisions. “It is counterproductive for government to prevent the industry from sharing information about their products and then making decisions on behalf of consumers and not treating them like adults,” she said.

Last year’s Evali crisis in the United States demonstrated how vulnerable the industry is to misinformation, according to Wise. A mysterious outbreak of lung illness spawned a media frenzy—“cat nip for the media,” as Wise put it—and a severe regulatory backlash, with authorities restricting vaping before the cause had been determined. Evali was later attributed to vitamin E acetate in THC products sold through informal channels, but by that time, the damage had been done. Nielsen figures showed a staggering 25 percent drop in global retail vapor sales in the months following the crisis.

While acknowledging that standing up for smokers and consumer choice might be perceived as bold in some quarters, Wise insisted it was the right thing to do. “We don’t encourage smoking; we know that it is bad for health,” she said. “We believe in freedom of choice: the right to choose cigarettes or RRPs or to quit. That’s what we mean by a consumer-centric approach; it reflects reality.”