Year: 2023

  • RLX Buys ‘Market Leaders’

    RLX Buys ‘Market Leaders’

    Photo: RLX Technology

    RLX Technology entered into two share purchase agreements with two target companies and their respective shareholders with a total consideration of approximately $25 million. The entry of the share purchase agreements for business acquisitions and the transactions contemplated thereunder have been approved by the company’s board of directors and audit committee.

    Each of the two target companies is a market leader in the vapor industry in their home countries, located in Southeast Asia and North Asia, respectively, RLX wrote on its website. The transactions contemplated under the share purchase agreements for business acquisitions are expected to facilitate the company’s international expansion in Southeast Asia and North Asia. The company also plans to continue its overseas expansion in the future.

  • A Mixed Reception

    A Mixed Reception

    Photos courtesy of Vladislav Vorotnikov

    E-cigarettes enjoy booming popularity in the CIS region—but not among lawmakers.

    By Vladislav Vorotnikov

    A meteoric rise in the popularity of vapes in Russia, Belarus, Ukraine and Kazakhstan is pushing the governments to act. Severe measures up to a complete ban are on the table in many markets, but the looming risks of black market expansion prevent the authorities from hustling moves.

    As of March 1, 2024, selling flavored vapes will be illegal in Russia, according to a draft government decree.

    Among the additives due to be banned are vanilla, spices, ginger, cinnamon and sweeteners along with caffeine, guarana and taurine, which increase energy and mental and physical performance.

    No matter whether the measure will come into force, the end of the anti-vape campaign in Russia is nowhere in sight. In October 2023, a bill altogether banning selling vapes in the country was tabled in the Russian Parliament. 

    The bill was originally prepared two years ago and has recently been resubmitted by lawmakers, Yaroslav Nilov, a member of State Duma, the lower chamber of the Russian Parliament, stated.

    “We realize that the ban means certain lost revenues, but the health of citizens is more important, so we will strive to make the ban real,” Nilov commented.

    Restrictive measures against selling vapes are easily being circumvented by unscrupulous sellers in Russia, the lawmakers said in an explanatory note to the bill, referring to the law prohibiting selling vapes and e-cigarettes to customers below 18 years, which came into force earlier in 2023.

    In addition, the Russian government now struggles to ban selling vapes through the internet. In November 2023, it was disclosed that a Russian regulator seeks to close 250 online stores selling such products. These efforts have gained little traction so far. 

    Russian authorities are not alone in the CIS region in their vaping crackdown. In July 2023, the idea of banning all forms of e-cigarettes was put forward by the Youth Parliament of Belarus, a public organization designed to raise future lawmakers.

    In July 2023, a Kazakhstan government commission hammered out a recommendation to prohibit selling e-cigarettes, liquids and vape flavors, though no concrete timeframe for the measure to come into force has been disclosed yet.

    Again, potential harm to the health of the citizens has been cited as the primary rationale behind the initiative.

    “The harm of vaping is undeniable,” Nurgul Tau, deputy of the Kazakh Majilis, the lower chamber of the Kazakh Parliament, said, emphasizing that the Health Ministry had been advocating the prohibition on selling vapes since 2021.

    Ukraine is the only country in the CIS region where a ban on selling vapes and e-cigarettes has already been put into place.

    The idea of banning vapes has been brewing in the Ukrainian Verkhovna Rada, the national Parliament, for the past few years. Retailers and tobacco companies urged the authorities to consider alternative options, including partial restrictions, but the legislators appeared to be adamant about banning vapes.

    A Booming Market

    Public discussions about banning vapes in the post-Soviet area have been spurred by a skyrocketing rise in sales in the past few years.

    In 2022, the Russian market of single-use vapes has nearly tripled, NielsenIQ, an international consultancy, estimated without providing concrete figures. Companies operating in this segment saw their revenues rise by about 350 percent.

    Between 2018 and 2021, the Russian vaping market expanded by a factor of 50, estimated an alliance of participants of the electronic nicotine-delivery systems market. Last year, the sales were nearly RUR250 billion ($2.5 billion).

    The scale of the market boom can be seen with the naked eye. While in 2021, only 7 percent of tobacco stores sold vapes, by May of 2022, this figure reached 35 percent, NielsenIQ said. Another study indicated that at the beginning of 2023, the number of stores selling vapes in Russia was equal to that of conventional tobacco products.

    The picture is similar on the neighboring markets. Since 2020, sales of vapes in Kazakhstan jumped by a factor of 300 times, the Kazakh finance ministry estimated.

    In Ukraine, the state budget collected UAH2 billion ($55.6 million) from the companies selling vapes, calculated Yuri Suptel, head of the Ukrainian Vaping Association. In 2023, this figure was projected to reach UAH5 billion, but the actual figure will be much lower due to the ban that came into force in July.

    Over the past few years, nearly 1 million Ukrainian smokers “migrated” to vapes, so the restrictions will be quite painful for a large number of customers, Suptel estimated.

    Time for the Black Market

    Ukrainian retailers have largely ignored the government ban on vapes imposed in July, local press reported, showing numerous pictures of tobacco stores selling vapes after the restrictions were enacted.

    Since August 2023, the black market of vapes has been flourishing in Ukraine, Suptel said, estimating that smugglers illegally delivering vapes to Ukraine from neighboring countries earn around UAH500 million per month.

    “In the shadow market, it is impossible to ensure compliance with the laws that regulate the sales of cigarettes, electronic devices and other tobacco products. For example, the access of minors to nicotine products is not limited. The National Police of Ukraine must fight this phenomenon. But unfortunately, they simply do not have enough resources,” Suptel admitted.

    “We hope that the government and members of the parliament will think about the absurdity of the ban and make the right decision,” Suptel added.

    The risk that the ban will push the entire vape market underground is believed to be one of the key reasons why Kazakhstan is not rushing to implement the restrictions.

    “I’m sure that our deputies, due to their naivety or bias, will ban vapes eventually. In a year or two, we will come to the point where this ban will have to be lifted,” commented Dmitry Zhukov, executive director of the QazSpirits Ale, a local vaping company.

    It is one thing to ban a product that is difficult to import into the country and challenging to make and entirely another to ban vapes, which “any schoolchild can assemble on his knee,” Zhukov said.

    Currently, Kazakhstan companies selling vapes have no plans to curtail their activities, even if the ban gets a green light. They explained that the demand on the market is not likely to be affected. On the other hand, when the entire market moves underground, there will no longer be a need to pay excise fees, according to Zhukov.

    Russia would lose RUR38 billion per year in tax revenue from a ban on vapes while the black market is going to flourish, reaching RUR500 billion to RUR600 billion in annual sales, calculated Dmitry Vladimirov, head of the Union of Enterprises of the Industry of Nicotine-Containing Products.

    “Significant losses of the Russian budget in such a difficult geopolitical situation, the growth of the black market, and the rising number of deaths due to the use of counterfeit products are just the tip of the iceberg [Russia will face],” Vladimirov stated.

    In the countries that opted to ban e-cigarettes, their illegal sales skyrocketed by a factor of 200 to 300, Vladimirov estimated.

    Russia analysts also pointed out that the black market of vapes will find itself on fertile ground as illegal sales of conventional tobacco products still exist in the country, especially in the provinces remote from Moscow. This business is doing well and even growing despite the government’s efforts to take it down, and there are reasons to believe that the ban will only buttress it.

    Production Perks Up Despite Uncertainty

    While all countries in the region are primarily importing vapes, there are signs that local production is also on the rise.

    “The industry could develop under the balanced control of the state; some operators, for example, planned to start producing such products on the territory of Ukraine, contribute to the economy through exports, help GDP growth [and] create jobs,” Suptel said.

    However, even if the ban is removed now, it will take time for the market players to reconsider their plans, owing to high uncertainty about the legal status of this business, according to him.

    Some capacities for producing e-cigarettes are being established in Russia, though the lion’s share of the sold products still comes from China.

    One local publication wrote about an entrepreneur who managed to earn RUR90 million in one year, investing a relatively small amount of money into the production of vapes. On the other hand, most vape manufacturers prefer to keep a low profile. One possible reason is that some plan to continue operations when the ban is enforced.

  • PMI to produce BAT cigarettes in Switzerland

    PMI to produce BAT cigarettes in Switzerland

    Photo: PMI

    Philip Morris International and BAT have entered into a contract manufacturing agreement for cigarette production in Neuchatel, Switzerland, reports Le Temps.

    “[L]imited volumes of BAT cigarettes will take place in the PMI factory located in Neuchatel,” BAT wrote in a press note cited by the newspaper. “This is an agreement specific to the Swiss domestic market.”

    Only part of the cigarette volumes intended for the Swiss market will be produced in Neuchatel; the rest, as well as previously exported volumes, will be manufactured in other BAT factories.

    Six positions will be added at the Boncourt site, according to BAT, bringing the total number of positions at the site to about 20.

    BAT Switzerland announced this summer that it would maintain its warehouse and shipping department in Boncourt. The company’s head office remains in the canton of Jura.

  • Serpil Timuray joins BAT board

    Serpil Timuray joins BAT board

    Image: BAT

    Serpil Timuray has joined the board of BAT as an independent nonexecutive director and as a member of the nominations and remuneration committees.

    Timuray is currently the CEO of Europe Cluster and a member of the executive committee at Vodafone Group. She joined Vodafone in 2009 and has held a variety of executive roles being the group chief commercial operations and strategy officer in charge of areas including global strategy, marketing, innovation and digital transformation, the regional CEO for Africa, Middle East, Asia, Pacific, and the CEO of Turkiye.

    Prior to joining Vodafone, Timuray was the CEO of Danone Dairy Turkiye, having started her career in 1991 at Procter and Gamble, where she held several marketing roles. Timuray is currently nonexecutive director of TPG Telecom. She previously served as an independent nonexecutive director of Danone Group from 2015 to 2023 and as the chair of the corporate social responsibility committee.

    “I am pleased to welcome Serpil Timuray to our board,” said BAT Chair Luc Jobin in a statement. “Her extensive experience in growing consumer and enterprise product companies in technology and fast-moving consumer goods sectors and in managing global strategy, innovation and digital transformation will be beneficial to the board as we continue to accelerate our strategy to build ‘A Better Tomorrow.’”

  • Borgia Walker to Direct HR at Reynolds

    Borgia Walker to Direct HR at Reynolds

    Photo: RAI

    Reynolds American Inc. (RAI) has appointed Borgia Walker to the role of senior vice president, human resources and inclusion. In this role, Walker will oversee RAI’s human resources strategy and operations and serve on the RAI leadership team, as well as BAT’s global human resources leadership team.

    “Our employees are key to driving our transformation, and no one is better fit to lead our people strategy than Borgia,” said RAI President and CEO David Waterfield in a statement. “She is a respected leader within Reynolds because of the tremendous impact she has made on our organization’s transformation towards building ‘A Better Tomorrow,’ and she also embodies the spirit of giving back to the community, which is core to who we are as an organization.”

    Walker joined Brown and Williamson (which merged its U.S. tobacco assets into RAI in 2004) in 1995 and held roles in finance, internal audit, and regulatory oversight before joining the HR function in 2015 as a business partner.

    Her career in HR includes serving as senior director – health and wellness, where she implemented a new health plan; vice president – organizational effectiveness and services, where she was responsible for the HR service team and payroll; and vice president – HR services and integration, where she expanded her responsibilities to lead the global integration of the U.S. HR framework.

    In her new role, she will lead and oversee talent acquisition, leadership development, diversity and inclusion, organizational design, and cultural development, as well as employee education and development, compensation and benefits.

  • SWM Deal Complete

    SWM Deal Complete

    Photo: SWM

    SWM International has been successfully acquired by Evergreen Hill Enterprise. The company will now operate as an independent privately owned business with its headquarters located in Luxembourg.

    SWM International is a leading supplier of premium, highly engineered lightweight materials. The company serves various industry segments, including tobacco, cannabinoids, battery, surface protection, packaging and medical. With a global footprint including facilities in Asia, Europe, Latin America and the United States, the company is home to nearly 2,000 employees worldwide, including an experienced management team.

    “Today marks a milestone for our employees, our customers and our partners,” said SWM CEO Katrin Hanske in a statement. “Leveraging our profound engineering expertise in botanicals and natural fibers, we are dedicated to further advancing innovation in our distinctive products and technologies, all while expanding our manufacturing capabilities.”

    The acquisition was first announced in August 2023. Headquartered in Singapore, Evergreen Hill Enterprise is affiliated with BMJ of Indonesia.

  • Grants Under Scrutiny

    Grants Under Scrutiny

    Image: Piotr Pawinski

    A corporate accountability group is urging Nigeria to investigate the Export Expansion Grant (EEG) awarded to tobacco companies by previous governments, reports the Daily Trust.

    The EEG is a post-shipment incentive to encourage indigenous companies to expand the volume and value of their exports.

    The Corporate Accountability and Public Participation Africa (CAPPA) made its call on Dec. 1, after the chairman of the Presidential Committee on Tax Reforms and Fiscal policy suggested that Nigeria’s administration of tax waivers fell short in terms of prudence and transparency.

    “We demand a full and transparent inquiry into these shady waivers that have ripped the country of its revenues,” CAPPA Executive Director Akinbode Oluwafemi was quoted as saying. “More so, we are concerned about the benefits awarded to the tobacco industry under the Export Expansion Grant Scheme, and other untoward agreements which insult every Nigerian striving for a healthier and more equitable society’.’

  • Kathmandu to Ban Plastic-Pack Products

    Kathmandu to Ban Plastic-Pack Products

    Photo: Taco Tuinstra

    Kathmandu will ban the sale of tobacco products in all its 32 wards from Dec. 13, 2023, reports myRepublica.

    Ram Prasad Poudel, chief of the Kathmandu Metropolitan City’s (KMC) health department, said the measure would apply to the sale, storage and use of all tobacco products packaged in plastic. This includes not only cigarettes and bidis, but also tamakhu, sulfa, kakkad, gutkha and paan parag, among other regional products.  

     “We are on a campaign of making Kathmandu a healthy city,” said Poudel.

    The KMC reportedly plans to apply similar measures to water pipe tobacco at a later stage.

  • On a Roll

    On a Roll

    image: Miquel y Costas

    Driven by cost considerations and growing environmental awareness, do-it-yourself cigarette papers continue to gain popularity.

    By Stefanie Rossel

    Traditionally, roll-your-own (RYO) products thrive in difficult economic periods, and for the time being, it appears, the challenges won’t cease. As the Covid-19 pandemic ebbed, the world was shaken by war in Ukraine, worsening inflation and cost-of-living crises in many countries. Since October, global stability and confidence has been further eroded by the war between Israel and Hamas.

    The economic slump means that many consumers are coping with lower disposable incomes. Among smokers, such a development often encourages a shift from factory-made cigarettes to more affordable RYO or make-your-own (MYO) products.

    Market research companies are hence upbeat about the rolling papers market. Future Market Insights (FMI), for example, expects the value of the global cigarette paper market to grow from $714 million in 2023 to $1.19 billion by 2033, registering a compound annual growth rate (CAGR) of 5.2 percent during that period. “The rising popularity of smoking rolled cigarettes along with an increasing number of states legalizing recreational cannabis are the key factors expected to augment the demand for rolling papers,” the report states. The U.S., where 24 states permit recreational cannabis use, accounts for 16.9 percent of the global rolling papers market.

    In emerging economies, meanwhile, growing demand for rolling tobacco is creating opportunities for manufacturers to expand their footprints in untapped markets, FMI writes. In some of these countries, restrictions on reduced-risk products also play a role. India, for instance, which banned vape products in 2019, is predicted to witness a CAGR of 6.9 percent in sales of rolling papers through 2033.

    Adult smokers increasingly seek all-in-one packaging solutions, rather than making multiple separate purchases.

    Careful Navigation Needed

    The global rolling papers market is dominated by several large players. Lately, however, smaller entrants to the category have been offering niche or novelty products in terms of sizes, colors and ingredients.

    “In general, we see an upward trend in the global market for rolling papers being driven by increasing preference for hand-rolled tobacco due to the value offer they provide compared to factory-made cigarettes as well as the rise in prominence for more environmentally friendly and innovative products,” notes Jose Rubiralta, global manager of Rizla, which is part of Imperial Brands. “For Rizla specifically, the more recent negative global developments mentioned bear limited impact. We are actively expanding our presence in different markets to build on our position as the world’s most iconic rolling paper brand.”

    Santiago Sanchez, executive president of France-based Republic Technologies Group, which is best known for its OCB, Zig-Zag and JOB brands, says that the Covid-19 pandemic had boosted his company’s sales. The more recent series of crises has made it difficult to find shipping vessels, however. It has also boosted inflation and caused a scarcity of raw materials. “I usually say that our products sell better during a crisis—and this is what is happening—though I personally regret very much the suffering of so many people in the present wars.”

    Republic has been doing well in its core markets. “Besides, we see an opportunity in new markets, mainly on the American continent,” says Sanchez. “This is not yet linked very much to the RYO tobacco expansion but the depenalization of certain substances such as cannabis that were prosecuted until recently.”

    For Xavier Garcia, commercial director of the RYO division at Miquel y Costas, the geopolitical challenges pose new hurdles that require careful navigation. “While we celebrate the positive impact of changing consumer habits, we must remain vigilant in the face of geopolitical complexities. The challenges are formidable, but they present opportunities for innovation and strategic adaptation.”

    Smoking Paper, Miquel y Costas’ rolling paper brand that will celebrate its 100th anniversary in 2024, currently experiences significant growth in various markets. “The growth of the brand is something transversal and not specific to just a few markets,” says Garcia, who attributes its growing popularity of RYO and MYO products to shortages of affordable cigarettes and higher taxation of factory-made products, among other factors.

    We see that consumers ask for new products that are more environmentally friendly.

    More Regulatory Hurdles

    The next challenge for tobacco-related rolling papers will be regulation, according to Sanchez. “We have the intrusion of the politicians with constant new regulations,” he says. “We will see what happens with the revision of the European Union Tobacco Products Directive and new laws trying to overregulate [the industry] such as [those] trying to have tobacco-free generations and forbidding filters.”

    Another challenge comes from the EU Single-Use Plastics Directive (SUPD), which entered into force in 2021 and bans the sale of single-use plastic items such as plates, cutlery, straws and plastic/cotton bud sticks as well as food containers and expanded polystyrene cups. The law exempts cigarette filters but will oblige tobacco manufacturers to cover the costs of consumer awareness-raising measures and extended producer responsibility schemes tackling the cleanup of litter and its subsequent transport and treatment and other issues starting this December.

    “While personally I have always been a great defender of the environment, I would have preferred a smoother application of the directive,” he points out. “The commission has not fulfilled its own timetable and now, in November, we still do not know about taxes to be paid next year, especially considering that some will be retroactive to 2023. Once again, the pressure for the smaller manufacturers is enormous and disproportionate.”

    Whether driven by regulation or other factors, eco-friendliness is a major trend in rolling papers, according to Rubiralta. “In line with key consumer trends in the broader fast-moving consumer goods industry, there is a growing demand for more environmentally sustainable products,” he says. “As part of our ongoing efforts, we are actively exploring strategies to reduce the impact to the environment. This includes different product and packaging initiatives of Rizla products, amongst other contributions.

    “This summer, for example, we have introduced our Natura filter tips as well as our plastic-free tips in selected markets, such as Greece. This is our first plastic-free tips range, made with biodegradable paper, which is a milestone that our team takes great pride in. This complements our recent environmentally friendly paper launches of Rizla Classic, which are unbleached papers, Natura hemp papers and our innovative Rizla Bamboo papers offer, which have received favorable consumer responses.”  

    Sanchez’s experience is similar. “We see that consumers ask for new products that are more environmentally friendly,” he says. “For centuries, our industry has used flax and hemp as fibers to produce rolling cigarette paper. Different fibers are now in demand, such as bamboo and rice. There is a preference of some people for rice paper, a raw material that was used many years ago to produce paper. With the improvement of paper technology, these fibers were abandoned because of their fragility. Many products still claim to be ‘rice paper,’ although they’re not made of rice. Republic has gone back to the origins, and it is now producing a special blend of rice plus organic hemp paper, which is the only product in the market containing real rice.”

    Several months ago, Republic Technologies introduced the first bagged filter paper. The company is also reviewing all its packaging to remove plastic wherever possible. “Most of our boxes are no longer plastic-wrapped but they still can guarantee the freshness of the product,” says Sanchez. “We have never been fans of closing devices such as magnets because we feel it goes against the environmental target, so we have developed a new way to close some of our booklets just with a paper flap.”

    While we celebrate the positive impact of changing consumer habits, we must remain vigilant in the face of geopolitical complexities. The challenges are formidable, but they present opportunities for innovation and strategic adaptation.

    Seeking Convenience

    In addition to natural papers and innovative materials, demand is also shifting toward larger paper formats and more advanced products, such as thinner papers, according to Rubiralta. Convenience is a big driver as well. “Adult smokers increasingly seek all-in-one packaging solutions, rather than making multiple separate purchases,” he says. “In response, we are placing a strong emphasis on our combi-packs, expanding our product offerings, and ensuring that this product is readily available to our key customers where this format is relevant.” The company launched its combi-packs of papers and paper filters in the U.K. this year.

    “Customers are steering the industry toward a future marked by sustainability, exploration of materials and a demand for convenient solutions,” confirms Montse Bonjorn, director of marketing of Miquel y Costas’ RYO division. “At Miquel y Costas, we’re not merely observing these trends; we’re actively shaping the future of smoking experiences in alignment with our customers’ evolving preferences.”

    The company recently introduced a range of eco-friendly, biodegradable paper filters. “As part of our commitment to setting new industry standards, we are set to launch Smoking Supreme, a product that transcends the ordinary,” she says. “Crafted with meticulous attention to detail, this new rolling paper is characterized by its feather-light weight of 12 grams and an ultra-soft surface texture—a harmonious blend for a supreme smoking experience.”

    In 2021, the company launched Smoking Cones, a collection of pre-rolled cones crafted in a unique spiral design, a layout that requires less paper and glue to manufacture.

    Potential for Growth

    Cannabis is playing an ever more important role for rolling papers manufacturers. As further legalization of recreational cannabis is expected in the U.S. and Europe, Sanchez expects demand for RYO papers to increase. “We have developed a patented system to infuse CBD in the natural gum used in the papers. These new products are now available under the Roor trademark that the group acquired a few years ago. Moreover, we have developed a new slim paper, including tips with a length of 125 mm, for the cannabis market.”

    “While global trends indicate a surge in cannabis-related products, our focus remains on identifying markets with the greatest potential,” Bonjorn explains. “Regions where cannabis legalization or cultural acceptance is on the rise are particularly promising. Latin America, North America and parts of Europe are among the regions showing considerable potential for growth.”

    Miquel y Costas is actively navigating the evolving dynamics of the cannabis market. The company, says Garcia, is ready to contribute innovative solutions to cater to the evolving needs of cannabis enthusiasts. “As we anticipate developments, our strategic approach includes identifying markets where the potential for growth aligns with our commitment to quality and innovation,” he says.

  • Beyond Face Value

    Beyond Face Value

    Images: Innovative Technology

    Applied properly, age estimation technology can be a valid tool to discourage youth access.

    By George Gay

    One of the most effective arguments available to those opposed to tobacco harm reduction (THR) is based on what they describe as the child vaping epidemic because, no matter whether such an epidemic is occurring, there is no rational argument that can overcome the emotional tug of politicians crying “child vaping epidemic!” as they trawl for votes and attempt to reset their flagging careers.

    Of course, children—here taken to mean those under the age at which it is legal to buy vaping products—should not be sold vapes because this is against the law in many, perhaps most, countries. But they are sold vapes—so the question arises as to how this is possible. Well, in the U.K. at least, it is possible largely because many of those politicians now fuming about the child vaping epidemic have, with 13 years of austerity, undermined the effectiveness of public services, including those, such as Trading Standards, that are charged with policing retailing.

    In the face of these problems, one of the few hopes the vaping industry has is to try to help bolster the policing of what happens in retail outlets, in part by using age estimation technology. Anybody who listened to the video presentation by Robert Burton, group scientific and regulatory director of Plxsur, which was part of the Bonus Content of the September Global Tobacco and Nicotine Forum in Seoul, South Korea, will have heard him make a case for age estimation technology to be used in stores selling vapes. In fact, such technology is currently being tested in two outlets in Italy run by Puff Store, part of Plxsur, before a planned wider rollout. Puff Store is using Innovative Technology’s MyCheckr system, which Puff Store’s CEO, Umberto Roccatti, described as “an excellent example of how vaping businesses can support vital legislation and responsible business practices through innovation.”

    Proper Terminology

    But before looking at the MyCheckr system, a little housekeeping is in order. The sorts of technologies in question are sometimes referred to as “facial recognition” or “age verification” systems, but I shall use the phrase “age estimation” because that is how Andrew O’Brien, the product manager at Innovative Technology, referred to it during a conversation with me. I doubt there is much wrong with using the term “age verification,” though, as will become obvious later in this piece, the way the system operates means there is nothing to “verify.” But “facial recognition” I would think is to be avoided, partly because it is misleading in respect of MyCheckr and partly because it would be as well to heed the lesson from the introduction of the electronic cigarette. The word “cigarette” in this phrase established a link in many people’s minds between the new, noncombustible product and the old, combustible product even though there was a world of difference between them; and it is only now, a decade and more later, that the term “vape” is starting to take the edge off this issue. I cannot help thinking that, for the same reason, THR advocates should, from the start, try to avoid the use of the term “facial recognition,” which in many people’s minds is linked, not unfairly, to mass-surveillance—in which Innovative Technology has decided not to become involved—overly intrusive policing, discrimination and human rights abuses.

    During a telephone interview on Oct. 23, O’Brien told me that age estimation, as provided by MyCheckr, was different from facial recognition, crucially because the data produced by this device was not capable of identifying a person and therefore was not considered to be “special category” data under the General Data Protection Regulation (GDPR) in force in the EU, the European Economic Area and the U.K. In particular, the U.K.’s Information Commissioner’s Office had clarified that processing biometric data for the purposes of the Age Appropriate Design Code could lawfully be done to meet the “substantial public interest” exception in the U.K. GDPR. In practical terms, this means retailers may operate the MyCheckr system for age estimation and may do so without needing to get permission from those entering their stores.

    The MyCheckr device is positioned next to a retailer’s till from where it scans the face of anybody who comes within its range.

    How it Works

    The MyCheckr device is positioned next to a retailer’s till from where it scans the face of anybody who comes within its range, which covers people in wheelchairs and those well over six feet in height—in all, about 98 percent of the U.K.’s adult population. If the system determines the person is more than 25 years of age, a green light shows and the store assistant may sell the customer age-restricted goods, including vapes, while if it determines the person to be under 25 years of age, a red light shows and the assistant is obliged to ask for a form of identification that provides proof that the person is more than 18 years of age.

    MyCheckr’s system is based on the use of algorithms that are composed during machine “deep learning” exercises. No, I don’t understand it either, but basically, the machine is presented with millions of facial images of people whose ages are known, and from the particularities of these images it builds a database of age-related facial characteristics. To avoid bias and inefficiency, care is taken during the learning phase to ensure the machine is presented with similar numbers of male and female faces and similar numbers of skin tones, as defined by the Fitzpatrick scale.

    Importantly, the machine learning seems to have worked. The MyCheckr was tested in March 2021 under the Age Check Certification Scheme when it was found to have been sufficiently accurate, to be used as part of a “challenge 25” program. The device did not “pass” anybody under 18 as over 25, and, on average, it underestimated the age of 18-year-olds by only 0.19 of a year. Remarkably, perhaps, O’Brien told me his company had improved the system during the year and a half since that test had been carried out. And he also mentioned that the device could now tell the difference between a face and a picture of a face presented either on paper or on a mobile screen.

    Privacy Protections

    One reason why MyCheckr is not, and could not be, used as a mass-surveillance facial recognition system is that it cannot store the scans it makes of customers’ faces. And since all the processing is done within the device, there is no need for it to be connected to the internet, which means no images leave the device.

    Interestingly, the efficacy of MyCheckr in preventing underage customers from obtaining age-restricted products from retail outlets goes beyond its scanning operations. O’Brien said that Innovative Technology had taken part in a trial of an earlier version of the MyCheckr in conjunction with the U.K.’s Home Office, which had wanted to understand how technology could help to ensure people complied with the Licensing Act 2003, covering the sale of alcoholic products. One of the things to come out of the test was that the mere presence in a store of an age estimation system tended to discourage underage visitors from trying to buy age-restricted goods. And another finding was that the device gave confidence to store assistants, especially younger and less experienced ones, to ask customers for forms of identity that provided proof of age because it was less likely that a challenged customer would make a fuss if the assistant pointed to the device and said, “the computer says ‘no.’”

    Although the device stores no facial images, it can gather and store analytical data concerning the demographics of a store’s customer base and the times of day that particular types of customers are most likely to visit, but, again, none of this data can be used to identify individuals. And another useful app that can be enabled allows the device to show adverts appropriate to the age and gender profile of a scanned customer.

    Finally, there is one area where the MyCheckr could be used in respect of “age verification/facial recognition” but only temporarily and where people agree to their facial images being scanned for the purposes of, for instance, allowing them, customers or members of staff, to gain valid entrance to a frequently visited, restricted and gated area of a store without the need to prove their age each time. And this sort of system has been successfully stood on its head for “self-excluded” gamblers who want to ensure they are challenged when they attempt to use gaming machines.

    We’re starting to see that this is a really exciting product for us.

    Collecting Feedback

    The MyCheckr device, which sells for about $500, is said to be easy to install and operate and uses about the same power as a low-powered laptop. It was released only a matter of months ago and so has not yet gone into commercial distribution, but it is in stores from where Innovative Technology is receiving feedback. Initial interest has been from smaller retailers, especially vape stores, but larger retailers are showing interest. “We’re starting to see that this is a really exciting product for us,” said O’Brien.

    I have no expertise in either retailing or technology, but it seems to me that, if used extensively and diligently, this device could be an exciting product too for the vaping industry and THR at a time when child access to vaping products is at the top of the agenda. But how much difference could it make and how quickly? One obvious problem is likely to be that those retailers who are less fussy about challenging customers in respect of age—those causing most of the problem—are less likely than others to take up the technology. Why should they when they are doing alright the way things are? Why should they buy into this new technology when they don’t want the fuss of challenging their customers?

    At this point, you realize that to encourage these retailers to change their ways, it is also necessary to have an adequately funded Trading Standards with the time and skills to challenge retailers who might be less than eager to be compliant. The government could consider making the use of such technology compulsory in all retail outlets where age-restricted products are on sale, but without the watchful eye of Trading Standards, there would be no guarantee that retailers would take any notice of the devices; they might not switch them on. The licensing of all retailers selling age-restricted goods might also help, but I’m certain this debate has been had by people far more in tune with these issues than I am.