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Year: 2023

  • Altria Group Reports 2022 Results

    Altria Group Reports 2022 Results

    Photo: Altria Group

    Altria Group reported net revenues of $6.11 billion for the fourth quarter of 2022 and net revenues of $25.1 billion for the full year, down 2.3 percent and 3.5 percent, respectively, from the comparable periods of 2021. Revenues net of excise taxes were down 0.1 percent for the quarter and up 2 percent for the full year, to $5.08 billion and $20.69 billion, respectively.

    “It was an exciting year for Altria as our businesses delivered strong financial performance, and we continued to strategically invest toward our Vision,” said Altria CEO Billy Gifford in a statement. “We generated strong adjusted diluted EPS growth of 5 percent and made meaningful progress in several areas of our smoke-free portfolio.”

    “Our plans for 2023 include a continuation of our strategy to balance earnings growth and shareholder returns with strategic investments toward our Vision. We expect to deliver 2023 full-year adjusted diluted EPS in a range of $4.98 to $5.13, representing a growth rate of 3 percent to 6 percent from a base of $4.84 in 2022.”

    Like other tobacco companies, Altria was impacted by high rates of inflation in 2022, which reduced adult tobacco consumers’ discretionary income and spending. “As a result, our businesses and the industry experienced elevated volume declines, and we observed accelerated share growth in discount cigarettes. Despite these factors, our leading tobacco brands remained resilient and we continued to observe significant brand loyalty in the tobacco space overall,” the company wrote on its website.

    While Marlboro’s retail share of the total U.S. cigarette category dropped 0.4 points to 42.5 percent in 2022, the brand gained 0.5 points in the premium segment, claiming 58.2 percent of that category.

    Altria Group also revised the valuation of its stake in Juul Labs, which has faced considerable regulatory and legal challenges. As of Dec. 31, 2022, the investment was worth $250 million, according to Altria.

  • A Blunt Tool

    A Blunt Tool

    Photo: MichaelJBerlin

    Unless properly structured, Europe’s tobacco and vapor tax plans may not achieve their public health objectives.

    By Stefanie Rossel

    The European Commission’s (EC) December 2022 proposal for an update to the 2011 EU tobacco excise directive came with a first: In addition to a significant hike in cigarette excise rates, the draft also calls for a bloc-wide vaping levy.

    According to the proposal, the current minimum EU excise tax rate of €1.80 ($1.92) should increase to €3.60 per pack of 20 cigarettes. This would double excise duties in member states with low cigarette taxes (in eastern European countries, a pack of cigarettes can currently sell for under €3) and affect excise duties in countries such as Luxembourg and Austria, where cigarette prices are low relative to income. The EU hopes to generate an additional €9.3 billion in revenue from the tax harmonization, which would be a welcome windfall for pandemic-struck and inflation-struck member states. If enacted, the proposal would also increase taxes on hand-rolled tobacco.

    E-cigarettes with less than 15 mg of nicotine per milliliter of liquid would attract a 20 percent excise duty, and stronger products would be subject to a duty of at least 40 percent. In the EU, nicotine content of e-liquids is limited to 20 mg per milliliter. According to the draft proposal, heated-tobacco products (HTPs) would attract a 55 percent excise duty, or a tax of €91 per 1,000 items sold.

    The proposed legislation would harmonize the fragmented EU vapor market, where each member state taxes vapor and HTP products at its own rates. It is part of a push aimed at accelerating the reduction of smoking rates throughout the EU. As part of the common market’s Beating Cancer Plan, introduced by the EC in February 2021, health officials seek to lower the current EU smoking prevalence of 26 percent to 20 percent by 2025 and achieve a “tobacco-free generation”—that is, a smoking rate of below 5 percent—by 2040.

    The draft was released only weeks after the EC imposed a ban on flavored HTPs to cut the growth in demand among younger consumers. Responses were mixed. While some argued that union-wide taxes are necessary because less harmful products still present risk, tobacco harm reduction advocates warned for unintended consequences.

    Too High, Too Complex

    David Sweanor

    “Simply increasing cigarette taxes is a blunt instrument when trying to reduce the health toll from cigarette smoking,” says David Sweanor, adjunct professor of law at the University of Ottawa in Canada. “It is far more powerful than other standard anti-smoking measures but has limitations and constraints that are often overlooked. Price sensitivity is real, but many people who smoke cigarettes will seek to deal with increased costs through access to contraband, the cross-border trade, simply changing the way they smoke without achieving health improvements, or further diminishing their overall well-being by redirecting expenditures from healthier purchases to the purchase of cigarettes.”

    Taxing low-risk alternatives reduces the incentive to switch from cigarettes and can make illicit cigarettes more competitive, according to Sweanor. In his view, it is akin to making alcoholics who give up drinking by taking up jogging pay a tax on running shoes. “It misses the point of how taxes can be justified due to the relative health impact of certain behaviors,” he says.

    Dustin Dahlmann

    Dustin Dahlmann, president of the Independent European Vape Alliance, believes that EU policy should be guided by scientific evidence. “Science around the world agrees that vaping is significantly less harmful than smoking,” he says. “E-cigarette taxes that are too high [to] prevent socially disadvantaged groups in particular from switching to e-cigarettes. In the first instance, there should not be excise duties for electronic cigarettes, as they are a means for smokers to switch to less harmful alternatives. If further harmonization of excise duties is considered, legislators should take into account the significant differences in risk profile between tobacco cigarettes and electronic cigarettes and apply the excise duties methodology accordingly, i.e., proportionality to the harm reduction benefits brought about by tobacco replacement products.”

    In practice, this would mean a maximum excise duty of €1 per 10 mL or €0.10 per 1 mL of e-liquid, and it should be applied only to e-liquids with nicotine, according to Dahlmann. “The EU draft imposes a combination of an ad valorem and a specific volume base excise that would be an administrative burden for small and medium enterprises and fiscal authorities due to the additional complexity. Giving two options will lead to uncertainty, defeating the purpose of a harmonization of excise rates.”

    Illicit Trade Could Increase

    The question about how the EU’s revised tobacco tax directive would impact the illicit cigarette market is justified. The experience of France provides a cautionary tale. Following a tax increase of almost three times the EC’s minimum level, the illicit market in that country more than doubled, from 13.7 percent in 2017 to 29.4 percent in 2021, leading to an estimated loss of €6.2 billion in tax revenues in 2021, according to a KPMG report. In general, the study found, illicit consumption in the EU increased by 3.9 percent, or 1.3 billion cigarettes, in 2021, which corresponds to a loss of €10.4 billion in taxes.

    How the suggested excise duty increase would impact markets with relatively low income and high smoking levels, such as Greece (42 percent smoking prevalence) and Bulgaria (38 percent), is anybody’s guess. “I have worked globally on illicit trade issues for decades,” says Sweanor. “There is much we can do to limit the trade, but the economics makes [illicit cigarette trade] so lucrative that it is hard to imagine bringing it under control so long as there remains a significant market for cigarettes. Markets meet needs, including illicitly. Cigarettes are extraordinarily inexpensive to make, and taxes and the huge profit margins of Big Tobacco create a business opportunity many people can be expected to see as a money spinner. The real answer is to facilitate disruptive technology that makes cigarettes as undesirable to consumers as unsanitary food or leaded petrol.”

    To achieve the latter, the EC would have to acknowledge the harm reduction and smoking cessation potential of novel tobacco products. In February 2022, the EU Parliament became the world’s first elected chamber to endorse THR when it adopted a resolution on cancer prevention and treatment that notes that e-cigarettes “could allow some smokers to progressively quit smoking.” Dahlmann praised the move as a “landmark declaration” that would help reassure smokers of the benefits of switching to vaping. “All other EU institutions—and in particular the European Commission—should take this on board and ensure that policy follows science, not the other way around,” he said at the time.

    Sweanor is less upbeat. “The taxation of low-risk products reflects an understanding of differential risks. But it fails to come to terms with the full magnitude of the harm from cigarette smoking and the enormous potential to dramatically reduce it. When we are looking at hundreds of thousands of annual deaths, surely it is a public health emergency—and policies should reflect that. Language such as “could allow some smokers…” and policies that limit the relative acceptability of low-risk alternatives indicate that the extent of the public health opportunity is not fully grasped.”

    Differentiated Approach Required

    Whether the EU is prepared to part ways with anti-novel nicotine product sentiment of the World Health Organization Framework Convention on Tobacco Control (FCTC), which the common market has ratified, remains to be seen.

    “The EU is obligated to support tobacco harm reduction as a signatory to the WHO’s FCTC as stipulated in the introduction, article 1 (d) of the treaty,” says Dahlmann. “The FCTC requires the EU to not only allow reduced-risk products but to actively promote them. However, this definition is not actively supported by the WHO. The rule here is much more ‘quit or die.’”

    “The WHO’s FCTC process has followed in the footsteps of narcotics protocols in being hijacked by ideologues who seek an abstinence-only approach on drugs where total abstinence is simply not a viable nor a humane goal,” Sweanor adds. “As with those narcotics protocols, caring governments that follow the Enlightenment principles of science, reason and humanism will either creatively skirt such guidelines or simply ignore them. This is something we are now seeing unfolding globally with cannabis policies.”

    The goal of the new tax directive to create a smoke-free European society, he says, is noble and achievable—and far more quickly than envisioned in that 2040 goal. “But it requires bold rather than tentative steps. Policymakers should act in ways consistent with cigarette smoking being a public health crisis of enormous importance,” says Sweanor. “The best way to tackle this is by use of cross-elasticities, of empowering and facilitating people who smoke cigarettes to make healthier choices. This is accomplished by measures such as the widest possible cost differential between lethal cigarettes and low-risk alternatives. Given the horrendous death and disease tool from cigarettes, this should be a huge priority.”

    “E-cigarettes need to remain accessible and affordable to smokers from all socioeconomic backgrounds who wish to quit smoking,” says Dahlmann. “E-cigarettes offer smokers an alternative that is 95 percent less harmful than smoking. Switching from tobacco to vapor has positive individual, social and economic implications and should be encouraged, not penalized by the tax system. If taxes make vaping more expensive than smoking, many smokers will lose an incentive to switch to the much less harmful alternative. We therefore would see no chance of achieving the EU’s ambitious goals.”

    Before it is enshrined in law, the proposal will have to be agreed on by all EU member states. BAT already noted that this is merely the beginning of a long legislative process. “I assume there will be amendments, but we do not yet know their likely nature,” says Sweanor. “The proposal could be changed to help facilitate a rapid public health breakthrough as people abandon lethal cigarettes in huge numbers. Or it could be amended to make that a pipe dream.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • A Teaching Moment

    A Teaching Moment

    Photo: Darren415

    Nicotine’s lessons for cannabis regulation

    By Cheryl K. Olson and Willie McKinney

    From the industry perspective, regulation of tobacco products by the U.S. Food and Drug Administration went from impatient foot-tapping to a lurching roller-coaster ride. The recently released “operational evaluation” of the FDA’s tobacco program, requested by Commissioner Robert Califf, lays out in sedate but clear terms some causes of industry’s frustrated exhaustion: years of delay in establishing requirements. Sudden major shifts in policy. Cycles of litigation and reprieve.

    Based on feedback from FDA employees, and people from industry and public health, the independent Reagan-Udall Foundation for the FDA made recommendations to start repairing the regulatory mess. After “observ[ing] that CTP [Center for Tobacco Products] has been forced to operate primarily in a reactive mode, moving from one challenge to the next,” the first recommendation to the agency is to get proactive. The Reagan-Udall panel encouraged the CTP to make time now to “think strategically about where it is today and where it needs to go in the next several years.”

    This advice might apply equally to whatever future the FDA faces with regulation of cannabis products. The FDA has authority over cannabis and its dozens of biologically active chemical compounds, including CBD and THC. Although marijuana falls under the federal Controlled Substances Act, the 2018 Farm Bill removed hemp (a low-THC cannabis plant and its derivatives) from that definition.

    Principal Deputy Commissioner Janet Woodcock recently announced in a press release that existing regulatory frameworks for food and supplements are not appropriate for CBD. “The agency is prepared to work with Congress” on a new pathway, she stated.

    What might we take from the U.S. tobacco experience to ease headaches for future cannabis regulation? Below are some points to ponder in three areas: regulatory structure, medical versus recreational use, and the effects of misinformation on regulation.

    What Should a New Structure Look Like?

    First, what regulatory structure makes sense: Should the FDA create an all new one for cannabis products, or should it employ some existing channels? Consider the tobacco parallel.

    “Safe and effective” is the FDA’s traditional standard for evaluating drugs and medical products. In the 1990s, then Commissioner David Kessler tried to assert the FDA’s authority to regulate nicotine as a drug—intended by industry to affect the body’s structure or function—and cigarettes as delivery devices. A 2000 Supreme Court ruling found that the “s and e” standard left no room for regulation of tobacco.

    In 2009, when Congress chose to place tobacco under FDA jurisdiction, a novel department was created. But this promising, fresh science-based regulatory approach for tobacco faced headwinds. This Center for Tobacco Products was largely staffed by people rotated from elsewhere in the FDA. The “appropriate for the protection of public health” (APPH) tobacco standard was a difficult departure from their accustomed ways and views. The combination of suspicion from past industry misbehavior and the political uproar over youth vaping fostered an “us versus them” mindset. The founding legislation’s focus on cigarettes, the most deadly of tobacco products, affected attitudes toward emerging alternative nicotine products with the potential to greatly reduce disease risks for people who smoke.

    Perhaps there is light at the end of the tunnel. The FDA appears to recognize that shoehorning cannabis into existing structures has its own problems. Each type of intended use must find a fit in an existing department, such as human food, veterinary products, cosmetics or drugs. Under the Federal Food, Drug and Cosmetic Act, a drug is any product (including marijuana or hemp) intended to affect the structure or function of the body or intended to diagnose, cure, mitigate, treat or prevent disease.

    What factors will influence staff mindset about cannabis in these various departments? How will that affect regulation?

    Medical vs. Recreational Pathways

    Another issue: How best to regulate cannabis for medical versus recreational use? Like tobacco, cannabis has been used historically for medical purposes, such as treating pain. Both nicotine and cannabis are reportedly used to self-medicate for mental health disorders. Use of marijuana to manage mood disorders is reportedly higher in states with medical marijuana laws. But there currently is no such thing as “medical” marijuana. (This is not unlike the confusion over what constitutes “natural” food.) The FDA drug pathway would create medical cannabis. A standardized product would be evaluated for quality, safety and efficacy for a particular medical indication.

    We lack randomized, controlled clinical trial data on whether cannabis effectively treats disorders such as depression. However, such studies could be done by industry and submitted to the FDA’s Center for Drug Evaluation and Research. Several specialty products containing THC or CBD (e.g., for chemotherapy-related nausea or severe forms of epilepsy) have emerged from this path.

    But what regulatory pathway might recreational cannabis take? And what complications arise from product format and route of administration: smoked, vaped, applied to skin or eaten? Where would combusted flower fit?

    Nicotine is regulated by the FDA as a drug and as a recreational product. Two paths for cannabis also make sense. Although there is overlap (to get technical: Gum bases that contain nicotine are regulated as both pharmaceuticals and recreational tobacco products), combusted tobacco products that contain nicotine are only regulated by the Center for Tobacco Products.

    We propose that Congress modify the 2009 Tobacco Control Act to give the CTP authority over combusted and vaped cannabis. Such products are very unlikely to pass the “safe and effective” drug standard, but the APPH standard may be applicable to recreational cannabis. And the CTP has built up expertise in combusted and vaped products.

    Keep Moral Panic Out of Regulation

    A third issue deserving of thought is how to prevent moral panic and misinformation from derailing the potential benefits of cannabis. One lesson from nicotine is how these can fog the ability of regulators, politicians and the public to see data clearly.

    Research shows that youth use of nicotine and cannabis (as well as alcohol and other substances) overlap. A 2022 analysis of Population Assessment of Tobacco and Health study data found that more than half of e-cigarette users aged 15 to 24 had vaped cannabis. At the population level, teen cannabis youth has been fairly stable for the last quarter century. However, there will be concerns that the spread of state laws legalizing cannabis for adults could ease access for youth.

    Once it takes hold, misinformation is hard to uproot. Witness stubborn rates of misbelief that the outbreak of vaping-related lung injuries (e-cigarette or vaping product use-associated lung injury, or EVALI) were caused by e-cigarettes instead of THC vapes adulterated with vitamin E acetate.

    We see signs of a potential moral panic over cannabis. When the Centers for Disease Control and Prevention noted that marijuana vaping was most often linked to EVALI, the Wall Street Journal editorial board decried the “risky social experiment [of] legalizing and especially destigmatizing cannabis”—a drug that “could be damaging young brains for a lifetime.” News reports tout studies suggesting higher potency cannabis could mean higher risks of addiction and health harms.

    Research to clarify the specific nature of cannabis risks to youth is needed. We also need research on the current state of cannabis misinformation, including overly rosy views of risk that could create a backlash when problems are publicized. Using the results of this research for outreach ASAP, before the pot panic gets rolling, could soften the impact.

    Scrutinize and Enforce

    To avoid repeating mistakes of the past, we also need rigorous oversight. The FDA has been criticized for reluctance to use its powers to remove illegal nicotine vapes from the market. Some companies continue to sell despite warning letters. We need to study what cannabis products drive youth use and proactively target those makers and distributors.

    Products likely to attract underage users deserve particular scrutiny. Although no deaths were reported, a study in the journal Pediatrics2 documented a worrisome increase in child poisonings from edible cannabis products. To protect both adult access and child well-being, it’s common sense to require that edibles come in clearly marked, child-resistant packaging with no resemblance to candy.

    We have tools to unmask the bad actors. Youth will tell us in surveys what products they buy. The FDA’s own National Youth Tobacco Survey identified products not legally on the market, such as Puff Bar and Hyde, as favorite brands (Hyde was identified through write-in responses).

    With nicotine, regulatory delays and gray areas (such as regulation of synthetic nicotine) were abused by companies willing to skirt the law for quick profit. We see analogous situations with cannabis. One example is hemp-derived delta-8 THC products, said to produce a milder high similar to that from marijuana-derived delta-9 THC. Sales are rising fast. So are concerns. There are safety risks from impurities created during delta-8 manufacturing. And public confusion over delta-8’s legal status could complicate marijuana legalization efforts.

    The Reagan-Udall Foundation review of the CTP highlighted the need for “truthful and accurate information to help adult consumers make informed decisions about the role of nicotine” and product-specific risks. This applies equally to cannabis.

    Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Advisors. She spent 15 years on the faculty of Harvard Medical School.
    Willie McKinney is the founder of McKinney Regulatory Science Advisors. He’s held senior regulatory roles at major tobacco product companies and served for three years as the industry representative on the FDA’s Tobacco Products Scientific Advisory Committee.
  • Enduring Legacy

    Enduring Legacy

    Packing and pressing station for tobacco | Photo: Godioli & Bellanti

    Celebrating 100 years in business, Godioli & Bellanti attributes its success to offering “quality machines at truly unbeatable prices.”

    By George Gay

    Lorenzo Curina | Photo: Godioli & Bellanti

    After three years of subdued demand for tobacco industry primary processing equipment, interest is picking up, according to Lorenzo Curina, chief executive officer and sales director at the primary machinery designer and manufacturer Godioli & Bellanti.

    There was now increasing demand for complete processing lines that were compact and uncomplicated, a demand that was being driven by a growing interest in the production of cut rag, he said in an emailed reply to questions.

    At the same time, there was a trend by major cigarette manufacturers to require the relocation and/or the refurbishment of existing equipment, projects for which Godioli & Bellanti, with its 100 years of experience in the business, was well qualified to undertake. The company’s engineering skills and experience enabled it to repair, rebuild, recondition or upgrade all types of primary equipment while its organizational skills and flexibility meant it could navigate the necessary logistics involved.

    In fact, an indication of the engineering and logistical skills the company can call on was demonstrated when, in 2018, it shipped and delivered what was believed to have been one of the tobacco industry’s biggest direct conditioning cylinders, which was 14 meters long, 3 meters in diameter and capable of processing flue-cured Virginia tobacco at a rate of 20 tons per hour.

    A Pioneer

    Godioli & Bellanti was established in 1923 by Gino Godioli and Angelo Bellanti, whose initial focus was on making agricultural implements, especially those aimed at helping the mechanization of tobacco production, since the Umbria region, where they were based, was one of the most important areas in Europe for the cultivation of flue-cured tobacco.

    After the passing of the founders, Godioli & Bellanti was, in 1963, turned into a limited company, which was the beginning of a transformation. Under its new designation, Godioli & Bellanti SpA, the company moved into new and challenging areas. It developed new technologies for the tobacco industry, becoming Italy’s first supplier of tobacco machinery to the tobacco manufacturing sector, which later included the multinational companies that established operations in Italy and elsewhere in Europe.

    The transformed company specialized in turnkey projects, which meant that it supplied, as well as machinery, services such as heating and lighting systems. And this breadth of operation allowed it to gain considerable expertise in machine and whole-factory design.

    Initiatives such as these have been continued and are continuing. Although the company is known for its tobacco industry services, it operates in other industries, most of them natural outcrops. It offers machinery and processing lines for medicinal herbs and other plants, including mechanized equipment for the cultivation of these plants, along with machinery for drying and dehydrating; cutting, threshing and classification; and mixing and blending. It offers, too, continuous drying plants for food products.

    Entering New Fields

    Processing line for medical herbs | Photo: Godioli & Bellanti

    Meanwhile, the company’s experience in the field of herbs was adapted to allow it to enter the field of industrial hemp processing, where its processing lines provide for the separation of the plant’s fiber, hemp, seeds, flowers, leaves and stems. This is an important and growing side of the business because the products that are generated are used in a wide range of industries, including those concerned with pharmaceuticals, textiles, foodstuffs, veterinary products and bio-building. Less well-known, perhaps, is the company’s work with tree seeds. It was the first company to develop a tree seed extraction system, and it now offers complete, custom-designed turnkey plants for the extraction and selection of tree seeds.

    Aside from its interests in food and related products, the company offers biomass driers that function with recovered thermal energy, including driers for woodchips and sawdust. And it offers machines and complete processing lines for producing glass-reinforced pipes and sleeves, using continuous filament winding technology.

    Custom Offerings

    Drying lines for tobacco | Photo: Godioli & Bellanti

    But a large part of its business is concerned with tobacco, for which it can supply equipment for auxiliary plants, threshing lines and, of course, primaries. For auxiliary plants, where the leaf tobacco process begins, Godioli & Bellanti is able to offer, among other items, conveyor belts, picking lines, feeding and blending tables, tipper feeders, tipping machines, weighing belts, vibrating conveyors, vibrating sieves, pneumatically operated pad looseners, sand reels, blending silos and ordering cylinders along with test shakers, stem testers, laboratory mills and laboratory cutters.

    For many years now, it has been a goal of most leaf processors to implement changes aimed at increasing packed-tobacco quality, costs and yields, and, to this end, Godioli & Bellanti offers custom-designed threshing lines and plants, including, among a host of other equipment, high-efficiency threshers operating over a wide range of speeds and compact classifiers with low energy requirements. It provides, also, compact, high-efficiency re-driers with steam recycling systems that reduce steam consumption. Being custom designed, the re-driers provide for a wide range of adjustments in such areas as, but not limited to, drying temperatures, humidifying steam pressures and apron conveyor speeds. Finally, Godioli & Bellanti offers complete, automatic, programmable leaf tobacco packing lines for cartons, wooden boxes, zipper bags and bales.

    Meanwhile, it is probably the case that the company is best known for its primary machinery and plants—particular plants at that. Curina told Tobacco Reporter that companies that contacted Godioli & Bellanti were those who preferred “traditional primary processing—I would say almost artisanal.” Such equipment includes automatic handling systems for cartons and bales, automatic de-cartoners, automatic vertical slicers, pneumatic conveying systems, weighing belts, dosing feeders, tipping feeders, blending and storage silos, toasters, sauce and flavor kitchens, casing and flavoring cylinders, drying cylinders for cut rag, and customized supervision software to render whole lines automatic.

    Finally, Curina further defined his company’s approach to business. “We don’t presume to compete with the big primary machinery manufacturers for the very big projects,” he said, “but we modestly offer quality machines at truly unbeatable prices.”

    This strategy seems to have paid off, not surprisingly, perhaps, given that the recent past has seen an increasing trend—at least outside China—toward shorter cigarette-manufacturing runs, a trend that has been reflected in primaries as a need to produce smaller batches of cut rag. There has been a rise, too, in the number of small, independent primary operators catering to multiple end users that need to run low-cost, highly flexible operations from small footprints. Certainly, Curina, and his brother Cesare, president of the board and technical director, who have steered the company’s direction in recent years, have made much progress—modestly expressed. A note on the company’s website describes how “Godioli & Bellanti works in several areas of the world,” before going on to list almost 60 countries and every continent.

    George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.
  • Cleaner Better Greener

    Cleaner Better Greener

    Photo: SPI

    Suppliers of adhesives and glue application systems prepare to accommodate new product requirements.

    By Stefanie Rossel

    In cigarette construction, adhesives are an invisible but indispensable ingredient. Even though adhesives often make up only a small percentage of the final product, they can have a major impact on the product life usage and consumer experience, explains Selda Akbasli, global business manager for rolled paper and tips at adhesives manufacturer H.B. Fuller. “Adhesives play a critical role as an enabler and a must-have technology that makes the products work. Due to its innovation, versatility and flexibility—not only in selecting technologies and raw materials—the industry now has many options that contribute positively to the way products are conceived and manufactured, reused or recycled.”

    Efficiency, sustainability and cleaner application: These trends currently dominate the market for adhesives and glue application systems. Akbasli says that as markets are in constant evolution and manufacturers are under pressure to control costs and improve customer service, efficiency is a top priority for her customers. Tobacco companies seek to improve production processes and improve their machinery’s performance while using fewer resources and producing less waste.

    Selda Akbasli

    “In some cases, it is not a matter of preferring a lower priced grade but looking for good value for money and quality,” she says. “For instance, often a high performance, higher priced adhesive can enable the user to apply less [adhesive], and the cost in use of the more expensive product will actually be lower. Additionally, customers are aiming to optimize their business complexity and reduce SKUs, for instance.”

    To meet these requirements, H.B. Fuller has developed Ipacoll 2606, which provides robust performance on both high-speed tipping and filter applications, according to the company. Excellent initial wet tack and clean application performance enables superior mileage optimization with no impact on bond strength, the manufacturer claims.

    On the application equipment side, there is also interest in enhanced efficiency, according to Danielle Roxborough, business development manager at SPI Developments, which in 2018 joined the Tembo Group, a holding company that also includes tobacco machinery manufacturer ITM. “Customers want application systems to run as smoothly as possible and without interruptions—and without the engineers being involved with the machine,” she says.

    SPI recently launched a new multi-line applicator, a small plate that is available with three holes to 15 holes, creating very thin lines of glue. “The innovation for this came from our paper straw-making machine,” says Roxborough. “We were developing a glue system that we were selling to our sister company to create multi-lines to make the paper straw. We then saw this could be transferred into the tobacco industry. We have now moved on from our previous triple line applicator to this cleaner, more accurate, more flexible application.”

    Sustainable is the Way

    Environmental considerations have gained prominence throughout the nicotine industry, including in adhesives. In Europe, the Single-Use Plastics Directive is forcing cigarette manufacturers to rethink their use of cellulose acetate filters. This has given rise to more sustainable solutions, such as filters made from crimped paper. Interestingly, adhesives are exempt from the directive.

    “Everyone would love to be more sustainable, but sometimes this comes at the cost of something else,” says Roxborough. “If you’re using paper filters as being better for the environment, you shouldn’t be using a plastic glue. The question is, how do you move away from such things as PVA glue—which is not sustainable but plastic—or hotmelt, which is thermoplastic?

    Danielle Roxborough

    “We are seeing some requests about creating applicators that could do starch-based glues. This is almost going full cycle; in the 1970s, starch-based adhesive was used to create cigarettes on a filter. Today the science is better, though. We believe that glue manufacturers will drive this development rather than SPI, which will follow with the respective application system.”

    According to Roxborough, gluing paper filters to a cigarette involves only minor tweaks to existing technologies, such as adjusting the angle of the applicator’s nozzle. “The interest from SPI’s point of view actually is in terms of flavoring because that’s a different challenge altogether,” says Roxborough. “From gluing, it’s the same principle, but how do you make a paper filter taste and feel like a normal filter?”

    “Sustainability is getting higher and higher on the agenda,” notes Jean Pierre de Smet, global tobacco adhesives business manager at adhesives supplier Henkel. “Paper-based filter products may need different adhesives. We develop them case by case and customer dependent.” In the short term, he states, adhesives have a role as carbon footprint (LCA) reduction enablers. “In the longer run—and if supported by the cigarette manufacturers—we might think about LCA reduction of the adhesive itself.”

    Wanted: Automated Cleaning

    H.B. Fuller can draw on a strong track record in adhesives to bond paper substrates for packaging. “We are continuously investing resources and capabilities to develop customized products for very specific applications such as coated paper or crimped paper as the market evolves to answer the new consumer needs.” She is seeing a rise in interest in “greener” products as regulations around the handling of chemicals become tighter and governments are introducing stricter laws. “In Europe, companies need to continue complying with the latest legislation driven by the Green Deal, like the tendency to remove aluminum. And we at H.B. Fuller have solutions to eliminate aluminum paper from the package to make it simple and easy to recycle in established wastepaper and board recycling streams. Net sustainability is a mega-trend, and the most substantial contributions adhesive producers make in the realm of sustainability are through product innovation, reducing the environmental impact of production processes and improving the sustainable performance of tobacco through their formulations.”

    The choice of an adhesive impacts tobacco production’s carbon footprint in a variety of ways, explains Akbasli. “We have ongoing projects for bio-based raw materials and products, and customers can already purchase our adhesives in bulk returnable and reusable containers to eliminate packaging waste, through to using our operator training packages to optimize the adhesive application ensuring maximum efficiencies. Whichever combination of options are selected, the adhesive is a small percentage of any tobacco product, and improvements in the overall carbon footprint of the production facility will be in the corresponding proportion.”

    Applying glue to cigarettes can be a messy business, and demand is growing to make the process cleaner. Roxborough says that “autonomation”—that is, intelligent automation—is becoming a big thing among customers. “The glue is very messy, and it’s very difficult to keep applicators clean. Currently, it’s a very old-fashioned way of wiping the nozzles at the end of the shift. What we see now are requests for nozzles that clean themselves. For years, we have had what we called positive shut-off, so when the machine stops, the needle closes the hole, pushes all the excess glue out, and that prevents leakage while the machine is not running. But the excess glue needs to be removed.” SPI is working with certain customers to create self-cleaning solutions for glue applicators. This technology may ultimately find its way into the general tobacco industry market.

    Novel Products, Novel Needs

    For a decade now, suppliers of adhesives and glue application systems have had to contend with a shrinking global cigarette market. The new smoking alternatives make up for just part of that reduction as many don’t use adhesives. “Only heated-tobacco products require adhesives and compensate for the decline of combustible cigarettes,” says de Smet. “Adhesives for HTPs have higher quality requirements.”

    As a leader in both traditional and HTP markets, H.B. Fuller does not expect any disruption to its business, with HTPs gaining traction and growing. “One of the biggest challenges we see for HTPs is the heat resistance of adhesives to ensure product integrity during use. At H.B. Fuller, we have recently developed Ipacoll 2364, a superior performance product that addresses the temperature resistance needs,” says Akbasli.

    Jean Pierre de Smet

    “Another [challenge] is related to the fact that the HTP industry is highly technical, regulated and always under high security. To closely monitor what is evolving in this segment and keep track on the latest developments, H.B. Fuller collaborates and develops strong relationships with its customers, paper vendors, machine manufacturers and other suppliers throughout the value chain. Working together and being part of the solution design from the beginning make it easier to develop adhesive solutions that meet the needed requirements valued by the market, even under short time pressures.”

    Roxborough notes increasing interest in the company’s multi-line application system from HTP manufacturers as the production process involves connecting different materials, such as foil, metal, reconstituted tobacco, paper and acetate filters.

    Understanding the Full Lifecycle

    As is the case in other industry, the supply chain, impacted by Covid-19, Brexit and the war in Ukraine, among other factors, remains a major issue for adhesive suppliers. In the current environment, small components normally considered insignificant can stop machinery from being shipped, according to Roxborough. Electronic supplies are particularly difficult to obtain. “SPI was fortunate to have enough on the shelf, so delivery was only a bit delayed,” says Roxborough. “But we’re getting to the point now where we will have to think of redesign allowing for alternatives. This is pushing costs up. We have seen a massive increase in costs from suppliers, from services through energy supplies. We try not to pass the higher costs on to customers, but we had to do it due to the economic climate we’re in.”

    De Smet says that like everyone in Europe, his company has been suffering from disruptions and an unstable supply chain. “Thanks to the leverage of Henkel in the adhesive industry, we have been able to supply all our customers in line with their needs,” he says. “More contingency and security of supplies was given by a strategic combination of our footprint and our product portfolio.”

    Meanwhile, dynamics have shifted, with many countries moving toward recession, demand across raw material markets decreasing and transoceanic shipping prices dropping to pre-Covid levels. “Yet many key input costs, such as energy, are expected to remain high through 2023 versus historical level,” says Akbasli. “As economies move forward, companies need to maintain a keen eye on fundamental consumer demand and focus on increasing agility. For instance, the move to on[-shore] or near-shore high demand/highly volatile goods will continue as organizations seek to be more reactive to demand changes and control logistics costs. Supply is currently balanced while pressure on margins up and down the supply chains is expected to increase. With this, and for most companies, cost containment will be the top priority this year, and supply chains will be under intense scrutiny to keep costs under control.”

    In 2023, cigarette consumption will be affected by economic crisis, inflation and excessive taxes, especially in developing countries, according to Akbasli.

    “This tends to promote hard-to-control illicit trade that poses many challenges across all industries,” she says. “At H.B. Fuller, we have the advantage of a robust, global and secure supply chain, making us a trusted partner. […] When considering the development of next-generation adhesive solutions, the goal is that adhesive manufacturers understand the full product lifecycle, including recyclability, bonding and de-bonding on demand, alternative cure processes and use of renewable or bio-based raw materials to name a few.”

    De Smet confirms that the supply chain is normalizing, and raw material cost is moving slowly but steadily to historical levels. “The challenge may be that we’re still in a potentially fast-changing environment. Opportunities may be found in a close cooperation between tobacco industry and its suppliers to manage costs keeping the holistic view in mind.”

    Despite all the challenges, SPI can reflect on a strong 2022, and, with a full order book, look forward to a good 2023. While tobacco remains its main focus, the company is collaborating with ITM and other Tembo Group members on projects for nontobacco industries, such as the homecare and paper businesses. To accommodate its growing team, the company will move to new premises this year.

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Surfing while Juggling

    Surfing while Juggling

    photo: Anna Berdink

    Five types of innovation

    By Clive Bates

    Where does innovation in the tobacco and nicotine field come from? Is it the far-sighted senior executive assessing the needs of the evolving market and committing R&D budgets to realize the corporate vision? Or is it the genius scientists and engineers toiling 24/7 in the labs to invent the wonder product that will become The Next Big Thing?

    Both are caricatures, of course, but neither explains how innovation really works.

    In his brilliant book, How Innovation Works, author Matt Ridley points out that “Innovation is not an individual phenomenon but a collective, incremental and messy network phenomenon.” For those involved, I would say it is more like surfing while juggling than a straightforward path from idea to implementation. To see why, let’s look at five types of innovation in the tobacco and nicotine market.

    First, disruptive innovation. The most prominent recent case of disruptive innovation in the tobacco and nicotine field is the rise of electrical heating as an alternative to tobacco combustion to create an inhalable nicotine-bearing aerosol. Though the Chinese inventor Hon Lik is usually credited with inventing the e-cigarette, the truly disruptive innovation came before and from outside the tobacco and nicotine industry. It is what makes the e-cigarette and modern heated-tobacco products possible. The critical disruptive innovation was the lithium-ion battery. By the 2000s, battery technology had steadily progressed to achieve a sufficiently high power and energy density, allowing rapid heating and an adequately long life between recharges within a compact form factor. Developments in battery technology were driven by the demands of the giant and ultra-competitive markets for mobile devices like smartphones and tablets.

    For decades, the intense heat, complex reactions and chemical cocktail generated by the combustion of tobacco leaf at 900 degrees Celsius in the burning coal of a cigarette were unmatched and unmatchable as a means of delivering nicotine to the lungs. The combination of electrically heated coil and e-liquid to generate an aerosol is now competitive. The disruption of the dominance of the cigarette, currently underway and likely to last two decades to three decades, is driven by a fundamental energy transition that degrades the advantage of combustion.

    I refer to the second type as system innovation. This is the consequential economic, regulatory and public health reaction to the initial disruption and may involve hundreds of innovative responses. For example, the emergence of e-cigarettes triggered a creative response in the Stop Smoking Service in the city of Leicester, U.K. Under the leadership of its manager, Louise Ross, the service changed its practice to embrace vaping as a low-risk alternative to smoking that could appeal to many smokers who had previously been beyond the service’s reach. Through the power of example, that experience led to further innovation at the National Centre for Smoking Cessation and Training and with the government’s support to guidance on e-cigarettes issued by the National Health Service.

    But this innovation did not happen linearly, driven only by personal inspiration. It is best seen as “emergent,” arising from a wide range of concurrent changes and influences triggered within the public health ecosystem. The disruptive innovation also led to system innovations in regulation, such as the 2014 European Union Tobacco Products Directive. In 2016, the U.S. Food and Drug Administration’s deeming rule brought vaping products into the definition of tobacco products and under the jurisdiction of the Tobacco Control Act. The initial disruptive innovation also led to innovation in the business models of tobacco companies, but also in the tactics of their traditional adversaries. Tobacco companies started moving their business toward a future in noncombustible nicotine products, and the anti-tobacco groups shifted their focus from preventing disease to fighting nicotine addiction.

    For tobacco and nicotine companies, the disruptive innovation and the system responses it triggers are like a “big wave,” both prized and feared by top surfers. Like a wave, the companies didn’t create it and can’t control it, but their challenge is to catch it, ride it well and not wipe out. The case of Kodak and its destruction under the breaking wave of digital photography is probably the most cited case of an innovation wipeout. But it doesn’t have to be a technology shift. In the 1970s, deregulation in the aviation sector enabled the emergence of the innovative low-cost airline business model. It wasn’t long before major airline incumbents were going under as that big wave gathered pace.

    The disruptive and systems innovations generate a changing paradigm: a big wave of opportunity or destruction that businesses must learn to surf. But why does innovation feel like juggling while surfing? The juggling reflects the frenetic activity of keeping a company moving, in financial balance and ahead of its rivals while it navigates a radically changing context. This brings us to three further types of innovation: the innovation occurring within the changing paradigm.

    So, the third type of innovation is evolutionary. It resembles the Darwinist process of evolution in nature. Here, the consumer provides what evolutionary biologists call selection pressure, and innovation emerges from incremental improvement through trial and error, mirroring what biologists recognize as mutation and natural selection. It will usually be incremental, but its impact will not always be gradual. Evolutionary innovation can make radical inroads into a market by solving a particular problem or exploiting an opportunity.

    A good example is pod-based vaping products using nicotine salts. Salts change how nicotine is absorbed in the airways and allow users to consume smaller volumes of higher strength liquids. The effect of the salts is to allow high-strength nicotine liquids to be used without undue harshness with a smaller battery and tank, enabling a compact and convenient device. This addressed the challenge of providing a convenient and discreet product with effective nicotine delivery. It was wildly successful—at least where regulators allowed it.

    I have seen much handwringing about the recent rise of disposable vaping products. But this is another case of evolutionary innovation. The disposables solve the problem of finding a quick and convenient way into vaping for smokers in the early or tentative stages of switching away from smoking. They are simple to use, low cost and convenient. They don’t require an upfront investment in a device, so they lower the cost of consumer trial and experimentation. Like many innovations, these products have downsides, such as the waste generated. But this is manageable and must be set against the potential benefits and in context with other waste material flows.

    The fourth type of innovation is adaptive. This is a variation of evolutionary innovation, but it arises in response to regulation. Ultimately, it is driven by meeting consumer preferences, but it is triggered by regulatory interventions that would otherwise compromise the consumer experience—ether by design or as an unintended consequence. One example is the mentholation cards that emerged after the European Union ban on menthol-flavored cigarettes. These are inserted into cigarette packs to infuse nonmenthol cigarettes with menthol flavor. Another case is the “shortfill” e-liquid containers that became popular as a workaround to overcome the European Union ban on e-liquid containers of more than 10 mL volume. Much larger containers of nicotine-free vaping liquid are sold only partially filled, allowing the nicotine to be added later—often from nicotine liquids stronger than permitted in the EU.

    As the FDA imposed ever more burdensome regulation on nicotine vapes, small companies introduced synthetic nicotine products because the law confined FDA jurisdiction to nicotine derived from tobacco. This example also illustrates the arms race fought between adaptive innovators and responsive regulators. By March 2022, the FDA had prompted Congress to amend the Tobacco Control Act to apply to nicotine derived from any source, not just tobacco. Adaptive innovations can come with novel risks. For example, regulated bans on flavored e-liquids may lead to consumers adding food or aromatherapy flavoring agents not necessarily intended for vaping.

    The fifth type of innovation is user-driven. The early vaping enthusiasts were hybrid producer-consumers, interacting on user forums with a strong problem-solving ethos and a hands-on approach to product design and construction. Users created innovations like “squonkers” or “squonk mods” to facilitate dripping, a niche style of vaping, by incorporating a flexible liquid bottle into the design of the vaping device. But the most impressive innovations from the user side have been social and community in nature. The vaping forums and vape meets created an elaborate technical and moral support infrastructure. This online community blossomed into vape shops as centers of expertise, personalization and encouragement. The vape shops are now de facto cutting-edge stop-smoking services but with a very different offer to the more clinical settings of traditional services. Even the biggest corporate beasts benefit and learn from user innovation. They should take care not to crush it.

    Innovation is a fluid and dynamic business phenomenon with many simultaneously moving parts embedded in an unpredictably evolving, threatening or promising context. Surfing while juggling is hard and risky, but it is no longer a choice in the tobacco and nicotine business.

    Clive Bates is the director of Counterfactual Consulting and the former director of Action on Smoking and Health (U.K.).
  • A Good News Story

    A Good News Story

    Photo: Teo

    Tobacco harm reduction has made more progress than is often assumed.

    By Patrick Basham

    The good news about tobacco harm reduction is the bad news is wrong. The tobacco harm reduction experience is actually a positive story.

    It is true that the preponderance of influential and well-funded public health institutions and stakeholders are rabidly anti-tobacco harm reduction (THR). The World Health Organization is the most clear-cut example, with billionaire philanthropists funding global campaigns that, in concert with the WHO, incentivize national governments and their public health agencies either to ignore or to disparage THR’s demonstrated ability to improve public health.

    It is also true that most politicians who talk about THR-related reduced-risk products (RRPs) are critical of the technology and its marketing and are subsequently prohibitionist with regard to e-cigarettes, heated-tobacco products (HTPs), oral smokeless tobacco, etc. It is also true that the tone and substance of the vast majority of media coverage is highly negative.

    Such a choreographed chorus of naysaying has most everyone with even a passing interest in THR assuming that the political, institutional and media criticism is, first, representative of a global consensus among stakeholders that THR is a bad idea and second, that THR policies fail whenever and wherever they are introduced. Consequently, when surveyed, the public is at best ambivalent about RRPs’ comparative benefits vis-a-vis combustible cigarettes.

    All of the above may be true, but it is not the entire truth about tobacco harm reduction and reduced-risk products.

    The Other Side of the Coin

    My recent THR report pushes back against the criticisms—and against the broader skepticism they engender. The report does not attempt to catalogue THR’s critics and their mostly ill-informed critiques. The case against THR is readily available, easily accessible and delivered ad nauseam. Instead, this report seeks only to inform the reader that there is actually another, distinctive and very positive side to the THR coin.

    To that end, my report addresses overlooked and underappreciated elements of this policy conundrum. The report discusses the public opinion hurdle that must be surmounted by THR proponents in order for their political representatives to adopt more progressive and enlightened positions on this crucial aspect of public health policymaking. A summary is also provided of RRPs’ successful, yet largely unknown and therefore unappreciated, track records since their adoption in many parts of the world.

    There is an accounting of the many pro-THR governments who have adopted sophisticated strategies and policy prescriptions; there is also recognition of influential public health stakeholder endorsements since THR products became a commercial reality more than a decade ago. The report concludes by drawing lessons from the THR story so far, so that open-minded political and regulatory decision-makers may be better guided on their policymaking journey.

    Consumers worldwide are, on average, either uninformed or ill-informed about the concept of tobacco harm reduction and the specific reduced-risk products central to its implementation. Such ignorance is understandable as the THR paradigm is a comparatively new concept beyond public health circles and RRPs are innovative new technologies that only recently delivered commercially viable options for consumers.

    Such ignorance is nonetheless frustrating because respective prohibitionist politicians, philanthropists, regulators, public health organizations, academics and consumer groups have consciously erected the central barriers to better consumer understanding of, and appreciation for, THR and RRPs.

    The aforementioned anti-THR actors are seemingly dedicated to the proposition that tobacco and nicotine products scientifically proven to be less harmful than combustible cigarettes should not be readily available for use either by current smokers seeking less (often far less) toxic sources of tobacco and nicotine or even by smokers seeking to quit smoking altogether.

    Layered upon the anti-THR and anti-RRP campaigns are unhidden, viscerally anti-industry agendas that reflexively oppose any innovative technology or business model that may preserve, let alone enhance, the profitability of the tobacco and nicotine industries.

    A great many countries, international institutions and public health organizations are employing, and advocating for, THR policies and strategies to reduce cigarette consumption. To date, nearly 70 countries have adopted regulatory frameworks on reduced-risk products.

    An enormous number and variety of electronic nicotine-delivery products are in the marketplace, with nearly 16,000 flavors available and global sales rising to $15 billion in 2019. HTPs were also available in over 50 markets worldwide in 2020. Only one Western democracy (Australia) still requires its citizens to acquire a nicotine prescription in order to vape.

    Snus can be legally bought in 81 countries. RRPs are already being used by 112 million people worldwide, with approximately 82 million using nicotine vaping devices, 20 million using heated-tobacco products and 10 million using smokeless tobacco.

    Contributing to Cessation

    The evidence in favor of THR as a complementary intervention to help drive down death and disease from smoking is robust. For example, we now have evidence of the impact vaping has had on smoking. Vaping is today widely considered to be the world’s most effective smoking cessation tool.

    Extensive international evidence supports the conclusion that vaping plays a major role in smoking cessation. All of the nearly 70 countries that have adopted regulatory frameworks on safer nicotine products subsequently report a decline, often a dramatic one, in smoking prevalence. Countries that embrace vaping have witnessed a decrease in smoking rates that is twice as fast as the global average.

    Snus’ extensive contribution to improvements in Swedish public health is well documented. When Norway allowed snus products to be more widely available, cigarette smoking fell by half in just 10 years.

    Japanese tobacco harm reduction is the story of HTP-driven success.

    Japan’s policies have led to a remarkable drop in cigarette smoking. In October 2020, in the world’s largest heated-tobacco market, the smoking rate dropped to a record low of 16.7 percent, down 1.1 percent on the previous year. Between 2016 and 2021, domestic combustible cigarette sales declined 43 percent.

    This decline is directly attributable to the availability of noncombustible RRPs, mainly HTPs. HTP popularity caused cigarette sales to plummet five times faster than before HTPs were available.

    Tobacco harm reduction is a refreshingly good news story, as detailed in the preceding sections. That is the reason governments around the world are increasingly placing THR at the heart of their tobacco control strategies.

    Pro-THR policymakers are legalizing RRPs for widespread consumer use as regulators in these countries construct regulatory frameworks that harness the products’ potential to reduce tobacco-related harm while restricting their availability to adult consumers exclusively.

    That said, certain governments and regulatory agencies have disproportionate influence on the global stage. The governments of many smaller and medium-sized nations, in particular, look to the likes of the U.S. Food and Drug Administration, the European Union and the Chinese government for case studies, regulatory models, bureaucratic signals and political cover regarding THR’s innate veracity, as well as the applicability and suitability of specific RRPs to public health in general and the consumer marketplace specifically.

    Some of the steps taken by governments and public health bodies with outsized influence have empowered THR while other steps have retarded its progress. My report’s accounting and cataloging of THR successes and adoptions provides these institutional actors, and those influenced by them, with numerous lessons concerning the best way forward should public health be the overriding concern.

    Ten policymaking lessons stand out:

    • Tobacco harm reduction should be the principal driving force behind a nation’s tobacco control strategy.
    • Legalize the import, export, sale, possession and use of reduced-risk products. These products should be as widely available as tobacco products and available without a prescription.
    • The debate is not legalization versus prohibition. The latter approach is empirically unsound, unenforceable and counterproductive. Hence, it is crucial that specific regulations and tax policies are THR-friendly, too.
    • Employ the “weighting principle,” that is, employ concepts such as absolute risk, relative risk, and usage patterns in order to calculate the net public health effect of RRPs, and utilize that data to guide the adopted regulation.
    • RRPs are most suitably regulated as consumer products rather than as medicines or tobacco products.
    • Apply the “continuum of risk” approach across tobacco and nicotine products. Regulation should reflect the lower toxicity levels of RRPs and, therefore, regulations and taxes should correspond to the level of harm caused by a given product, hence the need for the differential taxation of RRPs.
    • Lower rates of taxation for RRPs than for cigarettes help to ensure the affordability of RRPs for low-income consumers, who smoke disproportionately, and incentivize smokers to switch from combustible products.
    • Smokers have the right to accurate information on RRPs; therefore, governments should underwrite health education messages about the comparative risks of RRPs. A pragmatic regulatory approach furthermore recognizes the utility in fewer restrictions on RRP advertising than on cigarettes, hence reduced-risk claims for RRPs should be permitted in advertising.
    • Providing a choice of flavors to adult consumers encourages them to switch from combustibles to less harmful products.
    • Traditional cessation approaches are not the only tools available to help people transition away from smoking cigarettes. Vaping is the world’s most effective smoking cessation tool.

    The greater the number of governments that learn and apply these lessons, the greater will be the public health benefit that the world experiences from tobacco harm reduction’s focus upon the reduced-risk potential of innovative tobacco and nicotine products.

    Patrick Basham directs the Democracy Institute, a politically independent think tank. Basham was previously a Cato Institute senior fellow and taught tobacco regulation at Johns Hopkins University. Prior to Cato, he led tobacco policy research at Canada’s Fraser Institute. In 2016, he was the only pollster to predict both Brexit and Donald Trump’s Electoral College victory. A prolific author, Bahsam recently published “Covid-19: WHO is to blame?”
  • Lifting the Fog

    Lifting the Fog

    Photo: Andrii

    An official acknowledgement of nicotine pouches’ comparatively low risk clears the way for appropriate regulation in Germany.

    By Stefanie Rossel

    The news was a minor sensation given German authorities’ reluctance to acknowledge the reduced harm potential of novel tobacco products. On Oct. 7, 2022, the Federal Institute for Risk Assessment (BfR), a scientific institution of the German government, published a statement in which it confirmed that tobacco-free nicotine pouches could reduce the health risks compared to smoking.

    Jan Muecke | Photo: German Association of the Tobacco Industry and Novel Products

    The risk profile of modern oral nicotine products, as they are also called, is comparable to that of medical nicotine-replacement products such as nicotine patches, the institute wrote in its evaluation, which was published in several scientific journals, including Tobacco Control. Carried out by BfR scientists in August 2022, they study showed that aside from nicotine, the pouches contain no substances that present health concerns. In some samples, researchers detected traces of tobacco-specific nitrosamines, which are also found in medical nicotine-replacement products. According to Jan Muecke, chief executive of the German Association of the Tobacco Industry and Novel Products, this problem is solvable, however.

    To protect consumers, the BfR recommended regulation of the manufacture, presentation and sale of nicotine pouches. Tobacco harm reduction advocates hope the findings will prompt German authorities to finally regulate modern oral nicotine products as tobacco products.

    Nicotine pouches comprise small sachets with a mixture of cellulose fibers, flavorings, water, humidifying and gelling agents along with preservatives and artificial sweeteners. Since their introduction in Germany, they have existed in a regulatory gray area. Because the products contain nicotine, authorities decided that sales require monitoring. However, since the products are tobacco-free, the German tobacco product law does not apply.

    Following several assessments and court rulings, German regulators classified modern oral nicotine products as food, making it subject to European food law. However, the European Union prohibits the use of nicotine as a food, food ingredient, food additive or food flavor, which means nicotine pouches classified as food may not be sold in the trade bloc. In March 2021, the administrative court in Hamburg confirmed that the sale of modern oral nicotine products was illegal. Other German courts have followed suit.

    According to Muecke, the classification of nicotine pouches as food has been problematic because it misleadingly implies that the products are being eaten. “This is nonsense,” he says. “The products are consumed by putting the pouch between the upper lip and gum and leaving it there while the nicotine and taste is being released. After use, the complete pouch is disposed of. This makes them comparable to toothpaste or floss—no one would think of declaring these products as food.”

    Regulation Protects Consumers

    By classifying nicotine pouches as food, Germany is an outlier. In the 16 EU member states where modern oral products are available, they are regulated either as tobacco or as a consumer product. Demark and the Czech Republic have even created a new product category for nicotine pouches, defining them as tobacco surrogates and allowing the sale to adults.

    Muecke welcomes the opportunity that the BfR assessment offers Germany to change its classification. “The BfR statement contains all data that are required for appropriate regulation of nicotine pouches,” he says. “Scientific studies have confirmed that if nicotine content is limited to a maximum of 20 mg per pouch, nicotine blood levels will not be higher than when smoking a combustible cigarette. We therefore hope that the government will take the request of the consumer protection conference of the federal states seriously who in 2021 had called for regulation of nicotine pouches under tobacco law.

    “In the current state of legal uncertainty, modern oral nicotine is nevertheless on the German market—consumers buy their nicotine pouches online from abroad. These products often do not stick to nicotine limits, and child and youth protection cannot be efficiently controlled. Adequate regulation of nicotine pouches as tobacco products would hence protect consumers and youths.”

    A chance for a change is already in sight: Under a delegated directive from the European Commission, the German government has until July 2023 to revise the country’s rules for heated-tobacco products (HTPs). “HTPs will be more strictly regulated in Germany in the future,” Muecke explains. “Therefore, it would make sense to find legal regulation for nicotine pouches during the same legislative process, which for HTPs will have to be concluded in the first half of 2023. To wait for a new version of the EU Tobacco Products Directive (TPD) that won’t be translated into national law until 2025 or 2026 would be wrong as unregulated online purchases of modern oral nicotine products with excessive levels of nicotine would continue to endanger consumers.”

    The European Commission intends to publish a draft of the revised TPD in 2024. While the wording is still unknown, the public has an opportunity to share its views through a consultation. Muecke encourages all stakeholders to take part, for example through the German-language website dein-ding.de.

    While it would technically be possible to regulate nicotine under the revised TPD, this is not Muecke’s preferred solution. “The products are on the market right now and available in 16 EU member states, especially in most of our neighboring countries, hence Germany shouldn’t be an island of prohibition,” he says. Muecke suggests regulators use the TPD’s e-cigarette regulations as guidelines for modern oral nicotine products.

    Muecke is confident that appropriate regulation for the novel oral nicotine products will be implemented in Germany. “A ban of nicotine pouches would not be in accordance with the principle of risk minimization,” he says. “The government must create a possibility for consumers to buy such reduced-risk products at retailers—it’s an absolute necessity.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Losing the Plot

    Losing the Plot

    Image: Adobe Stock

    When it comes to tobacco, the European Commission should abandon its overly complex ideas and embrace some fresh thinking.

    By George Gay

    The people of England and Wales were advised by health chiefs not to get drunk on Dec. 21—and I think it is worth pausing for a moment to take in the enormity of the implications of that advice …

    But, moving on, the reason for the advice’s having been given specifically for Dec. 21 was that ambulance drivers were due to go out on strike that day, which meant it was going to be more challenging than usual to deliver to hospitals those people, drunks and their victims, injured by drunken behavior.

    No such advice had to be given in respect of the consumption of tobacco. Those seeking enjoyment through the consumption of nicotine rather than alcohol do not over-consume, and, importantly, do not, as a result of their smoking, lose their faculties for thinking clearly and, like drinkers, start acting in silly, violent and otherwise bizarre ways.

    Given this, I feel moved to ask, not for the first time, why it is that, in most parts of the world, and certainly in Europe, about which this story is concerned, tobacco and tobacco consumers are regarded as society’s pariahs while alcohol and alcohol consumers are regarded as being part of the normal social milieu—hail fellow, well met! Why is it that we take seriously people who, while drinking alcohol and becoming increasingly muddled in their thinking, pontificate on, among other things, the evils of tobacco and smoking?

    It seems totally illogical, but one answer, I guess, could be that so many people drink alcohol that, collectively, we have passed the tipping point of population-level befuddledness and, consequently, are no longer able to summon the level of critical faculties necessary to see through the inconsistencies and hypocrisies that drive our lives. On the whole, unlikely.

    Nevertheless, something weird is going on that defies logical analysis. While the world at large has long been at war with tobacco consumption, the original, often well-meaning objectives seem to have been pushed to one side. The purported reason behind the tobacco conflict, as I understood it, was to reduce the death and disease caused by smoking, but the focus seems to have shifted elsewhere, in part to the defiance of the various methods being used in the conflict, and to a whole string of largely peripheral activities. We are told that there are 1 billion smokers worldwide, but there must now be another billion who owe their livings or part of their livings to anti-smoker activities and/or to devising ways of defending the wasteful expenditure of conflict funds.

    A Curious Leaflet

    In June last year, the European Commission issued a curious leaflet that included a table illustrating what, at first glance, seemed to be the overall level, EU-wide, of the implementation of a European Council recommendation on the enforcement of smoke-free and vapor-free environments. In fact, some of the smoking restrictions, including those to do with outdoor areas and private places, and the vapor restrictions, apparently fall outside the remit of the recommendation but presumably within rules in force within some EU states. The left column of the table listed 20 places where, technically, a person could smoke or vape, but, according to the rules, may or may not be allowed to do so. The table had three right-hand columns, one headed “Traditional products for smoking,” the second headed “E-cigarettes” and the third headed “Heated-tobacco products.” Against each of the 20 places, three colored circles appeared, one in each of the right-hand columns indicating whether enforcement was “very good” (dark green), “good” (light green), “moderate” (yellow), “low” (orange) or “very low” (red). So, for instance, enforcement in indoor workplaces, the first of the rows, was indicated to be very good (dark green) in the case of traditional smoking products but only moderate (yellow) in respect of e-cigarettes and heated-tobacco products.

    What struck me about the right-hand columns of the table, which, in total, included 60 colored circles, was that it looked like something designed by a child, whiling away a wet Sunday afternoon, innocently unaware that some people have difficulty distinguishing such colors. But, of course, this was something that had been produced by adults paid to do so. It had been funded presumably by the anti-tobacco, anti-smoker money tree, which spares no effort, no expense on even the most peripheral of exercises.

    The table seemed so far removed from the coalface of tobacco harm reduction (THR) that I couldn’t understand what purpose it served, but I felt certain that the money it cost could have been better spent. The needle of THR would have been shifted more if the funds needed to produce the table had instead been used to buy 100 or so e-cigarettes or packs of snus that were subsequently handed out to impoverished smokers.

    And there was a sinister side to the table. One of the places listed in the left-hand column was designated “private homes,” where enforcement was described as very low (red) in respect of all three products. This raises a worrying question. Does the commission believe that, at some stage in the future, it would be very good if the lights changed to green along this row, indicating that people were being monitored in their homes to determine whether they were smoking or vaping? This is not idle speculation. The commission says in the leaflet that “There is a gap in the legislation of exposure to smoking in multi-unit housing” while acknowledging that “Smoke-free measures are difficult to monitor in private places (for example, homes and cars).”

    Of course, the amount of money wasted on the leaflet is probably small, but I suspect there is an awful lot of such ephemera wafting through the halls of the commission, and a lot of small amounts of money can add up to … well, a lot of money. And more is planned, even in these straitened times. The commission says that the 2009 recommendation is limited and that, in part, “There is a need to increase financial and human resources available for monitoring and enforcing rules on smoke-free environments.”

    Collective Consumer Intelligence

    Nothing could be further from the truth. The commission should pause for thought. When e-cigarettes first became available, they quickly became popular through a system of what I would call collective consumer intelligence, a human version of swarm intelligence in which insects such as bees and ants work together to form efficient societies without the need for management. Early adopters of e-cigarettes went on to the internet and performed waggle dances to indicate where the best e-cigarettes were to be found, and things started to work well. It was only with the intervention of countless managers, including those at the commission, that THR started to slow down.

    In fact, one of the proofs of this argument lies with snus rather e-cigarettes. The EU must have spent millions of euros purportedly on trying to get smokers to quit, but it banned snus, except in Sweden. Banning snus has got to rate as one of dumbest policies ever devised, anywhere in the world, in respect of anything. It requires apparently sentient people ignoring the evidence staring them in the face—ignoring the fact that the proportion of smokers in Sweden, which is heading down toward 5 percent, is lower than in any other EU country.

    But perhaps it is me who is being dumb in believing that the EU wants to reduce the level of tobacco smoking within its territory. After all, this premise is based on self-reporting. If it is wrong that this is the aim, then its actions become perfectly logical.

    Chasing its Tail

    The idea that the commission and the EU have lost the plot is supported by the effort they have put, and are putting, into the establishment and operation of a traceability system for tobacco products. Although this effort is aligned with the Protocol to Eliminate Illicit Trade in Tobacco Products, which came into force in 2018 under the aegis of the World Health Organization Framework Convention on Tobacco Control, it is not a health initiative. It has nothing to do with seriously trying to stop people smoking but is aimed at providing, in the commission’s words, “member states and the commission with an effective tool that enables the tracking and tracing of tobacco products throughout the union and the identification of fraudulent activities that result in illicit products being available to consumers.” In other words, the huge effort that is being expended to put the system in place is aimed at increasing the sales of licit tobacco by reducing those of illicit tobacco. But you have to ask whether this is a proper use of the commission’s energies, especially in the straitened times we are suffering.

    It could be argued, of course, that it is in society’s interest to stop illegal trading no matter what products are involved, but I would counter that, in the case of cigarettes, such efforts merely show the commission to be chasing its own tail. The illegal trade in cigarettes in the EU is fueled by unfair levels of taxation applied to tobacco products by countries, in part at the behest of the commission, so the simple answer is to reduce taxes and do away with the need for a complex traceability system.

    And it is complex, as anybody will realize if they read through the commission’s Nov. 3 draft of recommended amendments to the 2018 traceability system Implementing Regulations, which weighs in at 17 pages with 23 pages of appendices. “The traceability system established in accordance with Implementing Regulation (EU) 2018/574 started collecting data on tobacco products’ movements and transactional data on 20 May 2019,” the draft says. “Experience in its implementation has further demonstrated the importance of high quality, accuracy, completeness and comparability of the data that need to be recorded and transmitted to the system in a timely manner.

    “In its report on the application of Directive 2014/40/EU of 20 May 2021, the commission stressed that the member states and the commission had considerable problems with the quality of traceability data …”

    You can imagine where this goes—into a haze of legalese covering the minutiae of tobacco product logistics. None of this helps smokers, but it helps to provide jobs for those in the burgeoning and lucrative trade of making miserable the lives of smokers.

    Who pays for this traceability rigmarole, you might ask. Well, according to the commission, it’s very simple. The costs of operating and maintaining the system, and of storing the data, is borne largely by tobacco manufacturers and importers. But you would have to be terribly naive to accept that at face value. The costs purportedly borne by manufacturers and importers will be passed onto smokers, which will increase the financial burden on them and make it more likely that they will turn to illicit products. The system, incomprehensibly, is designed to punish those who buy licit products for the sins of those who buy illicit products. Again, the commission is chasing its tail.

    What the commission needs right now is a good dose of simplicity. It should throw out the complexities of traceability, unban snus, stop agitating for a ban on nicotine pouches, stop interfering in the development of the sorts of e-cigarettes and heated-tobacco products capable of persuading smokers to quit their habit, and stop worrying about novel products that might or might not come along.

    The collective intelligence of smokers, aligned with the best interests of tobacco product and nicotine product manufacturers, clearly intent on converting the market, will do the heavy lifting. It is time to sweep away the musty, overly complex ideas of the past and let in some light and new thinking.

    Yeah, like that’s going to happen in the run-up to the EU’s Tobacco Products Directive III, with the huge number of anti-smoker jobs on the line.

    George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.
  • CTP to Detail its Reagan-Udall Response

    CTP to Detail its Reagan-Udall Response

    Brian King at the GTNF 2022
    (Photo: Chris Frenzi)

    The U.S. Food and Drug Administration Center for Tobacco Products (CTP) will provide an update in February on its planned actions in response to the Reagan-Udall Foundation’s evaluation of its program, CTP Director Brian King wrote in a letter published on the FDA website today.

    In July 2022, FDA Head Robert Califf instructed the Reagan-Udall Foundation to review the agency’s food and tobacco programs following months of criticism over its handling of the baby formula shortage and e-cigarette reviews.

    The report, published in December, highlighted several problems at the agency and offered suggestions for improvements in regulations and guidance, application review, compliance and enforcement.

    “We are in the process of closely reviewing this feedback and in February will provide an update on our planned actions in response to the evaluation,” wrote CTP Director Brian King.

    In his letter, King also noted the CTPs priorities for 2023, which include finalizing the product standards relating to menthol cigarettes and flavored cigars, along with developing a proposed product standard that establish a maximum nicotine level to reduce the addictiveness of cigarettes and other combusted tobacco products.