Month: March 2024

FDA Urged to Follow the Science

Photo: Pixel-Shot
The U.S. Food and Drug Administration’s Center for Tobacco Products (CTP) should open the marketplace for electronic nicotine delivery systems to products with varied characteristics so that those interested in alternative nicotine products can access them, according to R Street resident senior fellow Jeffrey Smith.
In a recently published analysis, Smith critiques the FDA’s disregard for the current research on ENDS, diving into new data that he says represents a “tectonic-shift in the academic medicine community” regarding the safety of ENDS for smoking cessation.
”As evidence grows for the utility of ENDS and other potentially life-saving alternative products, the CTP continues to limit Americans’ access to these products,” writes Smith.
“Though the CTP has received millions of applications for ENDS products, it has only allowed a few to be marketed legally in the United States. Of those that have received marketing clearance, only older closed systems have been approved—with tobacco as the only permitted flavor.”
Arguing that a diverse range of ENDS products available to those who smoke and want to quit is critical to reducing the health burdens associated with smoking, Smith urges the CTP to revise its processes and procedures, and allow more cigarette alternatives on the market. Continued delay by the CTP, he says, will only lead to more unnecessary deaths and disease in the United States.
March 1, 2024
Hong Kong to Push Pack Price Above HKD90

Photo: Heorshe
Hong Kong will hike the duty on cigarettes by HKD0.80 ($0.10) per stick, pushing the price of a pack of 20 cigarettes to HKD94, reports The Standard. The duty on other tobacco products will be increased by the same proportion.
Currently, a pack of cigarettes costs HKD78 after a 25.8 percent increase last year.
Finance Minister Paul Chan Mo-po expects the proportion of tobacco duty in the retail price of cigarettes to rise to about 70 percent, gradually approaching the 75 percent level recommended by the World Health Organization.
Chan believes this will provide the public with a greater incentive to quit smoking. He said the government will step up enforcement against illicit cigarette trading and strengthen smoking cessation services, publicity and education.
The Coalition on Tobacco Affairs expressed regret over the government’s decision to increase tobacco taxes without disclosing how last year’s price hike impacted the prevalence of smoking.
The coalition said the prior-year increase had exacerbated illicit cigarette activities with customs seizing a record-high 650 million cigarettes in 2023.
“This indicates how syndicates take advantage of Hong Kong’s high tobacco tax policy to control the sale of illicit cigarettes with the aim to provide funding to other criminal activities,” the coalition said in a statement.
March 1, 2024
Ireland Prepares Vape Tax

Image: Zerbor
The government of Ireland is working to introduce a tax on e-cigarettes in 2025, reports The Irish Times.
Finance Minister Michael McGrath confirmed that his department had started work with the revenue department to announce the tax in the next budget and introduce it next year.
McGrath cited the vaping industry’s “insidious” targeting of e-cigarettes toward young people as justification for the tax.
“There’s no doubt, but it is a deliberate policy,” he was quoted as saying. “In my mind, what is happening when you see all the attractive flavors and names, it’s definitely targeting young people and very successfully.”
While acknowledging that e-cigarettes are helping some smokers quit more harmful combustible cigarettes, McGrath also noted that there are many unknowns about the long-term effects of e-cigarettes.
He said it was important for the Department of Finance’s proposed tax to align with policies of other departments around e-cigarettes and vapes, such as the Department of Health and the Department of Environment.
March 1, 2024
More FDA Warnings

Photo: Ljupco Smokovski
The violations involve products sold under the Elf Bar/EB Design/EB Create, Funky Republic, Lost Mary brands.
The U.S. Food and Drug Administration has warned five more online retailers for selling flavored disposable vaping products.
On Feb. 28, the regulatory agency announced that the warning letters cite the sale of disposable e-cigarette products marketed under popular brand names such as Elf Bar/EB Design/EB Create, Funky Republic, Lost Mary, Hyde, Breeze and Cali Bars, according to a press release.
“Protecting our nation’s youth from the harms of tobacco products is crucial to our center’s public health mission,” said Brian King, director of the FDA’s Center for Tobacco Products in a statement. “We’re committed to continuing to use a data-driven approach to identify and prevent the sale of unauthorized tobacco products and to take compliance and enforcement action when appropriate.”
March 1, 2024
Cuba Festivalgoers Roll Cigars at Factories

Ana Isel Mederos Cano (Photos Special to Tobacco Reporter)
Activities during the 2024 Habanos Festival usually only vary slightly. However, this year, attendees were allowed to roll a cigar alongside professional rollers at one of five factories. It marked the first time the festival hosted its master rolling class in the same buildings where Habanos cigars are produced.
Daymi Difurniao Rodríguez, communications and marketing specialist for Habanos, said that the venue change was to allow more attendees to learn firsthand about the “Totally by Hand” production process of a Habano.
“I wanted the press to make their own Habano so they could understand the details and intricacies involved in creating the Habanos, the world’s finest cigars,” she said.
The torcedor (cigar roller) who taught the El Laguito class was Ana Isel Mederos Cano, main quality specialist at El Laguito. She is also a nominee for the Habano Woman of the Year award in the production category for the XXIV Habano Festival currently taking place in Havana.
She has been at El Laguito for 25 years, 11 of them as a roller and the past 14 in her current position.
“I love that I have been given this opportunity to teach the art of cigar rolling to the representatives of media from around the world,” she told Tobacco Reporter.
The venue change was a welcome addition, according to several festival attendees. A seasoned festival media participant, Nicholas Syris of LH Cigars and several cigar podcasts, who also rolled at El Laguito, said the personal attention from the professional rollers helped festival goers learn the challenging art of rolling cigars better than in a large conference room setting.
“It was really good. It was a nice addition to the festival,” he said. “I would say many more people rolled a smokable cigar than previous editions of the festival.”
Visitors had the opportunity to visit La Corona, Partagás, H. Upmann and Carlos Baliño. El Laguito was for media only.
La Corona has about 750 employees, 300 of which are dedicated rollers. The rollers produce brands such as Hoyo de Monterrey, Montecristo, Cuaba, Diplomaticos and San Cristobal de la Habana.
At the H. Upmann Factory, H. Upmann, Montecristo, and Romeo y Julieta, and sometimes several sizes of Cohiba are produced. Partagas is one of Havana’s iconic factories and Carlos Baliño is the former El Rey del Mundo factory.
Tobacco Reporter was only permitted to attend El Laguito, the legendary home where many of Habanos’ premier marcas are produced.
Festival roller trainees were given a wooden board to roll, a “chaveta” tobacco leaf cutting blade, some vegetable glue, and an apron. Several factory rollers made rounds around the room helping festival attendees roll their cigars.
“I love this new idea,” said Brooks Whittington with Halfwheel, a major industry cigar information website. “While the rolling competition has always been a favorite part of the festival for me, getting to roll the cigars at the actual factory we were visiting took the experience to the next level.”
Many other attendees said they hope the tradition continues. The 2024 Habanos Festival is being held in Havana from Feb. 26 – March 1.
March 1, 2024
Green Pact

Greenbutts’ product is sold in bulk or as ready-made rods of filters and filter tips. Photo: Greenbutts
Filtrona partners with Greenbutts to expand its range of sustainable filter offerings.
By Stefanie Rossel
Discarded cigarette butts are a major source of plastic pollution. Of the more than 5 trillion cigarettes produced globally per year, an estimated 4.5 trillion end up in the environment, with 40 percent making their way into our oceans and waterways. Smokers often are unaware that the products will not decompose. While most of a cigarette’s components disintegrate quickly when disposed of, the filter will not. Around 98 percent of cigarette filters consist of cellulose acetate (CA), a polymer that is very slow to degrade in the environment. Depending on the environmental conditions, a CA cigarette filter can take up to 14 years to degrade.
While littering is illegal in many jurisdictions, the potential penalties, which can include fines, cleanup, community service or imprisonment, are insufficient to deter many consumers.
By banning single-use plastics, such as disposable plastic cutlery, fast food packaging or cups, from July 2021, the European Union became a forerunner in the fight against marine litter and plastic pollution with its Single-Use Plastics Directive (SUPD). While the legislation does not prohibit CA cigarette filters, it has established extended producer responsibility schemes (EPR) requiring tobacco companies to tackle the single-use plastic pollution generated by the filters they put on the market.
Although a February 2023 report by Rethink Plastic Alliance and other NGOs noted significant delays in implementation, the SUPD definitely helped trigger a rethink within the tobacco industry on the sustainability of its products. Experts believe that environmentally friendly filter solutions will be the next big thing in the industry, and they may be right.
In February 2022, the United Nations Environment Programme partnered with the Secretariat of the World Health Organization Framework Convention on Tobacco Control to raise awareness and drive action on the environmental and human health impacts of microplastics in cigarette filters, which it designated as a form of single-use plastic. One month later, the U.N. Environmental Assembly adopted a resolution to draft a legally binding U.N. treaty on plastic pollution, which addresses the full life cycle of plastic, from production to product design to waste management. Public health organizations around the world argue that the Intergovernmental Negotiating Committee for the plastics treaty, the fourth session of which will be held this April, must consider a ban or strict regulation of all single-use plastics as a necessary measure to reduce pollution.
Joining Forces
Robert Pye
To meet the growing demand for biodegradable filters, Singapore-based specialty filter manufacturer Filtrona in October 2023 announced a partnership with Greenbutts of California. Greenbutts has developed a patented substrate and filters that are made of all-natural, food-grade fibers, such as abaca fiber, cotton flock and industrial hemp as well as a starch-based binder, which debuted on the market in 2019. The product is sold in bulk or as ready-made rods of filters and filter tips.
“Filtrona’s collaboration with Greenbutts strengthens our support for our customers in helping them shift away from CA to more sustainable materials,” says Filtrona CEO Robert Pye. “As a major supplier to this industry, we are committed to help companies move into more sustainable solutions while ensuring they get the supply. Filtrona will continue to invest in our equipment and technology as we continue our research in alternative materials. Together with our partners and suppliers, we are ready to help our customers make the transition to plastic-free filter solutions. We have expanded our portfolio by adding Greenbutts filters to our ECO Range portfolio, thus providing a wider array of tailor-made solutions to address specific customer requirements in certain territories/markets.”
According to Pye, Filtrona alone can currently not meet the volumes required for sustainable filter conversion. “Filtrona currently works with various suppliers to select the most appropriate materials to create sustainable filter solutions that meet the unique requirements of our customers. We are constantly scouting the market for new, innovative materials. To give our customers wider options, we will offer Greenbutts filters that can be customized according to various product specifications.”
Under the joint development agreement, Filtrona will lease a machine from Greenbutts to produce biodegradable filters using proprietary technology. The company aimed to have the machine at its site in Greensboro, North Carolina, USA, by the end of February and begin production shortly thereafter.
The U.S. has been chosen as a location because the state of New York recently reintroduced the Tobacco Product Waste Reduction Act to the State Senate. The act would prohibit the sale of cigarettes using single-use filters as well as ban the sale of single-use electronic cigarettes. “With New York having proposed a law that would ban the sale of single-use filtered cigarettes and single-use e-cigarettes, we believe North America will eventually follow the EU in implementing the SUPD and EPR in the future,” Pye says. “We want to be ahead of the curve while expanding our capabilities to make our ECO Range available globally.”

Greenbutts has developed a patented substrate made of all-natural, food grade fibers. Photo: Greenbutts
Significant Market Potential
For the time being, biodegradable filters remain more expensive than CA varieties, but this may change as output increases. “Globally, consumers and regulators are pushing for more environmentally sustainable solutions and biodegradable products,” says Pye.
“Consumers are increasingly seeking sustainable products while tobacco companies want to be compliant to regulations by reducing the use of single-use plastics and be the first to market sustainable, plastic-free products. But having said that, pricing is still an important factor and will be affected by the scale of production. As the production of biodegradable products grows, we expect prices to become more competitive.”
Beyond the U.S. and Europe, Pye sees potential for environmentally friendly filter solutions in Indonesia, where Filtrona is already supporting the kretek cigarette market with its ECO Range of filter solutions. He also anticipates increasing demand for sustainable filters for heated-tobacco products (HTPs). “We offer a range of patented sustainable HTP filter solutions that has a carbon footprint that is four times lower when compared with a similar offering made with CA, in line with our commitment to develop more renewable, degradable and sustainable products,” says Pye. “We see it as a logical next step for the HTP category to evolve as the market continues to grow rapidly. Filtrona is also at the forefront of revolutionizing the botanicals sector with our sustainable and compliant ECO Range.”
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.

March 1, 2024
System Overload

The broken U.S. new tobacco product application process revealed by the numbers
By Steven McDonald
“How long will it take?” is a question often raised by project managers and executives alike. Typically, a reasonable estimate can be generated, but when it comes to predicting the time it will take for a review of a tobacco product application with the U.S. Food and Drug Administration’s Center for Tobacco Products (CTP), any time estimate is met with skepticism.
The CTP provides performance metrics for new tobacco product applications, which were evaluated for this article to determine if the time an application meanders through the regulatory pathways could be deduced. The backlog of applications brings into question the agency’s capabilities of managing its processes and ability to conduct timely reviews. Unfortunately, the backlog distorts the CTP’s internal process data for reviews and obfuscates the time estimation for a submission. In addition, significant gaps in the data do not allow for robust deductions.
Following is an overview of the steps for the different regulatory pathways, the collection and evaluation of the CTP’s (performance) metrics and reporting data, and the ramifications thereof for future submissions. Readers should be aware that the CTP’s past performance may not be an indicator of future results.
Application Process and Performance Metrics
In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act, which gave the FDA broad authority to regulate the manufacturing, distribution and marketing of tobacco products. This includes decisions on whether new tobacco products can be marketed and evaluation of new tobacco product applications.
New tobacco products can be submitted for review through three pathways: substantial equivalence (SE), exempt from SE (EX), or premarket tobacco product application (PMTA). A fourth submission type, modified-risk tobacco product application, is not a pathway for new tobacco products but a pathway to obtain permission to make advertising “claims” specific to a particular product.
Historically, the applications accepted through the SE and EX pathways have been for cigarettes, smokeless tobacco and roll-your-own products. In August 2016, the FDA’s tobacco authority was extended to all “deemed” tobacco products, including electronic nicotine-delivery systems (ENDS), cigars, hookah and pipe tobaccos. In addition, in 2022, Congress passed a law clarifying the FDA’s authority to regulate tobacco products containing nicotine from any source (nontobacco-derived nicotine (NTN)). The vast majority of applications in the PMTA pathway have been for ENDS. Both the deeming rule and the NTN law led to a crushing number of new product applications submitted to the FDA in 2020 and 2022, respectively.
The CTP posts the estimated number of submissions that are currently at each step on a somewhat regular basis and then publishes the totals for the fiscal year. Unfortunately, the level of detail provided and the frequency for the updates has not been consistent. However, by making use of the currently available information (through fiscal year 2023), annual values for the process steps can be estimated. The data and information, primarily gathered from the Tobacco Product Applications: Metrics and Reporting webpage was collected and compiled for SE, EX and PMTA submissions. For new tobacco product applications, the procedures for the SE and EX pathways are identical, and the PMTA pathway includes an additional step: acceptance review, filing review (PMTA only), scientific cycle reviews and determination.
The enormous number of submissions from fiscal years 2020 and 2022 is working its way through the system, evident from the data, but the backlog indicates that the review process may have overwhelmed the CTP’s capabilities and distorts the internal process data.
Substantial Equivalence
The data for SE is provided in Table 1 for the calendar years 2013–2016 and the federal fiscal years (October to September) hence. It is assumed that these values for SE, in particular, marketing orders, Not Substantially Equivalent (NSE) Orders and Withdrawn, include the provisional SE report applications. Briefly, a “provisional tobacco product” is one that was introduced between Feb. 15, 2007, and March 22, 2011, and for which a provisional SE report had been submitted on or before March 23, 2011. The final three rows, Estimated Administrative (Admin) Backlog, Estimated Office of Science (OS) Backlog and Estimated Total Backlog, are calculated values derived from the data provided. Since there may be additional (unreported) applications, these estimates should be considered conservative.
Table 1: Annual Data for Substantial Equivalence

The metrics are divided into the different phases of the regulatory process: administrative review of the submissions (Accepted, Refuse-to-Accept, Total Received), determinations (Marketing Orders, NSE Orders, Withdrawns) and the calculated values (Total Final Actions, Estimated Admin Backlog, Estimated OS Backlog, Estimated Total Backlog).
The calculated values for Total Final Actions are annual determinations: the sum of RTA, SE, NSE and Withdrawn. The remainder of the calculated values (Backlogs) should be considered estimates as the data missing from prior years may impact the accuracy of the results.
The Estimated Administrative Backlog is a cumulative value, the difference between those applications received and those processed (Accepted or Refused). For example, the Estimated Administrative Backlog for fiscal year 2021 includes the values from fiscal years 2020 and 2021. The Estimated OS Backlog is calculated similarly, beginning in fiscal year 2020, as the difference between those applications accepted to be reviewed and those with determinations (SE, NSE or Withdrawn).
Of note is the over 7,000 applications received by the CTP in 2020, which was likely due to the court-ordered submission deadline for newly deemed products such as cigars, pipe tobacco and waterpipe tobacco. Yet at the end of fiscal year 2021, the backlog of applications (neither accepted nor refused to accept) is less than 500. That number has since swelled to over 1,000, including over 100 submissions in fiscal year 2023 that remained unopened. In fact, during the October 2023 stakeholder engagement meeting, the CTP admitted that none of the SE reports submitted after Sept. 8, 2020, have undergone even an acceptance review.
The thousands of applications from the Estimated OS Backlog and Estimated Total Backlog is staggering. This is in stark contrast to the few hundred Total Final Actions, interrupted only by a spike of Refuse-to-Accept determinations in fiscal year 2021.
Using the historical CTP data and calculated estimates, projections for the CTP’s future throughput can be made. For example, it will take more than six years for the backlog of applications to work through the system with a 20 percent increase in staff and an insignificant number of future SE report submissions. In addition, if one considers a “first in, first out” application process, the time delay for a marketing order for any new SE report applications will be significant.
Exempt from SE
The annual data for Exempt from SE is provided in Table 2. The table structure and calculations are the same as Table 1. Similar to SE applications, the calculated Backlog values should be considered estimates as the data missing from prior years may impact the accuracy of the results.
Table 2: Annual Data for Exempt from Substantial Equivalence (EX)

The Estimated Administrative Backlog for fiscal year 2023 is less than 100 (during the October 2023 stakeholder engagement meeting, the CTP asserted that the EX backlog had been cleared). The Estimated OS Backlog and Total Backlog has been consistently over 1,000. This is in stark contrast to the few hundred Found Exempt Orders averaged annually.
Calculated similarly as that of the SE report throughput (a 20 percent increase in staff and an insignificant number of future Exempt submissions), it will take 16 months for these applications to work through the system if the same rate for reviews is maintained. As with the SE applications, the large number from the Total Backlog suggests that the time delay for marketing orders for any new EX applications will be more than a year (but significantly less than an SE submission) if one considers a “first in, first out” application process.
Premarket Tobacco Product Application
The annual data for PMTAs is provided in Table 3. Again, the final three rows are estimates, calculated values derived from the data provided, and since there may be additional (unreported) applications, these estimates should be considered conservative.
Table 3: Annual Data for Premarket Tobacco Product Application

The metrics provided by the CTP are divided into the different phases of the regulatory process: administrative, filing and determination. A staggering number of applications were received in the fiscal year 2020 through 2022 time frame, and to date, nearly 25 million applications have been rejected without substantive review. The calculated values in the table are generated similarly as for the SE and EX tables.
As the CTP has stated on several occasions (most recently on Jan. 22, 2024, in the press release announcing the marketing denial order (MDO) for flavored Blu e-cigarette products), the “FDA has received applications for more than 26 million deemed products and has made determinations on 99 percent of these applications.” The Estimated Admin Backlog at the end of fiscal year 2023 is over 60,000, and the Estimated OS Backlog is over 300,000. It is difficult to estimate the time for these applications to receive substantive review; however, if one considers the Marketing Granted Order (MGO) and MDO values from fiscal year 2022 as a guideline, values can be determined.
Based on these estimated values, a modest 20 percent increase in staff, and a limited number of future PMTA submissions, it will take more than 16 years for the applications under scientific review (Estimated OS Backlog) to receive a determination. If one considers the Estimated Total Backlog of applications calculated with the same parameters, it will take nearly 30 years for all the currently submitted applications to receive a determination.
Finally, the substantive review of the PMTAs for specific “covered applications” (brand names of Juul, Vuse, Njoy, Logic, Blu, Smok, Suorin or Puff Bar, and those that have a 2 percent or more sales volume as determined by Nielsen) is under a Maryland Federal District Court order (Am. Acad. of Pediatrics v. FDA (AAP), 379 F.Supp.3d 461, 492 (D. Md. 2019)). The original court-imposed deadline to complete the reviews was Sept. 9, 2021, which the agency was unable to meet. Based on the most recent (Jan. 24, 2024) status report filed with the district court, the CTP will take action on 100 percent of these applications by June 2024. This date has been pushed back on several occasions, indicating that even the CTP cannot predict how long it will take.
Steven McDonald is principal scientist, scientific engagement, at ITG Brands.
March 1, 2024
The Invisible Advantage

IQOS joined the Tobacco 10 ranking in 2023, achieving a brand value of $3.25 billion—higher than combustible brands such as Chesterfield or Rothmans. Photo: elenavah
Intangible assets remain a major contributor to the real value generated by the tobacco industry.
By Stefanie Rossel
Brand value is a nonphysical asset but one of the most important issues for every brand owner. Brand valuations are used for several purposes such as tax calculation, finance and marketing. They function as interpreters between the language of marketers and finance teams and provide structure for both to work together to maximize returns. Measuring such intangible assets is complex—the most common metrics on which brand performance and thus brand equity can be judged include market penetration, frequency of purchase, repeat purchase, customer loyalty and the ability of a brand to command a price premium versus other brands in its sector.
In 2023, the global value of intangible assets owned by the world’s largest companies stood at $61.9 trillion in 2023, up from $57.3 trillion one year previously, according to the Global Intangible Finance Tracker (GIFT) report, which is published annually by Brand Finance, an independent, U.K.-based brand valuation and strategy consultancy.
While tech giants like Apple (with intangible assets of $2.7 trillion) and Microsoft ($2.3 trillion) continued to lead the pack in the 2023 analysis, last year’s most intangible sector in relative terms, with 91 percent of total enterprise value, was tobacco and e-cigarettes, as companies invested heavily in proprietary technology and patented intellectual property around vaping devices to drive growth, according to Brand Finance.
In the company’s Tobacco 10 ranking, Marlboro remained the undisputed leader with a brand value of $34.74 billion followed by Pall Mall ($6.54 billion) and L&M ($6.35 billion). The list is dominated by combustible brands, but there are two noteworthy exceptions—smokeless tobacco brand Copenhagen and heated-tobacco product (HTP) IQOS.
Despite being the most intangible sector, tobacco products across all categories experienced significant brand value losses. “The performance decline witnessed in combustibles across extensive tobacco portfolios during the years 2022 and 2023 directly contributed to the decrease in brand value within our rankings,” explains Brand Finance’s global managing director, Richard Haigh. “Specifically, the decline in the volume sold of traditional oral cigarettes has been a consistent trend over the years. This can be attributed to reduced consumption and an accelerated shift in consumer preferences, leading to category switching. As we delve into the intricacies of this development, it becomes apparent that the challenges faced by combustible brands played a pivotal role in shaping the dynamics of brand value within the Tobacco 10 for 2023.”
BAT’s $31.5 billion impairment on the value of some of its U.S. cigarette brands last December resonates with Haigh’s observations. “The decision to write down the value of some of its brands was a bold step for BAT because despite the short-term pain, the reality is that the market for cigarettes is shrinking, and pretending otherwise would be irresponsible on the part of management,” he says.
Nevertheless, it is difficult to predict at this point who will need to follow BAT’s example. “The decision by BAT to impair its U.S. cigarette brands may not necessarily set a direct precedent for other companies. Each tobacco company’s considerations and actions are likely to be influenced by their unique brand portfolios, acquisition histories and strategic priorities within the evolving tobacco industry landscape.”

Marlboro remained the undisputed leader in Brand Finance’s tobacco ranking, with a brand value of $34.74 billion. Photo: jetcityimage
A Win-Win Move
In the GIFT ranking, BAT retained its position as the most intangible entity within the sector, boasting a total intangible value of $135.2 billion despite several acquisitions by its competitors. According to Brand Finance, China National Tobacco Corp. (CNTC) stood out in the 2023 GIFT study for accumulating substantial disclosed intangibles and goodwill. Its position was bolstered by its $63.4 million acquisition of China Tobacco International Brazil in late December 2021. Similarly, Philip Morris International’s acquisition of Swedish Match added approximately $18 million in goodwill and intangible assets to its financial statements.
“The acquisition of Swedish Match by Philip Morris International has proven to be mutually beneficial for both companies,” says Haigh. “PMI gains access to significant smoke-free brands, enriching its portfolio, while Swedish Match benefits from the resources and expertise offered by a larger organization. An intriguing aspect of this acquisition is the creation of an impressive, combined portfolio of smoke-free brands.”
He adds that the Tobacco 10 2023 ranking, which closely followed the November 2022 acquisition, did not show immediate noticeable impacts on the brand values of Swedish Match. “It was considered too early to discern any substantial changes. The anticipation now shifts to the upcoming 2024 tobacco ranking, where the performance of Swedish Match within this context will be pivotal in assessing the positive impact on both the financial and brand value performance for both Swedish Match and PMI. This evaluation will shed light on the effectiveness and synergies generated by the acquisition, providing valuable insights into the long-term implications for the brands involved.”

“The decision by BAT to impair its U.S. cigarette brands may not necessarily set a direct precedent for other companies.”
Richard Haigh, global managing director, Brand Finance
On the Way Up
Even before its takeover of Swedish Match, PMI succeeded in building a valuable reduced-risk brand. In 2023, its HTP IQOS joined the Tobacco 10 ranking for the first time, achieving a brand value of $3.25 billion—higher than combustible brands such as Chesterfield or Rothmans. In the 2024 ranking, IQOS has climbed three spots following an 8 percent brand value increase, Haigh points out. “The brand is currently valued at $3.5 billion. This notable increase is attributed to robust performance in the recent financial year. The brand has demonstrated improvement in revenues, expanded market share and witnessed a significant influx of customers switching to IQOS. These factors collectively contribute to the upward trajectory of IQOS in terms of brand value since its initial tracking in 2020.”
There is, however, still a substantial gap in terms of brand value between IQOS and Marlboro, which is valued at $32.5 billion in this year’s ranking. Since 2015, Marlboro has maintained its position as the world’s most valuable tobacco brand, and its resilience is evident, as the company celebrated its 50th anniversary in 2022, he says. “Despite recent challenges, such as disposable income pressures in various markets and the impact of cannibalization from IQOS, Marlboro has demonstrated enduring strength.”
The considerable difference in brand value between the two products is attributed to Marlboro’s extensive market presence, reflected in higher shipment volumes and revenue generation within the Philip Morris portfolio, Haigh explains. “Although IQOS exhibits consistent growth, surpassing Marlboro in brand value necessitates a substantial increase in its revenue contribution within the PMI portfolio. As IQOS continues to expand its market share and revenue, the potential for it to catch up with or overtake Marlboro in brand value remains contingent on its sustained growth and further integration within PMI’s overall portfolio. The journey to equivalence or overtaking Marlboro is a dynamic process, influenced by various factors that will shape the evolving landscape of PMI’s brand portfolio in the coming years.”
CNTC stood out in 2023 for accumulating substantial intangibles and goodwill.
There’s Value in Alternatives
So far, no vape product brand has made it onto Brand Finance’s Tobacco 10, which, according to Haigh, has been dominated by combustibles, traditional oral and smoke-free brands since 2015. The market for reduced-risk products (RRPs), in particular e-cigarettes, is highly fragmented. Since their first introduction to the market 20 years ago, a myriad of smaller brands has emerged, manufactured by smaller players, among them, only very few iconic ones.
However, there has been a gradual but steady entry of smaller RRPs into the rankings, says Haigh. “While the Tobacco 10 ranking primarily features established names, it is noteworthy that smaller players in the reduced-risk product category are gaining visibility in our rankings,” says Haigh. “Notable examples include IQOS, Glo (brand value $2.3 billion in 2023), Vuse ($1.4 billion) and Velo ($580 million). These brands, although not reaching the high values necessary to secure a spot in the top 10 globally, have made a significant impact on the market and our ranking. Over the past three years, all these brands have exhibited double-digit growth, reflecting their increasing presence in markets and contributing to their upward trajectory in our ranking. While their individual brand values may not place them among the top 10, the consistent growth signifies a notable trend in the industry. This gradual ascent of reduced-risk products and the sustained growth of these brands underscore their evolving significance in the market and their potential to further reshape the dynamics of the tobacco industry in the coming years.”
Establishing an iconic e-cigarette brand necessitates a dual focus, Haigh stresses, judging from his experience of evaluating the prominence of e-cigarette brands within leading tobacco companies. “It requires technological advancement, involving continuous product development and research and development. Simultaneously, building a robust online presence across multiple channels emerges as a crucial strategy to drive sales and effectively capitalize on the growing market demand for these products.”
With combustible cigarettes experiencing declining volumes, smoke-free products have been consistently ascending in rankings over the last three years.
Remaining Agile
The report underscores that despite increasing regulations on traditional tobacco products in developed markets, e-cigarettes remain in a nascent stage and are currently generating high intangible value. “This is primarily due to the lack of marketing regulations governing these products,” says Haigh. “The absence of stringent rules allows e-cigarette manufacturers to continuously iterate on device design, flavors and other product attributes, enhancing appeal and driving sales growth.” Of course, this sector’s outlook may be dampened by anti-tobacco harm reduction sentiments, especially in the wake of the recent Conference of the Parties to the World Health Organization Framework Convention on Tobacco Control.
“As e-cigarettes are currently enjoying high intangible value partly due to a lack of marketing regulation, any future regulations may influence the competitive landscape and strategies of tobacco companies, potentially affecting the brand value of RRPs,” says Haigh. “The ability of companies to adapt their marketing approaches and navigate evolving regulatory environments will likely play a crucial role in determining the impact on brand value in the realm of RRPs.”
In the near term, Haigh expects the development of nicotine brands’ value to undergo several significant shifts as global cigarette sales volumes continue to decline. “With combustible cigarettes experiencing declining volumes, smoke-free products have been consistently ascending in rankings over the last three years,” says Haigh. “This ascent is driven by their increased market share and revenue generation, signaling a notable trend in consumer preferences toward reduced-risk alternatives.”
Business model transformations will become another important factor. In response to the risk posed by declining shipments and revenue in the traditional cigarette market, companies are actively initiating transformations in their business models. “This involves a strategic shift toward becoming truly multi-category consumer products businesses,” says Haigh. “By diversifying their product portfolios to include smoke-free alternatives, companies aim to adapt to changing consumer demands and mitigate the impact of declining cigarette sales.”
Finally, tobacco companies will likely place greater emphasis on sustainability. “Consumers are prioritizing sustainable practices, and major tobacco companies are responding accordingly,” says Haigh. “Initiatives such as sustainable farming and waste reduction are being embraced, exemplified by [BAT’s] hiring of its first chief sustainable officer in late 2022. Similarly, Philip Morris International has introduced a bespoke sustainability index, demonstrating a commitment to measuring its ESG performance.”
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.

March 1, 2024
A New Reality

Photo: Delovoy Petersburg
Two years into the Ukrainian conflict, tobacco businesses still scramble to adapt.
Contributed
Since Russian forces crossed the Ukrainian border on Feb. 24, 2022, tobacco business on both sides of the conflict has been a roller-coaster ride. As the second anniversary approaches, tobacco companies have yet to fully adapt to the new reality.
In 2022, sweeping Western sanctions triggered massive disruptions in the supply of raw materials for tobacco factories in Russia and Belarus. The logistics havoc that followed the first EU sanctions packages took a heavy toll on production costs. Besides, the restrictions directly prohibited the delivery of some raw materials to the country.
Nearly two years since, this issue is yet to be fully solved, according to Sergey Glushkov, head of the communications department at Japan Tobacco International Russia.
“Two years ago, 100 percent tobacco and more than 90 percent of nontobacco materials were produced abroad. However, after necessary raw materials were included in the list of dual-use products and were placed under the U.S., EU and Japanese sanctions, tobacco companies operating in Russia started diligently looking for suppliers in China, India and other markets,” Glushkov said on the company’s social media networks in Russia.
In addition, to mitigate risks, the company puts a lot of effort into import replacement. JTI Russia has localized foil, plastic film, cardboard packaging, most paints and some raw materials. As a result, the share of localized raw materials has nearly tripled compared to pre-sanction times, though it is still falling miles short of the desired level.
Raw material supply is still a pressing issue, which is far from being sorted out, Glushkov admitted.
There are many reasons why sanctions keep executives of the Russian tobacco factories awake at night. As Western technologies are no longer available on the Russian market, modernization issues also come to the fore.
Some necessary equipment and production lines are nearly impossible to get, Glushkov stated, adding that this situation might push factories to somehow rejiggle operations. He didn’t elaborate, only admitting that this would incur costs.
Numerous reports indicated that Russian businesses find creative and effective ways of circumventing Western sanctions, sourcing necessary raw materials in third countries like Turkiye, China, Kazakhstan and Georgia.
However, as Western countries double down on their efforts to close the existing loopholes allowing Russian firms to bypass the restrictions, this work is growing trickier by the day. U.S. President Joe Biden signed an executive order in December announcing secondary sanctions on foreign banks suspected of supporting Russia’s campaign in Ukraine.
This move has seemingly hit the target, as banks in Turkiye, one of the largest hubs for re-exporting Western goods to Russia, have started closing Russian corporate accounts following threats of secondary sanctions from the United States, the local press reported, citing market players.
There are problems in China as well. A major Chinese bank for Russian importers, Chouzhou Commercial Bank, ceased operations with Russian and Belarusian companies. Occasional reports indicate difficulties Russian business has in other jurisdictions.

In Ukraine, plans are drafted to move cigarette factories to safer territories (Photo: Fifth Channel)
Seeking a Safe Harbor
On May 28, a kamikaze drone hit Imperial Tobacco Group’s factory near Kyiv, Ukraine. Although the destructions reportedly were insignificant, this event once again reminded foreign investors operating in the country that in the context of constant shelling, no place can be considered entirely safe.
Imperial Tobacco Group resumed operation soon after the Russian troops fell back from Kyiv. Galina Vorobieva, director of Imperial Tobacco Production Ukraine, claimed that the company faced a hard choice whether to resume operation, as safety risks were undeniable.
Plans were drafted to move the production to a Western region, which is considered safer, but the wheels are yet to be set in motion.
Philip Morris International, in turn, has recently confirmed plans to build a new cigarette factory near Lviv, not far from the Polish border, to manufacture around 7 billion cigarettes per year.
Maxim Barabash, director of Philip Morris Ukraine, explained that the company is primarily driven by safety concerns, as the factory in Kharkiv in the eastern part of Ukraine sits too close to the battlefields.
The Ukrainian authorities estimated that every third building in Kharkiv had been damaged by shelling. For this reason, putting the local factory into operation never seemed like a feasible option.
“We understand that in the medium term, it will be challenging for us to put the Kharkiv factory back into full operation. And we need local production as soon as possible to meet the demand on the Ukrainian market,” Barabash told local press.
In the good old days, the Kharkiv factory manufactured 20 billion cigarettes per year, of which nearly half was exported. It is hard to imagine this now, but a share even landed on the Russian market.
The Lviv factory will manufacture less because export is not in the cards. Besides, the demand on the domestic market has plummeted by roughly a third as millions of Ukrainians fled from the country seeking shelter in the neighboring countries.
The fate of the Kharkiv factory remains vague. According to Barabash, Philip Morris is not contemplating shutting it down completely, but the company also won’t need two production assets.
Almost all smaller tobacco factories continue operation in the country despite multiple challenges, spanning from worsening labor shortage to waning demand and flourishing illegal trade. A recent report by the Kyiv School of Economy indicated that the share of the shadow segment of the cigarette market in Ukraine spiked to a record-breaking 20 percent.

Illicit cigarettes remain a problem in both Russia and Ukraine. (Photo: Russian government)
Looming Nationalization
Since early 2022, all leading Western firms have been pressured to sever their ties with the Russian and Belarussian markets. Not all tobacco firms, however, were quick to do so.
In August 2023, Ukraine’s National Agency on Corruption Prevention even added Philip Morris International and Japan Tobacco International to the list of “international war sponsors” for not pulling a plug on Russian operations. The Ukrainian government agency claimed that both companies generated solid revenue in Russia and kept paying taxes to the Russian budget.
Imperial Brands was the first of the global tobacco firms to leave Russia in April 2022, followed by BAT in September 2023.
JTI Russia decided to continue its business in the country to not deprive customers of the products they are accustomed to, Glushkov unveiled. Despite that, JTI will not introduce a new generation of tobacco-heating devices to the Russian market. JTI also complies with all regulatory rules when working on the Russian market, Glushkov emphasized.
In March 2022, JTI announced that it suspended new investments and marketing activities in Russia. In April 2022, the company claimed it mulled various options for developing its business in Russia, including transferring it to new management.
Negotiations on the sale of PMI’s Russian business have reached a dead end, Jacek Olczak, CEO of PMI, told the Financial Times in February 2023. He explained that PMI’s position was that it would rather keep its business in Russia than sell it on unfavorable terms, at an unfair price to shareholders.
However, the reality is that Western firms running business in Russia no longer have an option to sell it, at least under reasonable terms. Since the middle of 2022, the Russian authorities have been consistently tightening screws for the foreign companies seeking an exit from the market.
In October 2023, the Russian government stipulated that to sell Russian assets, investors from the countries deemed as unfriendly will need to make a voluntary contribution to the Russian budget comprising at least 15 percent of the cost of the deal. During the previous year, this contribution was limited to 10 percent.
Besides, the Russian government commission on foreign assets requires Western firms to offer a nearly 50 percent discount on their assets for the deal to get a green light from the Russian regulator.
However, even fulfilling these terms doesn’t guarantee a success. In July 2023, Russian President Vladimir Putin signed an order to nationalize the Russian operations of Danone and Carlsberg—both companies were working on selling their Russian assets.
The move, among other things, has largely discouraged other foreign firms from executing their exit plans. The threat of forced nationalization has been looming over assets of foreign firms during the past two years.
The Russian tobacco industry must be nationalized, claimed Biysultan Khamzaev, a member of the State Duma Committee on Security and Anti-Corruption, in an interview with state press on Jan. 19, 2024.
“I would nationalize [assets of] all tobacco corporations in Russia. I would do it following the example of China. They established the China National Tobacco Corp. The system should be in the hands of the state, not private corporations. But it turns out that they earn money while the burden on the state, healthcare and social services rise,” Khamzaev said.
Although the public attention to hostilities in Ukraine has tangibly diminished, the challenges they brought to the tobacco business are still as real as ever. As the war grinds into the third year, the future of the tobacco factories in all countries involved remains highly uncertain.
March 1, 2024
Battening Down the Hatches

Photo: Synthex
Having weathered the supply disruptions of Covid-19, tobacco freight forwarders must now dodge missiles in one of the world’s busiest waterways.
By Stefanie Rossel
Forwarding businesses that are specialized in the shipping and storage of tobacco have gone through some challenging years: The Covid-19 pandemic led to a scarcity of containers and caused shipping rates to skyrocket in 2020–2022. The situation eased in 2023 when inflation tempered demand and eventually even reversed the supply and demand balance.
The end of last year, however, brought about a new test for the sector. Just as global supply chains returned to normal, the Houthis, a Shia Islamist political and military organization that emerged from Yemen in the 1990s, began attacking container ships and oil tankers passing through the southern Red Sea and even hijacked one of the vessels.
The attacks with ballistic missiles and drones near the entrance to the Bab-el-Mandeb Strait—a vital corridor for global shipping—started Nov. 19, shortly after the outbreak of the war between Israel and Hamas in early October. The strikes are in retaliation for Israel’s military offensive in the Gaza Strip, which by mid-February had killed around 27,500 civilians, according to Gaza’s health ministry. The Houthis claim that they target vessels linked to Israel and its U.S. and British allies, although ships associated with other nations have reportedly been hit as well.
There is strong evidence that Iran is bankrolling and arming the militants, who have meanwhile extended their attacks to include the neighboring Gulf of Aden. In response to the continuing attacks, U.S. and British forces have struck Houthi targets in Yemen to secure the waterway. The European Union is also planning a military operation to protect one of the world’s most important maritime trade routes.
Despite the airstrikes on the Houthis’ bases in Yemen, the rebel group’s drone and missile activity continues. Shipping companies began avoiding trade routes via the Suez Canal In December, rerouting their journeys via Africa’s Cape of Good Hope—a detour that greatly increases the time and cost of many shipments. According to data from supply chain platform Project44, the number of container vessels sailing through the Suez Canal fell by about 65 percent between December 2023 and the end of January 2024.
Longer Travel Time, Higher Costs
The Suez Canal carries an estimated 12 percent of global trade and is the shortest sea route between Southeast Asia and Europe. Cargo travels 8,500 nautical miles in 26 days to be shipped from Singapore to Rotterdam, for instance. By contrast, the trip around the southern tip of Africa takes 36 days and measures 11,800 nautical miles.
The Red Sea shipping disruptions impact many nations, but European countries are likely to feel the heaviest impact, according to business intelligence firm Euromonitor International. While electronics, chemicals, automotive, machinery and other engineering industries in Europe—which rely heavily on components imported from Asia—are the most vulnerable to trade disruptions, production disruptions would also impact upstream industries and cause temporary deficits of components or manufactured goods. “In turn, this would add to the higher inflationary pressures across Europe,” writes Euromonitor in a report. “Companies are also likely to face greater pressure on their profit margins as slower economic and consumer income growth make it more difficult to fully pass on cost increases to the end consumer.”
Nonetheless, Euromonitor says that large-scale trade disruptions as witnessed during the Covid-19 pandemic are unlikely because global production capacity remains sufficient and shipping companies and buyers have greater flexibility in adjusting their trade routes and production processes. This, however, will result in higher logistics costs for the companies. Euromonitor estimates that the 10 extra days needed to sail around the Cape of Good Hope require approximately $900,000 in additional fuel. Increased travel time and higher insurance costs for shipping companies also directly impact shipping rates, the research company points out. “For example, freight prices for a 40-foot-equivalent container on Asia-Europe routes have more than doubled to $4,000.”
The shipping disruptions lead to a series of other issues, including delays further down the transportation network. “Changes and disruptions to shipping schedules will cause challenges in ports and put greater pressure on cargo handling and road transport sectors to efficiently handle the goods and avoid major delays,” writes Euromonitor. “For buyers of logistics services, it will likely result in higher prices, as logistics providers will face higher labor, fuel and fleet management costs.”
Challenging Shipments
Lisa Rautenbach | Photo courtesy of Andromeda Forwarding
Sea freight accounts for 80 percent of Andromeda Forwarding and Logistics’ operations. While it offers all the services of a carrier, the Rotterdam-headquartered company does not own any vessels.
Until the Houthi attacks began, 80 percent of Andromeda’s shipments went through the Suez Canal, according to Lisa Rautenbach, Andromeda’s tobacco department manager. “This issue has so far impacted all commodities that have to be transported through the Red Sea and the Suez Canal,” she says. “Routings dramatically changed, with the result that they have a very long transit, and some routings have added an extra 30 days prior to arrival.”
Meanwhile, shipments are being delayed, leading to longer transit times and additional surcharges, with minimum equipment and space available for new bookings. Vessels are overbooked, leaving little space for additional shipments. “Blank sailings,” which is when an ocean carrier cancels or skips a scheduled port of call or region in the middle of a fixed rotation, also occur.
Freight rates increase, and liners use the Red Sea crisis as an excuse to raise rates for routings that don’t even need to be rerouted or were never planned for the Red Sea route, according to Rautenbach. “After finally having seen stable rates after the pandemic, we now have to cope with supplementary fees that are added to pending shipments already sailing; with shipments forced to be rerouted while already on route; and, unfortunately, with disappointing our customers, which is out of our control.”
While it is uncertain how much longer the security crisis in the Red Sea will last, shippers, vessel operators and manufacturers may perhaps take comfort in the fact that they have learned from the Covid pandemic. In a recent article on U.S. National Public Radio, supply chain experts noted that affected companies quickly evaluated the emerging threat this time and took action much sooner. Manufacturers benefit from having gone back from a just-in-time to a just-in-case inventory due to the pandemic, experts said. The bottom line, however, is that all stakeholders involved in the forwarding business must learn to live with uncertainty.
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.

March 1, 2024