Author: Staff Writer

Broughton Launches Blue-Sky Thinking Hub

Photo: BNS
Broughton Nicotine Services (BNS) has launched its Blue-Sky Thinking Hub, an “open innovation community” for companies to collaborate and develop ideas within the electronic nicotine-delivery system (ENDS), pharmaceutical and cannabis markets.
BNS is a contract research organization with more than 10 years’ experience helping ENDS companies bring tobacco-free nicotine-delivery products to market.
The company has recently added services aligned with a number of new product categories, including modern oral nicotine products, cannabidiol (CBD) and cannabis-delivery devices and work with clients based in the U.S., China, U.K., Europe and the Middle East.

The Blue-Sky Thinking Hub seeks to engage companies with innovative ideas.
Nveed Chaudhary, chief regulatory officer, BNS
The Blue-Sky Thinking Hub encourages manufacturers and regulators to build strong relationships to overcome product development and regulatory challenges and work toward total harm reduction. An additional benefit is around considering solutions to potential regulatory concerns as part of the product development.
“Broughton Nicotine Services is dedicated to helping manufacturers meet regulatory requirements and delivering reduced-harm products to market,” said Nveed Chaudhary, chief regulatory officer at BNS.
“The Blue-Sky Thinking Hub seeks to engage companies with innovative ideas, which could be anything from new formulations to plastic-free or biodegradable products, technology to discourage and reduce youth access or even alternative charging for devices.
“Broughton helps these ideas to come to life by providing expert scientific and regulatory advice, contributing to the end goal of global total harm reduction.”

We invite industry professionals to discuss, debate and develop their ideas for new products aligned with regulatory requirements and to hopefully help influence and shape new policies.
Paul Moran, chief executive, BNS
“We are delighted to be launching the Blue-Sky Thinking Hub, which is the first of its kind in the industry,” said Paul Moran, chief executive at BNS.
“We invite industry professionals to discuss, debate and develop their ideas for new products aligned with regulatory requirements and to hopefully help influence and shape new policies.
“Together we can achieve total harm reduction and a smoke-free future.”
April 1, 2021
Jerry Fowden to Resign From BAT Board

Jerry Fowden
Jerry Fowden, nonexecutive director of British American Tobacco (BAT), has submitted his resignation from the board effective April 1, 2021, the company announced on its website. Accordingly, he will not seek reelection at the company’s annual general meeting on April 28, 2021.
Fowden decided to step down from the board to ensure there would be no potential for a conflict of interest to arise in view of his other external commitments, which he has decided to focus on.
“On behalf of the board, I would like to thank Jerry for his valuable contribution to the company since his appointment as a nonexecutive director in September 2019,” said BAT chairman Richard Burrows. “We wish him the very best for the future.”
As the company’s notice of meeting has already been issued, the resolution to reappoint Jerry Fowden as a nonexecutive director of the company is now withdrawn.
Karen Guerra, a nonexecutive director of the company, will join the Audit Committee and step down from the Remuneration Committee effective April 1, 2021.
The Audit Committee now consists of Holly Keller Koeppel (chair), Karen Guerra, Luc Jobin and Darrell Thomas. Jobin will step down from the Audit Committee on appointment as chairman from the conclusion of the company’s annual general meeting.
The Remuneration Committee consists of Dimitri Panayotopoulos (chair), Sue Farr, Marion Helmes and Savio Kwan.
April 1, 2021
U.K. Urged to Challenge WHO’s Stance on THR
Mark Pawsey (Photo courtesy of UKVIA)
In a report released March 31, the All-Party Parliamentary Group (APPG) on Vaping calls upon the U.K. government to make the most of Brexit by challenging the World Health Organization’s (WHO) opposition to vaping at the upcoming Framework Convention on Tobacco Control (FCTC) Conference of Parties (COP).
The call follows a four-month Inquiry into the FCTC by the APPG, which investigated the FCTC’s history, governance and approach to evidence-based decision-making. It was prompted by the WHO encouraging and applauding bans on vaping.
At a time when the U.K. government has set an ambitious target to make England smoke-free by 2030 and Public Health England has asserted vaping is at least 95 percent less harmful than smoking, the members of the House of Commons and the House of Lords wanted to ensure the WHO doesn’t turn its back on the lives of the 1 billion people around the world who still smoke, including the 7 million in the U.K.
The parliamentarians—which included Viscount Matt Ridley, a vocal advocate for reduced harm alternatives—have called on the government to consider “dramatically scaling back our funding” if they don’t see a change in the approach from the WHO with the FCTC better reflecting the U.K.’s national interests.
The main recommendations from the report include:
Ensuring the WHO returns to the founding principle of the Treaty, which includes harm reduction.
Restricting any decision to ban vaping and other reduced-risk alternatives to smoking.
Sending experts and consumers to sit alongside the Department of Health & Social Care officials at the multilateral event.
Establishing a Working Group to look at the science and evidence for new and emerging products.
Ensuring openness and transparency instead of secretive decision-making.
If the WHO continue to pursue an agenda-driven approach to ban less harmful alternatives to smoking, then the U.K. should consider dramatically scaling back our funding.
Viscount Matt Ridley
The inquiry heard evidence from Clive Bates, former director of anti-smoking group ASH, as well as professor Lynne Dawkins from the London South Bank University and consumer groups the New Nicotine Alliance and We Vape, among others.
They called for the delegation of departmental health officials, diplomats and activists usually sent to these events to be strengthened with experts who have real world experience and even former smokers who can attest to the benefits of vaping and other reduced-risk products. It was strongly felt that the voice of the consumer has been missing in these debates so far, and by defending the strong story the U.K has to tell at home, the government would be putting the marker down for “Global Britain” abroad.
Now that the U.K. has left the EU, the U.K. delegation is no longer bound to a common European position on tobacco and nicotine policy. The COP9 meeting would be one of the first opportunities for the U.K. to take a stand at a U.N. forum.
We call on the government to defend the U.K. approach, challenge the WHO to stub out their ban on vaping and help return the FCTC to its founding pillar of harm reduction.
Mark Pawsey, chair of the APPG for Vaping

The MPs called for coalitions to be built with like-minded countries that have embraced tobacco harm reduction and have their own good stories to tell. At previous COP meetings, member states have often been afraid to speak up, but the Inquiry encouraged the U.K. government to stand firm in defending its strong domestic position, even if the WHO continues with its prohibitionist approach.
“There is no doubt that the WHO has developed a negative stance in relation to vaping over recent years,” said Mark Pawsey, Member of Parliament for Rugby and chair of the APPG for Vaping. “We wanted to evaluate whether it remained fit for purpose in an evolved landscape where new technology has enabled new harm reduction strategies.
“One of the founding pillars of the treaty the U.K. signed up to nearly 20 years ago was that of harm reduction. If the WHO are opposed to adhering to this and continue to pursue an agenda-driven approach to ban less harmful alternatives to smoking, then the U.K. should consider dramatically scaling back our funding.
“At the FCTC COP9, the U.K. has a unique opportunity to champion its progressive, successful and evidence-based domestic policies on the global stage. We are a world leader in tobacco harm reduction, and we call on the government to defend the U.K. approach, challenge the WHO to stub out their ban on vaping and help return the FCTC to its founding pillar of harm reduction.”
The APPG has written to Jo Churchill, MP, the Public Health Minister at the Department of Health & Social Care, with its findings and has requested a meeting to discuss its recommendations.
This is the first of two Inquiries the APPG for Vaping is undertaking this year. Its second—looking at how the U.K. can diverge from EU rules to further the U.K.’s chances of reaching the smoke-free 2030 goal—is set to launch imminently.
The U.K. Vaping Industry Association (UKVIA) applauded the APPG report.
“It’s about time that the vaping industry stood up against the World Health Organization (WHO), and the APPG on Vaping has done a great job of doing so, challenging the organization to change its approach to harm reduction and calling upon government to consider a reduction in funding if they continue in the same vein by taking a prohibitionist stance,” said John Dunne, director-general of the UKVIA. “It was also good to see that the WHO’s Framework Convention on Tobacco Control treaty was called into question by parliamentarians, who want it to better reflect [the] U.K.’s national interest.”

It’s about time that the vaping industry stood up against the World Health Organization.
John Dunne, director-general, UKVIA
“It is crucial that the vaping sector, and former smokers turned vapers, speak with one voice to put pressure on the WHO to change its ways. As the body, which is meant to promote health, keep the world safe and serve the vulnerable, the WHO has a moral responsibility to do the right thing. We know full well that vaping is a fraction of the harm of smoking and is proven to be the best way to quit smoking. In addition, some 3 million vapers in our country—a significant number who have vaped for a long time now and have experienced positive life changing benefits—is proof that it is highly effective.”
April 1, 2021
Conny Andersson Joins Sting Free

Conny Andersson (Photo courtesy of Sting Free)
Snus master blender Conny Andersson has joined Sting Free, a Swedish company that has developed a solution to eliminate the stinging sensation associated with snus use.
Andersson is a skilled and experienced tobacco expert and “father” to popular snus varieties, such as vintage snus Kardus (2005–2012), Islay Whiskey Snus, Crafted Snus and Hop (e) & Glory snus.
In recent years, Andersson helped produce several tobacco-free snus alternatives, including Infiniti, YoYo and others. Since 2015, Andersson has worked as a self-employed consultant for several Swedish and international companies, primarily in the snus and nicotine pouch industry.
Sting-free may become a new standard in the global oral nicotine industry.
Conny Andersson
“Sting-free may become a new standard in the global oral nicotine industry,” said Andersson in a statement. “The reason is that the burning sensation on the gums is a big obstacle for almost all adult nicotine users to take up snus or nicotine pouches [for the] first time. This is especially true in countries outside the Nordic region where there is no snus tradition at all. The fact that the new technology may also help smokers to dare trying a smoke-free oral nicotine alternative to cigarettes is inspiring.”
Andersson is a shareholder in Sting Free and a new member of the executive working group from April 2021.
Tobacco Reporter profiled Sting Free in July 2017 (see “Patching the Pouch”).
April 1, 2021
When Science Meets Art
Vapers say taste matters. According to a survey conducted by Frost & Sullivan, among 3,000 Chinese vapor consumers, taste was a key factor in choosing an e-cigarette. The top three indexes in flavor were the overall sensation of taste (66 percent), aroma (61 percent) and the amount of vapor (50 percent).
In late-December, FEELM, a heating technology brand, introduced the industry’s first taste evaluation model. The model allows FEELM researchers the ability to describe the taste of atomization scientifically. Composed of four dimensions, flavor, strength, note and vapor, and 51 specific indexes, the model establishes a system to evaluate the human senses of mouth, tongue, nose and throat.
Frank Han, CEO of FEELM, said the company’s devotion to continuously improving the taste of e-cigarettes originated from a client’s concern. “How’s the taste of California strawberries at 6 am? What’s the difference between it and that of refrigerated ones?” he said the client asked. “Could FEELM ceramic coils bring back the taste of California strawberry at 6am with flavored e-liquid?”

Inspired by the client, FEELM team members conducted numerous studies with the goal of developing a scientific system to properly evaluate and provide the perfect flavor. “As you can imagine, analyzing and delivering such an abstract concept as taste will [take] anyone tons of effort,” Han said.
To help with challenging endeavor, FEELM’s parent company, Smoore Technology, set up several research institutes around the world (Smoore does not produce any e-liquid). Smoore technical experts began building a world-leading atomization platform. Now, more than 75 percent of those researchers are focused on understanding and improving taste through atomization. Smoore also established relationships with research institutions such as Tongji University, Tsinghua University and Princeton University.
“This institute will focus on the background study and harm reduction from new perspectives such as bio-medicine and artificial intelligence,” Smoore said in press release. “To further study the science behind atomization, FEELM has also established a professional taste evaluation team, and built a taste evaluation lab complied with the national standard and could hold seven tasters at a time.”

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The process for evaluating a flavor is precise. Before picking up a vaping device, each taster washes and sanitizes their hands and then chews a slice of lemon or yellow peach to clean the palate. Testers than drink boiled water to freshen up the mouth and smell coffee beans.
“It is not until the light and the exhaust fan in the booth are turned on that the taster begins tasting,” Smoore explained. “While tasting, a recorded form with all detailed criteria is prepared for scoring and taking notes. Afterwards, the same vaping device will be handed over to chromatography, electron microscope as well as reliability labs to analyze its e-liquid ingredients, coil and safety … a diagnostic report will be produced based on both human and machine criteria. FEELM is then able to figure out the deficiencies in the vaping experience and work out precise solutions.”

The FEELM Taste Scientific Institute is made up of more than 10 labs, including cell lab, taste evaluation lab, element analysis lab, chromatography lab, and electron microscope lab. The company says its labs can produce 50 physical tests, more than 200 chemical tests, six microbiological test items, three genetic toxicology tests, three categories of clinical abuse tests, as well as three categories of human factor testing.
“Besides scientific research, great taste cannot be separated from production,” the company said. “Smoore has established a rigorous production safety standard, which is even stricter than the TPD [Tobacco Products Directive] in the EU and AFNOR in France. The production protocols are also more stringent than what is required by the premarket tobacco product application process for the U.S. Food and Drug Administration, covering 50 individual tests.”
FEELM also developed the first fully automated pod production line in the vapor industry. Its production capacity is 6,000 pieces per hour, boosting efficiency five times over manual production. Automated production guarantees the stability and consistency of quality.
“Taste is a meaningful word,” said Han. “Great taste relies on the scientific system of fundamental research, the persistent improvement of product development and manufacturing, strict quality control, and a devoted focus towards science and ingenuity.”
April 1, 2021
Tectonic Shift

Photos: PMI
By 2025, smoke-free products could contribute more than 50 percent to Philip Morris International’s total net revenues.
By Stefanie Rossel
Five years ago, Philip Morris International (PMI) announced its ambition for a smoke-free future, based on the development and commercialization of smoke-free products that are less hazardous than combustible cigarettes. During its virtual Investor Day conference on Feb. 10, 2021, PMI provided an update on its progress and revealed new targets. By 2025, PMI aims to derive more than 50 percent of its net revenues from smoke-free products, up from 24 percent in 2020.
IQOS Iluma, the next generation of its IQOS heated-tobacco product (HTP), is supposed to play a major role in the company’s transformation. The device comes with a new internal heating technology based on induction and will be launched in the second half of this year. “IQOS Iluma is simple and intuitive,” explained PMI’s Chief Operating Officer Jacek Olczak. “It self-activates and requires less explanation, which will save time and cost of acquisition as well as aftercare and retention. It supports easier switching and higher conversion for legal-age smokers.”
With the new heating system, PMI addresses consumer feedback on the heating technology of its successful IQOS tobacco heating device. Some consumers reported breaking blades.
The Iluma will be available in three designs at three price points. Next to a super-premium version, there will be a variant that corresponds to the present IQOS model 3.1 and more affordable version. For the time being, Olczak said, PMI will maintain IQOS with both the blade and the induction technologies on the market.
“Higher loyalty to the new products will drive consumers to conversion. Requiring less infrastructure, Iluma will enable more access to geographically remote areas,” said Olczak. Iluma will be introduced with a new broad range of consumables; the tobacco sticks of blade and induction technology devices cannot be interchanged.
In the five years since PMI announced its smoke-free ambition, the company has created an entire new product category. As of December 2020, IQOS had 17.6 million users, of which 12.7 million had switched from cigarettes and stopped smoking, according to PMI’s CEO Andre Calantzopoulos. The product is present in 64 markets, a reach planned to be expanded to 100 in the next five years. It also has an 80 percent segment share. According to PMI, IQOS is the world’s No. 1 smoke-free brand and No. 5 nicotine brand. In IQOS markets, the product is the third largest brand behind Marlboro and Winston. IQOS generated net revenues of $6.8 billion in 2020. To date, PMI has invested $8.1 billion PMI in developing reduced-risk products. IQOS has remained remarkably resilient during the Covid-19 pandemic, Calantzopoulos said. In 2020, 76 billion heated-tobacco units (HTUs) were shipped, an amount that is targeted to reach 140 billion to 160 billion in the 2021–2023 period.

Jacek Olczak
Exceptional growth expected
Calantzopoulos anticipates a decline of total nicotine industry volume of 1 percent to 2 percent over 2021 to 2023, but a clear transition to nicotine smoke-free products. He expects the share of combustible cigarettes and other tobacco products (OTP) to decrease from 94 percent in 2020 to 90 percent by 2023, whereas smoke-free products (HTP, e-vapor and nicotine pouches) are estimated to grow from 6 percent to 10 percent over the same period. The HTP category alone, which had a volume share of 3 percent last year, is forecast to account for 7 percent by 2023, assuming the same regulatory conditions as for combustible cigarettes.
In 2020, the retail value of the global nicotine industry stood at around $450 billion. Of that, cigarettes and OTP represented 94 percent, HTP 4.5 percent, vapor products 1.6 percent and nicotine pouches 0.1 percent. Over the next four years to five years, Calantzopoulos expects value compound annual growth rates of roughly 4 percent for the total industry but 25 percent for HTP and 10 percent to 15 percent for vapor products.
Opportunity for IQOS remains vast. “There are 150 million addressable users in current markets and around 600 total international potential users excluding China and the U.S.,” said Calantzopoulos. Indonesia, the Philippines and Vietnam are considered sizeable geographies with potential for IQOS. The U.S. market, where IQOS was authorized as a modified-risk tobacco product by the Food and Drug Administration in July 2020, also holds great promise for the company. “There is high consumer interest in smoke-free alternatives,” Olczak explained, “and a rational and robust regulatory environment for building awareness.” Commercialization of IQOS in the U.S. is supposed to start in early 2021.
“Reduced-risk products (RRPs) are a different business,” said Calantzopoulos, describing PMI’s learning curve. “Their complexity is much higher than that of combustible cigarettes.” Apart from the different manufacturing and supply chain, operating in an uncharted regulatory landscape, the need to build new brand equity and for high conversion for harm reduction and gaining scale, he mentioned a new consumer “journey,” which drives development and commercialization and route-to-market, high upfront investment for meaningful entry and new organizational skills and ways of working. Rewards, though, were also higher, he added. Next to the positive public health impact, RRPs come with higher profitability. This is especially true for IQOS: Its margin is about 2.4 times that of combustible cigarettes and approximately five times that of closed-system vapor products, according to the company’s chief financial officer, Emmanuel Babeau.

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IQOS as an umbrella brand
Over the midterm, the company says it might need two to three technologies and respective consumable offers to cover the full spectrum of consumer price segments. As a premium brand, IQOS can be stretched over two price segments as in Japan. To cover three to five price points in certain markets, further offerings and partnerships will be required.
IQOS is supposed to become the umbrella brand in a consumption environment characterized by poly-use, Olczak pointed out. In the combined markets of the U.K., Germany, Japan and Russia, combustible cigarettes were consumed by 66 percent, vapor products by 7 percent and HTPs by 8 percent of nicotine users in 2019. But there were overlaps: Of the smokers, 4 percent also used HTPs and 7 percent also used vape products. Triple use was observed in 7 percent. “We will move from single to multi-focus, with IQOS addressing a range of consumer preferences,” Olczak said. In the future, the company forecasts, consumers will increasingly use different smoke-free products in parallel.
The second new product launch this year will hence be a vapor product called IQOS Veev. Based on the company’s Mesh technology, which uses a metallic mesh with tiny holes to heat e-liquid in a pre-filled, pre-sealed pod, the product will initially be introduced in more than 20 markets. “Closed system users mean better economics for the manufacturer,” Olczak stated. “The e-vapor category is growing and consolidating. The expected increase in users over the next five years will be 7 [percent] to 10 percent, albeit concentrated in specific geographies. For existing business models, returns remain low—there is low conversion to the category, low loyalty within the category, and a high number of devices per user driving up acquisition and retention cost.”
PMI seeks to enter the market from a different angle, Olczak added, by leveraging the IQOS infrastructure with a bespoke route-to-market approach. Veev will be a premium product coming with a new age verification technology that presently is in the final stages of testing.

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Beyond nicotine
PMI is also eying the nicotine pouch category, a small but growing segment with a market size of 5 billion stick equivalents in 2020. With new consumer tests, the company will develop its platform 2, a THP closest to the combustible cigarette ritual and experience, further this year. Platform 3, an electronics-free nicotine product, is supposed to be commercialized within the next three years.
To accelerate smoking cessation, Calanzopoulos called for differentiated regulatory frameworks taking the differing levels of harm of nicotine products into account. “We must stop debating whether RRPs should be made available, but how fast and how best to help the men and women who would otherwise continue smoking,” he said. “With the right regulatory frameworks, dialogue and support from civil society, cigarette sales can end within 10 [years] to 15 years in many countries.”
To refinance its RRP investments, PMI intends to achieve around $2 billion in annualized gross cost efficiencies by 2023 compared to the 2020 cost base. The company will continue to use the revenues from its combustible cigarette business to support its smoke-free expansion. In 2020, PMI generated net revenues of $28.69 billion ($29.81 billion in 2019), of which combustible cigarettes accounted for the lion’s share.
Excluding China and the U.S., the global cigarette market decreased by 6.7 percent in 2020 compared to the previous year, PMI estimates. In IQOS markets, the decrease even amounted to 9.1 percent. “The reduction of social smoking moments during the height of Covid-19 restrictions has led to consumption loss, which put Marlboro under pressure in 2002 while our other brands performed well,” Olczak pointed out. The temporary loss of duty-free due to reduced air travel contributed to the overall category decline. “But consumption will come back once we return to our pre-Covid-19 daily routines,” said Olczak. Although impacted by the pandemic, the company continued to lead the global cigarette market excluding China with a share of 25.7 percent, down from 26.9 percent one year previously. The downtrading trend continued last year, with the majority being from mid-priced brands to low-priced and super-low-priced products.
PMI predicts a further annual drop in global consumption outside China and the U.S. of 3 percent to 4 percent between 2021 and 2023. The company, however, already has plans to go beyond nicotine: It intends to employ its newly won expertise in life sciences, inhalation technology and natural ingredients to explore and develop botanicals and respiratory drug delivery, the market sizes of which PMI estimates at $29 billion and $36 billion by 2025, respectively. If its up to PMI, “beyond nicotine” products will contribute at least $1 billion to the company’s net revenues by that time.
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.

April 1, 2021
Flexible Solutions

Photos: Parkside Flexibles
The prospects for tobacco packaging remain bright despite stagnating cigarette sales.
By George Gay
A recent Fortune Business Insights report predicted that the turnover of the global tobacco and nicotine packaging business would grow from the $16.15 billion of 2019 to $20.45 billion by 2027. This seems like a healthy increase given what we are often led to believe is the declining state of the business, at least the overwhelmingly dominant part of it that is made up of sales of traditional cigarettes.
Given this, Tobacco Reporter asked Paula Birch, global sales director of Parkside Flexibles, whether she believed the sector of the tobacco and nicotine packaging business that Parkside operated in would grow to this extent, and she kicked off her emailed reply by providing some context to the growth figures.
As was mentioned by Fortune Business Insights, the value of the tobacco packaging market was predicted to grow by about 27 percent during the next six years, she said. Additionally, research by British American Tobacco had found that more than 19 percent of the world’s population comprised smokers who consumed more than 5.3 trillion cigarettes annually across a global cigarette market worth about $700 billion, a figure that rose to $814 billion annually when other tobacco and nicotine products were included. It was also the case, though, that cigarette sales had fallen by 17 percent since 2010, so the high and increasing figures for the value of sales had been down to retail prices, which, at the same time, had increased by 91 percent, according to figures by the U.K. Office for National Statistics.

Keen to serve increasingly environmentally conscious consumers, Parkside Flexibles has developed products such as recycled content inner liners.
“As prices have risen, consumers have increasingly demanded value for money and greater premiumization to ensure they are getting what they pay for,” said Birch. “The key to achieving these two aspects is via enhanced barrier performance, which provides improved tobacco quality, freshness and extended shelf life, all of which can be achieved with flexible packaging. By using flexible solutions for inner liners, pack wraps and pouches, brands can provide consumers with the superior quality they are seeking.
“As a result, we are now seeing the emergence of flexible packaging as the solution of choice for tobacco brands in Eastern and Western markets due to its greater ability to protect, preserve and present throughout the supply chain from manufacture to supermarket shelf. For tobacco brands, flexible packaging offers greater flexibility and cost-effectiveness in production when compared to other popular solutions, such as cardboard. At Parkside, we develop flexible packaging solutions that offer superb barrier performance to prevent product deterioration and aroma transmission and inhibit the growth of bacteria within the pack, thus ensuring premium freshness and quality of tobacco products.
“The benefits of flexible packaging for the consumer and brand mean we feel confident that over the next decade, this packaging format for tobacco will grow at a similar double-digit rate in line with the overall tobacco packaging market.”

As prices have risen, consumers have increasingly demanded value for money.
JPaula Birch, global sales director, Parkside Flexibles
Growing populations and hectic lifestyles
One question that arises out of this is whether the growth in tobacco and nicotine packaging turnover will be driven mainly by demand in particular countries and regions or be a worldwide trend. Consumption patterns, at least up until the Covid-19 pandemic struck, would seem to suggest that growth would have to be fueled by developing countries, but is there more to it than volume consumption?
The U.S. Centers for Disease Control and Prevention stated that between 2005 and 2015, the percentage of adults smoking fell worldwide, said Birch. Despite this, the global tobacco packaging market continued to grow because, while the overall percentage of people smoking had reduced, global populations continued to rise, resulting in higher numbers of people consuming the product. And, as mentioned previously, packaging company turnover was increasing as a result of their meeting the rise in consumer expectations about product quality.
“The modern-day lifestyle in many countries—with increased workloads, hectic schedules and, indeed, the Covid-19 pandemic—has led to a significant increase in tobacco consumption among professionals and those with stressful professions,” said Birch. “We expect to see the Asia-Pacific region experience the fastest growth in tobacco packaging turnover due to this combination of population growth and working lifestyle. We also anticipate continued growth across Europe and the U.S. for the same reasons.
“Interestingly, growth in the flexible packaging format does not rely solely on consumption patterns. Due to the versatility of the format across pack wraps, inner liners and pouches to name a few, the substitution of metal, card and paperboard continues to drive market growth.”

Platform for promotion
Even with standardized tobacco packaging being introduced in many countries, the authors of the Insights report seem to believe there is still a part that packaging can play in product promotion. So Tobacco Reporter asked whether Birch believed this to be the case.
“Absolutely,” she said. “Although brands must adhere to strict packaging guidelines in terms of packaging standardization in many countries, there are still significant opportunities to utilize the right packaging to promote a particular product. These restrictions can be challenging when competing with lower-risk products like vapes that are not constrained by packaging design laws as stringent as those for standard tobacco packaging.
“It is vital in the modern market space that brands market and communicate their products through unique and innovative promotional methods. In particular, the opening and reclosing feature can be differentiated, the use of tactile or premium finishes on the inside of the pack, and integration of novel communications and graphics within the pack can all be leveraged. Tactile packaging and intricate design work like embossing can help to convey a premium quality. This is often seen in the premium spirits market, where bottles are placed in intricately designed boxes to create a sense of luxury, generating a consumer sensory experience beyond the purely visual.

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“Sustainability is also a feature that consumers consider when making their purchases, so brands can use this to stand out from the crowd. Laminate structures of compostable films can be used to produce the pouches widely used by the roll-your-own tobacco consumer, and they comprise a viable, environmentally friendly alternative to other materials. At Parkside, we have created fully accredited flexible packaging pouches that compost both at home and in industrial composting environments. Accredited to EN13432 and Vincotte OK Home Compost regulations, the compostable OTP pouch enables brands to demonstrate their sustainability commitment.”
Finally, Tobacco Reporter asked Birch the question that, currently, no interview can leave out: How has the Covid-19 pandemic affected Parkside’s business?
“The last year has been extremely challenging for all businesses,” she said. “Demand has been volatile, and there have been various supply chain challenges, which we have successfully navigated.
“At Parkside, our primary focus is on the health, safety and well-being of our employees and their families as well as our customers, suppliers and the communities we operate in. We implemented a range of measures in line with current U.K. government and NHS [National Health Service] guidelines to minimize the spread of the virus and ensure that productivity didn’t come at the expense of staff safety.
“Importantly, we have continued to successfully work with tobacco brands around the world and implemented a range of supply chain protocols, which have enabled us to operate at full capacity throughout the pandemic. We have excellent supply and stock management systems in place, and we are continuing to meet the increased demand from our customers across all markets.”
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.

April 1, 2021
Chewing the Fat
Our U.K. editor ponders the absence of health warnings on his calorie-laden ice cream bar
Recently, I had an ice cream bar from a stash in our freezer. I appreciate the own-brand product in question because the supermarket that offers it has gone to the trouble of catering for vegans such as me and is offering a tasty ice cream bar whose production is almost certainly more environmentally friendly than that of the usual animal-products-based ice cream bars. And while the vegan ice cream bars are wrapped in nonrecyclable plastic, the wrapping is thin, and the whole is offered in a recyclable cardboard box.
What’s not to like? Well, when I opened the box, the contents looked as if somebody fairly large had sat on it with intent. Packaging is supposed to protect products, but it cannot work miracles, and there must be a complex set of calculations that would have to be made to determine what is the ideal strength and efficacy of packaging, taking into account such things as the need to maintain product integrity in the supply chain, the danger of waste, the need to protect the consumer’s image of a brand, costs versus benefits, and a whole slew of factors impacting the environment.
Frankly, despite the forlorn appearance of my squashed ice cream bar, I cannot help thinking that the packaging of this own-brand was just about right. The type of packaging that would have been needed to protect the ice cream bars from the sort of pressure my box came under would make them too expensive at retail and far too damaging to the environment.
But there was something else about this packaging that made me think. Why was there no health warning on it? I’m sure these ice cream bars could become “addictive,” which means I could become obese eating them; so, using the sort of logic applied to cigarettes, these ice cream bars could kill—me, for one! Cigarette packs are strewn with huge, grizzly warnings while ice cream bar packs are not, which is perhaps part of the reason why only about 14 percent of adults in the U.K. smoke while more than 50 percent are overweight or obese.

I have lived a long time, but I have never seen teeth so badly damaged as some of those depicted on cigarette warning labels.
Okay, you might argue, cigarette consumption causes all manner of health issues—but then so does being overweight or obese. According to my rough-and-ready research, smoking is associated with 16 cancers, but being overweight or obese is associated with 12 cancers. And take a look at our current situation. I see a lot of stories about how smokers who contract Covid-19 are at higher risk of severe outcomes than others in the population, though these reports are often quiet on smokers’ risks of contracting the disease in the first place. But, in fact, “increased body weight is the second greatest predictor of hospitalization and a high risk of death for people suffering from Covid-19,” according to the World Obesity Foundation website.
And what is the greatest factor? Smoking? No, age.
So why are there health warnings on cigarettes and none on the sorts of food associated with overweight and obesity. One argument could be that you can eat sugary and fatty foods sensibly and not become overweight or obese just as, according to the government, you can—don’t laugh—drink alcohol responsibly. This, I imagine, is poppycock. The ideas that you couldn’t safely consume one cigarette a day, but you can consume one ice cream bar or one glass of wine and not be tempted to have another, are beyond reason to my way of thinking.
Am I advocating sensible, responsible smoking? No. Definitely not. But then I wouldn’t encourage either the responsible drinking of alcohol or the sensible consumption of ice cream bars.
What I find unacceptable is the fact that while the packaging of other consumer products that raise serious health concerns bear more or less no ill-health messages, cigarette packaging does have such messages, and many of those messages, I suspect, are bogus. The trouble is that on cigarette packs that I see, there is no indication of what percentage of smokers ever suffer from the types of complaints depicted or what proportion of smokers suffer those complaints to the level depicted, so what is being conveyed in many of these graphic warnings is misleading at best, wrong at worst.
One example comprises some of the oral problems portrayed. I have lived a long time, but I have never seen teeth so badly damaged as some of those depicted on cigarette warning labels. In this case, I have to assume that such afflictions affect only a small proportion of smokers, so, to my way of thinking, this should be stated on the warnings. That way, smokers might take note.
At the same time, it might be worth pondering whether ice cream bars are good for your teeth.
Oh yes, and one other thing. Purely by chance, I wrote this piece on World No Smoking Day, March 10, so I thought I might check whether there was a similar day in the calendar for obesity. There isn’t. Well, that’s not quite true. There is no World No Obesity Day nor any World No Eating Day. But there is World Obesity Day (March 4 this year), which sounds odd to my way of thinking—almost as if it’s a celebration. —George Gay
April 1, 2021
Fighting Fakes

Chinese law enforcement officers destroy confiscated equipment that was used to manufacture counterfeit cigatrettes (Photo: Tobacco Reporter archive)
As illicit trade thrives in the pandemic, demand for security devices is expected to grow.
By Stefanie Rossel
Reduction in trade, restrictions on movement—while many legal businesses are suffering in the difficult conditions brought about by governments’ attempts to halt the proliferation of Covid-19, the pandemic has provided fertile ground for the activities of criminal organizations. A 2020 report by Euromonitor International found that the pandemic led to a surge in illicit trade, particularly in the tobacco industry, where organized crime is causing governments to lose billions in tax revenue as well as severely affecting legitimate businesses.
“The pandemic has created the ideal conditions for illicit trade in general to grow by amplifying the underlying key drivers that contribute to market imbalance,” says Nicola Sudan, general secretary of the International Tax Stamp Association (ITSA). “These include disrupted supply chains combined with global demand going off balance and government interventions, such as closed borders and consumption bans.
“There is also altered consumer behavior as a result of increased economic hardship and lockdowns. In North America, for instance, we have seen an exponential increase in illegal tobacco—and drug—trafficking direct to consumers while they are locked down at home. This is expected to continue as a way of avoiding taxes. And in France, interestingly, changes in sales patterns during times when borders were closed has also shown the extent of cross-border shopping in normal times when customers take advantage of differential tax regimes in the European Union to circumvent tax measures.”

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Stretched government resources have curtailed enforcement efforts. “Indeed, the pandemic impacted the traditional work practices of tax authorities, leading to decreased inspection visits to factories and reduced audit performance. This weakened state capacity might have emboldened producers to mis-declare and under-declare their production,” says Sudan.
Criminals have been quick to exploit these opportunities to expand their activities in scope and scale. “While legitimate businesses were struggling to maintain business operations during the pandemic, criminal elements adapted to the altered conditions with remarkable speed. With air traffic and air cargo significantly reduced, traffickers increasingly utilized land shipments, international small parcel shipments and relocated production facilities closer to destination countries.”
Increased illicit trade in excise goods also resulted as an unintended consequence from well-intentioned efforts to blunt the impacts of the pandemic. Several countries, including South Africa, banned both the sale of liquor and tobacco products during lockdown, leading to unprecedented levels of illicit trade. “According to news reports, over 90 percent of smokers were able to buy their cigarettes from illegal sellers [in South Africa],” says Sudan. “Many people fear these levels of illicit trade will persist long after the pandemic finally subsides as they will have the effect of further entrenching in different countries an already thriving illicit tobacco and alcohol market.”

The pandemic has created the ideal conditions for illicit trade in general to grow by amplifying the underlying key drivers that contribute to market imbalance.
Nicola Sudan, general secretary, International Tax Stamp Association
Revenues required
The massive rise in counterfeiting during the pandemic is expected to boost demand for security and authentication devices to better protect brands. Sudan notes that requests for security devices, including that for tax stamps and marks and secure traceability systems, come primarily from national governments. “Given the devastating impact of the pandemic on economies across the world, it has never been more important for governments to be able to raise significant levels of revenue—and raise them quickly—in order to rebuild their ravaged economies. To do this, however, they will likely need to increase tax rates, including excise taxes.”
Sudan warns that before imposing tax increases, especially in the exceptional circumstances created by the pandemic, governments should ensure they have robust tax administration, border management and supply chain control systems in place to recover the taxes and duties already due to them that are lost to illicit trade. “This is where security mechanisms such as tax stamps and traceability schemes have a significant role to play as confirmed by authoritative bodies such as the World Bank and as demonstrated by systems already in place in a number of countries.”
Sudan anticipates the greatest need for security devices to come from developing economies, mainly throughout Asia and Africa, where weak tax administration and supply chain control have led to widespread acts of noncompliance and tax evasion by domestic operators and where porous borders have facilitated smuggling and other forms of illicit trade. “Robust tax administration and supply chain control systems are generally characteristic of advanced economies because of their well-established practices. In developing countries, there is an appetite for new technologies such as the use of tax stamps and other security devices to strengthen tax administration and increase compliance by economic operators involved with excisable products.”

With air traffic and air cargo significantly reduced, traffickers increasingly utilized land shipments, international small parcel shipments and relocated production facilities closer to destination countries.
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Sophisticated solutions
In recent years, authentication technologies in the tobacco sector have made great strides. The implementation of a tracking and tracing regime is a requirement of the World Health Organization Framework Convention on Tobacco Control’s (FCTC) supplementary treaty, the Protocol to Eliminate Illicit Trade in Tobacco Products, which entered into force in September 2018. Traceability of the movement of legal tobacco products from the field to the consumer has already become obligatory in the EU, which, as part of its revised Tobacco Products Directive, requires cigarette packs and other tobacco products packaging to be labeled with an individual ID code, a so-called unique identifier (UID) since May 2019.
An authentication system using a UID involves the generation, capture, encryption, application, recording, interrogation and verification of the code. “Such systems are designed to provide crucial data to revenue and customs authorities for the effective control and enforcement of their excise management programs,” says Sudan. “Comprehensive track-and-trace systems, which go a stage further by following the product all the way from manufacturer/distributor to retailer/consumer are not yet the norm. However, the building blocks are there, and an increasing number of such systems are now being implemented—not only because it makes financial and logistical sense to do so but because, in a few years’ time, the more than 60 parties to the WHO FCTC Protocol will in any case be obliged to implement tracking and tracing as part of their commitment to the Protocol.”
An all-digital solution, as opposed to one based on the use of paper-based security labels, cannot be used to cover the traceability, authentication and tax collection needs of a government, she clarifies. “Although there are some very good digital systems currently in place that provide a lot of data for national excise management programs, tobacco products in particular are susceptible to acts of fraud and manipulation due to the high levels of tax associated with them. Such illicit acts involve the cloning of a UID on a pack of cigarettes to make it look like the real thing and ostensibly perform the same function as a legitimate code.”
To mitigate the risk of code duplication, ISO standards recommend incorporating an intrinsic, physical security layer into the UID as an authentication element. “However, although it is possible to incorporate some security into digital codes, a lot more security can be carried by a label such as a tax stamp. The stamp provides better protection and higher visibility as well as providing an anti-tampering function and catering to a wider range of stakeholders. So, while a digital solution may be suitable for low-tax or no-tax products, tobacco products in particular need a more robust solution to deal with the fraudulent practices that affect this high-risk market.”
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.

April 1, 2021
Coping with Covid

Photo: Transcom Sharaf
Accustomed to dealing with unforeseen situations, tobacco storage and logistics companies take the pandemic-related disruptions in stride.
By George Gay
During a telephone call on April 10, 2019, Guy Harvey, the CEO of logistics company Transcom Sharaf Group, which is based in Beira, Mozambique, told me that while his business had suffered “a few blows” from Cyclone Idai, it would come out of it stronger than it went in and better equipped to deal with any future extreme weather events (see “After the Storm,” Tobacco Reporter, May 2019). The port was operating, and the infrastructure was there, “so it’s business as usual,” he added.
It is astonishing how resilient some companies are. For those who need reminding, Cyclone Idai, which struck Malawi, Mozambique and Zimbabwe in the middle of March 2019, was described by the U.N. as one of the worst weather-related disasters in Africa. Other agencies rated it as one of the worst in the Southern Hemisphere.

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Given what happened two years ago and Transcom’s response to those events, I wasn’t surprised when, at the end of February this year, I was in touch with Harvey again and learned that, while the Covid-19 pandemic too had delivered a few blows to the company’s tobacco business, these had been fended off with judicious changes to normal and planned methods of operation. Nor was I surprised that, in one sense at least, there was a feeling that the business might come out of the pandemic stronger than it went into it.
As part of an email exchange, and in answer to a question, Harvey told me the pandemic had to some extent disrupted leaf tobacco delivery times on those markets that use Transcom’s facilities. There had been a delay in getting sample test results and, as a consequence, delays in obtaining sales confirmations and shipping instructions, which had resulted in longer-than-usual storage periods of higher volumes, he said. In addition, some destination countries also had higher-than-usual tobacco stocks at ports or storage facilities, the result of their own shutdowns; so they could not accept new-crop tobaccos as soon as would normally have been the case. “A lot more shipments had to be carefully scheduled to limit volume arrival per month, which required careful planning,” said Harvey. “In some cases, financial pressures meant sales were rolled to 2021 completely.”

Guy Harvey
Different ways of working
Meanwhile, Rene Luyten, a director of b-Cat, which, as part of its business activities, works closely with tobacco warehouse and logistic companies, made the point that whereas the pandemic had affected all businesses, this didn’t mean necessarily that business activities were down in all areas; in some cases, it just meant that different ways of working had had to be adopted. Before the pandemic, it was usual to visit customers’ sites, whereas now, some of those “visits” had gone virtual—were being made via video calls, which in most cases worked well. And though some new projects had had to be put on hold last year, the company had been able to send technicians to install its Controlled Atmosphere Chambers, which, for instance, are used by some warehouse operators to control insects in tobacco stocks.
Rene Luyten
Harvey pointed out that Transcom had been fortunate in at least one respect because Mozambique had suffered fewer restrictions than other countries in southern Africa and, indeed, than those in much of the rest of the world. The only strict shutdown in Mozambique had occurred in April and May 2020, which was in any case the normal “off season” for tobacco. And while temporary government office closures and restricted working hours had added some documentation delays, the movement of cargo from Transcom’s facilities to and into the port of Beira had hardly been affected.
By the same token, Luyten considers b-Cat to have been fortunate to operate out of the Netherlands, which has operated a “Smart Lockdown,” thereby allowing the company to operate its factory as normal throughout the pandemic. On the negative side, he said, supplier delivery times had been extended, but even this had not affected b-Cat’s operations materially. One upshot of this business continuity is that, not only has the company been able to retain all its employees, but it is expecting to have to take on additional skilled technicians.

Due than higher-than-normal tobacco stocks at ports and storage facilities, some shipments had to be carefully scheduled to limit volume arrival per month during the pandemic.
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While getting tobacco to the port of Beira has been relatively straightforward for Transcom, shipping it out of Beira has presented challenges. During the past three months, some shipping lines have been moving their empty containers to Asia to meet the high demand there, regardless of export contracts already in place, and, in some cases, customers have had to pay higher ocean freight rates than those for which they would have budgeted.
Bart Brouwerens
And in this respect, it might be some time until things return to normal. Bart Brouwerens, a director of the Netherlands-based Andromeda Forwarding & Logistics, told me in an email exchange at the beginning of March that rates for containers from the Far East had quadrupled during the past year. Lots of clients were holding shipments in the hope that rates would decrease, Brouwerens said, but “regretfully this is not the case yet.” Vessels were fully booked and, for as long as shipowners were able to attract high levels of freight, they would require their clients to pay premium prices. “I do not foresee any changes to this in the near future,” he added.
As is suggested above, while for most industries and business sectors the pandemic has been hugely negative overall, some individual businesses, while suffering, have been able to take advantage of new opportunities. Transcom, for instance, has seen an increase in tobacco from Zimbabwe being routed through the Beira corridor because of the strict lockdowns and border closures that have been in place on the more traditional routing to Durban, South Africa. “This is an opportunity for us to show the services we can provide and hopefully grow more market share,” said Harvey. In a similar way, while pandemic-inspired restrictions on travel have been largely negative for a company that values face-to-face meetings and believes they cannot be replaced completely with virtual meetings, it believes also that, in the future, regular conference calls will comprise a useful addition to in-person meetings.

Despite the pandemic, b-Cat has been able to send technicians to install its controlled atmosphere chambers.
The importance of face to face
Luyten seems largely in agreement. He believes that making on-site contacts will remain important (and more fun than remote interactions), but that the travel this involves can be reduced and, indeed, rendered more efficient and effective by augmenting it with video calls, which he sees as being fast and efficient.
One aspect of b-Cat’s business that lends itself well to such ways of working is its vQm (modified atmosphere) packaging system, which is used mainly in the food industry and which is said to be taking off hugely. Luyten explained that this was a simple and flexible system that didn’t need installation support on-site. The client could operate the system without the physical presence of b-Cat personnel.
While dispatching tobacco has created challenges for Transcom, so, too, has ensuring receipt of the supplies necessary for conducting its business. Imports of spares and maintenance items from China and South Africa have been a lot slower than pre-pandemic, and the company has had to get used to holding higher stock levels than it would like to do and to planning further ahead. At the same time, it has been challenging getting the overseas contractors needed to work with some of the company’s specialized equipment and new project developments, which means that it has had to put some projects on hold and make alternative plans in respect of others.

Making a plan
Despite these setbacks, Transcom has retained and protected all its staff, none of whom had tested positive for Covid-19 by the time of our email exchange. Nevertheless, Harvey was not being complacent. Mozambique was currently facing its highest rates of infections, so preventative measures had been increased accordingly, he said. Transcom had introduced a program of continuous education and awareness, something that it hoped had benefitted society beyond the work environment. Strict sanitary measures had been introduced while the wearing of face masks and social distancing had been made compulsory. In addition, the company had introduced takeaway meals from its canteen according to a rotational shift system and increased the number of work shifts with lower staff numbers per shift. It had cancelled all external, noncritical visits to site for a long period, assessed on a case-to-case basis. Additionally, it had stopped all nonessential staff travel, and, where travel was essential, post-trip, home quarantine had been made a requirement.
It is a similar situation at b-Cat, where there have been no positive Covid-19 tests among employees, even those who have been travelling. Many precautions had been taken, said Luyten, both by b-Cat and by the clients on behalf of whom b-Cat had been operating. Strict protocols were in place, and all b-Cat’s employees had been provided with personal protective equipment while, at the same time, receiving clear instructions, including those concerning the need to respect the precautions being taken by client companies. Of course, Luyten added, none of this could eliminate completely the risk created by Covid-19, but, so far, maintaining high standards of hygiene and applying common sense had kept employees safe.

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It is too early to say what will be the full financial impact of the changes that have had to be made because of the pandemic, but this should be clearer by the end of this year. Harvey did say, however, that the pandemic had been a tough pill to swallow given that Transcom was still recovering from the effects of Cyclone Idai. The company had been proactive in business diversification planning and had taken advantage of the extra volume coming through the corridor due to the restrictions in South Africa. “We hope to show our new clients that we are a better alternative and establish long-term relationships with them,” he said.
So, what about the future? When, if ever, shall we be back to “normal”? Well, Harvey doesn’t think things will ever return to “normal” but that businesses, such as Transcom, will adapt to the “new normal,” perhaps by the end of this year, by which time, it is hoped, vaccination programs will have been rolled out regionally. Certainly, some protocols introduced because of the pandemic will remain in place indefinitely.
In addressing the question of the future, Luyten put his faith in science and, particularly, in the development of vaccines, though he said that the rollout of such vaccines to everybody was still some way in the future. And even then, he questioned whether life would return to what it was pre-pandemic. In the meantime, he added, it was incumbent on people to make the best of the situation and hope for an end to the loss of family members and friends to Covid-19.
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.

April 1, 2021