Author: Marissa Dean

Turning Point Releases Second-Quarter Results

Image: Tobacco Reporter archive
Turning Point Brands (TPB) announced financial results for the second quarter ended June 30, 2023.
Total consolidated net sales increased 2.6 percent to $105.6 million compared to the second quarter of 2022. Zig-Zag Products net sales increased by 1.1 percent. Stoker’s Products net sales increased by 7.3 percent. Creative Distribution Solutions net sales decreased by 1.3 percent. Gross profit increased 2 percent to $52.5 million, and net income increased 83 percent to $9.9 million. Adjusted net income increased 8.4 percent to $15.3 million.
“Our second-quarter results demonstrated continued progress against our plan,” said TPB President and CEO Graham Purdy in a statement. “The Zig-Zag segment grew double-digits sequentially from the first quarter as trade inventory normalized. Stoker’s had another solid quarter of performance led by double-digit growth in Stoker’s MST [moist smokeless tobacco]. We opportunistically purchased another $15.1 million in aggregate principal amount of our convertible notes during the second quarter while maintaining a strong cash balance. Given our solid first-half performance, we are raising our guidance for the full year.”
For the second quarter, Zig-Zag Products net sales increased 1.1 percent to $46.7 million. TPB’s Canadian and other smoking accessories businesses saw strong growth during the quarter, which was partially offset by declines in the U.S. rolling papers and wraps businesses.
For the quarter, the Zig-Zag Products segment gross profit was steady at $26.4 million. Gross margin declined 60 basis points to 56.6 percent, driven primarily by product mix.
“Our e-commerce business had another quarter of double-digit growth as we continue to build our omnichannel presence,” said Purdy. “We remain encouraged by our prospects with secular cannabis consumption growth trends driving demand for our products.”
For the second quarter, Stoker’s Products net sales increased 7.3 percent to $36.1 million. Double-digit growth of MST offset a decline in loose-leaf chewing tobacco. For the second quarter, total Stoker’s Products segment volume increased 0.7 percent while price/mix increased 6.6 percent.
For the quarter, the Stoker’s Products segment gross profit increased 10.4 percent to $20 million. Gross margin expanded 160 basis points to 55.4 percent due to MST pricing gains.
“Stoker’s continues to benefit from strong market share gains in both the MST and loose-leaf chewing tobacco categories as its value proposition continues to resonate with consumers,” continued Purdy.
August 2, 2023
A Growing Household

Photos: Annick Vernimmen
The Vandermarliere Family of Cigars is expanding.
By Stefanie Rossel
Cigars are a “gourmet” niche within the tobacco industry, but in the mass market cigar segment, sales keep growing. According to Statista, the global cigar revenues segment will amount to $22.43 billion this year, and the market is expected to increase at a compound annual growth rate of 4.28 percent between 2023 and 2027.
With a revenue of $12.7 billion in 2023, the U.S. is the world’s largest market for cigars, followed by the U.K., China, Germany and Italy. One reason for the recent growth, Statista analysts say, is the fact that cigars have started gaining popularity among younger adult consumers in many countries, reversing a decades-long downward trend.
One cigar company that has been growing in line with global market development is VCF of Zwevegem, Belgium. Founded in 1926, the family-owned business has a long tradition as a manufacturer of high-quality cigars and cigarillos. In the 1970s, VCF’s predecessor became the owner of the J. Cortes brand through the acquisition of the Belgian cigar manufacturers Neos Cigar. Chairman Guido Vandermarliere reinvented the brand, with a characteristic deep-blue packaging and select tobacco varieties.
For many years, the company traded under the name J. Cortes, which turned the firm into a global player in the 1980s. In 2016, it took over U.S.-based Oliva Cigar Co., a family-run manufacturer of hand-rolled cigars with whom the Vandermarliere family had long-standing ties. It then brought J. Cortes and Oliva Cigars together under the umbrella of VCF—the Vandermarliere Family of Cigars.
Today, Oliva Cigars is the parent company for all of VCF’s handmade cigars whereas J. Cortes is the overarching brand for all of the company’s machine-made products. The takeover of Oliva Cigars turned the United States into VCF’s most important market overnight. VCF now caters to more than 85 markets with both handmade and factory-made cigars.
“Historically, France has been very important for our family, and the U.S. for the Oliva family,” says VCF CEO Fred Vandermarliere, who leads the company in the third generation. “When looking to Europe, we are strong where we have our own sales teams. This is the case in the Benelux, France, Spain, Germany and Italy.”
Growing the Business

VCF grows its own tobaccos to help guarantee a consistent flavor and quality.
VCF has been expanding its sales and distribution networks in the latter two countries.
In July 2022, VCF acquired two German cigar companies, Woermann Cigars and Wolfertz—transactions that set the stage for VCF to become one of the leading premium cigar distributors in Germany, which is one of the largest markets for non-Cuban cigars outside the U.S. In addition to selling its own brands, Woermann is also a distributor. Wolfertz, too, is a leading cigar distributor in Germany; the company has been distributing Oliva Cigars since 2010. VCF’s German cigar business, which was operated by four different German distributors before, was transferred to the new organization in January 2023.
In June 2023, VCF announced a partnership with Cuban American cigar manufacturer EPC, under which VCF will start distributing EPC cigars in Italy.
“In Italy, we only cover the sales part,” explains Vandermarliere. “Since the early 2000s, we have been investing in a local sales team. Germany is a different story. It’s a big cigar country, and there is no real central distribution. Entering the market there was always rather difficult, so we never really put much effort into it. That changed since Oliva and Olifant joined the family. Suddenly, we had a stronger portfolio and more leverage. It opened our mind to think about alternative solutions. We talked to all our partners, and finally Woermann and Wolfertz decided to join our family, making us stronger to survive the heavy legislation that was coming to us. Concerning sales, we are strongly convinced that keeping focus is important for the company and the sales team. Consistently hitting the same nail over and over again is in my opinion the real key to success, even though it’s not always fun.”
New Processing Centers

The takeover of Oliva Cigars turned the United States into VCF’s most important market overnight.
Regarding its production facilities, VCF hasn’t been idle either. The company, which sources its tobaccos from all over the world, works in three locations: In Sri Lanka, it runs a tobacco processing factory, to which it sends all leaf tobaccos. Once processed, the leaves are sent back to Europe and made into cigars at VCF’s Belgian manufacturing plant in Handzame. Zwevegem is the company’s logistics center, where most of its cigars are packed, stamped for tax purposes and eventually distributed all over the globe.
In the past two years, VCF’s manufacturing focus has been on hand-rolled cigars. The company invested millions of U.S. dollars in two state-of-the-art processing centers in Nicaragua for its Oliva Cigars division. Las Llantas in Condega and Las Mesitas in Esteli, situated about 40 km apart in the northwest of the central American country, became operational in December 2021 and 2022, respectively.
The idea behind the ventures was to be able to closely monitor every step of the production so that soil, tobacco and handling reinforce each other to create a first-class product for cigar aficionados. For the same reason, VCF has also purchased farms in Nicaragua and is now growing its own tobaccos.
“We are strong believers that’s it’s essential,” says Vandermarliere. “If you want to produce a premium cigar, it is necessary to control every part of the process. Having your own fields and growing your own tobaccos are a few of the steps that guarantee a consistent flavor and quality for now and for the future. The fields also provide a certainty of supply and have an ecological benefit. It enables you to test new seeds, new variations, working with less pesticides and water, etc. But this doesn’t exclude the collaboration with local farmers; it enforces it. We start to gain knowledge in our own fields and are then helping the independent farmers as much as possible to follow our tests when they are successful.”
The new facilities have jointly created jobs for 1,400 local workers. The project has also boosted the local community, an important consideration in the company’s philosophy. In addition to creating the best possible working conditions for its employees, VCF has started a number of initiatives in Nicaragua, such as setting up a preschool with the Oliva Helping Hands Foundation. “Besides that, we have been doing charity for many years and all over the planet, with a focus on youth and the next generation,” says Vandermarliere. “We want people to have a chance at a better life, and it all starts with education. We have supported mobile schools in Sri Lanka and Nicaragua. There’s also the Procigar Initiative, which provides better housing for the local communities that we support every year.”
Smaller Carbon Footprint
On the other side of the Atlantic, VCF has reintroduced tobacco farming in Flanders, the Dutch-speaking part of Belgium. It’s another move to support the community; with its initiative, VCF hopes to revive knowledge about tobacco cultivation and the seed species that promote biodiversity in the region. But it also contributes to more sustainable production, says Vandermarliere. The main reason, he says, is to shorten the supply chain. “It is true that the crops are quite small and the Belgian soil does not grow every kind of tobacco,” says Vandermarliere. “The leaves have a specific flavor, but blended with other tobacco, you can definitely use them. Moreover, it helps us to secure our stock.”
Sustainability plays an essential role in the company’s strategy. In 2022, VCF received its first annual certificate from Voka, Flanders’ chamber of commerce and industry, for having eliminated 100 tons of plastic and 600,000 cardboard outer packagings from its production chain. The company also analyzed its mobility and has started switching to hybrid and electric cars. The measures were only the first in a series; in 2021, VCF signed a sustainability charter and, in consultation with Voka, set itself 20 sustainable action targets linked to the United Nations Sustainable Development Goals—all of which it achieved.
“Sustainability has always been very important to us, even long before it became a marketing asset,” says Vandermarliere. “Everything we do, we do for the next generation(s), so there is no other way than the sustainable way. Our further plan is to make every layer of the business sustainable. It is on top of our agenda because we want people to enjoy our cigars 100 years from now. Sustainability is not only about land but also about people and the market.”
The new plant in Nicaragua, according to Vandermarliere, is a great example of the company’s vision on sustainability: “First of all, it has a small ecological footprint. Secondly, the working conditions for our people are great. And finally, it’s such a beautiful building, which hopefully helps to ensure the lifespan of the building.”
With more than 7,500 employees worldwide, VCF manufactures more than 450 million cigars annually. Vandermaliere says he is not expecting radical growth of the cigar market, as the premium cigar market has always been stable. His company, he adds, is a family that sells relaxation. Fittingly, Vandermarliere is similarly relaxed about the future: “In all our history, we never planned any of the great milestones. Things happen as they do, and things seem to cross our path very naturally. This is part of our long-term vision to survive. If we find families with a similar philosophy and values to whom we can bring added value and vice versa, we will consider collaborating. Indeed, a lot happened in the last five years, but it is equally possible that nothing will change in the next five years.”
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.

August 1, 2023
Executive Experience

Photo: Smoore
Eve Wang, vice president of the world’s largest atomization company, shares her vision for vaping.
By Timothy S. Donahue
The largest atomization technology company in the world is Shenzhen Smoore Technology Co. Based in Shenzhen, China, the company has maintained its position as the global leader in the atomization technology market since the beginning years of the vaping industry.
Smoore has seen significant growth since its establishment in 2009 and operates three atomization businesses: nicotine delivery (including vaping and heat-not-burn), medicinal applications and healthcare.
Within the nicotine-delivery business, Smoore’s technology brand, FEELM, holds a prominent position as one of the industry’s leading closed-system vaping solution providers. This diverse business structure allows Smoore to deliver innovative solutions across multiple industries to meet several varied consumer needs.
Earlier this year, the international ESG rating agency Sustainalytics awarded Smoore International Holdings, parent to the FEELM and Vaporesso brands, the top position among global electronic atomization companies. Smoore consistently ranks first among global electronic atomization companies in the ESG ratings published by MSCI, the world’s largest index company.
Tobacco Reporter invited Eve Wang, vice president of Smoore, to share her vision for the vaping industry and her insights into how Smoore will move forward as atomization technology continues to improve and develop into various marketplaces beyond the vaping industry.
Tobacco Reporter: As an atomization technology solution provider, how important are Smoore’s investments in R&D?
Eve Wang: Centered on Smoore’s mission of atomization makes life better, we have a long-term approach to everything we do and believe that continuous technological innovation is the only approach to develop the atomization industry. Last year, Smoore invested £160 million ($199.5 million) in R&D, which accounted for 11.3 percent of the total revenue in 2022. This investment has resulted in 2,254 new patent applications worldwide, including 1,125 invention patents.
Our commitment to continuous technological advancement is best shown by the fact that we employ 1,500 R&D personnel, which accounts for more than 40 percent of our entire nonproduction workforce.
As a young and developing industry, constant R&D in both technology and manufacturing is vital to drive growth and ensure the highest quality standards. Our professional testing facilities feature more than 700 different types of testing equipment, valued at over £23 million, and we have many partnerships with leading research institutes and analysis laboratories to complement our already comprehensive testing capabilities. We have developed the world’s first fully automation pods production line, and our ceramic coil disposable automation line is not only the world’s fastest but also allows our products manufactured by FEELM to achieve a first pass yield of over 99.5 percent.
Looking toward the future, Smoore is exploring how to apply vape atomization technology within the healthcare sector, and our dedication to cutting-edge research and development, regulatory compliance and superior consumer experience supports our commitment to the longevity and sustainable growth of our business.
Is Smoore seeking to invest beyond the vaping industry?
We keep exploring the boundaries of innovation and the application of atomization technology in new application scenarios, such as medicinal and healthcare sectors. For example, last year in China we registered a ventilator in combination with an atomization drug delivery device and successfully obtained the production license for this technology.
We have also set up a team in the United States which has developed two drug delivery devices targeting asthma and chronic obstructive pulmonary disease and started the development of relevant medicinal preparations.
How do you see the vapor industry developing, and what will be the biggest growth areas in terms of technology and geography?
According to a report by Frost and Sullivan, the global retail market for e-vaporization is expected to reach $122.2 billion by 2027. It is expected that in the long run, companies that prioritize regulatory compliance and harm reduction while also focusing on consumer experience will emerge as the ultimate winners.
However, as an emerging industry aimed at assisting smokers toward a smoke-free society, e-cigarettes are still in their infancy and face a range of challenges which makes it crucial for all stakeholders in the industry to collectively provide the best possible harm reduction solutions for current adult smokers.
Therefore, we have developed and launched a new 2 mL e-liquid compliant disposable solution to provide 800 puffs with the innovative technology FEELM Max, where conventional products typically provide around 600 puffs.
How is the FEELM Max technology different from that used in conventional products?
As the world’s first ceramic coil disposable solution, FEELM Max benefits from a cotton-free design that, with a compliant e-liquid volume of 2 mL, can provide 800 puffs whilst current solutions offer 600 puffs. This is a significant step toward setting a new industry compliant benchmark for 2 mL.
In addition to more puffs, this innovative heating technology is designed to bring cleanness and silkiness, ensuring a satisfying experience for consumers. Our constant power technology provides a vapor and taste consistency, and together with a transparent e-liquid tank design offers an enhanced consumer experience.
The ceramic coil is like an electric car, symbolizing a more advanced technology. Several major brands have already adopted our new technology, recognizing that differentiation is key in a competitive market. We are committed to providing superior vaping experiences that meet the evolving needs of consumers around the world.
What is the largest market for Smoore and its subsidiary’s products?
In 2022, Smoore’s global enterprise customer business revenue was £1.22 billion, with the U.S. market ranking first, accounting for 35.4 percent. The revenue share of Europe and other markets increased from 24.1 percent in 2021 to 43.6 percent in 2022, up by 19.5 percentage points. Smoore will continue to provide technology solutions and products worldwide, all tailored to fully comply with all local regulations.
What are Smoore’s concerns about the growth of noncompliant products in the marketplace?
We believe that effective regulation is vital for sustainable growth and that proportionate regulation can support the industry’s evolution.
However, the presence of noncompliant or counterfeit products entering the U.K. market is a significant concern for us. These products not only pose potential health risks to consumers but also bring negative effects on the long-term development of the vaping industry. These illicit products can discourage innovation and deter potential investments in research and development, hindering the industry’s ability to evolve and improve.
Like any industry, there are always those who operate illicitly. However, it is vital that the responsible majority within our sector, together with government, regulators, enforcement bodies, trade associations and partners, collaborate on initiatives and share intelligence to eradicate illegal and noncompliant vapes. This collective effort is necessary to ensure that the sector’s reputation is not only maintained but also improved.
We believe in maintaining the very highest product standards whilst also being fully compliant in all local markets in which we operate. That’s why we have developed and launched the 800-puff compliant disposable vape: FEELM Max. FEELM Max represents a commitment to both technological innovation and regulatory compliance, moving the vaping industry forward in a responsible and sustainable way.
Many vapor products that have been authorized for marketing in the U.S. were developed by Smoore. What is the secret behind Smoore’s high share of Food and Drug Administration marketing orders?
Smoore is always committed to full regulatory compliance and product quality. In 2022, out of over 6.7 million e-cigarette product listing applications, the FDA only approved eight from JTI, nine from R.J. Reynolds Tobacco and six from Njoy. Smoore, as the atomization technology manufacturer, has aided the most clients in the ENDS [electronic nicotine-delivery system] category to pass the PMTA [premarket tobacco product application] process.
Last September, Smoore had the distinction of being invited to an industry meeting convened by the commissioner and director of the Center for Tobacco Products. We actively engaged in explorations and discussions regarding the future of a more compliant and sustainable vaping industry.
Smoore’s achievements stem from the long-term focus on the improvement of atomization technology and the commitment to innovation, compliance and product safety; we always deliver user-centric and user-friendly technologies and products to clients, consumers and industry.
As the FDA commented when approving one of the closed-system pod vaping products: “It met the standard because, in several key considerations, chemical testing is sufficient to determine that the levels of harmful and potentially harmful constituents in the aerosol of these products are lower than those in the smoke from combusted cigarettes.”
What is Smoore/FEELM’s strategy for the disposable market?
The disposable vape has been a widely accepted product in the e-cigarette market. Even as far back as 2018, when closed-system vapes dominated the industry with a 72 percent market share, it was predicted that disposables would account for more than 70 percent of the closed-system market over the next five years.
However, such rapid growth inevitably leads to challenges, and the market has seen a proliferation of noncompliant products and counterfeits, coupled with problems such as the illegal overfilling of e-liquids and the quality issues from the black market, as reported by the BBC. These issues have sounded alarm bells across society, calling for superior, compliant and healthier solutions.
How will Smoore confront the challenges associated with disposable products, such as environmental concerns?
As the first Chinese e-cigarette company to be included in the Dow Jones Sustainability Index, Smoore aims to minimize any environmental impact from our operations and products as much as possible.
In May 2022, we officially launched our carbon neutrality plan, setting a net-zero target by 2050. We will continue to increase the use of renewable energy in our operations, aiming for 50 percent energy consumption from renewable sources by 2030.
Whenever I come across a discarded disposable vape on the ground, I will pick it up and bring it back to the company, where my colleagues can professionally process and recycle it. But more needs to be done to encourage active participation by consumers in recycling their vapes. Therefore, we have launched the industry’s first end-to-end whole-chain recycling scheme, including manufacturers, brands, retailers, the Royal Mail and waste management specialists, Waste Experts.
Working closely with our clients, we have created a household collection service whereby consumers who return 10 or more old disposable vapes for recycling will receive a free disposable product incorporating our latest technology as a reward.
What do you consider to be Smoore’s greatest industry innovations?
The cotton coil is widely adopted within the vaping industry, and there are many challenges that affect the consumer experience.
Smoore drew inspiration from traditional Chinese ceramic making to develop the ceramic technology. We discovered that, compared to the cotton coil, the ceramic coil has advantages such as high thermal efficiency, leakage prevention and the ability for planned automated production as well as delivering strong taste consistency.
Therefore, in 2014, Smoore initiated research into ceramic heating technology, and in 2016, Smoore’s ceramic coil technology brand FEELM was officially launched in the market, aiming to “feel the moment of vaping” and representing our long-term commitment to vaping sensory and technology. Today, FEELM has already become a very well-recognized tech brand by the industry, especially for ceramic coil technology. Since 2018, we have shipped over 3.5 billion pod products worldwide, and we cover more than 50 different countries and regions.
We remain devoted to our mission of improving public health through the advancement of atomization technology.
What are the greatest challenges facing the global e-cigarette industry, and how is Smoore helping solve those challenges?
Smoore recently commissioned a survey, which was conducted by One Poll, among 2,000 adult smokers. The results revealed that 42 percent of respondents had little or no trust in e-cigarettes. Meanwhile, nearly two-thirds (62 percent) believed that e-cigarettes were more harmful or at least as harmful as traditional cigarettes whereas evidence from the Office for Health Improvement and Disparities highlights that e-cigarettes are at least 95 percent less harmful than smoking.
That’s why we have established an independent panel of experts in science, smoking cessation and compliance to look at creating a new rating system that will allow adult smokers and vapers to make informed decisions about their choice of vapes based on their harm reduction profile.
We are committed to innovating alternatives to traditional smoking, to reducing harm and to benefit public health. We strongly believe in the potential of e-cigarettes to provide a viable and less harmful alternative for smokers who struggle to quit.
Smoore hopes to fulfill our mission: Atomization makes life better—better for our clients and consumers. We aim to achieve this by providing better technological solutions and products in the future in novel tobacco, medicinal and healthcare fields.
August 1, 2023
Stranglehold

Photos courtesy of Vladislav Vorotnikov
The illicit cigarette trade remains a big problem in Central Asia.
By Vladislav Vorotnikov
Last year, cigarette production perked up in Central Asia, a part of post-Soviet space comprising Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan and Tajikistan. The positive production dynamics were registered despite mounting regulatory pressure and flourishing illegal trade.
Kazakhstan, the largest cigarette market in the region, saw a 7.9 percent rise in the tobacco industry’s output to 17.4 billion items in 2022, the National Statistical Bureau estimated. This is the strongest increase in the past decade, following a three-year decline.
Last year, the average household spent KZT44,800 ($101) on tobacco, up 10.8 percent compared with the previous year. This is primarily associated with a steady rise in tariffs, as Kazakhstan has been gradually raising the excise rate and the minimum prices per pack since 2021—a process slated to end in 2024. Against this background, the average price of cigarettes in Kazakhstan jumped by 17.9 percent in May 2023 compared with the previous year.
Some lawmakers were troubled by the trend. “Of course, tobacco is not bread, and it doesn’t belong to the list of essential products. However, there is a certain percentage of our citizens for whom it is also necessary,” said Sergey Ershov, a member of Kazakhstan’s parliament. “And in a situation where the prices for a pack of cigarettes are growing, and the incomes of the population remain at the same level, a further increase in the cost can lead to a significant increase share of illegal trade, inevitably spurring the consumption of cheap counterfeit products of dubious quality.”
The government is boasting of a 10.1 percent drop in domestic tobacco consumption to 3.7 billion units in the first quarter of 2023 compared with the 4.1 billion units during the same period of the previous year, though there are doubts whether these figures actually reflect the state of play in a market where the share of illegal trade reportedly is surging.
Currently, Kazakhstan’s cigarette market is dominated by Philip Morris Kazakhstan, which runs a factory in the Almaty region it acquired in 1993, and Japan Tobacco International Kazakhstan, which operates a factory in the same region. The sole local manufacturer, Phoenix Enterprises, which sells cigarettes under the Dryuzba brand, accounts for a small share of the budget segment of the market. In addition, nearly a quarter of demand on the Kazakhstan tobacco market is met by importers, including BAT Kazakhstan, KT&G and Donskoy Tobacco.
Uzbekistan has an estimated consumption of around 10 billion cigarettes per year, worth $500 million, according to Igor Nikolsky, JTI regional director.
In the past few years, Uzbekistan reportedly saw a substantial rise in cigarette production. Currently, the industry comprises the Tashkent Tobacco factory, manufacturing JTI brands, and the UzBat factory, operated by BAT Uzbekistan. The local press reported that these two factories ramped up production to a level allowing the country to nearly reach self-sufficiency.
In 2018, the Uzbek government abandoned a decade-long ban on cigarette exports from the country, allowing local factories to sell to Mongolia, Kazakhstan, Afghanistan and other countries.

Dignitaries examine tobacco at the Tashkent Tobacco factory in Uzbekistan.
The Wild West
The level of government control over the tobacco market varies across Central Asia. In Kazakhstan, it is relatively strict while in some other countries, such as Kyrgyzstan, it leaves a lot to be desired.
In 2021, the Kazakh government estimated that the share of illegal trade on the domestic market was close to 1.6 percent. Market players have doubts about whether this figure is correct, however. JTI Kazakhstan, for instance, put this rate at 3 percent to 5 percent, which is in line with the estimation of the Association of Trade Enterprises. Moreover, the steady rise in excise tariffs will likely drive this figure up by 1 percent to 2 percent per year, according to Alyona Stepanishina, external communication manager of JTI Kazakhstan.
Over the past two years, the share of illegal tobacco products in Uzbekistan jumped from 4 percent to 15 percent, Komil Abdurakhmonov, a spokesperson for the Agency for Regulation of Alcohol and Tobacco Market, estimated.
The lion’s share of illegal tobacco in the market comes from smuggling and flows into the country through the southern regions, Abdurakhmonov claimed. Commonly smuggled brands include Milano from the United Arab Emirates and KT&G’s Esse, he said. The cigarettes are first delivered to Kirgizstan and Tajikistan to be further smuggled to Uzbekistan.
“A series of recent studies showed that in all stores and the markets, we have Milano cigarettes, coming from Dubai. Their price is much lower than that of the local brands, and many consumers smoke them because of the price,” Abdurakhmonov said, adding that there are also substantial concerns over the quality of these products. “Simply checking information on the label, we can see that the level of nicotine content in these cigarettes by several times exceeds the allowed levels,” he added.
Ulugbek Kasimov, a spokesperson for the Uzbekistan State Customs Committee, also blamed Kyrgyzstan for illegally exporting tobacco products to his country. He disclosed that a large part of the shipments goes through the porous southern border. In this case, the customs service is nearly powerless to pull the plug on smuggling.
This is not the first time Kyrgyzstan has been blamed for large-scale cigarette smuggling in the region. The country shares a common customs space with Kazakhstan within the Eurasia Economic Union and is believed to be reexporting cheap cigarettes to several neighboring countries. In 2019, consulting firm KPMG reported that nearly a third of cigarettes entering Kyrgyzstan are reexported to other parts of Central Asia and Russia, often through various smuggling channels.
Azamat Arapbaev, a member of the Kirgiz Parliament, said that a large share of illegal cigarettes entering the country come from the Middle East, Tajikistan and Serbia while some cigarettes make their way to the market from duty-free stores on the border. He estimated that these supplies have a big impact on the domestic cigarette market, where sales are close to 3.2 billion units per year.
A 2022 study conducted by the think tank IPSOS showed that the share of illegal cigarettes on the domestic market of Kirgizstan is close to 9.5 percent. Kamila Aikultlova, an analyst with IPSOS, estimated that the national budget lost between $6 million and $7 million from illegal trade on the domestic market. Meanwhile, in Tajikistan, illicit cigarettes accounted for a whopping 74.2 percent of retail sales in 2021, according to Nielsen.
The future of the Kazakhstan tobacco market is tightly linked with a proposal, published by the healthcare ministry in early 2023, to ban vapes. Alibek Kuantirov, the economy minister, backed the initiative, claiming that the Kazakhstan society favored this idea. He promised that tobacco-heating devices would not be banned. Still, Olga Krutova, an analyst with local publication MK, assumed that the restrictions in this field would give further impetus to the growth of the illegal tobacco market.

In some parts of Central Asia, illicit cigarette account for 75 percent of the market.
An Island of Deficit
Things on the cigarette market look different in Turkmenistan, one of the poorest countries in the post-Soviet space, where smokers struggle to find affordable cigarettes. In 2016, the government imposed a ban on selling cigarettes in private stores, restricting the trade to state stores. Turkmenistan aims to become the world’s first tobacco-free country by 2025, though not everyone is happy with that goal.
News outlets report that people must wait in queues stretching for hundreds of meters for a rare opportunity to buy cheap cigarettes for TMT50 ($14) to TMT60. In 2021, the release of a long-awaited cigarette brand provoked stampedes, fights and detentions in several regions.
“A huge number of people gathered in front of the store in the Zheleznodorozhnik microdistrict of Turkmenabad, and even the police could not keep order,” said one of the customers who described those events to the foreign press. “Two people in line got sick. In the pandemonium, several shop windows were smashed. The store started dispensing cigarettes at 7 a.m., and people were standing in line 10 [hours to] 12 hours before that.”
Turkmenistan remains a closed country even by the standards of authoritarian Central Asia, so there are no reliable statistics pertaining to actual cigarette consumption. Occasional reports describe cases of smuggling and the existence of various underground cigarette workshops. Some citizens try to grow tobacco on their land plots for personal consumption, though frown on the practice.
August 1, 2023
Teatime

Photo: cook_inspire
Sales of herbal heated-tobacco sticks are growing in Europe.
By Stefanie Rossel
They’re called Anita, Leme or Nexus, and they come in flavors such as chocolate, banana, coffee and strong menthol: Herbal heat-not-burn (HnB) sticks are becoming increasingly popular in European markets. Instead of tobacco, they use black tea leaves as a carrier material, which is infused with aromas and may or may not be laced with nicotine. The sticks are used with regular tobacco-heating devices. Most of the herbal consumables are compatible with heating-blade systems, like the original IQOS.
Albeit still a tiny niche of the market, the segment is growing—and it is fragmented. In a recently published report, TobaccoIntelligence noted that an internet search for the term “herbal stick” in five European languages yielded almost 900 products across 31 websites.
Containing no tobacco, herbal HnB consumables fall into a regulatory grey area, particularly if they are nicotine-free, according to Barnaby Page, editorial director at Tamarind Intelligence, the publisher of TobaccoIntelligence. “When the EU Tobacco Products Directive [TPD2] was first devised, nobody had anticipated these products,” he says. “So while there is some general regulation that covers things such as packaging and labeling, they don’t have the kind of stringent requirements applied to them that most tobacco products do.”
Looking at compatible herbal HnB sticks in the Czech Republic, Germany, Hungary, Poland and the U.K., TobaccIntelligence identified 19 brands. In all countries except the Czech Republic, nicotine-free consumables are more prevalent than those containing nicotine. The highest number of such products is found in Hungary, which has a big market for heated-tobacco products (HTPs). According to TobaccoIntelligence, only in Lithuania and Japan did HTPs account for a greater share of the overall tobacco market in 2022. According to Page, the success of herbal HnB products in Hungary may simply be a response to the pricing of HTPs there. The U.K., a vape market, had the fewest number of herbal HnB products but ranked second in terms of unique brands found.
Healcier was the most commonly searched for herbal HnB brand on the internet in the five countries investigated by TobaccoIntelligence, followed by Heccig and Nuso. On average, there are eight different flavors per brand, with fruit flavors and cooling flavors, such as menthol or mint, being most sought after. The sticks retail at an average price of €4.40 ($4.79) per pack of 20 and are cheapest in Poland and most expensive in Germany, with average retail prices of €3.30 and €6.20, respectively.
Across all five countries analyzed, the average price of a pack of compatible herbal heat sticks was lower than the recommended retail price of a pack of IQOS Heets, with the largest difference detected in Hungary, where the herbal alternatives are on average €1.15 cheaper than IQOS consumables. Because they don’t contain tobacco, tea-based products avoid tobacco taxes and are subject only to value-added taxes.
The herbal sticks are sold at tobacconists, vape stores, supermarkets and convenience stores and through online channels, such as online marketplaces, social media sites or the brands’ own online shops. They are also available on all eight of Amazon’s country-specific EU websites. Most products come with their own branded heating device but are also compatible with existing heating devices.
Low Entry Barriers
The market for herbal combustibles is opportunistic, according to Page. “It’s no dramatic kind of paradigm shift in the way the e-cigarette was or even in the way of heated tobacco,” he says. “It’s a way of taking advantage of specific market needs and a specific regulatory situation.” Entry barriers for manufacturers are low and not dissimilar to the e-cigarette model. “It’s like producing e-liquids—something you can do on a very small scale,” says Page. “You don’t have to tool out vastly complicated factories.”
In terms of construction, the consumables resemble HTP units. The products feature a cotton core mouthpiece followed by a cooling unit made from food-grade silicone and, at the stick’s end, the tea leaves, which contain a combination of vegetable glycerin, propylene glycol, sodium benzoate and potassium sorbate. Their nicotine content ranges between 0 percent and 4 percent.
Of the 19 brands TobaccoIntelligence analyzed, seven had both nicotine and non-nicotine variants; seven featured only non-nicotine sticks, and five featured only nicotine-containing consumables. The number of flavor options ranges from two to 18 per brand, according to the report, which found a total of 112 different flavors.
Such variety will soon present herbal heating products with competitive advantage. On Oct. 23, nontobacco-flavored HTPs will become illegal throughout the EU. The potential success of herbal alternatives may be short-lived, however. A revised version of the directive, TPD3, is expected to be released in 2024. Page expects the EU to broaden the definition of covered products.
“Anything including herbal sticks would fall in it,” he says. “Tobacco regulators used to consider tobacco and nicotine as undistinguishable synonyms. Obviously, this has changed in the last decade. So nicotine has to be seen as a separate category than tobacco. TPD3 is not likely to target herbal consumables directly but as part of an overarching framework.”
That said, it will be challenging for authorities to regulate products that contain neither tobacco nor nicotine. “How do you sensibly bring it into a regime?” he asks. “You are essentially inhaling the vapor of tea. I don’t see how you can rationally regulate a flavored nicotine-free product as being a tobacco product because it simply isn’t one.”
In a Grey Zone
Depending on the way they are marketed, nicotine-free herbal sticks might escape regulation. Because they are not subject to tobacco regulation, manufacturers of herbal heated sticks are free to make all sorts of claims about their products, though they are of course still subject to general consumer laws.
On their websites, companies operating in the segment emphasize that without tobacco, their herbal sticks—at least the nicotine-free varieties—present a lower risk of addiction than tobacco products.
In addition, they claim tea leaves are not treated with the same harmful chemicals that are frequently found in commercially available tobacco products, resulting in a less toxic product. Also, unlike tobacco heat sticks, herbal alternatives leave no unpleasant tobacco smell. And because herbal sticks allow users to mimic the hand-mouth action of smoking, they may make it easier for consumers to wean themselves off the “hazardous and addictive” consumption of tobacco, according to herbal HnB companies.
Herbal consumables may offer a “unique and pleasurable alternative to tobacco regarding taste and experience,” in the words of one vendor, and manufacturers frequently highlight how “natural” the aromas are.
A look at Amazon customer reviews of these products, however, is sobering: Some users complain about flavor and unpleasant side effects, saying, for instance, that the products taste like black leaves and that the taste becomes unbearable after four or five puffs. Others mention headaches and nausea. Page says he is unaware of any scientific research into the health impact of herbal sticks.
As for the growth opportunities of the category, Page says he would be surprised if tobacco manufacturers ventured into this small market. “We do know that they have looked to cannabis for obvious reasons, though,” he says. “Perhaps we will see a second or third generation development of herbal sticks from them.”
The argument that low-nicotine or non-nicotine herbal products may help smokers quit nicotine consumption certainly is a point to be considered in this context. Currently, tobacco manufacturers only offer consumables featuring a constant nicotine strength.
Page expects sales of herbal consumables to grow in Europe after the EU ban on flavored HTPs takes effect. “Regulators permitting, I could also see herbal sticks being taken up in the U.S.,” he says.
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.

August 1, 2023
Making Their Mark

Illustration: BeMade
RYO and MYO products continue to present remarkable opportunities to the companies supplying these segments.
By George Gay
It has long been debated whether smokers choose roll-your-own (RYO) products over factory-made cigarettes simply because they can save money that way or whether there are other factors in play, most of which revolve around the idea of product customization. One thing that seems certain, however, is that if some smokers want to customize their RYO cigarettes, now is a great time for them to get creative. The product combinations that are possible by putting together the huge range of papers, filters and tobacco now available must be immense and growing.
This is not to say that RYO is about to experience a boom; taxation and regulation will not allow that to happen. But this category, being lifted by the current cost-of-living crisis affecting many people and by the legalization of recreational marijuana use in a growing number of jurisdictions, is likely to punch above its weight for some years to come.
Here, we look at the state of various aspects of the RYO and make-your-own (MYO) sectors: machinery, papers and filters.
Machinery
Anne Laure Jaeckel
Although many cigarettes are hand rolled mainly as a way of saving money, whenever I think of the hand-rolling process, I imagine somebody involved not in an economic activity but in an artistic undertaking. This idea might be a little romantic, however, given that many hand-rolled cigarettes appear less than beautiful, so perhaps I am talking more of a craft than an art, an activity akin to constructing dry stone walls or making hurdle fences, which are often beautifully irregular and, in certain instances at least, economically necessary.
Of course, there is something highly misleading in all this because, unlike the people making dry stone walls and hurdle fences, who are working with crude materials, the person hand rolling a cigarette has in her hands elements that have been produced using advanced designs and technology—elements such as ideally formed, long-stranded fine-cut tobacco and papers and filters fine-tuned for the individual’s preferred choice of cigarette.
And what often gets forgotten is the technology that goes into producing those tiny booklets of hand-rolling papers. They might look simple and insignificant, but the processes necessary to produce them are far from it. Where bobbins of paper have not been pre-gummed, they must have glue applied to one side, they must be cut to length, interleaved, packed into booklets and the booklets included in multi-packs.
And I must confess that, in describing this process, I have paid too little attention to part of the undertaking that is technically challenging: interleaving the cut papers. I was reminded of this when Luc Van de Perre, the founder and owner of BeMade, described how his company had a patented interleaving method, ReadyToRoll, which ensures that when individual leaves are pulled by the consumer from the booklet, the gummed side of the paper always comes out pointing upward. At present, says Van de Perre, 99 percent of paper booklets deliver alternate leaves gummed-side up and then gummed-side down, so half must be turned over by the consumer.
Does this matter? I think it does, if for no other reason than it allows a smoker with impaired vision, who has misplaced her spectacles or is in conditions where the light is poor, to roll a cigarette with confidence. It provides, also, the assurance that she is not going to waste a paper or, even worse, lick the wrong side of a lightweight paper, which will cause it to stick, but only up to a point—that point probably being when the cigarette is lit.
It also demonstrates that even in what some might regard as a backwater segment of the tobacco industry, attention is being paid to the smallest details. The smoker of hand-rolled cigarettes is being treated as important.
In fact, such attention to detail is now at the forefront of BeMade’s activities. The company, which was founded in 2005 and which has a background in booklet production, used that manufacturing experience to develop a fully flexible maker/packer that can produce a full range of booklet formats and pack them in a variety of display boxes. But Van de Perre said that whereas his company had in the past taken machinery projects from start to finish, it was now concentrating on machine developments and installations while working with a bigger partner company in building the machines.
BeMade has also come up with a service strategy recognizing that while its booklet-producing customers are geographically widely spread, it is operating in a relatively modest segment. “Our target is to make sure our customers, booklet producers, get all the tools needed to organize service and maintenance operations in-house or through local support,” said Van de Perre. “This means also that we are prepared to sell the know-how necessary to make our customers independent. All new customers are provided with whatever is necessary to make them self-supporting, though we can also support them via direct web connections to their machines.”

Photo: SWM
Paper
Of course, to produce booklets, you need paper, and, asked about the main RYO market drivers, a spokesperson for SWM and Botani, Anne Laure Jaeckel, product manager of rolling papers at SWM, said the past few years had been all about product research and collaborative developments as their customers had focused on delivering to consumers the best smoking experiences by offering them thinner and lightweight papers. Another important trend had been delivered through developments in botanicals, especially hemp, which had become an essential material in a matter of a few years. In the future, the transparency of papers would be a key feature while the provision of new and exciting colors would also take center stage.
SWM and Botani comprise the Engineered Papers division of Mativ, with SWM serving the tobacco industry and Botani serving the emerging global cannabinoids market.
One question that arises is whether RYO has a future given the array of next-generation tobacco and nicotine products that have emerged recently and given people’s apparent tendency to embrace new technology generally. But Jaeckel seemed unconcerned. While, as always in business, things were changing, this did not signal the end, she said. The change being brought in by the trend toward the legalization of the recreational use of cannabis in many countries was a positive, leading to, among other things, an increase in demand for rolling papers and pre-rolled cones, especially in the U.S. All that was needed now to take things forward in a sustainable way was the introduction of uniform legislation governing product standards.
But some things would remain largely unchanged. For some consumers, RYO had always been and would remain just what they needed—a widely available and cost-effective product. Rolling papers had been invented in the 19th century, and, in part, it was the proof of the product tied up in this history that appealed to many consumers, something to which SWM could attest since its factory in the south of France had been active for 150 years and had witnessed the launch of one of the first rolling paper brands, JOB.
Generally and historically speaking, wood-based bleached materials have gone into making tobacco rolling papers, but Jaeckel said that customers looking to the cannabis market were preferring thin, unbleached, colored or hemp-based papers. Of course, the market for papers, while being strongly influenced by consumer preferences, was also governed by legislation, she added.
The base paper for rolling-papers, Jaeckel said, was supplied in rolls, bobbins and reams, depending on the converting capabilities of customers and on end use applications—for instance, interleaved or flat booklets, or even pre-rolled cones and MYO tubes. All grades of paper could be offered pre-gummed and with filigree patterns, which, along with color options, provided for a wide variety of brand differentiation. And for companies that were only brand owners, SWM and Botani could supply their paper through a network of partner converters capable of transforming it into the required forms.
The range of experiences on offer to the consumer is certainly huge. Indonesia-based The Rolling Paper Company (TRPC), for instance, offers worldwide a wide range of papers, including those made from bleached wood, unbleached wood, unbleached hemp, alfalfa and bamboo. Papers can be watermarked, printed or colored, and the company’s offer also includes blunts, cones and printed cones, all manufactured under one roof using machinery and paper imported from Europe.
TRPC, which has been in business since 2008, produces its own papers under brand names such as SmokeBox but also contract manufactures for other companies.
Ashwyn Daryanani, the founder and owner of TRPC, is confident about the future. In reply to emailed questions, he said the main drivers of the rolling paper business in recent times had been the legalization of the recreational use of marijuana in various jurisdictions and the rising prices of factory-made cigarettes just about everywhere. And, he added, the trends toward the legalization of marijuana use and rising cigarette prices would continue in the future, boosting demand for rolling papers.

Photo: Filtrona
Filters
While Filtrona identifies consumer economics as being the key driver for the MYO category, it sees product customization mainly driving the RYO sector. And the company, which develops and manufactures filters for all types of smoking products, including both the categories under review, predicts that two main factors will drive the RYO/MYO market for the next two years to three years: product customization, and sustainability in respect of both filters and packaging. RYO smokers would be drawn to innovative filter shapes, formats and additives, said Hugo Azinheira, global director of innovation and ESG [environmental, social and governance]. At the same time, there would be a growing need for customized packaging that was more sustainable and that delivered improved product freshness when compared with what was on offer now.
The second driver, meanwhile, meant it was vital for Filtrona to extend its ECO range of filters to RYO/MYO and to work with its packaging suppliers to develop and introduce more sustainable packaging materials.
“The industry’s shift from acetate filters to more sustainable alternatives presents us with one of our biggest opportunities,” said Azinheira in an email exchange. “Our growing ECO range comprises more than 12 innovative plastic-free filters, providing solutions that address single-use plastic bans by using sustainable, biodegradable and plastic-free non-woven materials. All our ECO filters are suitable for use in RYO and reduced-risk product categories as well as ready-made cigarettes.
“We are also working with suppliers to develop and qualify new materials with a lower carbon footprint. We believe that it requires an industry-wide effort to support our customers in their ESG journeys; therefore, we are collaborating with a wide array of suppliers.”
Meanwhile, Azinheira said, because demand for both RYO and, especially, MYO tended to grow when adverse economic environments prevailed, the market for both had been relatively stable during the past five years to six years. But with MYO being a more volatile category, there was higher growth potential in RYO, though both were expected to remain niche categories.
Overall, the RYO and MYO categories would follow the main industry trends, including in respect of the growing cannabis category in North America, for which special filters were being developed and commercialized. While RYO would remain a niche product, demand for it would grow in markets where hemp and cannabis were legalized, but it was important to keep in mind that, within the EU, the new Tobacco Products Directive would impact these new categories.
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.

August 1, 2023
Iran: Smuggling Ring Busted

Image: Tobacco Reporter archive
Iran’s intelligence ministry busted a large tobacco smuggling network, reports Press TV. According to the ministry, members of the network were operating in 10 Iranian provinces as part of 15 connected smuggling bands.
Millions of dollars from the illicit products were funneled into bank accounts outside Iran via illegal currency exchange shops. Foreign sanctions have caused a shortage of hard currency resources, leading to Iran introducing strict regulations to crack down on smuggling. Preventing smuggling is also part of Iran’s plans to help domestic manufacturers and prevent use of unsafe products.
Increased prices of domestically produced cigarettes have led to an increase in smuggling, according to some experts.
The smuggling bust led to 60 arrests and the closure of over 100 warehouses used to store the illicit tobacco products.
July 27, 2023
Brief Supports Limiting ‘Chevron Deference’

Image: Tobacco Reporter archive
Keller and Heckman has filed an amicus brief with the U.S. Supreme Court on behalf of members of the electronic nicotine-delivery system (ENDS) industry in support of petitioners in a case to overturn or limit the so-called Chevron deference.
Named after a landmark Supreme Court decision dating from 1984, the Chevron deference is a legal doctrine that generally requires courts to defer to an administrative agency’s interpretation of ambiguous statute so long as that interpretation is reasonable.
In practice, Chevron deference often gives agencies broad leeway to reach beyond the limits of a statute’s plain language, often bypassing the rulemaking process otherwise required under the Administrative Procedure Act and making it more difficult to challenge an agency action in court.
In the years since ENDS became subject to Food and Drug Administration regulation, the vast majority of courts reviewing ENDS industry challenges to premarket application denials, as well as FDA rulemakings and guidance documents, have rubber-stamped the agency’s interpretation of the Family Smoking Prevention and Tobacco Control Act (TCA) and the “appropriate for the protection of the public health” standard, Keller and Heckman wrote on its blog.
Critics contend that the Chevron deference has enabled the FDA to impermissibly interpret the TCA to implement a de facto ban on all nontobacco-flavored ENDS products without any requisite notice and comment rulemaking or congressional amendments to the TCA.
The filers on the amicus brief urge the Supreme Court to at least restrict the application of Chevron deference so that it is the exception, not the rule. The Supreme Court will hear oral arguments in the case in its fall 2023 term.
The petition to overturn or limit the Chevron deference was brought by a group of fishing companies challenging the National Marine Fisheries Service’s construction of the Magnuson-Stevens Act to require the industry to pay the salaries of federal monitors.
The ENDS industry amici include the American Vaping Manufacturers Association, the American Vapor Group and Bidi Vapor.
July 25, 2023
TPSAC Meeting Materials Available

Credit: Postmodern Studio
The U.S. Food and Drug Administration’s Tobacco Products Scientific Advisory Committee (TPSAC) met on May 18 to discuss the “Requirements for Tobacco Product Manufacturing Practice” proposed rule. All the meeting materials, including the recording, transcript and summary minutes, are now available online.
The proposed rule, if finalized, lays out the FDA’s requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of tobacco products.
Comments on the proposed rule must be submitted by 11:59 p.m. Eastern Time on Sept. 6, 2023.
July 25, 2023
Zimbabwe Records Best Ever Sales

Image: Taco Tuinstra
Zimbabwe’s tobacco auctions will close July 31 after four months of record sales, according to Bulawayo24.
Final cleanup sales for the auction system will take place on Aug. 30, according to the Tobacco Industry and Marketing Board (TIMB).
“After consultations with all stakeholders, the board wishes to advise that the official date of closure for the 2023 auction floors is 31 July.
“However, growers will still be able to sell their auction tobacco through a mop-up sale. The final auction cleanup sales will be held on Wednesday, 30 August 2023,” the TIMB said.
“Contract sales will continue to operate until such a time when individual contractors have fully received all their tobacco,” the TIMB added.
“The closure was approved by the Minister of Lands, Agriculture, Fisheries, Water and Rural Development, Honorable Dr. Anxious Jongwe Masuka,” said the TIMB.
A total of 291.1 million kg of tobacco worth $882.2 million has been sold at an average price of $3.03 per kilogram. Of the total tobacco sold, 271.2 million kg were sold via the contract system.
This year’s sales volumes put Zimbabwe on track to achieve its target of 300 million kg by 2025, as formulated in the Tobacco Value Chain Transformation Plan, ahead of schedule.
July 25, 2023