Author: Marissa Dean

Chasing Unicorns

Photo: pimmimemom
In their quest for cutting-edge innovations, tobacco companies have set up venture capital subsidiaries.
By Stefanie Rossel
Incessant innovation is at the heart of tobacco companies’ transformation process. Eager to move their businesses away from combustible cigarettes toward less hazardous alternatives and opportunities beyond nicotine, cigarette manufacturers have invested billions of dollars into innovation and scientific research. They have substantially expanded their research and development teams, recruiting talent from sectors such as consumer electronics while acquiring companies in adjacent business areas, including pharmaceutics.
To avoid missing out on innovative trends and new technologies, however, tobacco companies in their transformation process need to think out of the box, or rather outside the organization, and keep an eye on the startup scene. For this purpose, the leading players have established platforms to serve windows on future technologies. In addition to using corporate venture capital (CVC), they are working with incubators, accelerators and universities.
Japan Tobacco International has chosen the latter approach. In March 2019, it teamed up with Silicon Valley-based Plug and Play Tech Center, a technology incubator, to run Vapetech, a program aimed at bringing together innovators and data experts to develop technology that improves the user experience and health benefits of vaping. Each year, Plug and Play selects about 20 startups that will develop ideas and solutions for a more enhanced vaping experience, JTI said in a statement. Startups with new devices or technology applicable to the Internet of Things (IoT), biometrics, data and lifestyle will enter a three-month program to develop their products and services and have access to investment and corporate partnerships.
“We need new innovative products coming on in future years, so the Vapetech process will be really instrumental,” explains Suzanne Wise, senior vice president of corporate affairs and communications at JTI. “We surround startups with the right ecosystem and provide them with all they need. It’s a process where you get people completely from outside the industry, with different mindsets, who are looking at what we are facing as challenges, and they just come up with stuff that we say, gee, why not us?”
Wanted: Extraordinary Solutions
With PM Equity Partner (PMEP), Philip Morris International was the first tobacco company to set up a CVC division in 2016. CVC is a variant of venture capital where the required capital comes from a corporation outside of the financial sector. In contrast to risk financing, which primarily aims to generate a return for the venture capitalist, CVC also pursues strategic goals.
Established companies use their CVC arms to develop new technologies or new business models, to explore other markets or for diversification. Staying ahead of competitors in a specific market is another motivation for CVC. In turn, startups benefit not only from the funding but also from getting access to technological know-how, distribution channels and cooperation partners.
PMEP invests in early stage and growth-stage companies with technology-based business models and proven commercial traction, such as existing revenue or contracts, that fit into the focus it shares with its parent company: the ambition to replace cigarettes with smoke-free alternatives and explore new markets beyond nicotine.
Candidate companies should be able to make a positive, significant and sustainable contribution to PMI’s core business and science-centric, technology-driven smoke-free vision, and they should operate in one of the four investment corridors defined by PMEP: life sciences, industrial technologies, consumer engagement and product technologies. Aspirants could, for example, offer innovations in inhaled therapeutics and computational research methodologies, industrial robotics and automation, or technology-based process optimization. Or they could bring in their solutions for bioauthentication, user identification or innovative customer care.
“The startup should have developed an innovation in one of these areas that substantially differs from other technologies currently used in its respective market segment,” explains Alexander Stoeckel, head of PMEP. “Furthermore, it should have left the startup phase behind and ideally have customer relations or a testable prototype because usually we test the startup’s innovation together with PMI’s respective departments and decide on an investment after we have understood which contribution this technology could contribute to our success as PMI.”
Strong Funding Basis
Being the CVC arm of a well-known company such as PMI helps generate business, according to Stoeckel. The fact that PMEP’s parent company is a tobacco corporation hasn’t been any hindrance yet, he says. “Founders are regularly surprised to find out how professional and broadly positioned PMI is.”
The CVC team is in constant communication with PMI’s division heads to identify their challenges, suggestions, problems and innovation requirements in order to find startups that develop or already market matching solutions. In return, the investee companies will be able to make use of PMI’s extensive R&D capabilities, operational and marketing excellence, and deep involvement in supply chain. PMPE says it provides its entrepreneurs with long-term support not only in financing but also for mutual benefits at strategic and commercial levels. More precisely, it helps entrepreneurs strategize, steer partnerships, help with negotiations and raise and utilize capital.
In October 2021, PMI allocated a further $200 million to the CVC’s initial $150 million investment. According to the company, ideal investments are between $2 million and $10 million in Series A stage companies, with flexibility to also consider investments in seed or late-growth companies. (Series A funding is the first round after the seed stage; companies need to have a strong plan for developing a business model that will generate long-term profit.)
To date, PMEP has invested in 13 companies, according to Pitchbook.com. Among the companies still in PMEP’s portfolio is BOW Group, a startup specializing in wearables, connected vehicles and smart home products. The company is supporting PMI to deliver on its commitment of a consumer-centric ecosystem. Another investee company, Biognysis, enables PMI with its disruptive technology to identify biomarkers and understand the biological impact of switching to PMI’s IQOS heated-tobacco product.
Driving the Change
BAT created BTomorrow Ventures (BTV) in 2019 and established a £150 million ($176.33 million) fund to help accelerate BAT’s transformation. As BTV’s managing director, Lisa Smith, pointed out during the recent GTNF in Washington, D.C., “Transformation requires innovation, and BTV has set up a number of innovation ecosystems. It’s a highly competitive market, and finding the best innovators out there is difficult. Our role is to be the outward-looking ‘handshake’ to the outside world to show that we are the preferred partner of choice.” BTV’s job, she said, was to channel these innovators to the right part of its business. “There are many tasks in transformation, such as to quickly move the environmental, social and governance (ESG) agenda and to build the science and credibility to be able to operate in the beyond-nicotine world.”
The CVC therefore invests in specialist categories, including consumer brands, digital transformation, new technologies, future sciences and sustainability. BTV has also established an accelerator and growth platform called BTV Labs and divided them it three categories: Consumer Delight Lab (focusing on consumer brands), Futures Lab (focusing on science, technology and digital) and an ESG Lab. In its portfolio are businesses from the functional food and beverage, electronic equipment and instruments, and cannabinoid sectors. To date, BTV has invested in 22 companies. Unicorn-nest.com estimates that the average round size was $3 million. With building a community a core part of BTV’s value proposition, the corporate venture unit stages “Binspired” events, a collaborative forum for CEOs or founders, investment partners and senior executives. In addition, it runs the “Battle of Minds” in partnership with BAT, which is a “business pitch” competition for students, graduates and early stage startups from around the globe.
Lexy Prosszer, BTV’s investment principal who previously worked in BAT’s merger and acquisitions department, says that BTV was established to accommodate a different type of deal. “M&A was not set up to deliver on that in terms of speed, scale and credibility to get these entrepreneurs at the table to want a conversation with us and believe that BAT has got the right intentions to change and transform. With BTV, we’re meeting a real need that the corporate [sphere] has.”
According to Prosszer, collaborating and engaging with startups has contributed to shift in mindset among BAT employees, encouraging them to do things faster. “They’re excited, engaged and love working with the entrepreneurs. Much has been achieved. It’s been a cultural shift to being open to how an entrepreneur might do things and how that can be leveraged to us to get our result faster.”
Through BTV, observes BAT Finance and Transformation Director Tadeu Marroco, the company suddenly has access to understanding better products that otherwise would take ages to develop internally. “We can be closer to them and see how they perform in the markets. For entrepreneurs, it means that they can leverage on the massive strengths that BAT has as a multinational company with massive distribution capabilities.”
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.

December 1, 2022
Shifting Alliances

Financial analysts debate the outlook for Altria and other tobacco companies during the recent GTNF in Washington, D.C. | Photo: Chris Ferenzi Photography
With a new partner in heated-tobacco products, Altria prepares to compete in a radically different U.S. tobacco market.
By George Gay
During the GTNF in September, Bonnie Herzog of Goldman Sachs admitted that she had been wrong about eight years ago to predict that within 10 years, sales of reduced-risk products (RRPs) would overtake those of combustible cigarettes on the U.S. market.
To my way of thinking, no discredit attaches to this admission because there was no shame in having been wrong in this prediction—at least no shame that could attach to Herzog. What sane person would have argued with her? Eight years ago, after decades of hand-wringing by politicians, health professionals and society at large over the deaths and diseases caused by the consumption of combustible cigarettes, surely everybody was, as a matter of urgency, going to get behind these RRPs to ensure they were developed to their full potential, their benefits were widely communicated, and they were made readily available at prices that were attractive to smokers. After all, here was a solution to a long-term, seemingly intractable problem that would involve almost no outlay from the public purse. It had to be embraced by people of every political stripe. Yeah, right.
Basically, Herzog made two mistakes eight years ago. She ignored the rule that says you never make predictions about events that will unfold within your lifetime. And, I guess, she assumed the U.S. is run on a set of straight, rational rails rather than, like the rest of the world, along a meandering path of hypocrisy.
Despite the dog’s breakfast that has been made of the U.S. market for RRPs, the battle for this market was one of the major factors considered by analysts when, during the GTNF investor panel, they considered the relative merits of investing in the U.S.-listed tobacco companies, Altria and Philip Morris International. It was by no means the only factor, but I would like to concentrate on it because it demonstrates the dangers of making predictions.
Unclear and Unraveling?
During the panel discussions, PMI was said by one of the panel members, Pam Kaufman of Morgan Stanley, to be unique within the tobacco industry in respect of the success it had enjoyed in executing its strategic transformation. The company now generated 30 percent of its revenue from reduced-risk, smoke-free products, and the Swedish Match acquisition was going to be a game changer, helping PMI to move to a position where 50 percent of its revenues came from smoke-free products by 2025.
Specifically, on the U.S. market, Swedish Match could be used as a distribution platform for PMI’s heated-tobacco product (HTP), IQOS, bypassing the existing distribution agreement with Altria, which, at the time of the panel discussion, was not in operation because a U.S. International Trade Commission ruling in response to a patent infringement challenge by BAT’s U.S. subsidiary, Reynolds, was preventing IQOS being made available on the U.S. market.
At the same time, Altria’s strategy around RRPs was seen by Kaufman as being unclear and unraveling. Altria, which was not known for its internal development, she said, lacked a clear reduced-risk exposure because it was reliant on its stake in Juul, with which it had a no-compete agreement and which was facing a lot of challenges, and because of its agreement with PMI on IQOS, which was in question. Kaufman said she was certain that Altria was now investing greater resources than previously in RRPs, but, while it was talking about showing a new HTP by the end of this year, this was far from commercialization as the product would have to go through a Food and Drug Administration premarket tobacco product application process. PMI was years ahead of Altria, which was in a tough position.
Herzog was more upbeat on Altria’s future in the field of RRPs. She said that people underestimated Altria because it didn’t share as much information as other companies did. She reminded her audience that PMI and Altria were once one company and that Altria owned a lot of the early technology and rights to IQOS, so, maybe, she suggested, given the time when Altria was distributing and selling IQOS for PMI in the U.S., there had been some “learnings and understandings.” She questioned whether it was possible that Altria had built a better product.
Herzog was more positive, also, about Altria’s ability generally to compete with PMI coming onto the U.S. market through Swedish Match, citing the fact that Altria had dealt with a formidable competitor before: with BAT coming in fully with Reynolds. It was a question of how Altria could transform its product portfolio more toward RRPs, whether those products were already on the market, like On! and those in which it had an interest through its stake in Juul, or the result of things on which it was working. Altria was in the final stages of design of its own oral tobacco and its own HTP.
Herzog conceded that it was going to take time to bring some of those products to market, given the processes required by the FDA, but it was nevertheless the case that Altria had other products in its arsenal that it could ultimately leverage.
Rapid Developments
Writing this story toward the middle of November, it’s obvious that two months can be a long time in respect of the U.S. market for RRPs. Since the panel discussions were held, PMI has secured its takeover of Swedish Match. PMI and Altria have agreed on terms under which Altria will receive from PMI $1.7 billion (on top of $1 billion paid at the inception of the IQOS distribution agreement) to relinquish, from the end of April 2024, its right to distribute IQOS in the U.S. on behalf of PMI. Altria has, while maintaining its economic interest in Juul, which is currently appealing against an FDA order to remove its products from retail shelves, extricated itself from its no-compete agreement and so is free to bring its own e-cigarettes to market or to explore acquisitions in this field. And Altria has signed a joint venture agreement with Japan Tobacco to market HTPs in the U.S. with Ploom-branded devices and Marlboro-branded consumables. They also signed a long-term, nonbinding global memorandum of understanding to explore commercial opportunities for a wide range of RRPs.
The question is how much of a difference these developments will make to the U.S. market for RRPs, and especially to Altria, whose future has been painted as being bleak by some observers, even after these recent developments. My guess—and this is not a prediction—would be that these developments, on their own, will make little difference immediately and perhaps for some time. IQOS, which has been granted a modified-risk status under which consumers may be given certain information, such as that the product generates lower levels of harmful chemicals than combustible cigarettes, is still not available for sale in the U.S., though, clearly, it is likely to reenter the market relatively soon.
At the same time, it is likely to take considerably longer to put Ploom and a new HTP from Altria through the FDA procedures necessary for market commercialization. But it is worth bearing in mind a point made by Rupert Wilson of Strategic Business Consulting during the panel discussion. HTPs, he said, had done well on markets where e-cigarettes, for whatever reason, were not a major market contributor, such as Japan, but less well on markets where e-cigarettes had been well received, such as the U.K. The U.S. is a strange market in that e-cigarettes are available but development of them has been held back by regulations, but I would guess that there are just enough e-cigarettes—and other RRPs—available to mean the U.S. is not going to simply become a battleground for HTPs. They will become a significant, but not an exclusive, part of the RRP market.
There are other factors in play that are probably more important. PMI, which has concentrated heavily on HTPs, is expanding its RRP offering, but even with the help of Swedish Match, which is experienced in dealing with FDA applications, these products will take time to clear FDA hurdles. And Altria could presumably acquire a vaping company that has devices already approved for the U.S. market.
Some observers point to the fact that Altria, unlike PMI or Swedish Match, is heavily exposed to the U.S. market for combustible cigarettes, which is in decline, especially the premium sector of that market, which seems like not a good place to be during a cost-of-living crisis. But evidence was presented during the panel discussion that demonstrated how, in the past, Altria had been able to increase profits significantly in the face of plummeting cigarette volumes caused in part by steeply rising prices.
Overall, I tend to agree with Jon Fell of Ash Park Management, who, during the panel discussions, while not dismissing the competitive challenge being thrown down by the arrival of PMI on the U.S. market, said that companies already on that market were highly competitive themselves and that it would be rash to assume they could be brushed aside.
It would surely also be rash to make predictions when who knows what developments might be announced in the future. During the session usually devoted to possible mergers and acquisitions, the GTNF panelists spent nearly all the available time talking instead about companies investing in R&D, forming alliances, finding new technology partners, bringing people in from other industries to provide new perspectives and moving into new business areas. Something unforeseen must come out of that.
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.

December 1, 2022
A Taste of Things to Come?

Nveed Chaudhary | Photo Courtesy of the Broughton Group
What the recent marketing denial order for Logic’s menthol vapes implies for flavored e-cigarettes
By Stefanie Rossel
On Oct. 26, the U.S. Food and Drug Administration wrote a new chapter in the story of electronic nicotine-delivery systems (ENDS) regulation. That day, the agency for the first time rejected a premarket tobacco product application (PMTA) for a menthol e-cigarette. Logic Technology Development received marketing denial orders (MDOs) for its Logic Power Menthol E-Liquid Package and its Logic Pro Menthol E-Liquid Package.
In a press release accompanying its decision, the FDA said the rejection was based on a full scientific review. The applications, the FDA argued, “lacked sufficient evidence to demonstrate that permitting the marketing of the products would be appropriate for the protection of the public health.” The evidence provided within the application, it said, did not demonstrate that these menthol-flavored e-cigarettes were more effective in promoting complete switching or significant cigarette use reduction relative to tobacco-flavored e-cigarettes among adult smokers.
In its statement, the agency also referred to the 2022 National Youth Tobacco Survey (NYTS), which had been released shortly before the Logic MDO. “For nontobacco-flavored e-cigarettes, including menthol-flavored e-cigarettes, existing evidence demonstrates a known and substantial risk with regard to youth appeal, uptake and use,” the FDA wrote.
Tobacco harm reduction advocates were dismayed. The MDO shattered their hopes that mentholated vapor products would be allowed to remain on the market as a less risky alternative to mentholated cigarettes, which the FDA wants to prohibit. They were also surprised given that the FDA in late 2021 authorized 22nd Century Group to market its reduced-nicotine VLN Menthol King brand as a modified-risk tobacco product.
According to data by the Centers for Disease Control and Prevention, menthol-flavored products accounted for 37 percent of all cigarette sales in the U.S. in 2019 and 2020.
Misplaced Priorities
Critics also lambasted the agency’s focus on the risk of youth uptake at the expense of the opportunity to move adult smokers to lower risk products. Christopher Russell, director at Russell Burnett Research and Consultancy, made up a quick calculation based on recent NYTS data. Of the 2.55 million U.S. students who had used an e-cigarette in the past 30 days according to the survey, 84.9 percent had used flavored vapes. Of the current flavor vapers, 26.6 percent consumed menthol ENDS, which corresponded to 2.12 percent of U.S. youth having vaped menthol in the past 30 days. “MDOs for menthol e-cigarettes,” he concluded, “equals banning menthol to 100 percent of adults in order to protect under 3 percent of youth.”
Neil McKeganey, co-director of the Centre for Substance Use Research, went a step further, quoting a Scottish study carried out by his institution that looked at ENDS use among representative samples of U.S. youth and adults in 2021 and 2022. Out of the 1,215 youth aged 13 to 17 surveyed in 2022, he said, 0.2 percent had ever used a Logic Power and 0.5 percent had ever used a Logic Pro.
When the Scottish researchers looked at youth e-cigarette use over the last 30 days, the levels of Logic use shrank to 0.1 percent of youth reporting having used the Logic Power during that period whereas the level of Logic Pro use was so low that it was not even recorded.
“In dispatching the MDOs for these two products,” he stated, “the FDA seems to have set aside a commitment to review the data around individual devices and liquids and to formulate a response in terms of the brand of products being used and justify the denial orders issued by reference to the NYTS data.”
Jim McDonald of Vaping360 predicted a rise in illicit trade if the FDA blocks the legal path to market for menthol vape products. The FDA, he said, ignored the fact that most youth vapers use unauthorized gray market flavored disposable vapes, many of which are menthol flavored. “They will continue using these products, too, while the FDA pursues its goal of eliminating legal vaping, locked into the belief that its ‘authority’ has some effect on the market,” wrote McDonald.
In March, the FDA authorized Logic devices with tobacco-flavored refills. To date, the agency has not approved a single vapor product with nontobacco flavors.
Shortly after receiving its MDO, Logic Technology Development secured a stay of the FDA order in court, allowing retailers and wholesalers to continue selling Logic menthol products for the duration of the stay. Even if the court requires the FDA to reevaluate the evidence, this does not guarantee a more favorable outcome for Logic and the future of menthol vape in the United States.
Understanding the FDA’s Requirements
Despite Logic Technology Development’s travails, Nveed Chaudhary, chief scientific and regulatory officer at Broughton Group, is confident the recent MDOs do not mark the beginning of the end for menthol and other nontobacco-flavored e-liquids in the U.S.
While he agrees with McKeganey that the FDA’s positions are being driven in large part by the data from cross-sectional studies like the NYTS, Chaudhary believes the fundamental issue is how the PMTA studies were designed, how the data has been interpreted and how the arguments have been presented to the FDA. “Based on the original PMTA guidance and then the Final Rule, many, if not all, of the applications for menthol and nontobacco-flavored products were considered to be ‘equal,’” he says. According to Chaudhary, the relative benefits of all the ENDS flavors together were compared with the risks of smoking combustible cigarettes. The youth access measures introduced were the same across all flavors of a given platform.
“What has become very clear from the FDA’s recent communications, especially through the MDOs, is that they do not consider all flavors of ENDS to have the same risk profile—in this case, the risk of promoting on-ramping amongst youth,” says Chaudhary.
“Therefore, the expectation from the FDA has evolved. Given the data from studies such as NYTS, the FDA are now saying that the PMTA applications need to demonstrate that there is additional benefit of the menthol over tobacco flavors for current smokers—essentially that the additional benefit outweighs the continued risk of youth finding menthol more attractive. Over time, as the industry presents this data to FDA and FDA begin to approve menthol-flavored products, I can imagine a situation where the same would apply to other nontobacco and nonmenthol flavors—only that, for these flavors, an additional benefit for smokers compared with menthol that outweighs the risk on youth use would be required.”
Remediating Deficiencies
Chaudhary believes that “with the addition of a few relatively inexpensive studies and an overhaul of the dossier to build the arguments that FDA want to see,” Logic Technology Development should be able to convince the agency of the additional benefits of nontobacco flavors.
Attempts at rectification, however, may prove futile. In January 2020, the FDA banned all flavors except tobacco and menthol in cartridge-based e-cigarettes. In September 2020, the agency signaled that it would not authorize flavored products without extraordinary evidence. With Logic Technologies Development being part of Japan Tobacco International, one of the world’s leading players, it may furthermore be assumed that the company submitted a very comprehensive application.
While acknowledging that many of the applicants are large multinationals with the financial power to conduct large complex studies, Chaudhary says this does not mean that the studies that the FDA is now looking for were in fact conducted. “It all goes back to the industry’s understanding of the PMTA guidance and final rule back in September 2020 and the way in which the FDA have chosen to enforce the rule today,” he says. “The ongoing view of FDA is that that NYTS illustrates a preference for menthol flavors amongst youth. Therefore, since the original studies were designed to compare all flavors of ENDS to combustible cigarettes; they are not geared to demonstrate additional benefit of menthol flavors compared with tobacco flavors. I would say for any new applications, that has to be a central question to which the application must provide answers.”
Chaudhary deems it likely that much of the data required to build these arguments already exists in the comprehensive PMTA applications—perhaps with some gaps that could be potentially filled with relatively inexpensive studies. He expects the FDA to apply the same logic to flavored disposable products, which are exempt from the agency’s 2020 flavor ban and have recently experienced a surge in sales. “I would imagine that unless any company has constructed their PMTAs to show the additional benefit of flavors compared to menthol and menthol compared with tobacco flavor, they will also receive MDOs,” says Chaudhary.
“I think we all agree that this is awful news for U.S. smokers who will be denied the wide range of options that they need to stop smoking,” he continues. “It seems that the only way to re-offer smokers these critical choices is to ensure that we as an industry are responsible. We must ensure that we understand the evidence the FDA want to receive and provide this data to them so that menthol and ultimately other flavors can be authorized back into the marketplace, and all smokers can continue their off-ramping journeys.”
Chaudhary says the industry needs to move forward, put aside grievances that have arisen as a result of how the FDA has enforced the PMTA final rule and provide the agency with the data it wants to see to ensure that smokers can have these products in their hands at the earliest opportunity.
“Any integrated technology that can minimize or even eliminate underage use of e-cigarettes would lower the risk of youth use and therefore lower the bar for the additional benefit data that the FDA are now asking for,” 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.

December 1, 2022
Innovation Inside

Continuous innovation is the foundation for the advancement of Smoore and the e-cigarette industry. | Photo: Smoore International Holdings
Of the few vaping products that survived regulatory scrutiny, many have been manufactured by Smoore.
By Timothy S. Donahue
The U.S. premarket tobacco product application (PMTA) process is one of the world’s most rigorous regulatory pathways to market for nicotine products. Out of nearly 7 million applications, only 23 e-cigarette-style products have been approved for marketing by the Food and Drug Administration. Most of the approved products have been manufactured by a single company.
Smoore International Holdings, through its subsidiary, Shenzhen Smoore Technology, manufactures the Njoy Ace, Njoy Daily, Logic Power and Logic Pro devices. The Njoy Ace is the most technologically advanced vaping product to receive marketing approval in the U.S. It is the first e-cigarette authorized by the FDA that is equipped with ceramic coils that are manufactured by FEELM, the atomization brand owned by Smoore Technology. The Ace marketing orders mark the first approval by the FDA of a pod-style vaping product.
Garnering the marketing orders required plenty of forethought and investment from Smoore. Based on PMTA requirements, Smoore established a comprehensive analytical testing and safety assessment system, including the vaping industry’s first corporate toxicology laboratory, which explores the health impacts of exposure to e-cigarette vapor by means of cytotoxicity tests. These test the reaction of living cells to different components of e-cigarette vapor. The company has also developed the third generation of in-house safety standards, Smoore 3.0, which covers all of the necessary PMTA tests, including testing for harmful and potentially harmful constituents.
In a conversation with Tobacco Reporter, FEELM Marketing Director Sofia Luo attributed the success of Smoore products in the regulatory process to the company’s detailed and lengthy research and development process, which includes a rigorous testing and safety assessment system.
“FEELM ceramic coils have more than seven years of research and development. It is the first black ceramic atomization coil that presents high harm reduction performance in the electronic atomization industry. It provides more flavor than a cotton coil,” Luo said. “‘FEELM Inside’ technology has also been upgraded and optimized continuously since its debut. We believe that only innovation from bottom to top can lead to industry breakthroughs and allow us to provide outstanding products for our clients.”
Because of their innovative atomization technology, FEELM coils significantly increase Smoore clients’ chances of garnering an FDA marketing order and meeting China’s e-cigarette standard. Currently, the top four Chinese e-cigarette brands with the highest production quotas (amounting to 80 percent of the total) are partnered with the FEELM brand.
A quality coil is a much-needed component for generating flavor in vaping products. Looking at the current regulatory landscape, tobacco will likely remain the dominating flavor in both the U.S and China. Tobacco taste-only policies could also impact other regions. According to Luo, Smoore has upgraded its ceramic coils, which can be specifically tailored toward tobacco flavors.
“To comply with the Chinese national standard for e-cigs released this year, domestic brands use materials directly extracted from tobacco for e-liquid production, making it harder for coil manufacturers to produce a suitable device,” explains Luo. “We developed a comprehensive technology solution [that helps Smoore’s] Chinese and overseas clients to study [and develop new innovations] and produce better e-cigarette products. This continuous innovation is the foundation for the advancement of Smoore and the rapid development of the e-cigarette industry.”
Innovation is important for the industry. Smoore has been a frontrunner in innovation and has applied for 4,300 global patents. The company must also be diligent in protecting its intellectual property. Last October, Smoore filed a complaint under the U.S. Tariff Act accusing 38 American and Canadian companies and individuals of infringing on three of its patents and one of its trademarks. As of April 20, 17 of the 38 defendant companies had signed consent letters or settlement agreements.
To stay ahead in innovation, Smoore has recruited over 1,500 R&D experts, accounting for more than 40 percent of its total staff. The company has applied for more than 500 vaping-related heating patents. Recently, Smoore launched the FEELM Max, the world’s first ceramic coil disposable pod solution. The ceramic coil allows for a higher level of safety and harm reduction compared to previous devices.
Smoore presented its FEELM Max disposable technology solution at the Indonesia Electronic Atomization Exhibition (IECIE 2022), which took place at the Jakarta International Convention and Exhibition Center in late October. Speaking at the exhibition, Smoore Vice President Clayton Shen highlighted the importance of technological innovation in driving progress in the vaping industry.
During his presentation, Shen explained that the closed system is the fastest-growing category in the next-generation tobacco market and will claim a significant market share over time. According to Smoore, ceramic coils solve longstanding coil challenges such as leaking liquid and a burnt taste. FEELM’s ceramic coils, said Shen, are used by many of the leading vapor product manufacturers, such as Relx and Njoy.
Founded in 2009, Smoore was one of the first companies to join the e-cigarette industry and later became China’s first billion-dollar vapor company. Smoore International Holdings, parent to Shenzhen Smoore Technology, is also the first vapor company to be listed on the Stock Exchange of Hong Kong. Globally, Smoore is considered one of the most valuable vapor industry manufacturers. According to Frost and Sullivan, Smoore is No. 1 in the global vaping device market with a 22.8 percent market share in 2021.
Smoore is parent to Vaporesso and FEELM, two vaping brands that have gained global recognition for their innovative products. Vaporesso is an open system product brand created in 2015 and is “dedicated to establishing a smoke-free world while raising the quality of life for its users,” according to Luo. “Based on its continuous innovation, strict quality control and substantial commitment, Vaporesso creates products that can fit all levels and styles of vapers.”
FEELM is a closed system technology brand that has been devoted to providing comprehensive atomization technology for global tobacco giants and independent e-cigarette brands, according to Luo, adding that FEELM manufactures FEELM Inside and FEELM Air, the latest in closed pod systems, and FEELM Max, a disposable system.
“This year, FEELM has started to bring the advanced technology of ceramic coils to the field of disposable vapes, hoping to bring our consumers of disposable products the same atomizing experiences as a closed pod system. Compared to other disposable products, FEELM presents a better performance on safety and harm reduction,” Luo said. “Developing and upgrading atomization technology to better optimize the user experience has been a goal, and we wanted to support our clients in launching disposable vapes with ceramic coils in the global market rapidly. This has provided end consumers with more choices.”
When Smoore International announced its financial results for 2021, it reported annual revenues of RMB13.75 billion ($2.16 billion), representing a year-on-year increase of approximately 37.4 percent. The company credited its FEELM brand and its innovative vaping solutions for its growing success. “The driving force of the atomization industry is technological innovations, which brings fundamental breakthroughs in product safety and flavor reproduction,” said Smoore board chairman Chen Zhiping during the presentation.
In its effort to provide consumers more choices in harm reduction products, Smoore has now launched Metex, its heat-not-burn division. The company’s goal is to create a new heating technology R&D platform “that connects the present and the future, balancing the beauty of technology and life,” according to the Metex website. Metex aims to provide its business partners with one-stop supply chain solutions, from core heating technology research to product development and final production.
While Smoore began as an e-cigarette company, the company increasingly views itself as a technology company. Recently, it changed its email address from @smoorecig to @smooretech to better reflect the company’s growing goals. Luo said that changing the email suffix was a way to “better convey our technology” concept to the public, and at least 10 percent of the company’s profits every year are reinvested into its science and technology components, including Smoore’s 14 research institutes that the company has established around the world.
Smoore is growing rapidly. The company expects the e-cigarette market to continue growing at a significant stride over the next five years. Industry experts say product innovation, too, is going to continue at a rapid pace. Luo said that smoking alternatives are becoming increasingly popular worldwide as more consumers and governments realize the significance of e-cigarettes in supporting harm reduction. Improvements in the manufacturing process, she says, will help increase the options for consumers, and manufacturers will inevitably move from semiautomated production lines toward fully automated production lines.
“Regarding the technical development in the overall e-cigarette market, we believe that improving safety, taste optimization and improving the efficiency of nicotine delivery are the major trends in the future. We also are conducting in-depth research on these important technologies internally,” Luo said. “As for the device development trend, we believe that consumers prefer to purchase environmentally friendly and carbon-reducing products as we move toward the future. Consumers need more diversified choices.”
Smoore’s new FEELM Max disposable pod line includes products featuring concepts that help minimize environmental concerns, according to the company. FEELM also published its Carbon Neutral Plan, and the company is committed to implementing increasingly high sustainability standards into its business strategy. “We are moving toward carbon neutrality,” Luo said. “It’s part of [our] strategic plan moving forward.”
With atomization technology being the foundation for Smoore, the company is looking toward more diversification over the next five years and growing outside the vaping industry. Luo said that the company is increasing its research and development investments for atomization improvements in the medical and beauty/cosmetics industries, for example.
“In addition to vaping products, Smoore is committed to integrating atomization technology into more industries, distributing these technologies to other industries,” Luo said. “Our medical atomization and beauty atomization products are now being tested. After their launch, they will broaden the business categories of Smoore and increase the scope of our clients. We are very excited about enhancing our future development through multiple driving incentives and wider roads. And we firmly believe that atomization makes life better.”
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

December 1, 2022
Reality Check

Photo: Grispb
To what extent do flavor bans achieve their stated objectives?
By Cheryl K. Olson
As a California resident, I set aside an evening before every state election to educate myself about that year’s crop of “propositions”—proposed policies that have gathered enough signatures from registered voters to place on the ballot. This year’s motley assortment addressed kidney dialysis centers, arts and music education, online gambling … and flavored tobacco products. The brief text on my ballot stated that a “yes” vote would approve a stalled 2020 law prohibiting retail sale of certain flavored tobacco products. And this would decrease state tobacco tax revenues as much as $100 million per year.
The California ban includes all flavored tobacco products (aside from premium cigars, loose leaf tobacco and certain hookah tobacco) as well as flavor enhancers designed to be added to tobacco products. Bans of flavored vaping products are now in effect in states such as Massachusetts, New Jersey and Rhode Island. New York bans both flavors and online sales (five states ban online sales but not flavors). Various cities and counties, including Chicago and Boulder, Colorado, also forbid flavors.
This led me to wonder about the purpose of laws prohibiting flavors in various types of nicotine products. Are flavor bans a useful way to achieve tobacco policy goals? And what unintended consequences might result?
Why the Focus on Flavors?
Despite questionable evidence, it’s now dogma that flavored tobacco products addict youth and are a slippery slope to smoking. “The ban on flavored nicotine vapor products will protect our children, who, thanks to the tobacco industry’s marketing efforts, have been using vaping products at alarming rates,” said New York state’s commissioner of health in May 2020. “We will no longer permit Big Tobacco to target young New Yorkers for a lifetime of nicotine addiction.”
“Flavors are complicated. They are initiation products for new users, no question,” says Dave Dobbins, former chief operating officer of the Truth Initiative. “We see this play out in alcohol as well. Kids start with flavored seltzers. We tolerate this because adults like flavored alcohol also.”
“That said, nicotine can be dependence inducing, and youth initiation is a serious issue,” he adds. “But, if we expect adults to switch, measures that reduce combustible appeal (no flavored cigars or cigarettes) and increase the appeal of safer products (flavored nicotine pouches) will be important.”
A nicotine researcher who has worked in academia and industry (and asked for anonymity) notes, “Just because most youth use flavors doesn’t mean they need flavors to experiment. They didn’t need flavors to experiment with cigarettes 20 years ago.”
Unintended Consequences of Flavor Bans
What do we know so far about the effects of flavored product sales restrictions? There are hints in a recent scoping review by Todd Rogers and colleagues at RTI International and the Truth Initiative Schroeder Institute. They looked at studies of local U.S. policies, most passed in 2015–2019. Research designs and measures were generally weak, and there were many gaps. None of the studies gave evidence on whether flavor bans reduced youth access to or susceptibility to use tobacco products, for example.
The authors did find post-policy short-term reductions in flavored product sales but little assurance that these would be sustained. Most of the studies looked at unintended effects. There was evidence of cross-border sales and substituting other products rather than quitting. There were also creative workarounds as when large numbers of New York City retailers began selling “noncigarette products with concept flavor descriptors” such as “purple” instead of “grape.”
Three included studies that measured policy success via scanner sales data found “significant, sustained levels of sales of restricted products in policy-affected areas.” The review’s authors piled on the pessimism by noting that retail scanner data leave out online sales, sales from specialty vape and tobacco stores, out-of-town purchases and “illicit sources.”
The upshot? Rather than express skepticism of flavor bans, the review authors doubled down. They encouraged larger scale (state or national) bans because “these governments typically have more resources … to defend and enforce policies and measure outcomes.”
A new survey and interview-based study looked at how young adult e-cigarette users in six major cities responded to the combined effects of 2020 federal restrictions on flavored cartridge-based vapes and state/local flavor bans. Very few (one in 12) reduced e-cigarette use. They went to alternative providers (including online) or used menthol/tobacco flavors. Faced with further restrictions, some intended to switch to cigarettes.
Recent studies of flavor bans have found preliminary evidence linking bans to increased cigarette use among young adults and high school students. Any reversal in the longstanding downward trend away from smoking is cause for concern.
In short, there’s little evidence thus far that bans achieve their stated goals. And unintended effects are potentially serious. One cynical but supportable conclusion: Tax Foundation researcher Ulrik Boesen called the Massachusetts ban on flavored e-liquids and menthol cigarettes “a public health measure that merely sends tax revenue to its neighboring states without improving public health.”
Alternatives to Flavor Bans
Atakan Erik Befrits, chief operating officer of the International Network of Nicotine Consumer Organizations, notes growing international interest in flavor bans as a means to protect children. He fears that the European Union and World Health Organization may have “painted themselves into a corner” with their current negative stances and find it difficult to change course. This would leave nicotine users, including those in low-income and middle-income countries, “with only the most dangerous delivery devices and the worst possible (if any) harm reduction alternatives to cigarettes for the 15–25 extra years that it will take for the natural experiment to run its course and become self-evident.”
Are there policies that meaningfully target youth tobacco use without torpedoing reduced-harm options for adults who smoke? Dobbins favors policies, such as the recent raise in the age of sale, and using technology and volume purchase limits to reduce youth access. He also supports prohibitions on “lifestyle” marketing, such as desktop DJ parties.
“After all, nobody will ever try an unflavored nicotine pouch, and few will switch if tobacco is the only option,” he says. “In the end, a balanced approach is the most sensible. I hope we get there.”
Adapting to Tobacco Flavor Bans
What do people who quit smoking with reduced-risk products do when flavors are banned? Members of the Consumer Advocates for Smoke-Free Alternatives Association (CASAA) were asked, “If you live in a state where flavors are banned, how has that affected your ability to stay smoke-free?” Examples below are representative of dozens of emailed responses.
When flavor bans shuttered trusted local vape shops, many former smokers felt adrift. “There was a store with a very knowledgeable owner who answered all of my questions. Unfortunately, because of the ban in New York, he was forced to close,” said Melanie. “The options were scary at best because you never knew if what you were getting was safe. I am still vaping and have found reputable places to get my products.”
To those former smokers used to buying products online, local flavor bans can be irrelevant. “I learned most of my information about vaping on various YouTube channels,” said Dave. “I think flavors are banned in my state/county, but I mix my own liquids, so the bans do not affect me.”
Many who responded get their products across borders, in person or via family. “The New Yorkers that refused to go back to smoking either started to DIY [do it yourself], went out of state, found an online store that still ships to N.Y., or go to a Native American reservation for their flavored e-liquid,” said Dale.
“I’m close enough to Connecticut to be able to get flavors there,” noted Rolf. “Without that, I think I would’ve returned to smoking.”
“My fiance has a daughter who lives in North Carolina, so I usually make a big juice order and have it delivered to her” for drop-off when she visits New York, reported Roger. “I do not know what I would do if I did not have the ability to get the juice. My favs are black licorice, almond and bubble gum.”
The extra effort required raises the costs of vaping, reducing its appeal versus smoking. “I can no longer afford to buy my favorite juice anymore. What was once a relatively cheap hobby has become too high priced,” said Zack from California. “I’m not going to lie; I’ve slipped up a few times since the flavor laws and nicotine taxes went into effect and found myself having a cigarette when socializing with friends.”
Calling flavor bans “nonsensical,” Rob in California blamed “our government [that] can’t enforce the age barrier to buy these products” and block “teenagers looking for kicks.” He has written repeatedly to his representatives in Congress and the California state legislature to educate them about vaping and “let them know that if vaping is ever banned or flavors we need are banned, I will have to seriously consider going back to cigarettes.”
“The flavor ban has been devastating. It feels like some states want the people to go back to cigarettes to recover some of that lost [Master Settlement Agreement] money,” said a former smoker who requested anonymity. “With that said, I’m still able to get flavored liquid. It just has to be done in a different way that I’m not going to outline here for obvious reasons.”
“The flavor ban has not affected me much; I want my vape to taste like an authentic tobacco vape,” said Marc. However, “the ban has hindered what was an alleged battle against the dangers of cigarettes. All the vape ban did was pull Big Tobacco up off the canvas after a KO a few years ago.”
Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Advisors. She spent 15 years on the faculty of Harvard Medical School.

December 1, 2022
In the Bag

Photo: Swedish Match
Swedish Match continues to dominate the U.S. nicotine pouch market with its popular Zyn brand.
By Stefanie Rossel
It’s still a fledgling industry but growing rapidly: According to the Foundation for a Smoke-free World (FSFW), nicotine pouches, also known as modern oral products, accounted for an estimated $2.38 billion, or 0.3 percent, of the global retail market in 2021. Toward the end of 2022, the segment had already achieved a value of at least $5.86 billion, estimates Market Reports World. The nicotine pouch market is forecast to expand at a whopping compound annual growth rate of 31 percent until 2028.
Pouches appeal to adult nicotine consumers because they are discreet and spit-free. They can be used in places where cigarettes or vaping products are banned and can be disposed of in household trash after use. Of the global category volume, the five leading modern oral manufacturers jointly hold an 82.1 percent share, according to the FSFW. Swedish Match is the largest player with a share of 48.7 percent, followed by BAT (20.3 percent), Swisher International (6.4 percent), Altria Group (5.4 percent) and Japan Tobacco International (1.4 percent).
Sweden and the United States are the largest markets for nicotine pouches. Both countries have long traditions of smokeless tobacco products. In the U.S., where the modern oral category currently accounts for 2 percent of the nicotine market, one brand sticks out: Swedish Match’s Zyn. Launched in 2016, Zyn pioneered the modern oral nicotine segment and has since experienced impressive and continued growth.
Based on MSA data that records shipments by distributors to retail stores, Zyn could extend its U.S. nicotine pouch market share to 66.5 percent in the third quarter of 2022. According to IRI data, which measures consumer purchases based on a sample of retail stores, the brand’s market share even exceeded 76 percent during the quarter. Zyn’s penetration is particularly high in the west of the U.S., where it was first introduced.
Boosting Production
Zyn’s continuing success in the U.S. was one of the factors that prompted Philip Morris International to make its offer for Swedish Match. In May, PMI bid approximately $16 billion to acquire Swedish Match. To overcome opposition from activist investors, the multinational in October increased the offer price. Nevertheless, Framtiden Partnerships, which owns almost 1 percent of shares in the Swedish company, refused to accept the increased offer, saying it undervalued Swedish Match’s leading position in the fast-growing modern oral nicotine market. At the time of writing, PMI had secured 82.59 percent of Swedish Match.
Owning a substantial stake in Swedish Match will give PMI a comfortable lead in the U.S. nicotine pouch market, where it currently has no presence. In recent years, Swedish Match has ramped up production of its nicotine pouches in the U.S. When Zyn debuted six years ago, it was available in approximately 40,000 stores in the west of the country. By the end of 2021, the product could be purchased in more than 120,000 retail outlets nationwide. Swedish Match increased Zyn U.S. shipments from 114.1 million cans in 2020 to 173.9 million cans in 2021. In February 2020, the company announced that it would raise production capacity again, enabling its factory to produce more than 200 million cans of pouches per year from 2022.
Zyn is made from tobacco-derived nicotine and comes in a variety of flavors, among them coffee, cinnamon or citrus. In 2021, Swedish Match said it had rolled out Zyn Menthol and Zyn Chili nationwide. Nicotine pouches are regulated by the U.S. Food and Drug Administration and are subject to age restrictions, a nicotine health warning and premarket assessment.
Swedish Match submitted premarket tobacco product applications for all Zyn products currently on the U.S. market in March 2020. The applications are currently under review by the FDA. According to Swedish Match, the applications show that almost all harmful and potentially harmful components associated with tobacco products are below detection levels in Zyn. Furthermore, consumer studies indicate that there is little interest in Zyn among users who are not current tobacco consumers and that there is a large potential to attract existing tobacco users to the products.
Lawsuit Pending
Despite Zyn’s dominance, the U.S. market for modern oral nicotine is highly competitive. According to Swedish Match, several companies expanded their nicotine pouch footprint in 2021. And some are even challenging the market leader in court. On Aug. 2, 2021, Dryft Sciences filed a lawsuit in the U.S. District Court for the Central District of California, claiming Swedish Match had driven it off the market with a series of sham legal actions.
Kretek International, the largest importer, marketer and distributor of specialty tobacco products in the U.S., announced the creation of a new company, Dryft Sciences, that would focus exclusively on Dryft nicotine pouches.
In a September 2019 statement, Kretek announced the new company intended to substantially expand its manufacturing capacity and roll out its nicotine pouch globally. It anticipated manufacturing 30 million cans of Dryft in 2020 and 60 million cans in 2021.
Shortly after the announcement, Swedish Match initiated several legal actions: It asked the International Trade Commission to investigate Dryft for alleged patent infringements and sued the company for the same reason in the U.S. District Court for the Central District of California. Next, it filed trade secret misappropriation claims under Kentucky and federal law.
“Because of [Swedish Match’s] actions, Dryft was never able to manufacture or sell the amount of product it reasonably anticipated it would when it issued the September 2019 press release,” Dryft Science explained in statement.
As a consequence, the plaintiffs said, Dryft’s market value dropped significantly. On Oct. 20, 2020, Dryft Sciences sold its formulations, brands, know-how and other relevant assets—originally valued at $485 million—to BAT for $150 million. BAT has since sold the products under its modern oral nicotine brand Velo.
Dryft Sciences requests $1.2 billion in damages. Swedish Match has not publicly commented on the lawsuit, and its financial report for the third quarter of 2022 made no reference to the case.
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.

December 1, 2022
Contemplating the Future

Tobacco growers gather in Portugal to debate the many challenges facing their sector.
By Ivan Genov
The year 2022 marked a return to in-person meetings for the International Tobacco Growers’ Association (ITGA). After successfully conducting regional conferences in the Dominican Republic for the Americas region and in Zambia for the Africa region in August, the ITGA held its annual general meeting (AGM) in Castelo Branco, Portugal—the organization’s secretariat headquarters.
The event was attended by tobacco growers’ associations from five continents—Africa, Asia, Europe, South America and North America—together with key industry stakeholders and local hosts. Participants included delegations from Argentina, Brazil, Bulgaria, India, Italy, Malawi, the Philippines, Poland, Portugal, Spain, Switzerland, the United Kingdom, the United States, Zambia and Zimbabwe. The three-day event featured an open session, during which a variety of topics were discussed—the latest leaf production dynamics, a global market overview, regulatory updates and three blocks dedicated to sustainable tobacco growing in Africa, the Americas and Europe. ITGA members shared the latest market information regarding their respective regions and highlighted the most pressing concerns going into the 2023 season. Among the frequently mentioned ones were the growing costs of production, unsatisfactory pricing and the importance of being included in major tobacco forums.
The Consumption Side
Euromonitor International provided an in-depth briefing dedicated to the global nicotine market. The market intelligence provider’s head of nicotine and cannabis research, Shane MacGuill, identified broadening of the nicotine universe, regulatory innovation (including sustainability) and the opportunities and threats created by Covid-19 as the key future consumption drivers. In 2021, the pandemic effects sent cigarettes to their best performance in years while the category accounted for 83 percent of the total tobacco value sales. With most regions likely to see both volume and value declines in their cigarette sales, the Middle East, Africa and China are where growth is most likely to come from in the future.
In the illicit sphere, sales are expected to rebound significantly in the short term as costs of living are growing rapidly in many markets. Currently, the countries with the biggest illicit penetration are Ecuador, Peru and Uganda. In emerging products, heated tobacco is seen as the leading reduced-risk format while nicotine pouches show significant potential, mainly driven by sales in the U.S., but starting from a lower base. The importance of sustainability is another key driver in the tobacco and nicotine universe. The growing focus on cultivation and its environmental impact; supply chain emissions, widely accepted as environmentally damaging; and product waste, which is now in part tackled by the EU Directive on Single-Use Plastics, are among the key issues that will shape the regulatory framework. Finally, Euromonitor flagged the potential of legal cannabis, which is forecasted to reach nearly $100 billion in sales by 2026, according to company estimates, with focus on the U.S. and Germany as key examples of how the newly emerging industry could take shape.
The Production Side
After a sharp drop in 2020, 2021 marked a slight rebound in production for the biggest tobacco variety, flue-cured Virginia (FCV). This was largely driven by production increases in the U.S., Brazil and Zimbabwe, coupled with good weather conditions and revival of trade after the initial waves of Covid-19. In 2022, further production growth was registered, but this was primarily triggered by a 110 million kg increase in China. The biggest producer of FCV, excluding China, is Brazil, where the season concluded with 60 million kg of FCV less than the year before, with production costs up nearly 30 percent. Projections for 2023 suggest that China will keep the 2022 production levels while Brazil will also increase its FCV outputs, which could lead to additional growth on a global level. Pricing is showing an upward trend in some of the biggest markets for FCV, but the rapid growth in production costs is the biggest concern flagged by most ITGA member associations. As inflation and unstable supply chains are likely to continue shaping trade in 2023, this issue is likely to persist in the medium-term to long-term.
The trajectory for burley tobacco is downward. Production levels have been consistently declining in the past three years to four years. In contrast, for 2023, leading merchants expect notable production growth for burley in Africa, bringing the global quantities closer to the 500 million kg mark. Whether this forecast will materialize remains an open question. A market of particular importance for burley, Malawi experienced a difficult season. Sales were just under 70 million kg, down from 104 million kg the year before, representing a more than 30 percent drop on a yearly basis. The average price of $2.03 meant that total proceeds for the sector were only 7.7 percent down in comparison. The Tobacco Association of Malawi has indicated that 2021 and then 2022 have recorded a high increase in input prices because of Covid-19-related logistical developments and the impact of the Ukraine crisis, with fertilizer prices almost doubling. Fertilizers will be a big factor going into 2023 as well. In the U.S., another important producer of burley, growers indicated that interest in the variety is rapidly decreasing. Although some have diversified into other tobacco varieties, such as dark air-cured for the growing popularity of smokeless products, next season’s production is likely to register a double-digit year-on-year decline.
Focus on Other Markets
The AGM also shed light on some of the smaller markets that do not often enter the spotlight. For example, in the Philippines, production currently stands at 46 million kg, with an expected rise of 3 million kg going into the 2023 season. During the current crop, at least 4 million kg were lost due to rains. In Italy, the season was particularly difficult, with the rising cost of gas, fertilizer and power impacting production. A significant number of farmers took a sabbatical year while climate was hot and dry with several thunderstorms impacting production. The situation in the wider European region is also difficult. In the span of a decade, production went down drastically, with little help for growers on a regional level. Recently, the war in Ukraine has seriously been affecting pricing and availability of fertilizers. Shisha has arisen as a new opportunity for EU growers, especially in Poland.
Special attention was also paid to Ukraine, where the war has a significant impact on the larger agricultural environment. According to U.N. data, a significant number of markets depend heavily on agricultural commodities from Russia and Ukraine while the wheat dependence of many African and other least developed markets is also noteworthy. In addition to the fertilizer shortage and availability issues, big tobacco manufacturers have large exposures of their cigarettes and heated-tobacco portfolios to Russia and Ukraine, making supply chain complications even more pressing.
Election of New ITGA President and Future Objectives

Jose Javier Aranda (Photo: ITGA)
Among the important outcomes of the ITGA’s 2022 AGM was the election of Jose Javier Aranda as the new association president. Aranda belongs to a family of farmers with roots and traditions in Argentina’s Lerma Valley. His ancestors were among the first Virginia tobacco producers in Salta Province. Currently, he serves as the first member of the Camara del Tabaco de Salta, a founding organization of the ITGA and secretary of the Cooperativa de Productores Tabacaleros de Salta. His leadership experiences are built on 16 years of action in the representative entities of the Salta producers.
Going into next year, ITGA members highlighted the importance of maintaining and strengthening communications with already scheduled regional meetings in Africa, America, Asia and Europe. The ability to sit in all meetings where the future of the sector is being decided, including meetings hosted by the World Health Organization, is among the goals of the new president. The multiple challenges facing the most vulnerable part of the supply chain necessitates the close cooperation between associations and major industry stakeholders to continue, so the sustainable future of millions of people taking part in tobacco growing can be ensured. Finally, growers agreed that tobacco should be grown in a sustainable way, respecting the environment and making sure all processes involved in production are fully compliant.
Ivan Genov is ITGA’s manager of tobacco industry analysis.

December 1, 2022
Hong Kong May Resume ENDS Shipments

Photo: Tatiana Morozova
The Hong Kong government wants to resume shipment of alternative smoking products through the city to boost the air cargo industry, reports the South China Morning Post. Domestic sales would remain illegal under the proposal.
The city currently prohibits imports and transshipment of electronic nicotine-delivery devices, many of which are manufactured in neighboring Shenzhen.
“The government hopes to ensure the policy on the importation ban on alternative smoking products will be preserved while maintaining Hong Kong’s position as a leading international aviation and logistics hub,” said Pamela Lam Nga-man, deputy secretary for transport and logistics.
Hong Kong International Airport handled 5 million tons of cargo in 2021, which is about 42 percent of the city’s overseas trade worth about HKD4.34 trillion ($556 billion). Air cargo volumes fell 18 percent on average from May to October of 2022 compared with the same period last year. Some of this decline was attributed to loss of transshipment of alternative smoking products from mainland China; most of the materials were transported through Hong Kong.
Under the government’s proposal, products that arrive by sea for air shipment would use a mainland logistics park set up under a pilot transshipment scheme between the city’s airport and the mainland city of Dongguan. A scheme for secure road transport from the mainland would be set up, documents would have to accompany shipments to prevent them leaking into the black market, and products would have to be directly transferred by designated routing in Hong Kong. Goods would be delivered to restricted areas of the airport and held until flown out. Provision of advance cargo information, application of designated seal or e-lock on containers and GPS tracking of cargo would also be used.
November 29, 2022
Gallup: Fewer Young Americans Smoking

Photo: Wlodzimierz | Adobe Stock
The smoking rate among young Americans has fallen from 35 percent to 12 percent over the past 20 years, reports The Hill, citing to a new Gallup poll.
Data shows that the decline among those aged 18 to 29 was more than double any other age group measured, meaning young adults are the second least likely group to smoke following those aged 65 and older.
Between 2001 and 2012, the rate of young adult smokers was higher than any other age group.
Between 2019 and 2022, 7 percent of U.S. adults reported smoking e-cigarettes, and 19 percent of young adults reported e-cigarette use.
“Given these differences, young adults are more likely to vape than to smoke cigarettes while among older age groups, cigarette smoking prevails,” the report states.
It is unclear how e-cigarette use has grown in this age group in recent years as Gallup only started polling e-cigarette use in 2019. Data from the U.S. Centers for Disease Control and Prevention shows an increase in youth e-cigarette use between 2011 and 2018, however.
“These data suggest that much of the decline in cigarette smoking among young adults may have been offset by vaping, indicating that young adults are still smoking products containing nicotine but through different means,” the Gallup report states.
November 29, 2022
Vape Group Denounces EU Vape Tax Proposal

Photo: Orlando Bellini | Adobe Stock
The World Vapers’ Alliance (WVA) has denounced the EU’s leaked plan to increase vaping taxes, according to the U.K. Vaping Industry Association.
“The [EU] Commission claims that higher taxes will improve public health, but the reality is the exact opposite,” said WVA Director Michael Landl. “A less harmful alternative, such as vaping, must be affordable for ordinary smokers trying to quit cigarettes. If the commission wants to reduce the burden of smoking on public health, they must make vaping more affordable and accessible, not less.
“High taxes hit the least advantaged people most. In times of multiple crises and people struggling to make ends meet, making vaping more expensive is the opposite of what we need. Policymakers must understand that tax increases on vaping will force people back to smoking or the black market, a scenario nobody wants. In times of crisis, people shouldn’t be further punished by an unscientific and ideological fight against vaping. This must be stopped,” said Landl.
“Rather than fighting vaping, the EU finally must embrace tobacco harm reduction. What we need is risk-based regulation. Vaping is 95 percent less harmful than smoking and, therefore, must not be treated the same way as conventional smoking,” added Landl.
November 29, 2022