Author: Marissa Dean

  • FDA Issues Warning to Puff Bar, MDOs to Hyde

    FDA Issues Warning to Puff Bar, MDOs to Hyde

    Credit: Puff Bar

    New data from the 2022 National Youth Tobacco Survey (NYTS) shows that 2.5 million U.S. youth use e-cigarettes, according to the published findings in the Morbidity & Mortality Weekly Report released by the U.S. Food and Drug Administration in conjunction with the Centers for Disease Control and Prevention.

    “The FDA remains deeply concerned about e-cigarette use among our nation’s youth. It’s clear that we still have a serious public health problem that threatens the years of progress we have made combatting youth tobacco product use,” said FDA Commissioner Robert M. Califf. “We cannot and will not let our guard down on this issue. The FDA remains steadfast in its commitment to using the full range of our authorities to address youth e-cigarette use head-on.”

    The study shows that about one in 10 middle school (3.3 percent) and high school (14.1 percent) students reported current e-cigarette use; current use is defined as use within the past 30 days. About 85 percent of surveyed students reported using flavored e-cigarettes while 27.6 percent reported daily use. Respondents most commonly used disposables, with Puff Bar being most common (14.5 percent) followed by Vuse (12.5 percent) and Hyde (5.5 percent). Puff Bar and Vuse were pre-specified options on the survey, but Hyde was written in by students as their preferred brand.

    Since methodology changes occurred, including in survey administration and data collection procedures due to the Covid-19 pandemic, comparisons between the 2022 NYTS and previous years is limited.

    Following the release of this data, the FDA has issued a warning letter to Puff Bar for receiving and delivering e-cigarettes in the U.S. without a marketing authorization order. The FDA has requested a response within 15 working days of receiving the letter, detailing how the company intends to address the FDA’s concerns, including the dates on which they discontinued the sale and/or distribution of these tobacco products and plans for maintaining compliance with the Federal Food, Drug and Cosmetic Act. Failure to address the violations puts the manufacturer at risk of regulatory action, such as a civil money penalty, product seizure and/or injunction.

    The Puff products subject to this warning letter are nontobacco nicotine products.

    After reviewing premarket tobacco product applications for 32 Hyde e-cigarettes, the FDA issued marketing denial orders (MDOs) for these applications submitted by Magellan Technology Inc. In conducting its scientific review, the FDA determined that the applications lacked sufficient evidence demonstrating that the products would provide a benefit to adult users that would be adequate to outweigh the risks to youth. No Hyde products have received marketing authorization orders from the FDA.

    “Congress gave the FDA authority to hold manufacturers and retailers who violate the law accountable,” said Brian King, director of the FDA’s Center for Tobacco Products. “FDA is actively working to identify violations and to swiftly seek corrective actions, particularly for products popular among youth. We will use all compliance and enforcement tools available to us, as appropriate, to protect our nation’s youth.”

  • A Clean Sheet

    A Clean Sheet

    Photo: phonlamaiphoto

    Cigarette paper manufacturers are reconfiguring production processes to reduce their environmental impact.

    By Stefanie Rossel

    The effect of papermaking on the environment is considerable: According to Wikipedia, the pulp and paper industry is the world’s fifth-largest consumer of energy, accounting for 4 percent of global energy use. The sector uses more water than any other industry; producing 1 ton of paper requires an estimated 300 tons to 400 tons of water. Other issues include deforestation, greenhouse gas emissions, harmful chemicals and wastewater.

    Driven by greater environmental awareness and stricter regulations, paper manufacturers have been moving toward more sustainable production practices. Tobacco Reporter spoke to leading players in the cigarette paper business about their strategies to reduce the environmental footprint of their operations.

    Photo: BMJ

    Reduce, Reuse and Innovate

    Liem Khe Fung

    Based in Indonesia, BMJ is the world’s No. 3 cigarette paper producer, supplying about 10 percent of global requirements. BMJ Innovation Center Director Liem Khe Fung is convinced that without a sustainability strategy, a company won’t survive the next 10 years to 15 years. Therefore, BMJ has adopted a strategy of “reduce, reuse and innovate.”

    “First, we reduce energy consumption,” explains Liem. “Second, we reuse or recycle water from the production line to minimize the use of water from the river. We also select the chemicals used in the production carefully to minimize their impacts to the environment. Finally, we intend to replace plastic-based materials with paper/pulp-based materials, for example, replacing plastic[-based] or metalized-based packaging with paper-based packaging that is safe for the environment yet has the same functionalities.”

    Paper machines consume huge amounts of energy. To reduce that consumption, BMJ replaced energy-hungry machine parts, such as the motors that drive the rolls, with more efficient parts. By generating and feeding exactly the right amount of steam to the drying drums, BMJ reduced waste. The company also captured part of the carbon dioxide (CO2) emissions from its coal boiler and used them to produce calcium carbonate (CaCO3), a key chemical in papermaking. According to Liem, using CaCO3 in liquid form saves much energy because it eliminates the need to transform the chemical into a powder for transportation.

    Such actions have enabled BMJ to reduce its energy consumption by about 15 percent in just a few years.

    Papermaking also requires lots of clean water, an increasingly scarce resource. Water accounts for up to 99.9 percent of the material mixture in the web-making process. Water is also used to generate steam to dry the web or paper. To reduce water consumption, BMJ modified its No. 3 paper machine to recycle water back into the production process several times before sending it to wastewater treatment.

    Currently, BMJ derives 20 percent of its water requirements from recycled water. The company aims to use 50 percent recycled water by the end of 2023.

    Looking ahead, BMJ hopes to install renewable energy systems, such as solar panels, by 2023. “We also would like to replace some of the coal used in our boiler with biomass,” says Liem.

    Papermaking requires large amounts of energy and water. (Photo: Jose Luis Stephens)

    Own Your Power

    Vincent Li

    Creating an in-house green energy supply is also at the heart of Hengfeng Paper’s sustainability strategy. With 21 production lines and an annual production of 230,000 tons, the Chinese manufacturer of cigarette paper, plug wrap and tipping base is an industry giant.

    The company, which celebrates its 70th anniversary this year, recently published a carbon footprint status and emission reduction action plan designed to meet government requirements. In September 2020, President Xi Jinping announced that as part of the country’s 14th five-year plan, China would strive for peak CO2 emissions by 2030 and carbon neutrality by 2060.

    Due to its level of development, China’s primary energy demand is expected to increase to 6 billion tons of standard coal by 2030. The government aims to increase the proportion of power generated by clean energy sources to 59 percent by 2030 and 86 percent by 2050 while boosting the proportion of electricity generated by clean energy sources to 48 percent by 2030 and 83 percent by 2050.

    To help China meet these objectives, Hengfeng plans to slash its carbon emissions by more than a third in eight years. The company will focus its efforts on improving the efficiency of power and steam acquisition, as a carbon footprint analysis identified these activities as the major contributors to the company’s global warming potential.

    Among other initiatives, Hengfeng plans to build a 10 MW photovoltaic power plant. The company has already signed cooperation agreements with partners and is currently preparing for construction, according to Vincent Li, sales manager at Hengfeng Paper’s Export Department II. Upon completion, the facility will generate up to 1,000 kWh, which will be fully used for paper production.

    To recover energy, Hengfeng will deploy cogeneration technology, which involves the thermodynamically efficient use of fuel. “In traditional power production, some of the energy must be discarded as waste heat, but in cogeneration, some of this heat is put to use,” explains Li.

    “Hengfeng makes full use of low-pressure steam after power generation for paper drying to achieve the purpose of maximizing energy utilization,” he says. The company fully recovers and utilizes the heat of the condensed water generated by the paper web drying process. It also plans to install high efficiency heads on the water pipe for washing. “We will promote high-pressure cleaning of the Fourdrinier* sections, thus improv[ing] the cleaning efficiency and sav[ing] the washing water by mobile spray and increasing the spray pressure,” adds Li.

    Hengfeng has also been working on reducing its carbon footprint in CaCO3. “Hengyuan biochemical company, the calcium carbonate supplier [for] Hengfeng, introduced German process technology in 2017 and introduced the flue gas of Hengfeng’s thermal power plant into the reactor through an overhead pipeline,” says Li. “It uses quicklime and carbon dioxide in the flue gas to generate light calcium carbonate, comprehensively utilizes the carbon dioxide in the flue gas and reduces the carbon dioxide emissions. The annual comprehensive utilization of carbon dioxide in the flue gas is about 22,000 tons.”

    To reduce fresh water consumption, Hengfeng has expanded the volume of its storage tank and increased the share of recycled water, among other measures. “We also introduce, popularize and apply new water-saving technologies and carry out a water-saving inspection every month to ensure that water-saving targets are achieved,” says Li.

    SWM’s Quimperlé facility in Brittany, France. (Photo: SWM)

    A ‘Thinner’ Impact

    Marc Bettoli

    SWM, a provider of engineered fine papers with expertise in natural fiber-based solutions, has launched a new initiative called “Thinpact” that regroups its different actions across its engineered paper division.

    The company aims to set an example for the industry by researching and developing sustainable processes and solutions while being authentic and transparent about the process.

    For the 2020–2030 period, SWM wants to reduce the CO2 emissions of its engineered papers business unit by 40 percent and its water withdrawal volumes by 25 percent.

    “Reducing our impact is a complex process to which SWM is fully committed,” says SWM ESG Manager Marc Bettoli. “We decided to act step by step, starting with energy and waste. The first step for the reduction of carbon emissions is a program launched on Scope 1 and Scope 2—direct and energy-related—emissions. We have designed a sufficiency plan in order to get the right setting on paper machines. For instance, the drying temperature is set differently depending on the reference produced on the machine. We have also developed a plan to run the most efficient assets for the needed usage. For instance, we choose a pump with the best power, yield or technology, or we recover all possible heat from steam. The third step is the use of renewable sources of energy. For instance, we will add renewable electricity in the power mix.”

    SWM has reduced its CO2 intensity—that is, the CO2 equivalent emissions per metric ton of goods produced, Scopes 1 and 2—by 11 percent between 2020 and 2021. At its largest site, Quimperle in France, the company has saved 3 percent of energy consumption year to date.

    Waste reduction is also on SWM’s agenda. At Quimperle, the company plans to reduce landfill waste by 30 percent in the first year of a pilot program through internal incentives and education, waste assessment and waste valorization.

    In addition to Quimperle, SWM has two other paper mills in France. This summer, France experienced the impact of climate change firsthand through a historic drought.

    At the time of writing, the company’s French sites had not yet been impacted by water scarcity. “We are monitoring water levels on all sites with environmental managers at the sites, and we are in close contact with administration to [make] decisions if needed, especially in times of crisis,” says Bettoli. “We have implemented water recycling modes that were prepared for a long time. With the specific program on water management in order to reach or exceed our minus 25 percent goal for 2030, we will be prepared for upcoming historic droughts.”

    Some of SWM’s energy comes from biomass. In Le Mans, for example, a biomass boiler produces steam. “We have developed a plan to roll out biomass boilers on other papermaking sites by 2030,” says Bettoli. “We are currently studying possibilities to add renewable electricity in our power mix, with the ‘Virtual Power Purchase Agreement’ approach.”

    The company has also installed several energy recovery processes in its mills. The Quimperle plant, for example, both produces and burns black liquor, a byproduct of pulp processing, for energy recovery. SWM uses heat exchangers to recover energy losses of air and hot water and heat from production processes to heat its offices and buildings. It has also implemented hood closures and automatic controls to limit losses such as exhausted air.

    By reusing excess water from the paper machines for dilution in the stock preparation area, the company reduces water consumption. For that purpose, SWM has implemented a fiber recovery system.

    Bettoli says the company is also reshaping product design to support the development of new products that have a lower overall impact. “This approach is included in our R&D processes,” he says. “We have developed an eco-scorecard, and we are looking forward to collaborating with the industry to reduce the impact of our activities together. One recent example is the Evolute filter media product range, which is paper for filters to replace standard acetate within filters.”

    *Modern papermaking machines are based on the principles of the Fourdrinier Machine, which uses a moving woven mesh to create a continuous paper web by filtering out the fibers held in a paper stock and producing a continuously moving wet mat of fiber. This is dried in the machine to produce a strong paper web.

    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.
  • Banned for Life

    Banned for Life

    Photo: Nikolay

    Harm reduction activists worry about New Zealand’s plan to phase out tobacco use.

    By Stefanie Rossel

    Imagine it’s 2039. You’re at one of a few remaining tobacconist stores with a former classmate, both trying to buy some combustible cigarettes. But as it happens, you were born on New Year’s Day 2009 and your friend on New Year’s Eve 2008. An ID check lets him acquire the desired smokes, but you are not allowed to buy the products—for the duration of your life.

    This is a situation New Zealanders will soon be facing. In January, New Zealand unveiled its Smoke-Free Aotearoa 2025 Action Plan, an amendment of the country’s Smokefree Environments Act (1990), which seeks to take the country’s already low current smoking prevalence of just under 10 percent down to 5 percent or below within the next three years.

    The proposal’s most spectacular element is a generational tobacco ban: Starting in 2023, anyone born on or after Jan. 1, 2009, would be barred for life from purchasing combustible cigarettes under the new rules. Someone aged 14 when the law entered into effect would hence never be able to legally purchase tobacco. In a statement, Ayesha Verrall, the country’s associate health minister, said the government wants to make sure young people never start smoking. While it would still take decades to phase out tobacco products completely, the generation currently at school would feel the effect of the legislation very soon.

    In late July, the bill passed the first reading in Parliament. It is now being reviewed by the Parliament’s public health select committee and is expected to be adopted in December. The regulation would be a world first, and implementation is likely; Prime Minister Jacinda Ardern’s Labour Party is governing with an absolute majority.

    Nancy Loucas

    Reactions to the proposal have been divided, according to Nancy Loucas, co-founder of Aotearoa Vapers Community Advocacy (AVCA). The association agrees with the “smoke-free generation” in principle but remains concerned that it could be an overreach. “Our youth smoking rate is already at 1.3 percent, so many are saying it’s unnecessary and overkill,” she says. “There are concerns [that] an older sibling giving someone from the smoke-free generation [SFG] tobacco may be criminalized, and that is not acceptable. Others are saying it’s a possible human rights violation because if someone from the SFG comes of age and can drink, etc., but not buy tobacco, how can the government prevent a legal adult from a legal consumer product? The reaction has been much more negative than the government expected, I would say.”

    Marewa Glover

    Marewa Glover, director of the Centre of Research Excellence: Indigenous Sovereignty and Smoking, describes the strategy as “virtue signaling.” “The negative consequences of previous ‘smoke-free’ legislation are already resulting in an uptick in young people committing robberies for tobacco and being charged and imprisoned for such crimes,” she says. “Youth mental health and preventing youth suicide are a higher priority for increased intervention. The negative consequences of the proposed legislation risks will be worsening that crisis. The law will create an unnecessarily larger bureaucracy, increased enforcement activity, and more people will be diverted into the justice system. It also will set a dangerous precedent. Young people are not taking up smoking now. It is no longer considered ‘cool.’ The rationale for preventing the ‘rite of passage,’ as stated by the minister in her interview on June 21, 2022, with the editor of the Tobacco Control journal, is therefore outdated and flawed.”

    The proposal not only discriminates against age. Legal experts have indicated that the generational ban will particularly target Maori and Pacific Islanders, among whom smoking prevalence is disproportionately high. According to Health New Zealand, the Maori smoking rate was 31.4 percent in 2019–2020. At 32 percent, Maori women constitute New Zealand’s highest smoking rate. According to critics, the generational tobacco ban could end up stigmatizing certain communities. “That is a very real possibility,” confirms Loucas. “The Maori and Pacifica communities are already disadvantaged, and the last thing they need is more stigma and discrimination.”

    Glover, who has been working closely with Maori smokers for years, says New Zealand’s adoption of government Ministry of Health campaigns to encourage people who smoke to quit or switch to vaping is working particularly well for Maori. “There is no need for another drastic punitive law to be passed. The negative consequences already mentioned will worsen other outcomes for Maori, e.g., associated with the increase in black market activity.”

    Rapid Withdrawal

    Proponents say the goal of a smoke-free generation is achievable and realistic whereas smokers’ rights advocates consider the plan an attack on personal freedoms, a prohibition that will not work. Others fear it might backfire and fuel the already burgeoning illicit cigarette market, which is estimated to account for around 10 percent of New Zealand’s total tobacco market. Loucas believes the illicit market is much higher because the official numbers capture only imports while leaving out the growers and sellers in the country. “The gangs will take over as they have with everything else the government ‘bans’ if the law is punitive,” she says. “Bans don’t work. They never have and never will. The market, especially the gray and black market, will always rise to meet the need.”

    The two other components of New Zealand’s Action Plan also have the potential to boost the black market: Starting in 2024, the number of legal retail outlets will be reduced from about 8,000 to fewer than 500. Cigarettes will no longer be available at kiosks, gas stations or supermarkets, with sales limited to licensed tobacco retailers. From 2025, the country will mandate the sale of very low-nicotine cigarettes. Currently, a 90 percent to 95 percent nicotine reduction to nonaddictive levels is being discussed. With a sense of understatement, Glover describes a nicotine yield of below 0.05 mg per gram as “subfunctional.”

    Almost overnight, New Zealand’s government will make its citizens quit cold turkey. In contrast to the World Health Organization’s anti-tobacco harm reduction stance, though, the proposed law includes a massive broadening of addiction therapy offers. Vaping, which was regulated in 2020, will remain legal. “Vaping has worked so far in the last year to cut the number of people who smoke down drastically,” says Loucas. “I think we stay the course. What is missing is a public education campaign that was slated to start upon legalization but was sidetracked because of Covid. That education plan needs to be rolled out immediately to stop the disinformation campaign from a select few NGOs [nongovernmental organizations] who are anti-nicotine.”

    Having passed the generational tobacco ban upon first reading in July, New Zealand lawmakers are likely to endorse the legislation in December. (Photo: asanojunki0110)

    Legal Issues

    With its tobacco control plans, New Zealand enters uncharted territory. While the tobacco-free generation was first discussed in 2010, it was never implemented anywhere on a nationwide scale. Bhutan banned tobacco sales and cultivation in 2010, but the measure backfired, with smugglers taking the place of legal vendors. In 2021, the Himalayan kingdom lifted the sales ban. 

    Mandatory very low-nicotine cigarettes, an objective also pursued by the U.S. Food and Drug Administration, might run into legal challenges as well, as AVCA points out. Like the generational tobacco ban, such a measure might prove to violate human rights on the basis that adults have the right to make informed choices. Vaping advocates believe there’s insufficient longitudinal research to prove that very low-nicotine cigarettes help people quit smoking. Further, the move could also see New Zealanders heading to the black market or growing their own tobacco.

    The question of whether the planned measures are proportional is justified. New Zealand has been a model student as far as the implementation of tobacco control measures is concerned. From the 1970s, the country has used the full range of tobacco control instruments, including smoke-free laws, advertising bans and standardized cigarette packaging. Due to high taxation, New Zealand cigarette prices are the second-highest in the world after Australia’s. A pack of 20 Marlboro cigarettes retails at around nzd37 ($22.69). Smoking rates have dropped drastically over the past decades. With those lighting up accounting for less than 10 percent of the population, the country has roughly 450,000 smokers left.

    A Blueprint for Others?

    The world is watching as New Zealand embarks on its smoke-free experiment. Shortly after New Zealand had revealed its Action Plan, Singapore’s health authorities started debating whether the city state should follow suit by gradually raising the smoking age until it covers the entire population. However, Singapore is unlikely to copy New Zealand’s embrace of vaping as an alternative to smoking, as vape products are banned in the city state. Singapore has been fiercely anti-tobacco since the 1980s, with measures having become progressively stricter over the years. The country’s smoking prevalence presently stands at 10 percent.

    Also in January, Malaysia announced it would ban the use, possession and sale of cigarettes and vape products for those born after 2007. The bill proposes a fine for offenders and also empowers enforcement officers to open without a warrant any baggage or container for inspection. The draft law was met with resistance from several sides. The parliamentary select committee on health called for the plan to be postponed by three years, arguing that the period should be used to study the possible need to enact separate legislation for combustible and noncombustible tobacco products.

    In Malaysia, too, there are concerns about black market sales. Critics fear a generational tobacco ban would further invigorate the country’s illicit cigarette market, which is proportionally already the largest in the world, accounting for about 60 percent of the country’s total tobacco market. In August, the bill was sent back to the parliamentary select committee for further scrutiny. The regulation may be further delayed or even abandoned as Malaysia’s Parliament is expected to be dissolved in late October after the tabling of the budget.

    Outside the Asia-Pacific region, Denmark said it wanted to introduce New Zealand-style measures, including a generational ban that would prohibit anyone born in or after 2010 to buy tobacco products.

    “Bans and prohibition do not work,” Loucas emphasizes. “They create more harm, and that is the last thing any public health promoter wants as their legacy. In countries that are willing to accept tobacco harm reduction on the basis of science and evidence, they can (and should) see similar decreases in smoking relative to population, such as New Zealand has. But it requires risk-proportionate regulations and effective and compassionate enforcement.”

    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.
  • Failure to Launch

    Failure to Launch

    Photo: Aleksandr

    Zimbabwe’s attempt to diversify into cannabis is proving more challenging than some anticipated.

    By Daisy Jeremani

    Zimbabwe announced its approval for cannabis growing for medicinal and industrial use in April 2018 amid much hope for an immediate economic impact.

    Finance Minister Mthuli Ncube projected export revenues of up to usd1.2 billion in the first year of growing, processing and exporting the crop and its products. The forecast is almost at par with what gold, the southern African country’s most lucrative export, brings in—and higher than the amount it generates from tobacco, its current No. 1 agricultural export. Cannabis was, too, touted as a diversification route for tobacco growers amid declining demand for the golden leaf.

    However, experts have cautioned that Zimbabwe may not realize the benefits as rapidly as authorities initially projected. Forty-two months since the government issued the first licenses, only 15 out of the 57 companies have started work, hampered by a plethora of challenges. Chief among them: lack of financing and expertise.

    Speaking to Tobacco Reporter just after her organization, Zimbabwe Industrial Hemp Trust (ZIHT), hosted a cannabis roundtable under the theme “Unpacking the Challenges and Potential of Cannabis as a Medicine” in Harare, the capital city, on Sept. 7, 2022, Zorodzai Maroveke said a lot of work still needs to be done for the country to realize gains from the crop.

    A key proponent of legal cannabis production, Maroveke said most licensees lack guaranteed off-take agreements. An unstable market has not helped matters, she added, as prices have kept fluctuating since Zimbabwe became Africa’s second nation after Lesotho to legalize cannabis for medicinal and industrial use.

    “An unstable market has been a major challenge for investors to move forward with this project in Zimbabwe and also the issue of funding. Most banks are not willing to finance cannabis because they still don’t understand it,” said the ZIHT founder and CEO.

    Another obstacle for license holders is that they have to import expertise as this is a new frontier for the country. Recruiting the right skills is expensive. The cannabis regulatory framework, which she described as very strict, has also hampered the speed at which the industry is progressing.

    Maroveke said the cost implications of growing medicinal cannabis are high, citing the European Union’s good manufacturing practices (GMP), which force producers to set up facilities of a high standard of hygiene and security and hire well-trained personnel.

    “You will find that for a very small project, maybe even a hectare project, one would potentially pump out not less than usd1million,” said Maroveke.

    So if one is to expand, there is a need for more funding, not considering money that must be paid for the GMP compliance auditors as well as inputs, like seeds, which are not only expensive but are also imported.

    Though industrial hemp is generally cheaper to produce than medicinal cannabis, the cost depends on its type, she noted. If it is botanical, which is grain hemp for the CBD flower, one should be prepared to part with at least usd200 for a 5 ha project. The market determines the standards and quality that the farmer has to put in.

    “So if you’re going to do hemp for fiber and grain, it’s obviously going to be cheaper; you’re looking at usd3,000–usd4,000 a hectare. But Zimbabwe’s hemp and grain industry hasn’t developed to that extent, so we don’t have many activities in those particular subsectors of industrial hemp,” she said.

    Tobacco is likely to remain Zimbabwe’s No. 1 agricultural export for the foreseeable future. (Photo: Cavendish Lloyd)

    The Sept. 8 roundtable was meant to find, bridge and plug the knowledge gap not only among health professionals but also other experts along the value chain. It is against that backdrop that a top Zimbabwean pharmaceutical supplier, New Avakash International, awarded scholarships to 100 health personnel to undergo training to make them more conversant with cannabis.

    At the moment, local varieties are at the research stage. Due to the dictates of the market, buyers direct farmers toward the genetics they want, which at this stage are all imported. As a result, roundtable participants called for more investment in research and development and the development of local growing and processing expertise. As the industry tries to find its place, Maroveke said the government should support it through tax breaks and other incentives for cannabis value addition to be accelerated.

    She said Zimbabwe will only realize the gains from cannabis once production kicks off and the export markets are stable and guaranteed.

    Former Zimbabwe Tobacco Research Board (TRB) CEO Dahlia Garwe noted that the country leapt in headfirst without conducting proper market research.

    “We were supposed to look at what kind of varieties we should be growing and where exactly the material will end. We have a lot of cases where people grew cannabis, but they don’t know what to do with it,” she said.

    Garwe noted that the costs involved in setting up facilities for the processing of the herb and for a basic setup are as high as usd400,000. For a facility that is compliant with all the necessary health requirements, the costs can be about usd3 million.

    With regards to research that is underway, she said experts are looking for locally adapted germplasm, with the TRB going around the country to identify varieties adapted to the local environment. After that, they would breed local varieties and material from elsewhere to come up with varieties that are most suitable for Zimbabwe.

    “That is ongoing work. It will obviously take a few years before we get to a point where we say we have locally adapted varieties,” she said.

    However, this is not to say varieties developed elsewhere can’t do well in Zimbabwe, “but that’s where the research comes in, where you’re actually evaluating varieties coming from elsewhere and you see whether they actually work or not.”

    Speaking while commissioning a usd27 million medicinal cannabis project by Swiss Bioceuticals in May 2022, Zimbabwean President Emmerson Mnangagwa expressed frustration over the slow investment by licensees.

    “It is disappointing that since 2018, only 15 out of 57 entities issued with cannabis licenses are operational,” he said. “Such licenses should not be held for speculative purposes, and those not using them risk government invoking the ‘use it or lose it’ principle.”

    Former Tobacco Industry and Marketing Board chairperson Monica Chinamasa said farmers are still waiting for the ongoing research on varieties that are suitable for the local climate.

    “We are still waiting for the TRB to guide us on this matter,” she said.

    The EU requires GMP and good agricultural collection practices certificates to be in place before a cannabis producer can venture into that business. The financial implications for applying for the certification are huge for some Zimbabwean investors, said Munyaradzi Shamhudzarir of Voedsel Cannabis, one of the few Zimbabwe-owned companies to have planted cannabis.

    “The process of getting these certifications is also very long—at least three years before you can complete all the audits and get certification,” he said.

  • Transformation and Its Enemies

    Transformation and Its Enemies

    Photo: Chan2545

    The twin strategies of migration away from combustible nicotine products and diversification into new businesses underpin the tobacco industry transformation. Why is there so much opposition?

    By Clive Bates

    How should a rational and dispassionate public health advocate think about tobacco companies? How should tobacco companies think about public health?

    The simple and lazy answer is that they are sworn enemies in a permanent and irreconcilable conflict. This idea has now been immortalized as a guiding principle by the World Health Organization. The “scream test” devised by Australian anti-tobacco campaigners was a crude forerunner of the WHO’s principle: “If a new policy gets no reaction from the tobacco industry, it rarely has an impact, but if the industry screams blue murder, the impact will be large.” If the industry hates it, it must be good for public health.

    But what if there are policies, practices and messages that are good for the tobacco industry and public health? Or bad for both? One of the accusations frequently thrown at public health advocates who favor tobacco harm reduction is that they are doing the bidding of Big Tobacco. No one likes to be accused of that. But implicit in that accusation is either the assumption that tobacco harm reduction cannot be good for both or worse, that it is more important to hurt the tobacco industry than to serve public health. We see this playing out in the industry’s twin-track efforts to transform by migration and diversification: migration into noncombustible nicotine products and diversification into non-nicotine businesses in which they have natural commercial advantages.

    These issues loom large in the transition strategies of tobacco companies, which range across a continuum from “not bothered; we like the business as it is” to “this is the competitive play of the 21st century, and we’re all in.” In my view, the transition strategies of the companies will be highly beneficial for both public health and the companies that successfully transform. Transition involves giant companies moving out of the merchant-of-death business and into something closer to selling mild and popular recreational stimulants. For public health reasons, I would be happy if tobacco companies made handsome profits from a diversified business far less reliant on cigarettes. Yet their efforts to attempt this attract strident opposition at every turn.

    Why? I think it is worth unpacking this opposition a little.

    First, is the continued sale of cigarettes just too much to bear? How can public health welcome transformation when the companies involved are still hooking kids, selling trillions of cigarettes and killing millions of people? Here, public health advocates must understand the nature of the market and a corporation. Every country has a lawful market for cigarettes. Commercial tobacco sales are permitted, regulated and taxed by governments. There is also a demand for cigarettes, with over a billion smokers consuming over 5 trillion cigarettes annually. This demand will inevitably be matched by supply, and the suppliers are, by definition, the tobacco industry. We should treat this as a given not an act of evil—a fact of life that we may not like that much but that constitutes the reality in which we try to secure public health gains. I am all for putting pressure on the cigarette trade through tobacco control measures, but these are the prerogative of governments. We should expect companies to compete vigorously for market share within the parameters set by policy and law. That should not be a shock; it is what companies do. Public health advocacy should be focused on influencing the regulatory, fiscal and communications environment in which tobacco companies operate and challenging abusive business practices. Other than gratifying righteousness, it serves little purpose to condemn tobacco companies for what they are and must be. What matters is how this can change.

    Second, should we only trust the tobacco industry when they pull out of cigarettes? There have been numerous calls for companies to stop selling cigarettes. The problem is that the advocates of this idea believe the companies should just do it unilaterally. Public health colleagues need a better grasp of shareholders and fiduciary duties. The companies cannot simply squeeze or shut down a lucrative earnings flow to their shareholders. The management would be fired, the company taken over or the cigarette assets sold as a going concern with no public health benefit. Ironically, the companies, to varying degrees, do have viable exit strategies for cigarettes—migration of the nicotine business to noncombustibles and diversification to “adjacent” industries such as plant biotechnology and vaccines, inhalation technologies and recreational stimulants. This strategy to exit the cigarette trade meets an essential requirement; if successful, it can work well for shareholders. The irony is that public health campaigners lament the slow progress in phasing out cigarettes. Yet, at the same time, they oppose every element of the only commercially viable strategy to bring it about: migration and diversification.

    Third, is tobacco harm reduction just the “nicotine maintenance strategy of Big Tobacco”? The concern is that diversification is merely a cunning ruse to escape the inevitable demise of the tobacco industry and the nicotine market. Here, public health advocates need to think more carefully about the product and where it is heading. I believe there is a far more robust long-term market for nicotine than for smoking. That’s because nicotine use is popular among many for its impacts on stress, anxiety, concentration and pleasurable sensations. And nicotine itself is not that harmful. The main reason people have stopped using nicotine over several decades is the health impacts of smoking and the pressures from policies and taxation to address the health impacts of smoking. The early stages of migration to noncombustibles have been welcomed by many as a harm reduction option for smokers. But in the longer term, the noncombustible products represent the basis for a nicotine market that operates within the normal boundaries of acceptable risk. This may open a frightening vista for some in public health. Nicotine products with minimal harm create weird new challenges that we have yet to fully grasp. The deterrence effects from the harms of smoking are lost, the case for taxes and regulation to control use is diminished, the designation of nicotine as an addictive agent no longer applies and the whole purpose of the vast complex of tobacco control interests is lost. There is only a case for tobacco control if there are serious harms. Otherwise, it becomes a moralistic war on drugs enterprise.

    Fourth, is diversification just an exercise in reputation laundering? Much tobacco control activism now relies on “denormalizing” the industry and, by inference, whatever the industry touches. Tobacco companies can deploy their human resources, facilities, assets and intellectual property to branch out into new businesses for which they have inbuilt advantages. Shocking venom and energy have gone into attacking companies and their staff for some of their efforts to develop or acquire pharmaceutical businesses, invest in vaccine production, exploit their plant biotechnology expertise, enter new markets for personal well-being recreational drugs or even provide ventilators to struggling hospitals. It is bizarre. What is achieved by preventing companies from moving into new businesses that reduce the dependence on cigarettes? This can only be explained by a fear that the industry will reform itself into a more normal business and that arguments grounded in denormalization will fail. The arguments from tobacco control are peculiarly aesthetic—it just looks wrong for a tobacco company to make drugs to treat chronic obstructive pulmonary disease (COPD) or provide Covid-19 vaccines. But why is this so wrong? What are the ethics of opposing the development and deployment of a vaccine or COPD treatment if these would otherwise be successful in the market?

    Finally, will migration and diversification be additional and not replace cigarettes? Maybe Big Tobacco is building even bigger, more voracious businesses? Here, public health advocates need to grasp what shapes a market. Ultimately, that is up to consumers and what they are inclined to buy. But in a market like this, policymakers and communicators have a role. For example, they can make taxation and regulation proportionate to risk. They can communicate candidly about risks. They can have better insights into unintended consequences or test and reject assumptions that fail to hold water in real life. Some companies may grow bigger through migration and diversification or even acquire a larger share of the cigarette business—that is how competition works. What matters for public health is not what individual companies are doing, though it matters greatly to the companies. What counts is the migration of the whole market to reduced-harm products instead of cigarettes, which is strongly affected by public health policies and communications. If the companies also diversify to keep their shareholders engaged and exploit their advantages during a transition, what exactly is wrong with that?

    In public health, we need to stop our warrior rhetoric and think harder about the world as it really works and what will change it for the better.

    Clive Bates is the director of Counterfactual Consulting and the former director of Action on Smoking and Health (U.K.).
  • Poised for Growth

    Poised for Growth

    Photos: Kaival Brands Innovations Group

    After the win of its merits case against the FDA, Kaival Brands and Bidi Vapor are back on track.

    By Stefanie Rossel

    The year 2022 has been both challenging and exciting for Kaival Brands Innovations Group. The Melbourne, Florida, USA-based company is the exclusive distributor of products manufactured by Bidi Vapor, which is best known for its Bidi Stick vape pen, a disposable electronic nicotine-delivery system (ENDS).

    In September 2021, Bidi Vapor received a marketing denial order (MDO) from the U.S. Food and Drug Administration for its nontobacco-flavored Bidi Sticks. The company had submitted premarket tobacco product applications (PMTAs) for the product’s nine flavor varieties plus a tobacco and a menthol variant.

    In response to Bidi Vapor’s petition for review, the FDA stayed the MDO until December 2021, after which the order was again stayed by the 11th Circuit Court of Appeals. On Aug. 23, 2022, Bidi Vapor won its merits case against the FDA. Granting Bidi Vapor’s petition for review, the 11th Circuit ruled that the MDO was “arbitrary and capricious,” primarily because the FDA failed to consider the relevant marketing and sales access restriction plans included in Bidi Vapor’s PMTAs.

    Eric Mosser

    At the time of writing, the FDA had yet to announce how it would move forward following the 11th Circuit’s decision. “FDA could seek to appeal the decision by requesting ‘en banc’ review, or a review by the entire 11th Circuit,” explains Eric Mosser, president and chief operating officer of Kaival Brands Innovations Group. “Or they might even try to petition the Supreme Court to review the decision. Regardless, we anticipate being able to continue selling and marketing our flavored products for the duration of any potential appeal, subject to FDA enforcement discretion. It is also possible FDA will simply follow the court’s instructions and review Bidi’s nontobacco PMTAs instead of trying to appeal.”

    Flavors, insists Mosser, are a critical matter of public health, and Kaival is adamantly opposed to illegal underage use of tobacco and vape products. “The company has focused on limiting access via contracts with partners prioritizing retailers’ age verification policies, secret shopper audits, repackaging devices to better align with FDA guidance, no use of social media or influencers and no consumer-facing advertising,” he says. “The company even discontinued its online direct sales to consumers—while we had state-of-the-art verification practices, company leaders realized online access was a way that underage youth in general were gaining access to vaping products and decided to eliminate that potential for the Bidi Sticks.”

    According to the most recent National Youth Tobacco Survey, Bidi Vapor was not among the top brands that appeal to youth. In 2021, among students who currently used e-cigarettes, Puff Bar was the most commonly reported usual brand (26.8 percent) followed by Vuse (10.5 percent), Smok (8.6 percent), Juul (6.8 percent) and Suorin (2.1 percent).

    Niraj Patel

    Victory for Vaping

    The 11th Circuit’s decision is a victory not just for Bidi Vapor and Kaival Brands but for the entire vaping and tobacco harm reduction industry, according to Mosser—especially for those companies who have been rigorously following the FDA guidelines in their attempts to obtain market authorization. “We at Kaival Brands have done so on the belief that the FDA will follow the science and allow solid evidence to guide their decisions. If that is the case, then the company is on solid ground, and we are hopeful FDA will ultimately agree that our products, including our nontobacco flavored products, are appropriate for the protection of the public health.”

    The PMTA for the company’s tobacco-flavored Classic Bidi Stick is currently undergoing Phase III scientific review. There is no timeline for this process, says Niraj Patel, chief science and regulatory officer for Kaival Brands Innovations Group and president and CEO of Bidi Vapor. The Arctic Bidi Stick, which Bidi Vapor maintains is a menthol product, was characterized as a flavored product by the FDA and subjected to the MDO that was vacated. “Barring an appeal, we anticipate that FDA will soon begin the scientific review of the Arctic Bidi Stick PMTA along with our other nontobacco-flavored products,” says Patel.

    Patel founded both companies. With a wholesale distribution network of more than 54,000 stores across the United States, Kaival Brands helped Bidi Sticks, which entered the market prior to 2016 under a different brand name and with limited success, to become the fastest-growing and now No. 1 disposable vape brand in the U.S. market. Despite the MDO, the Bidi Stick is still the bestselling disposable ENDS product based on retail sales for the 52-week period ending on Aug. 27, 2022, Nielsen data shows, according to the companies.

    Kaival Brands, which commenced business operations in March 2020, generated a cumulative $100 million in revenues in less than a year. In July 2021, Kaival Brands’ stock began trading on the Nasdaq. In April 2022, the company announced the expansion of additional wholesale and retail accounts, a move expected to increase the reach of Bidi Sticks by about 28,000 stores and to make up for the losses the company experienced in the wake of the MDO.

    Difficult Times

    In fiscal year 2021, which Patel described as “very challenging,” Kaival Brands reported a net loss of $9 million compared to net income of approximately $3.8 million for fiscal year 2020. In a press release, Patel said the MDO had caused “irreparable harm to both Bidi Vapor and Kaival Brands.”

    The greatest revenue loss occurred in the last two quarters of fiscal year 2021, between the lifting of the FDA’s administrative stay and the ordering of the judicial stay, when the company was unable to market its Bidi Sticks. Revenues for fiscal year 2021 were approximately $58.8 million compared to $64.3 million in the prior fiscal year. Kaival Brands’ revenues decreased by approximately $15.7 million in the second quarter of fiscal year 2022 compared to the same period of fiscal year 2021, but revenues rose 11 percent compared with the first quarter of 2022, suggesting further recovery.

    The 2021 year also presented challenges to Kaival Brands’ attempted foray into the modern oral nicotine market, a category that is still a niche but that has recently grown dramatically. The global nicotine pouches market size was valued at $1.5 billion in 2021. Grand View Research expects it to increase at a compound annual growth rate (CAGR) of 35.7 percent from 2022 to 2030.

    Bidi Vapor had planned to introduce its Bidi Pouch in February 2021, but due to the Covid-19 pandemic, the launch had to be postponed. In September 2021, the company said in a press release that the launch would be further delayed while the company reformulated the product to utilize tobacco-derived nicotine and sought FDA marketing authorization. The company had originally envisioned the pouch to contain synthetic nicotine but pivoted following concerns about the legality of nontobacco-derived nicotine.

    Congress subsequently changed the definition of a “tobacco product” to include synthetic nicotine products, with the FDA requiring manufacturers of nontobacco nicotine products to submit PMTAs by May 14, 2022. As of July 13, 2022, any new synthetic nicotine product that has not received premarket authorization from the FDA cannot be legally marketed. “We did not launch our nicotine pouch product,” Patel says. “Due to concerns with synthetic nicotine, we decided to focus on tobacco-derived nicotine and will launch in the U.S. only after we obtain FDA PMTA marketing authorization.”

    Cooperating with PMI

    In June 2022, Patel handed over the management of Kaival Brands to Eric Mosser. The leadership change had always been a part of the plan, according to Mosser. “I was preparing for the leadership role, which was set to occur as soon as plans for international expansion solidified. International distribution came sooner than later once Philip Morris International decided to license technology from Bidi Vapor and now also has distribution rights in certain markets outside the United States.”

    Two weeks earlier, Kaival Brands’ newly created wholly owned subsidiary, Kaival Brands International, had entered into a licensing agreement with Philip Morris Products (PMP), a wholly owned affiliate of PMI. The agreement grants to PMP a license of certain intellectual property rights relating to Bidi Vapor’s premium ENDS device, the Bidi Stick, as well as potentially newly developed devices to permit PMP to manufacture, promote, sell and distribute such ENDS devices and newly developed devices in international markets outside of the U.S. Patel called the agreement a major milestone in Kaival Brands’ efforts to expand the global sales and distribution of the Bidi Stick.

    Kaival Brands, in turn, announced the launch of Veeba, PMI’s first disposable e-cigarette utilizing Bidi Vapor’s intellectual property, in Canada in late July. PMI’s new product is now the lowest-priced disposable vape on the Canadian market. Mosser says he anticipates revenues through royalties paid by PMP, pursuant to the licensing agreement, in the fourth fiscal quarter. “I see Kaival Brands reclaiming its previous revenue growth trajectory and expanding into additional market segments with new innovative products that we exclusively distribute or own, not only here in the U.S. but also in profitable global markets.”

    Disposable e-cigarettes are a growth market. According to report from Future Market Insights, the global disposable e-cigarette market size is expected to be valued at $6.34 billion in 2022. The overall demand for disposable e-cigarettes is projected to grow at a CAGR of 11.2 percent between 2022 and 2032, totaling around $ 18.32 billion by 2032.

    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.
  • Solid Foundation

    Solid Foundation

    Sarah Bostwick (Photo: PMI)

    Sarah Bostwick discusses the significance of materiality assessments in PMI’s long-term strategy.

    By Stefanie Rossel

    In the world of investment, the sustainability of businesses was long considered a negligible financial risk. According to the Sustainable Finance Disclosure Regulation, a European piece of legislation introduced to improve transparency in the market for sustainable investment, a sustainability risk is an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of investment.

    As the effects of climate change became more noticeable, however, sustainability became an increasingly important consideration for companies, requiring them to adjust their risk management strategies. Today, a company’s ability to manage sustainability issues is thought to be related directly to its long-term growth. Institutional investors, private equity firms and hedge funds now tend to prefer companies complying with ESG principles.

    The Covid-19 pandemic has added new challenges for businesses, showing them that factors such as workplace culture or executives’ behavior are having a growing influence on corporate performance and company reputation and hence need to be included in their risk management plans.

    In order to develop a sustainability strategy, companies use materiality and stakeholders’ assessments. Materiality, a concept that defines why and how certain issues are important for a company or a business sector, is considered one of the most crucial elements to determine business risks and impacts in this process. A sustainability materiality assessment (SMA) is the backbone of sustainability reporting.

    Philip Morris International is working to deliver a smoke-free future and evolving its portfolio to include products outside of the tobacco and nicotine sectors. In February 2021, PMI announced its ambition to expand into wellness and healthcare areas and deliver innovative products and solutions that aim to address unmet consumer and patient needs. 

    PMI conducted its first SMA in 2016 and updated the assessment in 2018, 2019 and 2021, according to Sarah Bostwick, head of sustainability stakeholder engagement at PMI. “Sustainability is at the core of PMI’s business strategy and is an opportunity for innovation, growth and the long-term value creation of the company,” she says. “Our sustainability materiality assessment forms the foundation of PMI’s sustainability strategy. It helps us to ensure that our efforts remain focused on those areas where we can have the greatest impact and that we continue to deliver relevant reporting to our stakeholders. To keep pace with our business transformation toward a smoke-free future and constantly evolving stakeholder priorities, it’s necessary to regularly update our sustainability materiality assessment.”

    The periodic SMAs, adds Bostwick, allow PMI to monitor and adapt its business and long-term strategy to social, environmental, economic, political and technological changes. For the 2021 assessment, PMI partnered with BSD Consulting.

    Double Sustainability Materiality Approach

    PMI’s SMA follows a five-step process: Identifying ESG topics, gathering stakeholder perspectives, assessing outward impacts, assessing inward impacts and identifying the company’s most material topics. The assessment has embedded the concept of double materiality. In recent years, various standard setters and regulatory bodies have begun to refine the concept of sustainability materiality, with the European Union Corporate Sustainability Reporting Directive proposal and the International Sustainability Standards Board recently set up by the International Financial Reporting Standards Foundation Trustees both distinguishing between “single materiality” and “double materiality.”

    The principle of double materiality acknowledges that businesses should assess both the risk and opportunities linked to ESG topics that can influence enterprise value creation (“inward impacts”) and the ESG impacts that a company can have on the planet and society (“outward impacts”). Furthermore, the concept of “dynamic materiality” recognizes that the financial materiality of an ESG impact can evolve over time.

    In their foreword to PMI’s Sustainability Materiality Report 2021, BSD Consulting advisors explain that there are several advantages to this approach: “PMI gained deep insights that go far beyond generic sectoral or geographical approaches to match the company’s business model and dynamic transformation path. By considering emerging topics and aligning the process with internal risk management, PMI paved the way for pragmatic interim reviews and adjustments. In this way, the chosen approach allows the company to identify topics with medium-term to long-term strategic relevance for PMI and its business model as well as to dynamically adapt them to external or internal developments.”

    Stakeholders play a key role in the assessment process. For its 2021 SMA, PMI expanded the group of stakeholders to participate, recognizing that there is value in integrating different perspectives into its analysis to deepen its understanding. In addition to soliciting input from employees, regulators, public health community, suppliers and civil society, PMI built on consumer understanding acquired over time (e.g., through studies on consumer perception of sustainability issues associated with the industry). The aim was to achieve a fair representation of its key stakeholders across the geographies it operates. Inputs were collected through an online survey in which around 150 internal and external stakeholders took part and in-depth qualitative interviews.

    The company welcomes critical voices. “Constructive dialogue is essential to moving society forward,” Bostwick states. “To achieve the collective action required to solve the world’s most pressing challenges, we must include all voices, bringing together people with differing opinions, scrutinizing facts and finding common ground upon which to build. We will always have critics, and we remain committed to engaging with them honestly and transparently, pointing out the actions we are taking to address their concerns and welcoming feedback on how we can do better. In line with the principle of double materiality, the assessment consists of a five-pronged approach that evaluates both outward and inward impacts and accounts for the expectations of the company’s stakeholders.”

    Emerging Topics Identified

    While the company’s 2021 list of topics accounted for those assessed during its 2019 sustainability materiality analysis, it underwent significant changes that impact the comparability of results, says Bostwick. “Most topics were renamed as we sought to define them in a neutral way, accounting for both their potential positive and negative impacts. We also introduced new topics, such as ‘innovation in wellness and healthcare’ or ‘laws and regulations,’ to reflect changes in our business and value proposition and the rapid evolution of the regulatory landscape; bundled topics that were deeply connected, for instance, consolidating under ‘economic contribution’ aspects related to fiscal practices or illicit tobacco trade prevention; and split some topics that merited a more granular assessment, for example, decoupling ‘health and safety at work’ and ‘employee well-being.’ Lastly, reflecting the maturity of sustainability at PMI, we did not consider ‘human rights’ as a standalone topic but rather as an ever-present topic pervasive across our company and all ESG issues.”

    Furthermore, the company identified three topics that were not included in the list of most material sustainability topics but that it expected to gain momentum in the future: human capital development, biodiversity and water. Their selection, Bostwick points out, relied on the identification of major trends in the sustainability arena, coupled with insights gathered throughout the various steps of the materiality process.

    According to Bostwick, the SMAs’ findings have directly impacted PMI’s operations. In 2021, the company acquired Vectura Group, an inhaled drug development solutions specialist; Fertin Pharma, a developer and manufacturer of pharmaceutical and well-being products based on oral and intraoral delivery systems; and OtiTopic, a respiratory drug development company with a late-stage inhalable acetylsalicylic acid candidate for the prevention and treatment of acute myocardial infarction.

    The emergence of “innovation in wellness and healthcare” as a material sustainability topic concretely manifests “changes to our strategy and vision that prompted the revision of our Statement of Purpose, expanding it to no longer have as its last horizon to achieve a smoke-free future but also to encompass our strategic efforts to venture toward becoming a wellness and healthcare company,” Bostwick says. “Notably, we aspire to achieve at least $1 billion in net revenues from such sources by 2025. In wellness, we are developing and looking to commercialize scientifically substantiated consumer health products and solutions with the aim to improve people’s lives. In healthcare products, we have already committed resources to its development pipeline of over-the-counter and prescription products.” 

    Optimized Strategy

    As a consequence of the SMA’s results, PMI has also reframed its ESG framework to better articulate the ESG topics the company should focus on. “This framework recognizes two distinct forms of issues: Those that relate to our products—what we produce—which are part of the ‘Product Impact’ pillar and those related to our business operations—how we produce—which are part of the ‘Operational Impact’ pillar. We subsequently classified each topic based on its environmental, social or governance-related nature,” says Bostwick

    “This approach allows us to appropriately highlight that, consistent with our sustainability materiality analysis results, addressing the social impacts generated by our products is the core of our strategy. The biggest and most pressing negative externality our strategy aims to address is the health impacts of cigarette smoking. This is the most important contribution we can make to public health and is the cornerstone of PMI’s purpose and business strategy.”

    Following an acceleration of the company’s targets for carbon neutrality in its direct operations by 2025 and net-zero emissions across its value chain by 2040, the company aims to further develop its biodiversity strategy, covering all relevant areas of the company and its integration within its climate, water, forest and waste reduction efforts. “Noting the relevance that biodiversity and water have in our overall climate strategy and aims to preserve nature, we look forward to introducing 2025 targets that reflect our level of ambition,” Bostwick explains. “We expect to have a full set of targets and actionable milestones by the end of 2022.”

    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.
  • The Dilemma of Diversification

    The Dilemma of Diversification

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    While lambasted by anti-smoking activists, the tobacco industry’s move into pharmaceuticals may well turn out to be a positive for public health.

    By Cheryl K. Olson

    “The pharmaceuticalization of the tobacco industry.” This awkward phrase comes from a 2017 Annuals of Internal Medicine article referring to industry moves into noncombustible nicotine products. But recently, it’s gaining some literal truth. Legacy tobacco companies are stepping up diversification into pharmaceutical ventures.

    Given that their current business direction is stalling, new adjacent opportunities that let tobacco companies use their specialized knowledge (say, of the tobacco plant genome or lung physiology or means of delivering substances) make sense. It may seem counterintuitive, or ethically iffy, for these companies to start offering solutions to problems they helped create. But they may frankly be well placed to do so because of their deep expertise. The criticisms of current industry moves into medical research and pharmaceuticals, such as Philip Morris International’s acquisition of Vectura and Fertin Pharma, seem more rooted in emotion than in practical concerns about effects on public health.

    A Tour of Recent Criticisms of Diversification

    Let’s review some recent criticisms and attempt to separate the moral from the practical. Take this September STAT+ article by Olivia Goldhill, titled “Tobacco Giant Philip Morris is Investing Billions in Health Care. Critics Say It’s Peddling Cures for Its Own Poison.”

    The tone of the article makes ordinary business behavior sound sinister. Vectura Fertin Pharma, a firm combining two companies previously acquired by PMI, was “quietly incorporated.” PMI has been “racking up patents and taking over healthcare companies, an unlikely pivot that has accelerated dramatically in the past year.” PMI has also been “poaching considerable regulatory and pharma expertise.” All this in the article’s first two paragraphs.

    The recent move by Matt Holman, who was director of the Office of Science at the Food and Drug Administration’s Center for Tobacco Products (Goldhill mislabels him as head of the CTP), to a position at PMI is described as a “move that shocked public health and tobacco researchers.” Why the surprise? Employees cycling from the FDA to the pharmaceutical companies they reviewed is commonplace; back in 2016, Time magazine called it “a revolving door.”

    When PMI purchased Vectura, best known for making asthma medicine inhalers, the Reuters headline read, “Philip Morris seals deal for U.K.’s Vectura despite health group concerns.” The chief executive of Asthma U.K. and the British Lung Foundation stated, “There’s now a very real risk that Vectura’s deal with big tobacco will lead to the cigarette industry wielding undue influence on U.K. health policy.”

    The U.S. reaction was similar. A joint statement by the presidents of the American Lung Association and American Thoracic Society called the acquisition a “reprehensible choice” by PMI. They were concerned that PMI might use Vectura’s inhalation technologies “to make their tobacco products more addictive.” They raised the prospect that PMI “could further profit from the disease their products have caused by now selling therapies to the same people who were sickened by smoking.”

    The idea of cigarette companies profiting from conditions such as asthma and lung disease was reportedly also raised by British government officials, with the U.K. business minister asking for information on PMI’s plans for Vectura.

    A deliberate company strategy to invest simultaneously in selling addictive poison and in peddling cures for that addiction would indeed be reprehensible. Is that what’s happening here? Or are tobacco companies making effortful attempts to find paths to replace the profits from cigarettes with profits from products that don’t harm and might improve public health?

    Time will tell. PMI’s website states, “We are focused on our mission to one day stop selling cigarettes.” The Guardian newspaper’s coverage noted that while the Vectura acquisition was part of PMI’s smoke-free vision, “the company still makes about three-quarters of its $28 billion in annual revenue from ‘combustible’ products that involve the burning of tobacco.” 

    Critics of the tobacco industry didn’t always take such a dim view of moves away from cigarettes. A quick search in Google Scholar for “tobacco industry diversification” brought up this 1985 piece by Alan Blum in the New York State Journal of Medicine. He stated, “Some health professionals believe that criticism of tobacco companies for promoting cigarette smoking should be tempered because they have become conglomerates that are diversifying into nontobacco products and services. By encouraging such diversification, it is reasoned, health professionals can help expedite the phasing out of smoking while tobacco companies can have an opportunity to replace the resultant lost revenue.”

    Blum’s concern was that this belief among “individuals working to eliminate smoking may be misguided.” This was not because those individuals saw industry diversification as a potentially positive step. Rather, he thought diversification wasn’t happening fast enough. Blum noted that tobacco companies were not decreasing investment in cigarette manufacturing and that “the percentage of total profit accounted for by tobacco sales is still the highest of all sources of revenue for tobacco companies.”

    “Those It Employs [or] Funds Are Therefore Banned”

    PMI’s announced acquisition of Vectura triggered efforts to exclude its employees and their research. The Drug Delivery to the Lungs conference terminated Vectura’s sponsorship. A Thorax editorial titled “Vectura and Philip Morris: The leopard has not changed its spots” stated that “The tobacco industry, those it employs and those it funds are therefore banned from membership of professional societies, including the British Thoracic Society (BTS).” The BTS would “exclude the tobacco industry as a legitimate partner in science and education,” including “publishing in respectable journals” and collaborations with universities. The editorial warns that “Vectura employees will need to consider their future.”

    The treatment Vectura’s employees received is far from unique. Ian Fearon, director of whatIF? Consulting, has conducted research in a variety of settings and helps manufacturers write up their scientific data for publication. “The barriers to publication for tobacco companies and independent ENDS [electronic nicotine-delivery system] manufacturers are high, with many journals flatly refusing to even accept a paper to undergo peer review,” he said. “One major irony is the ‘we need the industry to be transparent’ phrase, yet the reality is that the number of journals willing to publish manufacturers’ data, despite its potential importance in assessing public health impacts, is small and diminishing.”

    Fearon noted the criticism Juul received for “buying out” a 2021 special issue of the American Journal of Health Behavior to fully present their findings, which were a comprehensive examination of the potential impact of Juul on public health. Such publishing fees are common in academia; Juul even paid extra to make the articles free to all readers.

    Derek Yach, formerly with the World Health Organization and the Foundation for a Smoke-Free World, equates the opposition based on the tobacco industry’s past bad practices to the 1980s U.S. boycott of Nestle. “That pushed NGOs [nongovernmental organizations] and WHO to vilify them for decades despite changes in their marketing way back,” he said. “To this day, in many public health leadership settings, Nestle is a real villain, regardless of all they have done to change. I suspect that playbook will apply here too.”

    Yach sees the downside of diversification as less about ethics and public health and more about the practical difficulties. “It’s all about company focus and the inevitable clash of cultures—a pharma culture versus a tobacco company one, for example—and as a result, the ability to manage the transition.”

    David Sweanor

    Thinking About Diversification: A Conversation with David Sweanor

    David Sweanor of the Centre for Health Law, Policy and Ethics at the University of Ottawa has long monitored tobacco company behavior.

    Tobacco Reporter: Why are you interested in the issue of tobacco companies diversifying into things like pharmaceuticals?

    Sweanor: My main interest is public health policy: How do you end up with a healthier population? Is this doing anything that’s going to create poorer health—in which case, there’d be a need to oppose it or try to regulate it in some way? Is it going to be neutral in terms of public health? Then, who cares who owns these companies?

    If it’s something that could actually be good for public health, then we should be supporting it. And there’s reason to believe this could be the case. When companies have loads of resources to throw at something, and if this signals more of a move to transformation within the industry, it would be incredible for public health.

    If they are working on [inhalation] technologies for lower risk alternatives to cigarettes, we have the potential for enormous breakthroughs. If we can get any of the major companies to really switch to being all-in on risk reduction, it would completely change the environment. The impact globally would be remarkable and happen very quickly.

    If you want to get tobacco companies to switch to being in favor of transformation, the last thing you want to do is prevent them from doing things that would aid transformation. If you’re trying to get automobile companies to switch to electric cars, don’t prevent them from buying companies with battery technologies. You’re forcing them to continue to focus on internal combustion engines.

    What do you see as valid and invalid criticisms of this diversification?

    No valid ones immediately come to mind. If they were buying up technology that gave a far better alternative to cigarettes and then trying to kill that, then yeah.

    It’s easy to talk about the invalid criticisms. A really good example of that is in Canada, where Medicago, based in Quebec City, developed a vaccine for Covid-19. In developing countries, this vaccine would work well because it doesn’t need to be stored at cold temperatures. Philip Morris has an indirect holding of about 30 percent in Medicago. Anti-tobacco groups attacked the government for approving the vaccine, and WHO refused to approve it.

    What’s the thinking behind that? It’s saying: We don’t like this company because we think it’s done bad things in the past. To deal with this, we’ll prevent them from doing good things now. They created an epidemic of disease from smoking that became larger and lasted longer than it should have. So we’re going to prevent them from doing things that could reduce this epidemic of disease from Covid to make it last longer than it should.

    Are people following the principles of the Enlightenment or the Inquisition? So much now with mainstream anti-tobacco groups is the latter. We don’t care about the quality of your work; we won’t give you a platform to discuss or debate it. That some affiliation you have is more important than the knowledge you bring is pretty reprehensible. It’s like saying Roman Catholics are not allowed to express their views.

    What do you see as potential benefits to public health from this diversification? For example, Matt Holman’s new position as vice president of U.S. scientific engagement and regulatory strategy at PMI.

    Look at the counterfactual. If they don’t do that, the only people working in cigarette companies working on transformation spent their careers working on and understanding and benefiting from cigarettes. If General Motors says, “we’re hiring engineers who understand electric mobility rather than hydrocarbons,” isn’t that a good thing? How can you transform if all the people in senior positions have their expertise in internal combustion engines?

    We see this in high tech all the time; one company will buy another to get the expertise of their employees. You need them at the table when you make decisions on where to go with the next generation.–C.K.O

    Addendum

    In the main article above, I stated that the boycott of Nestle from the 1980s has had a lingering negative effect on WHO and many public health leaders’ views of the company many decades later. This despite Nestle being a global leader in addressing food insecurity, sustainable agriculture and the use of 21st nutrition science (see the company’s 2021 annual report).

    In the second half of October, Nestle’s past came back to haunt the company. The WHO Foundation, set up to build innovative private public partnerships, banned future Nestle contributions despite having originally accepted  a grant for their work on addressing Covid-19.

    The WHO Foundation already bans contributions from tobacco and arms manufacturers though it is unclear how “tobacco” is defined. Does it include governments with state monopolies? Does it include standalone e-cigarette, or nicotine pouch companies? Does it distinguish between companies where revenue from reduced risk products is increasing while combustible revenues are decreasing? Probably not.

    Labelling companies as good or bad is the far easier option. But that option that ignores serious transformation and the opportunity to nudge and support the good emerging faster.

    Derek Yach

    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.
  • The Eye of the Beholder

    The Eye of the Beholder

    Photo: Nopphon

    Not all smokers will be put off by the ‘dissuasively’ colored cigarette papers promoted by health activists.

    By George Gay

    Writing in this magazine two years ago about the pressures being placed on paper suppliers to the tobacco manufacturing industry, I claimed, uncontroversially I think, that the market for combustible cigarettes was declining. Later in the piece, and more controversially, I speculated that the part of the decline in demand for combustible cigarettes being caused by their substitution by vaping devices might slow because of policies being followed by some authorities.

    Although that speculation still has validity today in many parts of the world, significantly in countries with big populations, such as China, India and the U.S., in the U.K., there has been a development that is aimed at putting a different hue on things.

    In June, Javed Khan published his U.K. government-commissioned review into government policies aimed at reducing the incidence of tobacco smoking in England to 5 percent by 2030, Making Smoking Obsolete. As part of that review, Khan suggested the government should rethink how cigarettes look—that it “should use every part of the cigarette, and what’s in the pack, to communicate the harms of smoking and offer opportunities to quit.” He gave three examples of what he was getting at:

    • mandating anti-smoking messages on cigarette sticks, such as the number of “minutes of life lost” per cigarette;
    • using dissuasive colors (like green or brown) on individual cigarette sticks or hand-rolling papers; and
    • [including] cigarette pack inserts that provide information on the health benefits of quitting, supported by web links that direct smokers to support for stopping smoking.

    I am little interested here in the third idea, though my concern would be that the information provided would be grossly misleading as is much of the “information” currently churned out on tobacco smoking. And I would say just two things in relation to the first. One is that you must always be careful what you wish for. Before mandating the printing onto cigarette paper of the estimated number of minutes of life lost to smoking those cigarettes, I would suggest checking whether this might prove to be a promotion among some young people, especially in the short term. Youngsters, at least those who might be drawn to smoking, tend to be perverse in some ways as was proved fairly conclusively when, in the 1990s, students in the U.K. took the Death brand cigarettes to their hearts. The second thing I would say is that, as far as I am aware, we possibly all lose more minutes of life to pollution than smokers lose to smoking, but of course it is difficult to disseminate the pollution figure because you cannot write on air no matter how polluted it is.

    Perception Matters

    But it is the second idea that interests me most. To my way of thinking, you have to try to be objective when describing and talking about colors, not least because not everybody perceives or experiences the same color in the same way. For instance, when the idea of standardized cigarette packaging was first raised in Australia, it was suggested that the background color should be an unattractive olive green. This idea went down like a lead balloon with Australian olive producers, and references to olive green were quickly shelved.

    In perhaps trying to sidestep such issues, Khan makes what to me is the mistake of claiming that all greens and browns are “dissuasive,” though I should point out that in saying this I am assuming he is using the word “like” in the bracketed phrase “like green and brown” to mean “such as” green and brown, not colors that are similar to green and brown, a concept that only an artist might be able to understand. In support of this claim, he references a web survey carried out among 281 adolescents (16–20 years of age) in Norway, though that survey references at least one other previous survey, which was carried out in the U.K. The Norway survey, which seemed to have investigated the reactions to yellow-colored and green-colored cigarette papers (as well as reactions to products with printed warnings) rather than green and brown, was summed up in an abstract that concluded: “This study supports earlier findings and suggest[s] that the use of unpleasant colors and warnings printed directly on cigarette sticks could increase perceived harmfulness, reduce notions of good taste and possibly reduce desires to experiment with cigarettes in adolescence.”

    The first thing that has to be said about this conclusion is that it seems rather uncertain of itself. It is less than 40 words in length, but it manages to cram in at least three doubting words: “suggest[s],” “could” and “possibly.” This is unsurprising in a way. I doubt that it would be possible to find a color that was widely dissuasive, though a certain hue of a certain color might prove to be more so. What is an unpleasant color is in the eye of the beholder and might even be the subject of fashion movements. And, of course, people, especially young people, tend to get used to things changing. Pasta that was rendered blue, a color not usually associated with food, especially savory food, would probably meet some resistance from consumers, but they, especially the young, would surely get used to it.

    In any case, if there were such a thing as colors that were unpleasant in the eyes of everyone, as the conclusion appears to suggest, it seems to me that the research carried out in Norway would be rendered pointless. It stands to reason that an unpleasant color applied to a consumer product that was previously another color would make that product less attractive, though, once again, it is likely that, over time, consumers would get used to it. Not that I think such considerations would dissuade many of the people who carry out such research. Rather, these considerations would probably be seen as a reason why scientists should, in the usual way, call for further study into this issue—further study grants to be used to make life a little more unpleasant for smokers.

    There is also the issue of what green signifies. I would imagine that if a cigarette manufacturer launched on its own initiative a green cigarette, it would be pilloried by the anti-tobacco lobby, the media and possibly other manufacturers for trying to imply that the product was environmentally friendly and, by extension, healthier. Something similar has happened before in Europe, and the U.S. Food and Drug Administration makes such a link.

    Hypocrisy

    But the real issue is whether it is fair or, indeed, whether it makes sense to foist onto, say, a 40-year-old committed cigarette smoker in the U.K., a product variation that a web survey found made the product less attractive to a small number of adolescents in Norway. Not to mention that doing so amounts to rank hypocrisy. As above, the purpose of mandating that cigarette papers are available only in green or brown would be to make the cigarettes unattractive to smokers—that is, to ruin their enjoyment of them. Now the health evangelists might wring their hands and say they seek this only for the good of the smokers and their physical health, but they have to realize that once a smoker has made a decision to smoke, it is no business of those evangelists. Smokers are adults who are entitled, legally, to enjoy a tasteful, fragrant, satisfying and otherwise appealing product presented in attractive packaging. Goodness knows, they pay enough for this product.

    Now, let me explain what I mean by hypocrisy. Outdoor air pollution causes more deaths worldwide than tobacco smoking. It speeds up climate change and is a major cause of the biodiversity crisis, and yet we allow automobiles, which comprise one of the major causes of such pollution, to be sold in the most attractive forms imaginable. If it weren’t for hypocrisy, car design, like cigarette design, would have been heavily restricted so as to make people spurn these vehicles. Automobiles would come in a single “unattractive” background color adorned with health warnings covering everything from what happens when a pedestrian, especially a child, is hit by one to what happens to the lungs, especially young lungs, when they are hit by carbon dioxide and nitrogen oxide emissions. There would be no heaters or no air conditioning in automobiles, and the seats would be made from unadorned, used tires so as to make traveling uncomfortable. There would be no tops and no windscreens so that drivers and their passengers would have to wear goggles to keep (the quickly diminishing number of) insects out of their eyes. And, right now, somewhere, a person publishing a government-commissioned review would be recommending that all automobiles be fitted with square, solid-rubber wheels—brown ones with unevenly distributed knobs on them.

    Priorities

    Quite what will be the fate of the Khan review and his call for colored cigarette papers must be in doubt. For one thing, you have to wonder if any research has been done into whether adding pigments to cigarette paper would increase the toxicity of cigarettes, whether it would impede the technologies put in place to ensure that carelessly discarded cigarettes extinguish quickly, whether it would improve the taste of cigarettes and make them more attractive, or whether it would cause any other unintended—read: ill-thought-out—consequences. My bet is that the answer to those questions is no and that the only people who would gain in the short term from such a proposal would be the scientists who would be called on to carry out such research—and the follow-up research they would recommend.

    Secondly, the review was commissioned by a government that was falling apart and that, as I write, is de facto leaderless and wallowing in internecine battles as two woefully inadequate figures fight over who should take on the mantle of further undermining the U.K.’s tottering democracy and dragging further into impoverishment the long-suffering people of these increasingly septic isles. I write increasingly septic with conviction because, while the government is concerning itself about whether cigarette paper should be green, brown, puce, tomato red (my bete noire) or whatever color the most recent health minister might find unattractive, it is allowing water companies to discharge increasing and illegal amounts of raw sewage into our rivers and coastal waters.

    Why worry about the dangers of smoking when the air around you is putrid, the water around you is a lavatory and food crops are failing in a drought because, presumably, farmers are unable to irrigate given the low level and toxic nature of the rivers? Not to mention that, largely because of the Brexit dividend, “even if the crops were to survive, there would be nobody to harvest them.”

    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.
  • Key Takeaways

    Key Takeaways

    ITGA CEO Mercedes Vazquez

    Tobacco growers reflect on the challenges and opportunities facing their business during the ITGA’s 2022 Americas and Africa Regional Meetings.

    By Ivan Genov

    In August 2022, after almost three years of Covid-19-related disruptions, the International Tobacco Growers’ Association (ITGA) organized two in-person meetings—one in Santiago de los Caballeros, Dominican Republic, for the Americas region and another in Lusaka, Zambia, for the Africa region. The much-awaited events brought together ITGA members, partners and key industry stakeholders to discuss the burning issues of the day and the appropriate ways to mitigate the negative effects of the current multi-vector crises.

    Participants gathered from Argentina, Brazil, Colombia, the Dominican Republic and the U.S. as well as Malawi, Tanzania, Zambia and Zimbabwe, among other countries. Having already visited the Oriental region (Bulgaria and North Macedonia) earlier in the year, the ITGA is now preparing for its first physical annual general meeting, to take place in Castelo Branco, Portugal, since 2019.

    Costs of Production—Drastic Growth in Most Markets

    Although many topics were discussed during the Americas and Africa regional meetings, one stood out—the growing costs of tobacco production. In the U.S., growers continue to face challenges related to unavailability of labor and increasing costs of inputs. Local associations have reported that fertilizer costs alone exceed $1,000/ton. These factors are leading to the most expensive crop in the country’s history. In Brazil, current costs of production are also up significantly, between 27 percent and 29 percent for different tobacco types. In Zimbabwe, the growth is 25 percent against the 2021 crop. This is not an isolated event for the two regions. In Europe, the situation is no different. Tobacco growers in Verona, Italy, have revealed that energy costs have increased fivefold, gas has tripled and growers’ viability is once again in danger. Essentially, growers from nearly all ITGA member associations are afraid that if pricing does not adequately reflect the ongoing economic difficulties, the sector will be in serious long-term trouble.

    Participants in ITGA’s African region meeting in Zambia (Photo: ITGA)

    Leaf Updates—Production Decreases in Leading Tobacco Growing Countries

    The global leaf situation was the other key point discussed by growers. Some of the biggest tobacco producing countries showed notable volume slowdowns during the year. In Brazil, the estimated 2022 crop is about 570 million kg, down from 628 million kg in 2021. The flue-cured Virginia (FCV) share of the totals is 92 percent. In the current season, around 40,000 fewer individuals were involved in the farming of the crop, or a total of just over 600,000 people. Nevertheless, pricing in the country is also up, firmly above the $3 mark for both FCV and burley.

    In Argentina, the total production volumes are around 92 million kg, down from 101 million kgs in 2021. In the U.S., 2022 burley tobacco production is 2 million kg less, or 27 million kg, but dark air-cured tobacco planting area is on the rise. This is in part driven by stable consumer demand for smokeless tobacco products, limited substitutes for U.S. quality dark air-cured tobacco and greater profitability for local growers. In the U.S., popular agricultural commodity prices have sharply risen since 2020, providing viable alternatives to local growers.

    In Zimbabwe, the total quantity of tobacco sold in 2022 is around 205 million kg against 212 million kg in 2021. Average pricing has improved but at a slower rate compared to production costs. The total number of growers is also down 14 percent to around 136,000 people. One of the leading burley producers in the world, Malawi produced 83 million kg of the tobacco variety, or a yearly decrease of 21 percent. In Zambia, production of FCV is up around 2 million kg to 32 million kg, but burley is down 2 million kg to 3 million kg. In Zambia, while production costs have nearly trebled, pricing has only moved up from around 7 percent to 10 percent for different tobacco types.

    Delegates at the ITGA Americas region meeting in the Dominican Republic (Photo: ITGA)

    Regulations—ITGA to Get Growers Back in Discussions

    ITGA CEO Mercedes Vazquez focused on the World Health Organization Framework Convention on Tobacco Control (FCTC) Article 5.3, regarding industry interference, and Article 17, covering the need to promote economically viable alternatives to tobacco production to prevent possible adverse social and economic impacts on populations whose livelihoods depend on the crop. Unfortunately, Article 17 has been highly underestimated. Implementation at country level is poor or simply nonexistent. The WHO FCTC has not provided significant technical nor financial support to growers. The 15-year efforts of tobacco growers demanding inclusion at the FCTC Conferences of the Parties (COP) and how Article 5.3 was misused to prevent growers and their legitimate representatives from attending meetings was also discussed. Tobacco growers will, from now on, put high pressure to ensure their participation and will do their utmost to guarantee their legitimate representation at the future COP. The next one will take place in Panama in 2022.

    Growers were briefed about incoming initiatives, including the regulatory push in the U.S. to prohibit menthol as a characterizing flavor in cigarettes and all characterizing flavors other than tobacco in cigars. As a reference, menthol accounts for around a third of the U.S. cigarette market. The U.S. administration is also considering requiring tobacco manufacturers to lower the nicotine in all cigarettes to levels that are no longer addictive. If enacted, these policies are likely to radically change the industry dynamics in one of the most profitable tobacco markets in the world. The other important regional initiative—the European Union’s €4 billion ($4 billion) Beating Cancer Plan, based on a goal of creating a tobacco-free generation by 2040, is also likely to shape up legislative changes in a variety of markets and affect the supply chain.

    Other Key Discussions—from Cannabis to Climate Change

    Among the other topics discussed was hemp as a potential alternative to tobacco in the U.S. However, initial euphoria led to massive overproduction and a corresponding price crash. Although small-scale projects for crops, including cannabis, are being carried out in both the Americas and Africa, the consensus opinion is that regulatory clarity is still lacking.

    Some markets, including Malawi, Zimbabwe, Argentina and Colombia, among others, have taken steps in their respective local regulatory frameworks regarding cannabis production. However, any meaningful opportunities are nowhere near the opportunities provided by tobacco in these regions at the moment.

    Another topic that was discussed is related to abnormal climate events impacting the crops. In Zambia alone, over the course of the past three decades, the impact of floods and droughts have been estimated to cost the country around $13.8 billion. Small-scale projects have made inroads to support farmers, not only in tobacco, but it is feared that much more trouble is coming—something that no one is adequately prepared for.

    Persistent Issues and Growers’ Resilience

    Tobacco growing, much like all agricultural activities, remains a difficult calling. While many businesses could afford to keep their workforces at home during the Covid-19 pandemic, growers had no other choice but to remain on the fields. The sector proved to be more resilient than many anticipated, and high-quality tobacco leaf continues to be delivered.

    In the past couple of years, tobacco and nicotine consumption has remained stable. The principal category for the entire industry, cigarettes, is even growing in some of the main global markets. Growers are aware that they only take a small fraction of the total industry value while their fundamental role is being constantly undermined. For the industry to survive, prices will have to catch up with the growing costs of production.

    At the same time, the war in Ukraine is putting severe pressure on key agricultural commodities. Many countries, especially in Africa, rely heavily on such imports from Russia and Ukraine. The countries that have the capacity to produce the scarce products could find easier diversification options. However, the growing inflation and general economic uncertainty will keep the international situation tense. Growers have proven their resilience, but their legitimate demands cannot be ignored anymore.

    Ivan Genov is ITGA’s manager of tobacco industry analysis.