Author: Taco Tuinstra

Vector Posts Record Quarterly Revenues

Photo: Phongphan Supphakank
Vector Group reported consolidated revenues of $378 million for the third quarter of 2022, up 26.6 percent over the prior year period.
Tobacco segment unit volume increased 30.1 percent compared to the comparable 2021 period. Liggett’s wholesale and retail market share increased to 5.7 percent each, compared with 3.9 percent and 4.2 percent, respectively, in the prior year period.
Reported net income declined to $38.9 million from $48.9 million.
Reported net income from continuing operations was $38.9 million, up from $29.9 million in the prior year period. Adjusted net income from continuing operations was $37.6 million compared to $33.9 million in the prior year period.
Reported operating income increased by $1.9 million to $83.9 million.
Tobacco segment operating income was down 4 percent to $88.1 million, primarily as a result of the company’s investment in its Montego brand.
“Vector Group delivered record tobacco quarterly revenues in the third quarter as we continued to capitalize on favorable market opportunities to substantially increase value and market share,” said Vector Group President and CEO Howard M. Lorber in a statement.
“Driven by the significant growth of our price-fighting Montego brand, Liggett’s wholesale market share in the third quarter was 5.7 percent, which is its highest market share since 1984. We have begun to gradually shift our growth strategy of Montego, which is now the second-largest discount brand in the United States, from volume-based to profit-based. As we move forward, we will continue to focus on optimizing long-term profit through the effective management of volume, pricing and market share growth.”
November 2, 2022
Tunisia to Sell State Tobacco Factory

Photo: Maksym Yemelyanov
The government of Tunisia has promised the International Monetary Fund (IMF) to sell a state tobacco factory, reports Reuters.
The pledge is part of a preliminary deal with the IMF for a $1.9 billion rescue package in exchange for unpopular reforms, including reducing food and energy subsidies, and reforming public firms.
The leader of Tunisia’s powerful UGTT union said his organization would strongly oppose the move.
November 2, 2022
Accessing Innovation

Photos: Chris Frenzi Photography
The GTNF 2022 once again delivered on its promise to promote respectful debate among stakeholders in the nicotine business. From Sept. 27 to Sept. 29, participants gathered at the Four Seasons hotel in Washington, D.C., to discuss the challenges and opportunities facing their business, with an emphasis on innovation—and the importance of making the fruits of that innovation accessible to consumers worldwide.
This year’s GTNF was noteworthy for the diverse lineup of participants. More than half of the forum’s participants were not employed by the tobacco industry, and at least 41 percent of speakers addressed the conference for the first time.
Below is a sampling from the conference.

Adam Afriyie: The U.K. Example
Adam Afriyie, Member of Parliament for Windsor and vice chair of the All-Parliamentary Group on Vaping, examined the successful U.K. approach to tobacco harm reduction and the lessons it might hold for other countries.
This was an appropriate time to do so, he insisted, with life returning to a semblance of order following the Covid-19 pandemic and regulators around the world poised to make decisions—“life-and-death decisions”—about alternatives to smoking.
Despite progress, smoking still kills 75,000 people in England yearly. Britain’s National Health Service spends about £2.5 billion ($2.82 billion) annually treating smoking-related illnesses. Every year, tobacco use results in economic losses of £17 billion through ill health, absence and low productivity.
Afriyie distinguished four elements in the U.K. approach, which started with Britain setting a target to make smoking obsolete by 2030.
Second, the government and the health establishment accepted the evidence that vaping and other smoking cessation products, such as patches, pouches and snus, are all part of the legitimate arsenal of weapons against smoking—a conclusion that was reinforced by the Department of Health’s conclusion that vaping is at least 95 percent less risky than smoking. “What matters is the relative harm,” said Afriyie. Rather than relying on conjecture, emotion or the fear of Big Tobacco, the government relied on data, he noted.
Third, the government regulated vaping as a consumer product, setting minimum standards for quality and safety, such as a requirement to sell e-liquids in child-resistant packs. This framework, said Afriyie, allows adults to make informed decisions while protecting children from marketing and harm. All new products must be registered with the Medicines and Healthcare products Regulatory Agency. While vapes are not considered medical products in Britain, this prerequisite installs a discipline among manufacturers to be cognizant of the evidence base behind their offerings, said Afriyie.
Finally, the government commissioned an independent review of the progress toward its smoke-free objective. Published in June, the Javid Kahn report concluded that Britain would miss its target if it continued on the current trajectory. To get the project back on track, Kahn suggested that vaping must be front and center of the drive to eradicate smoking. In light of widespread misperceptions about vaping—50 percent of general practitioners are unaware that vaping is less harmful than smoking—the report also recommended opening a conduit for the industry to communicate directly to smokers the benefits of switching from cigarettes to vapes.
While Afriyie was inspired by the level of technical innovations in nicotine-delivery products, he was less encouraged by the equally important innovation or evolution of regulatory frameworks internationally. For example, while heat-not-burn products have been thriving in Japan, vapes are nearly impossible to access in that country because they are treated as medical products rather than consumer products.
The World Health Organization, too, should adopt the U.K. approach, according to Afriyie. Unfortunately, the global health body’s direction of travel, he said, appears to be made in “smoke-filled” rooms lacking transparency. Rather than basing its policies on science, said Afriyie, the WHO’s stance on tobacco harm reduction products appears to be subject to influences that are not directly to do with public health.
Concluding his presentation, Afriyie addressed each of the stakeholders in the tobacco harm reduction debate. “My message to smokers is please stop. And if you can’t stop, choose a vaping device or a heat-not-burn product—but move on. My message to investors: Britain is open for business.” His comment drew good-natured laughter, but Afriyie was only half joking, reminding his audience that when it comes to smoking cessation products, Britain is a gateway to the world. “The U.K. regulatory imprimatur on your documentation is a sign of quality and an aid to marketing and acceptance around the globe,” he said.
“My message to industry: Be good. Conduct open, honest research,” said Afriyie. “If the answers aren’t exactly what you want, don’t hide the results. Every bit of extra information and knowledge that we gain through research is useful.” To regulators, Afriyie stressed the importance of following the science. “Follow the U.K.,” he said. “Do not let the perfect be the enemy of the good.”

Philip Evans: An Outside Perspective on Innovation
Philip Evans, senior advisor at the Boston Consulting Group, provided an outside perspective on the challenges and opportunities of transformation through innovation.
Evans started by reflecting on the successes and failures of other sectors that, like the tobacco industry today, had faced existential crises. He cited Netflix CEO Reed Hastings’ decision to walk away from the business of distributing DVDs in favor of streaming video, thereby transforming the company and creating staggering amounts of economic value—and contrasted that with BP’s fruitless attempt to rebrand as “Beyond Petroleum.”
What can such experiences teach the tobacco industry about transformation through innovation? Evans identified five lessons.
First, transformation requires a crisis—the more acute, the better. Transformation takes place regularly in the military—always after defeat, when generals are forced to fundamentally rethink their strategies. And one reason the fast-moving tech industry is so innovative is that when a crisis hits, it tends to hit quickly, which means it cannot be evaded.
Second, while companies can try to overcome their problems through mergers and acquisitions, this will not necessarily achieve the type of transformation that the tobacco industry is interested in. Evans cited the example of the American Can Co., a low-margin commodity business that transformed itself into a life insurance company by buying other businesses. “Over time, the only thing that transformed was the business card of the chief executive,” said Evans, adding that “a bunch of investment bankers probably got very rich in the process.”
The third lesson in transformation, according to Evans, is that it almost invariably takes new leaders to set a new direction—and those leaders need a single-minded, long-term vision along with the security and legitimacy to withstand short-term reversals, which is the fourth lesson. Evans notes that successful transformers were often led by a sole proprietor. Bill Gates was able to overcome the threat posed by the internet to Microsoft’s software-based business model in part because he was a uniquely powerful controller and owner of the company.
As the fifth lesson, Evans stressed the importance of a clearly articulated strategy and purpose. “Companies that lose their way cannot recruit good people,” he said. Talented candidates are attracted by the promise of growth and vitality, especially through innovation.
Evans then set out to dispel the myth that big companies are unable to innovate. “It’s untrue,” he said. To illustrate his point, he showed a chart plotting the number of patent filings against the population levels in America’s biggest cities. The cities with the most people clearly filed the most patents. “Innovativeness is a function of the breadth and comprehensiveness of the other ideas to which an individual is exposed,” explained Evans. “That exposure is much greater in a large network than it is in a small one. If appropriately structured, there can be positive economies of scale to innovation; big is indeed beautiful.”
The other secret of cities’ success in innovation is their lack of hierarchies. According to Evans, it’s the hierarchy rather than the scale that squelches the ability of many large organizations to innovate. If a large organization wants to be successful in innovation, it should replicate the hierarchy-free social structure of cities.
To illustrate his point, Evans showed charts revealing patterns of collaboration within Google, Apple and Amazon—companies that are large and innovative. While each of these companies operates in a different part of the innovation cycle, the charts revealed patterns of considerable collaboration.
Openness is key, according to Evans. Google, for example, is deeply networked in academia and does not assert intellectual property in the traditional sense.
This lesson was learned the hard way by the pharmaceutical industry toward the end of the 20th century. In the late 1980s, there was little collaboration among pharmaceutical companies, with each player jealously guarding its intellectual property. When large molecule biotechnology emerged in the early 1990s, many traditional pharmaceutical companies stuck to old models of who owns what—and therefore got marginalized.
In the ensuing decades, they were forced to buy their way back into the business by acquiring some of these biotech companies. According to Evans, the pharmaceutical companies have since learned their lesson. But the point, he noted, is profound: Innovation requires openness and sharing. “It is incompatible with a lot of the traditional ideas about exclusivity, secrecy and ownership,” he noted.

Brian King: Leading an Agency Under Scrutiny
There are plenty of reservations about the way in which the U.S. Food and Drug Administration’s Center for Tobacco Products (CTP) has handled its responsibilities. During a brief speech at the GTNF 2022 in Washington, D.C., the new director of the CTP, Brian King, did little to quell those concerns. He did, however, acknowledge the continuum of risk. “We do have certain products that are lower risk than combustible cigarettes, and that’s an important component of the dialogue,” said King.
King told attendees that there is an opportunity for the CTP to assess the risk of youth vaping initiation and counterbalance that with the opportunity for adults who use e-cigarettes to quit combustible cigarettes.
“I think that [the] public health standard is pretty critical to the work we do, and it’s definitely a guiding light in terms of my determinations and decision-making,” he said. “Ultimately, it comes down to the science … it’s very critical, to me, to ensure that we use that as our guiding light. And, of course, the onus is on the applicants to ensure that they are providing the most robust signs possible to inform decision-making.”
The FDA has long been criticized for its handling of the premarket tobacco product application (PMTA) process and is currently defending multiple lawsuits from vapor companies challenging its marketing denial orders (MDOs), including two from Juul Labs, which recently filed a lawsuit over the regulatory agency’s refusal to disclose documents supporting its MDO.
Juul claims the agency overlooked more than 6,000 pages of the data it submitted on the aerosols that users inhale, according to Joe Murillo, chief regulatory officer at Juul Labs, who also spoke at the conference.
King said that a sizeable portion of youth are still vaping flavored and disposable products. However, he also said that the potential benefits for adult smokers are “mutually exclusive” from youth uptake concerns. “I don’t think that they necessarily have to be separate; they can certainly be explored concurrently,” he said. “But again, we need to ensure that we’re considering the science from both ends when making our decisions.”
King said the agency is “continuing to make progress” on the estimated 1 million PMTAs for nontobacco nicotine products as well. He said over 90 percent of the applications have been completed. “We have 350 acceptances so far, and there’s about 800,000 that have received an RTA [a refuse-to-accept letter], and I’m hopeful that within the next few weeks we should be able to get through all 100 percent of those 1 million.”
Being accepted for review is only the first step in the PMTA process. There are six stages, or rounds, to the PMTA process. After acceptance is filing, then a substantive review before an action is taken. King called the first step an important one. “[It’s] an important step, and I’m committed to ensuring that we keep things moving as expeditiously as possible,” King said.
King recently told the AP that he believes “there’s a lot of really important science and innovations” that have occurred in the vaping industry in recent years, adding that the most notable is nicotine salts in e-liquids. “We know that when you smoke a tobacco product, it’s a very efficient way to deliver nicotine across the blood-brain barrier. So it’s been very difficult to rival that efficiency in another product,” said King in the interview. “But in the case of nicotine salts, you have the potential to more efficiently deliver nicotine, which could hold some public health promise in terms of giving smokers enough nicotine that they would transition [off cigarettes] completely.”
King also discussed the FDA’s ability to force companies to comply with its MDOs. So far, very few companies that have been told to remove their products from the market have complied. King said the agency has multiple enforcement options to bring both manufacturers and retailers to heel.
“We have several tools available to us, including advisory actions,” he said. “We also have regulatory enforcement actions, including voluntary recalls as well as various other requested recalls. We can also take administrative action, civil money penalties (in terms of manufacturers, that penalty cannot exceed $15,000 for any single violation or $1 million for any number of violations related to a single action),” explained King. “When it comes to judicial action, we can do seizure, injunction and also criminal prosecution. I will say that when it comes to enforcement and compliance, nothing is off the table.”
King also updated attendees on the FDA’s external review of the CTP’s procedures, which is being conducted by the Reagan-Udall Foundation. Lauren Silvis, a former FDA chief of staff, was named as chair of the panel that has been asked to “evaluate regulatory processes and agency operations related to tobacco to help the center address new challenges as it works to reduce death and disease from tobacco and achieve its public health mission.”
“Within only a few weeks of assuming this role, we were told that there would be an external evaluation,” said King. “I actually wholly welcome it. I think it’s a good opportunity, particularly with new leadership, to identify areas where we’re doing things very well but also identify areas where we can enhance our efficiency and effectiveness. I have had meetings with [Silvis] and her team, and I’m confident that we’re going to get very useful information.
“It’s an ambitious timeline, 60 business days, so it’s going to work out to about 90 days total. It should finish probably by the end of the year, mid-December, and I’m looking forward to the opportunity to hear the recommendations. And I do have a very open mind on this. I’m always for improvement.”
King expects there will also be opportunities for external engagement, including listening sessions. He could not provide specifics during the speech but said he welcomes feedback from others in terms of informing the CTP’s processes.
“It’s not a one-size-fits-all, but I do think that we have some great opportunities here,” he said. “I’m fully committed to listening to the evaluator’s input and ensuring that we use it in a very useful way … then we’ll take it from there … I’m sure many of you have heard publicly, my calendar is rapidly filling up, and we are meeting with many—I know I’ve met with several of you in the room already, and I value those opportunities to meet with folks from across the spectrum, whether it be industry or public health … to hear people’s insights, what your priorities are.
“And those have been very productive and helpful to me. I do listen. I think it’s a very useful opportunity to me in terms of hearing specifically what the recommendations are from industry and what are areas where you feel it would be useful for FDA to engage in to make your life easier in terms of submissions and applications and [what] processes are overly complicated and could be improved,” said King. “I’m fully committed to ensuring that happens.”

Panel Discussion: The Investment Climate
The 2009 Family Smoking Prevention and Tobacco Control Act charged the U.S. Food and Drug Administration with regulating tobacco products for the protection of public health, so, from one point of view, it was dismaying to hear a panelist on the investor panel of the recent GTNF describe how, under the tutelage of the FDA, the U.S. tobacco and nicotine market had become a resilient one for combustible cigarettes.
Of course, this being an investors panel, the panelist’s comment was less about the FDA and more about Altria, whose short-term fortunes are tied to a large extent to the resilience of the combustible segment and whose reduced-risk strategy was said by another panelist to be unclear. Altria’s appeal as an investment opportunity was contrasted with that of another U.S.-listed company, Philip Morris International, which has had success in moving its sales from higher risk to lower risk products.
The panelists discussed the proposed acquisition of Swedish Match by PMI, which, if it goes ahead, would allow PMI to use SM as a vehicle for marketing in the U.S. the heated-tobacco device IQOS, which has marketing approval and is the subject of an FDA modified-risk order but which is currently banned from being imported following a patents dispute, a ban that is being challenged in the courts. According to one panelist, Altria has an agreement with PMI to market IQOS in the U.S. until April 2024, but there is apparently a question mark over whether the agreement provides for Altria to extend the agreement for another five years.
This raises the question of how an Altria shorn of its right to market IQOS would fare. Well, apparently, Altria is said to be due to unveil a heated-tobacco product toward the end of this year, but with FDA approval necessary, it would take some time for the company to start commercializing a new product. One interesting comment made the point that while PMI was years ahead of Altria in the heated-tobacco product field, the two companies used to be one.
There seemed to be an assumption at times that PMI would easily be able to muscle in on the U.S. market, but not everybody was having that. One panelist made the point that Altria and other U.S. companies were likely to prove highly competitive, and another added that IQOS might not be welcomed with open arms by U.S. consumers who had access to a range of reduced-risk products, including e-cigarettes, which had out-competed IQOS on some other markets. But on the other side of this coin, PMI was said to be starting to widen the focus of its reduced-risk strategy in respect of product categories.
It would seem that a week is a long time in the investment arena. During the panel discussion, Altria was seen as being in a difficult position when it comes to vaping. Its investment in Juul Labs involved a no-competition clause, and Juul has suffered a setback in the form of an FDA marketing denial order (MDO). The panelists indicated that the MDO was being contested, however, and that it would be open to Altria to make an outright bid for Juul. Less than a week after the panel met, however, Altria announced that it had exercised its option to permanently terminate its noncompetition obligations to Juul.
Surprisingly, perhaps, threats raised by the potential cigarette menthol ban and the imposition of a very low-nicotine cigarette standard in the U.S. were not yet seen as particular drags on tobacco businesses’ appeal to investors since, partly because of likely legal challenges, they were seen as being some way off.
On a wider front, while PMI was seen as a growth company, it was said to be facing headwinds created by the strength of the dollar and its exit from Russia. Or not. One panelist said that only Imperial Brands had exited Russia completely and that he would be surprised if the other major companies, which had invested heavily in the country, had exited Russia without providing for a way back.
On a more general level, the investment case for tobacco was seen as strong, partly because most companies—the exception seems to be PMI—are undervalued but also because they offer strong and secure cash flows and high yields. This situation was said not to have changed but to be more appreciated now than it was two or three years ago, particularly in the face of a recession. And while the appeal of tobacco stocks would be negatively impacted by the current increases in interest rates, on the positive side, most tobacco company debt was at fixed rates. Still, environmental, social and governance issues comprised an overhang in respect of getting investors interested in tobacco stock.
The discussions were heavily skewed toward the U.S. market and U.S. companies to the extent that the chairman apologized for ignoring the world outside the U.S. and Europe. The upcoming EU directives on excise taxes and tobacco products were mentioned, the former in a fairly good light given that it seemed that harmonized taxes would not be set at the same level across product categories but at a lower level on less risky products. Such a rational policy seems at odds with the Tobacco Products Directive, which seems set to retain the irrational ban on snus.
BAT and Imperial Brands were said to be undervalued by investors. BAT’s multi-category reduced-risk portfolio was held up as the way ahead, and its success with Vuse was highlighted a couple of times. Mention was made of a new management at Imperial that was said to be getting to grips with the business, focusing on the areas where it could perform well, resetting its new-generation products business and creating an opportunity for some geographical divestments.

Panel Discussion: Global Regulatory Issues
It’s been almost 60 years since a U.S. Surgeon General first stated the dangers of cigarette smoking and 50 years since scientists found out that the inhalation of smoke rather than nicotine is the major cause of smokers’ health problems. With goals in tobacco harm reduction (THR) long set, regulators should be able to solve the problem and shape rational regulation, argued moderator David Sweanor, adjunct professor of law at the University of Ottawa. “In all cases, it’s only small steps forward. What would happen if we saw this as a matter of urgency and, for instance, allow more products at a time?”
Gizelle Baker, vice president of global scientific engagement at Philip Morris International, stressed the role of science as a basis for policymaking. “Science isn’t perfect, but it has evolved,” she said. “We need to look at the data we need in the future to correct our idea and come to conclusions that can drive policy. Because the only way to shape policy is to use science, data and facts.” Knowledge about long-term effects or which part of the population in certain countries will use a reduced-risk product (RRP) can only be gained if the products are put on the market, she stated.
Konstantinos Farsalinos, research fellow at Onassis Cardiac Surgery Center, noted that there are no missing data, only missing common sense. “We will never be fully informed about anything,” he said. “At one point, we have to make a decision.” The bar of proof for THR has been set extremely high, Farsalinos noted. In some markets, this forces smaller companies to leave the market to big companies that can afford the approval process. “We live in a high-risk society—let’s consider THR like any other harm reduction strategies,” he said.
Marewa Glover, director of the Center of Research Excellence on Indigenous Sovereignty and Smoking, spoke about New Zealand’s Smoke-Free Aotearoa 2025 Action Plan, which is currently under review and includes a smoking ban for all those born after 2008, a drastic reduction of legal retail outlets for RRPs and the reduction of nicotine content in combustible cigarettes to nonaddictive levels. Glover said the draft bill lacks not only common sense but also compassion. “The regulatory intent is to not allow vaping to become normalized but denicotinization,” she said. “As a smoker, you should switch to vaping temporarily and then quit completely. Anyone who quits vaping should never go back.” She predicted a domino effect on other countries and urged regulators not to follow the example of New Zealand.
The objective of THR, said Sharon Goodall, group head of regulatory science at BAT, is very clear: to reduce the number of smoking-related deaths. The sentiment of positivity that comes with this prospect should be maintained in the industry’s talks with regulators who are willing to change their approach toward THR. “We must not get distracted. We must react to individual events but remain focused on the long-term outcome. There are insufficiencies in the system, markets without open dialogue, therefore we must continue to work with regulators.”
Focusing on the role of market structure and competition in the U.S., David Levy, professor of oncology at Georgetown University, pointed out that before 2005, the cigarette industry was static and homogeneous and, for tobacco control, the epitomized enemy. After 2005, the market fragmented, with consumers using multiple products. After 2012, e-cigarettes quickly gained market share.
Tobacco companies responded by producing their own e-cigarettes. They played a role but didn’t control the market. Vaping became a highly competitive market. Recently, it has been joined by heated-tobacco products, which, Levy said, could play an important role as they solved problems e-cigarettes couldn’t solve. “Companies have to be serious in THR because it’s decisive for their businesses,” he said. “New Zealand and the U.K. have done well in THR. In low[-income] and middle-income countries [LMICs], such as India or Pakistan, oral nicotine could replace the highly harmful chewing tobaccos. However, restrictive policies, such as a ban of RRPs, will drive smokers back to cigarettes.” Levy saw clues for a closer cooperation between the industry and public health.
Fadi Maayta, president and co-founder of Alternative Nicotine Delivery Solutions, provided a snapshot of the situation in LMICs by portraying the Middle East and North Africa (MENA) region, which he called a forgotten region in the picture of THR.
Of the 547 million who live in the region, there are 140 million adult smokers. In some countries like Jordan, there is a smoking incidence of more than 60 percent, and cigarette sales are growing across the region. Governments are employing the typical measures to curb consumption, such as tax hikes and increases in customs. Saudi Arabia was the region’s only country to introduce plain packaging, which resulted in a burgeoning illicit cigarette market.
Eight out of the 22 MENA markets have regulated vape products whereas the remaining 14 have banned them altogether. In these markets, however, vape products are still around—and unregulated. But even in regulated markets, 80 percent to 90 percent of the markets are illicit products because the government followed an aggressive path when regulating the products, introducing a fiscal and regulatory framework that is stricter than that for cigarettes.
“Throughout the region, misinformation is polluting the whole idea of THR,” said Maayta. “Regulators rely on articles about the harm of e-cigarettes, instead [of] on robust science, and still believe that nicotine causes cancer.” An opportunity, he said, could be to cooperate with global THR associations.

Plenary Panel: Innovating for Tomorrow
When creating a smoke-free world, innovation must take place not only in terms of products but also in terms of regulation, communication and sustainability. That was one of the messages of the “Innovating for Tomorrow” panel discussion during the recent GTNF in Washington, D.C.
Ming Deng, head of the Next-Generation Products (NGPs) Industry Study at Yunnan University, spoke about his desire to make NGPs smart and mobile. At present, he said, the electronic functions that differentiate an NGP from a combustible cigarette just serve as a marketing tool. However, the Artificial Intelligence of Things (AIoT)—the combination of artificial intelligence and the Internet of Things—offers considerable opportunity to improve human-machine interactions and enhance data management and analytics, among other benefits. “With AIoT, producers could trace consumers’ needs and innovate products accordingly,” said Deng.
For Meisen Liu, R&D director at Shenzhen Zinwi Bio-Tech, lower temperature atomization is one of the most important objectives in current research as it is safer for human health. A higher atomization temperature causes atomizing agents to decompose into harmful aldehydes whereas atomizing agents with a low boiling point decrease the atomizing temperature and reduce the emission of harmful substances. Liu also described how nicotine salts derived from different acids had different properties regarding sensory stimulation or taste. His company, he said, had created a new type of nicotine salt that allows for enhanced stimulation in markets where the amount of nicotine in e-liquids is restricted.
Kevin Peng, advanced technology scientist at ALD Group, spoke about technologies to reduce the carbon footprint of vape product manufacturing and consumption. Earlier this year, his company launched a “green cigarette,” a disposable vape product featuring 6 percent lower carbon emissions than combustible cigarettes. The company also developed a super-slim pod for reusable vaping devices made from a material that has only one-third of the carbon emission of ALD’s older materials. This way, he said, his company had achieved a 50 percent emission reduction compared to other pod products.
ALD also conducted an emission assessment for its organization and products. “ESG [environmental, social and governance] is a much more difficult thing than we thought,” Peng stated. “We found that most suppliers are not very responsive in terms of such requirements.” He called for a unified industry ESG standard for suppliers, which would make it easier to reduce emissions.
To help accelerate its transformation, BAT established Btomorrow Ventures two-and-a-half years ago. Lisa Smith, the subsidiary’s managing director, related how Btomorrow had set up a number of innovative ecosystems. “It’s a highly competitive market,” she said. “It’s difficult to find the best innovators out there.” Her company’s role is to be the “handshake” to the outside world to show that BAT is an appropriate partner for innovators. Among the many tasks in BAT’s transformation are to quickly promote the ESG agenda and move beyond nicotine. In order to achieve the latter, she said, the company had to build science and credibility.
ICCPP, a provider of solutions for e-cigarettes and heated-tobacco products, believes that the key to innovation in vaporization might be the ceramic coil. The company, which focuses on research and manufacture of electronic atomizing technologies and is the parent company of the Voopoo vaping brand, introduced the world’s first nano-microcrystalline ceramic core in 2021. According to William Yu, vice president of global ODM business at ICCPP, the core is based on environmentally friendly mineral materials that result in an increased nicotine delivery and stable flavors. In combination with a powder-free technology and a porous structure, the core enables a significant increase in atomization, according to Yu. The company also develops environmentally friendly products, such as a disposable cigarette made from special recyclable paper.
Continuing to innovate is essential as the industry is at a crossroads, said George Cassels-Smith, CEO of Tobacco Technology Inc. (TTI). After the Food and Drug Administration, through its onerous market authorization processes, had “frozen” the U.S. market for next-generation products, TTI opened a new manufacturing site in Italy, which according to Cassels-Smith is more open to innovation. “It’s vital to involve science, which is one of the pillars of what is a quick-moving new technology,” he said. “It needs expertise to focus on this direction because, ultimately, we must find superior products to combustible cigarettes.”
Additional GTNF 2022 session summaries >>
November 1, 2022
Kingsley Wheaton

Photo: Chris Ferenzi
Kingsley Wheaton, chief growth officer at BAT, posed an interesting question at the recent GTNF. “So, we must be even more courageous, speak to the outside world further still and come together even more,” he said near the end of his presentation. “Greater collaboration is key. Is it time, for example, for the GTNF to move from the networked forum that it is to operating more like a fully fledged NGO [nongovernmental organization]?”
Such a suggestion certainly provides something to ponder. For instance, while I take it that, since the suggestion was put forward by BAT, such an NGO would be legally viable, how would it be viewed by those cynical of the tobacco/nicotine industry’s motives and skeptical about the direction of travel of tobacco harm reduction (THR) as mapped out by those who participate in GTNFs?
I imagine that the suggestion was prompted by a concern that, whereas the concept and application of THR principles have weaved and are weaving a certain magic, the spell might be broken without further impetus, without further change. Indeed, the word change was used 12 times in the presentation.
But why is change necessary? After all, Wheaton told his audience that “[i]n the U.K., the U.S., Canada, France, New Zealand, Japan and Sweden, the needle is moving toward tobacco harm reduction.” In the U.K., Japan and Sweden, he said, more than half of BAT’s revenues now come from new-category products while across Europe that figure was more than 20 percent.
Well, change is necessary, I guess, because, on the flip side, globally, the needle stubbornly refuses to move fast enough. Overall, five-sixths of the company’s revenues still come from combustible products.
Of course, there are any number of general and country-specific issues determining why the countries named have moved the THR needle further than many of those not mentioned have, and many of those issues cannot be addressed by the tobacco/nicotine industry. Indeed, it was evident, listening to the presentation, that the industry cannot, on its own, end tobacco smoking. Far from it. “Can we look forward to a day when BAT sells its last cigarette?” Wheaton asked, before answering, “Yes, I think that is indeed within long-range view. But it will require more than just the efforts of industry or governments.”
Even the development and marketing of less risky tobacco and nicotine products is not just down to the industry, I guess. There is no point in developing products whose viability will fall foul of unhelpful regulation in a significant number of countries. I caught the end of the GTNF panel discussion on innovation at which the moderator ended the session by bewailing the fact that the innovations that had been discussed were unlikely to be introduced in the U.S. because of regulatory hurdles in that country. And the U.S., remember, is one of the countries that is counted among those that are moving the THR needle.
Most of the suggestions that Wheaton put forward as being necessary to reinvigorate THR have been made before but have proved devilishly difficult to implement. For instance, Wheaton made the point that in order to allow consumers to make informed decisions about what types of tobacco/nicotine products to use, public health needed to communicate risk accurately, and the industry needed the marketing freedoms to be allowed to communicate responsibly the benefits of switching from higher risk products to lower risk products. This is true, but while there is some movement in some countries toward such positions, in many countries, official information about the risks associated with tobacco and nicotine products is generally confusing and, in some cases, misleading.
While it was a little disappointing, I thought, that Wheaton did not spend time discussing the relative environmental merits of the various tobacco and nicotine products on offer, which the engaged consumer would also seek, he did make the point that the industry needed to demonstrate that it can change sustainably. This is correct in my view. There is little point in prolonging the lives of individuals if we are going to help bring forward the death of humanity at large.
BAT has a good record when it comes to research into lower risk products, and Wheaton made the point that science was the key to unlocking the potential of industry transformation from selling higher risk tobacco products to selling lower risk nicotine products. But he will know as well as anybody that not all the “science” points in the same direction because not all research is conducted in a scientific manner. At least one other GTNF session was taken up with a presentation demonstrating that the findings of some research funded by the U.S. Food and Drug Administration were not supported by the evidence but were nevertheless likely to influence regulations.
Wheaton admits that he doesn’t have all the answers. But he has laid down the challenge. “It is no longer the time for talk but time to act because tobacco harm reduction is too important for us not to,” he said.
“Ladies and gentlemen, we are standing at a crossroads. It’s either more of the same, more ‘quit or die,’ more path of least resistance, or we can chart a new course with tobacco harm reduction as our goal.”–George Gay
The full text of Wheaton’s presentation is available here.

November 1, 2022
Court Stays Logic MDO

Photo: de Art
A U.S. appeals court has stayed the Food and Drug Administration’s marketing denial order (MDO) for Logic Technology Development’s Logic Power Menthol E-Liquid Package and Logic Pro Menthol E-Liquid Package, according to a NATO newsletter.
The ruling allows retailers and wholesalers to continue selling the products for the duration of the stay.
The U.S. Circuit Court of Appeals for the 3rd Circuit will now consider a further motion from Logic regarding the MDO that the company has seven days to file, according to media reports.
“The foregoing motion for a partial administrative stay is GRANTED as follows. The FDA’s marketing denial order is TEMPORARILY STAYED as to the Logic Pro Menthol E-Liquid Package and the Logic Power Menthol E-Liquid Package products. Within seven days of this order, the petitioner must file its motion for a stay pending the petition,” the order states. “The FDA’s response must be filed within 10 days thereafter.”
The temporary administrative stay will remain in effect until a panel of the court decides on Logic’s new stay motion. If no timely stay motion is filed, the clerk is authorized and directed to vacate the temporary administrative stay.
Tobacco harm reduction advocates have questioned the FDA’s reasoning behind the Logic MDO, suggesting that the agency misinterpreted youth consumption statistics.
November 1, 2022
Russia Continues to Collect Significant Tobacco Taxes

Photo: RODWORKS
Tax payments by the leading international cigarette manufacturers have provided the Russian government with at least $7.25 billion in additional income since President Vladimir Putin ordered his army to attack Ukraine, according to an analysis of Russian Treasury figures conducted by The Telegraph.
Center-Life, an anti-smoking lobbying group in Ukraine, told The Telegraph that 2020 taxes from PMI and JTI alone would fund 700 Mil Mi-24 helicopters, 1,970 T-72 tanks and 382 Sukhoi Su-25 fighter jets for the Russian army.
“It’s clearly completely wrong that these western firms continue to pay significant taxes into Russian coffers because so much of Russian state expenditure now is to fund the war in Ukraine, which is killing people in large numbers,” Bob Seely, a Member of Parliament on the Foreign Affairs Committee, was quoted as saying by The Telegraph.
Following the Feb. 24 invasion, international cigarette manufacturers announced they would end their operations in Russia, but retreating from such a major market is easier said than done. Tobacco companies have had to carefully navigate shifting regulations and avoid missteps that could prompt the government to seize the business, for example—all the while trying to protect employees from becoming targets for arrest.
Earlier this year, Philip Morris International CEO Jacek Olczak described the process as “bloody complex.” In a July interview, he said the company was unlikely to be able to leave Russia before the end of 2022.
Russia is the world’s fourth-largest cigarette market. Prior to the war, Japan Tobacco International led the market with a 36.7 percent share, followed by PMI (31.7 percent) and BAT (23.5 percent), according to Cowen & Co.
November 1, 2022
Medicago Cuts Jobs at Covid Vaccine Facility

Photo: Miljan Živković
Medicago is cutting 62 jobs at its manufacturing facility in Durham, North Carolina, USA, which played a key role in producing the company’s tobacco plant-based Covid-19 vaccine, reports the Triangle Business Journal.
In a notice to the North Carolina Department of Commerce, the Canadian biopharmaceutical company said the layoffs are the result of Medicago “restructuring its workforce to align with its changing business needs.”
Using tobacco plants, the company developed a Covid vaccine called Covifenz, which Canadian regulators approved earlier this year. The country’s government committed to purchasing 20 million doses of the vaccine with an option to purchase 56 million more.
No other country has approved Covifenz, however. The World Health Organization, meanwhile, has been reluctant to grant the vaccine emergency approval due to Medicago’s ties with Philip Morris International, which owns about a third of the biopharmaceutical company.
Headquartered in Quebec City, Medicago employs 600 people.
The company built out its facility in Durham through a 2010 partnership with the U.S. Defense Advanced Research Projects Agency, which included $21 million in funding from the federal agency. The facility features greenhouse space and an automated extraction and purification system.
November 1, 2022
Philip Morris Expands Operations in Lithuania

Photo: krivinis
Philip Morris International is expanding the production capacity of its factory in Klaipeda, Lithuania, following the suspension of its operations in Ukraine, reports Interfax, citing a company statement.
The multinational will reportedly construct a new production building connected to its existing storage facilities.
The Klaipeda factory will manufacture products intended for Ukraine, the company said. The project will cost €3.5 million and is expected to be completed toward the end of 2023.
On Feb. 25, PMI announced the suspension of its activities in Ukraine, including at its factory in Kharkov, due to Russia’s military invasion.
Ukraine accounted for around 2 percent of the multinational’s cigarette and heated-tobacco shipments in 2021 and less than 2 percent of PMI’s total revenue, according to the company.
November 1, 2022
Perceptions of Nicotine

Photo: Chris Ferenzi Photography
Participants in “The Perceptions of Nicotine” panel during the GTNF 2022, held in Washington, D.C., in September, began the conversation by drawing comparisons to similar consumer products, most notably caffeine. Nicotine is found in tobacco leaves, but it’s also found, at lower levels, in plants, such as tomatoes, potatoes, eggplants and sweet peppers. However, by far its predominant source is in tobacco leaves.
Caffeine can also be found in multiple food sources, including coffee beans, tea, cocoa beans, Kola nuts and guarana berries. The amount of caffeine in guarana berry seeds is about the same as the amount of nicotine in tobacco leaves, up to about 4 percent, according to a panelist. Unlike caffeine, however, nicotine is tied to tobacco. Nicotine is a public pariah while caffeine is socially acceptable. The panelist agreed that this is due to the differences in how the public has been educated on these products. Medical professionals, for example, get much of their information from medical societies, one panelist noted.
One challenge is that the public and even many medical specialists don’t distinguish between nicotine and smoking. “I think that’s part of the problem,” a speaker said. “How do we untangle that? Nicotine does not produce disease. It’s not carcinogenic. It does increase heart rate and blood pressure. And perhaps there are some positives … it’s a stimulant, it induces pleasure and it improves concentration, reaction time [and] performance on some tasks, but it can also reduce stress and anxiety.”
For consumers, when asked why they smoke, the most common answer is for enjoyment and pleasure; however, nicotine ranks low on the list of motivations. But when you ask a smoker, “Why do you find smoking difficult to quit?” the answer is “because I’m addicted—addicted to nicotine.” One panelist said when consumers want medical information, more than 70 percent say the first place they go is the internet. The misinformation is rampant, even from seemingly trustworthy sources.
“The first place that they turn for health-related information is the internet. More than 70 percent of people say that’s the first place they go when they’re looking for information … because it’s easy to use, and they find information that way,” a panelist said. “Just doing the quick search yesterday, you put in electronic cigarettes into the Google search engine, and the first thing you see is the Center[s for] Disease Control [and] Prevention website, which is great; it’s a government resource. The Office on Smoking and Health is the place within the federal government for information on health and smoking.
“But when you click on that link, the first thing you see is information on the EVALI [e-cigarette or vaping product use-associated lung injury] outbreak. The headline is [about an] outbreak of lung injuries from e-cigarettes and vaping products. That’s not the right way to help people understand the comparative risks between cigarettes and electronic cigarettes and nicotine-replacement therapy and other lower risk [nicotine] products.”
Many years ago, smoking and addiction were joined together, and that has now created the assumption in the public that nicotine use equals smoking, which equals addiction. It’s not helping people who smoke understand how they might be able to use the products that are available, including lower risk tobacco and nicotine-containing products as well as nicotine-replacement therapy, to quit smoking. Panelists agreed the misconception was doing more harm than good for public health.
The way vaping and tobacco products are regulated is also partly to blame, according to the panel. Tobacco companies are very limited in the amount of information they can provide on their products. Swedish Match, for example, was the first company to receive an authorization for a modified-risk tobacco product. The U.S. Food and Drug Administration, however, severely restricted the ways in which Swedish Match could communicate the lower risk of its product to consumers.
“We got super excited internally. I mean, here we have a product, it had no carcinogens, no tar, no nitrosamines, significant risk reductions, and when we started looking at how and what we can communicate, it was incredibly limited … as we were going through our process, we had [tried] to figure out how to tell consumers this was different without telling them it was different,” explained a panelist representing Swedish Match. “It was very challenging. We were trying to figure out how to use different colors and different cues. It was a brand-new category, so we’re trying to educate people on a brand-new category with a can, and you didn’t even know what was in it …. It was incredibly difficult to try to do that.”
Swedish Match also gathered customer testimonials, but regulations kept the company from doing anything with them. Another panelist explained that consumers do not separate nicotine from tobacco. Nearly 80 percent of the population agree that those are virtually the same. When asked to compare the risks of products, people list tobacco as the most harmful, followed closely by nicotine and then alcohol.
Caffeine, however, is on the other end of the scale. “Caffeine is on a totally different end of the spectrum. Interestingly, when we think about where the market is moving and things are moving relative to legality, you look at CBD, look at THC, [and caffeine] is more closely associated from a harm perspective to CBD and THC,” a speaker said. “In terms of addictiveness, 96 percent of U.S. consumers would say that nicotine is addictive. Only 76 percent say that caffeine is addictive. But then, you look at harmfulness to health. You can see this wide gap that exists in terms of … the core chemical, 89 percent versus 46 percent in terms of harmfulness to health [nicotine versus caffeine].”
The panelists argued that people who smoke combustible cigarettes are less likely to try less harmful products if they perceive those products to be no different than what they’re currently using in terms of harm. There’s very little motivation for them to try them. There is also very little the industry can do to reverse the misinformation surrounding nicotine.
“The industry’s hands are tied with regard to the voice that the industry can have. But I think the role that the industry can play in it is to continue to develop high-quality, lower risk products that are acceptable alternatives for cigarettes for people who smoked cigarettes, and then get those through the regulatory process,” a panelist said. “It’s up to the FDA to communicate to consumers that there are less risky products to consume nicotine.”
October 31, 2022
‘Forgotten’ Smokers

Photo: Chris Ferenzi
Rather than being “forgotten,” as the session’s title suggested, people who smoke are an unexplored, stigmatized and often misunderstood species, according to the participants in a GTNF discussion about consumers. While consumer centricity has become a buzzword in the reduced-risk product industry, companies still have a lot to learn about their target group.
Altria, whose vision is to responsibly lead the transition to a smoke-free future, examined the plight of consumers on their journey to less hazardous products. “We had done a comprehensive research program about the interest in vape products, but what was really missing was to bring the voice of the consumer directly to the organization,” said Brent Taylor, managing director of consumer and marketplace insights at Altria.
Last year, the company initiated “Project 21,” a study of 21 consumers of combustible tobacco who were interested in switching to less harmful nicotine products (see “Listening to Nicotine Users,” Tobacco Reporter, September 2022). Over 21 days, Altria’s researchers catalogued the study participants’ behavior via videos and weekly surveys. The participants were asked to “do their best” but didn’t get any guidance, as Altria wanted to learn how they tackled the challenge on their own. Their progress was checked after three weeks, three months and six months.
After six months, 15 participants were still smoke-free. The people who were most successful were those who really wanted to switch and held themselves accountable. The project also showed that many factors unrelated to the product category, such as a bad day at work, impacted the success of participants in transitioning. Each of the journeys was unique and entailed its own set of complications. For all participants, it was a highly emotional experience, according to Altria.
Kim “Skip” Murray, a person who vapes and a tobacco harm reduction (THR) advocate who until last year ran a vape shop in Minnesota, related experiences from her customers that illustrate how external factors, such as misinformation and economic strain, can impact attempts at switching. One of her customers, a Vietnam veteran with chronic obstructive pulmonary disease, returned to smoking for some months after press reports and health authorities mistakenly attributed the e-cigarette or vaping product use-associated lung injury (EVALI) outbreak to nicotine vapes.
Some clients reverted to more harmful but less expensive cigarettes when their budgets were tight. Discouragingly, the Food and Drug Administration’s marketing denial orders forced products off the market that had helped Murray’s customers quit cigarettes while leaving combustible products widely available. Murray said she was unable to dispel the myths about EVALI and many of the other false narratives about vaping. The number of people who came into her shop wanting to quit dropped substantially, eventually forcing her out of business.
Alex Clark, CEO of the Consumer Advocacy for Smoke-free Alternatives Association, stressed the importance of language in the smoking and health debate. “Smoker,” he said, has become a pejorative term. “We’re now focusing on people who have a history of being underprivileged, undeserved and oppressed—people who we don’t see in offices or at conferences; people who have been pushed to the margin of society.” Having smoked heavily in his youth, Clark recalled being told that his habit was a character flaw. The stigma of having no control over his decisions and essentially being a drug addict, Clark said, stuck with him even after he had switched to vaping.
Most of the 30 million Americans who smoke today belong to vulnerable groups, suffering, for instance, from mental illness or unemployment, according to health behavior consultant Cheryl K. Olson. Among people in custody, the percentage of people who smoke is four times higher across the world. Together with other researchers, Olson explored the potential of vape products for use in a prison environment and found that the acceptance was 95 percent. “For vulnerable groups, harm reduction is a realistic goal if nicotine abstinence is not,” she said. “Our findings about these groups have the potential to rebalance the conversation about appropriateness for the protection of public health.”
Will Godfrey, editor-in-chief of Filter and executive director of the Influence Foundation, bemoaned the lack of synergy between harm reduction for illegal drugs and harm reduction for tobacco.
Many illegal drug users smoke, and it would make sense to apply harm reduction strategies to both habits. In reality, those running drug-related programs are often unwilling to apply harm reduction to tobacco use. Bizarrely, some needle exchange programs for intravenous drug users are accompanied by anti-vaping policies, noted Godfrey.
He blamed the “deep suspicion” of the nicotine industry within the left-wing harm reduction movement as well as the growing influence of Bloomberg Philanthropies, a big funder of anti-smoking programs that is notoriously hostile to vapor products.
Godfrey urged the administrators of drug harm reduction programs to extend the harm reduction principle to smoking. “It is vital that THR, including the industry, builds momentum in this direction,” he said. “The hostility to the industry won’t go away but is surmountable, as the role of pharma in drug harm reduction has shown.”

October 31, 2022