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  • FDA Cracks Down on Illegal Disposables

    FDA Cracks Down on Illegal Disposables

    Credit: Waldemarus

    The U.S. Food and Drug Administration issued warning letters to 30 retailers, including one distributor, for illegally selling unauthorized tobacco products. The unauthorized products were various types of Puff and Hyde brand disposable e-cigarettes, which were two of the most commonly reported brands used by youth e-cigarette users in 2022. The Puff products include Puff Bar.

    “Protecting our nation’s youth from tobacco products—including disposable e-cigarettes—is a top priority for the FDA,” said FDA Commissioner Robert M. Califf. “We’re committed to holding all players in the supply chain—not just manufacturers but also retailers and distributors—accountable to the law.”

    According to the FDA, the warning letters are part of a nationwide blitz to crack down on the sale of unauthorized e-cigarettes that are popular with youth—specifically Puff and Hyde products. The blitz included investigations of hundreds of retailers and distributors across the country. All products cited in the warning letters are disposable e-cigarettes, which are the most commonly used e-cigarette product type among youth. Puff Bar and Hyde were the first and third most popular brands used by youth who reported using e-cigarettes, according to the 2022 National Youth Tobacco Survey. Among youth e-cigarette users, about 20 percent reported usually using Puff Bar or Hyde brand products in 2022.

    “Since becoming director of CTP [Center for Tobacco Products], I’ve been crystal clear that FDA will not stand by while retailers and distributors seek to profit off illegally selling products that are well known to appeal to youth,” said Brian King, director of the FDA’s Center for Tobacco Products. “Retailers and distributors play a key role in keeping unauthorized tobacco products off the shelves, and if they fail to do so, we’re committed to taking appropriate action.”

    To date, the FDA has authorized 23 tobacco-flavored e-cigarette products and devices. These are the only e-cigarette products that currently may be lawfully sold in the U.S. The distribution or sale of unlawfully marketed products is subject to enforcement action.

  • Broadening the Base

    Broadening the Base

    Photos: Taco Tuinstra

    Malawi seeks to reduce its heavy dependence on tobacco.

    By Taco Tuinstra

    The impacts of Malawi’s balance-of-trade crisis were visible in late March even to an infrequent Western visitor who could afford to stay at an upscale hotel. Certain items on the room service menu were consistently out of stock, for example, while getting around Lilongwe required queuing for gasoline and hoping the petrol station would not run dry before the driver reached the pump.

    Because Malawi imports more goods and services than it exports, it suffers a chronic shortage of hard currency. In 2020, the latest year for which figures are available, the country’s import bill was $2.8 billion, versus exports of only $800 million, according to the National Statistics Office. With not enough U.S. dollars to pay for imports, many foreign-made goods were simply unavailable.

    For Malawi’s well-heeled international guests, the shortages represent mere inconveniences. Upon return to their home countries, they will be able to generously make up for the missed food items and travel without worrying about fuel. For the average Malawian, however, the trade deficit represents a real problem. Among other things, the dearth of foreign currency prevented the nation from importing enough fertilizer for its Maize and other crops this year, spelling trouble for food security and social cohesion. While Malawi was peaceful during Tobacco Reporter’s visit in late March, some feared civil unrest. “It’s coming,” warned an industry veteran.

    Visit the countryside in April/May, and you will see how people’s lives change when the tobacco markets open. If the markets fail, however, there will be poverty in the villages.

    One cause of Malawi’s economic problems is the fact that it relies too heavily on a single commodity. Tobacco accounts for between 12 percent and 15 percent of Malawi’s gross domestic product and between 40 percent and 70 percent of export earnings, depending on who you ask and on the season. Cultivation alone employs nearly half a million people, according to the Tobacco Commission, which regulates the trade. Those figures make Malawi the world’s most tobacco-dependent country.

    They also leave Malawi vulnerable to factors outside its control, including climate change and global cigarette sales. “Visit the countryside in April/May, and you will see how people’s lives change when the tobacco markets open,” says Nixon Lita, CEO of the TAMA Farmers Trust, describing the influx of cash at the start of each selling season. “If the markets fail, however, there will be poverty in the villages.”

    Last year is a case in point. Due to unfavorable climate conditions during the growing season, Malawi produced only 85.09 million kg of tobacco in 2022—the lowest volume in a decade, according to the Tobacco Commission. Despite higher per-kilo prices than in 2021, farmers earned just $182.12 million from their leaf sales last year. The reduced inflow of foreign currency in 2022 has left Malawi struggling even harder than usual to import essential items. The money made from this season’s larger crop (see “Back to Normal”) is unlikely to make up for the shortfall.

    Malawi’s overreliance on tobacco will become an even greater problem as global cigarette consumption stagnates. Already, the country’s leaf sales are down considerably from only a few years ago. Between 2016 and 2021, tobacco exports in real terms dropped by 42 percent, according to the World Bank. While local merchants are confident that Malawian burley—the country’s predominant tobacco variety—will continue to find buyers in the near future (see “Enduring Demand“), they are acutely aware that the industry should start preparing for a future with less tobacco, especially as the World Health Organization Framework Convention on Tobacco Control measures to discourage cigarette consumption start to bite.

    Malawi tobacco growers benefit from structured markets, which give them access to customers worldwide. Such infrastructure does not exist for many of the country’s other commodities. The video shows leaf being auctioned at the Lilongwe sales floors.

    Spreading the Risk

    To broaden Malawi’s economic base, stakeholders have stepped up efforts to develop other sectors. The TAMA Farmers Trust, for example, expanded its mandate in 2019. Originally established to represent only tobacco farmers, the organization is now helping its members produce other crops as well. Tobacco merchants such as Limbe Leaf Tobacco Co. (LLTC) and Alliance One Tobacco Malawi (AOTM), too, are encouraging diversification. Leveraging their existing farmer-support structures, they are now also disseminating inputs and agronomic advice for nontobacco crops to their contracted growers.

    Another big push comes from the Foundation for a Smoke-Free World (FSFW), which is an independent U.S. nonprofit organization that is funded by annual gifts from PMI Global Services. Established to “end smoking in this generation,” the FSFW focuses its grantmaking and charitable activities in three categories: health and science research aimed at helping smokers quit or switch to less harmful products, industry transformation and agricultural diversification.

    We should not make the same mistake as with tobacco by developing just one value chain.

    The foundation’s agricultural diversification objectives include ensuring that smallholder farmers in Malawi impacted by the declining demand for tobacco are supported to find sustainable alternative livelihoods. To advance these objectives, the FSFW has made grants to set up two institutions—the Centre for Agricultural Transformation (CAT), a science, business and technology incubation hub, and the MwAPATA Institute, an independent agricultural policy think tank that conducts research to inform and improve agricultural-related policies.

    Candida Nakhumwa, FSFW vice president and country director in Malawi, stresses the importance of developing multiple value chains simultaneously. “We should not make the same mistake as with tobacco by developing just one,” she says. In selecting alternative commodities, Nakhumwa urges Malawi to prioritize both exports and import substitution. “We are spending precious foreign exchange on importing things that we should be producing domestically,” she says. “For example, we can make cooking oil from soya beans or sunflower and use that as an import substitute.” Soya beans and sunflower, along with traditional Malawi crops such as groundnuts, also enjoy growing demand internationally, representing export potential.

    For crops like soya bean, sunflower and bananas to succeed, Malawi will need to replicate some of the factors that have allowed tobacco to thrive, notably infrastructure and a deliberate focus on productivity

    Building Markets

    For crops like soya bean, sunflower and groundnuts to succeed, however, Malawi will need to replicate some of the factors that have allowed tobacco to thrive, notably infrastructure and a deliberate focus on productivity. Over the years, the Malawi government gave lots of support to tobacco at the expense of other crops that also had potential, according to Nakhumwa. As a result, the markets for those other value chains remain underdeveloped.

    “The fact that tobacco has a structured market in Malawi, with auction floors and contracting companies, means that leaf growers have access to buyers worldwide—something that is not necessarily the case for producers of other crops,” says Nakhumwa. Without a structured market, producers of nontobacco crops will simply be trading in Malawi kwacha instead of earning hard currency on the global market.

    A structured market also gives confidence to financiers. “Tobacco farmers are not paid in cash; they receive their payments through the bank—so the lenders know they will recover whatever they loaned to the farmer,” says Nakhumwa. Access to finance in turn means access to agricultural inputs, including inorganic fertilizers, which are imported.

    In addition, tobacco has benefited from research and agronomic advice, both through the leaf merchants and the government’s Agricultural Research and Extension Service Trust. Such services have historically been provided at much lower levels to other crops, although this is starting to change as stakeholders adjust to evolving market conditions.

    Due to suboptimal agricultural practices, nontobacco farmers in Malawi are producing at only 30 percent to 40 percent of their potential, according to Nakhumwa. The country’s soils suffer from high acidity and low nutrient levels. These can be fixed using both organic and inorganic fertilizers. However, with commercial banks charging interest rates of 20 percent to 30 percent, tools to improve the soil, such as agricultural lime and inorganic fertilizer, remain out of reach for many smallholder farmers.

    Low productivity means that even though there is demand for Malawi’s nontobacco crops, the country is in many cases unable to satisfy it sustainably. “When a customer in South Africa signs a forward contract, he will want assurance that the goods are going to be delivered consistently,” says Nakhumwa. “If we can supply for only two months and then run dry, we are no longer an attractive supplier for them. The customers may in that case prefer to deal with a seller in Brazil or elsewhere who can guarantee supply.” This is why the FSFW is focusing on enhancing productivity at the farmer level and creating new markets through the CAT.

    At a demonstration farm on the outskirts of Lilongwe the CAT offers a platform for private sector partners to showcase technologies to help farmers optimize their operations.

    Strengthening Skills, Raising Productivity and Creating New Markets

    The CAT aims to boost agricultural productivity through science, technology and innovation while helping innovators turn their ideas into sustainable agribusinesses to create new markets for the alternative commodities produced by smallholders. At a demonstration farm on the outskirts of Lilongwe, the organization offers a platform for a wide range of private sector partners to showcase technologies to help farmers optimize their operations.

    Alongside technologies such as irrigation and ground sensors, the farm features different varieties of maize, groundnut, soya beans, rice and sunflower, among other crops. It also works with agronomists to transfer knowledge: What happens if you plant 10 cm apart or practice double-row planting? What happens if you tweak the amount of fertilizer? According to CAT Executive Director Macleod Nkhoma, such demonstration plots are an effective way to disseminate information to smallholder farmers and promote the adoption of technology, especially in a country with low literacy rates like Malawi.

    In addition to its work on the farm, the CAT helps agricultural entrepreneurs with skills that enable them to access finance and grow their agribusinesses while providing markets to smallholder farmers. “Banks tend to be wary of unstructured markets,” says Macleod. “They view those value chains as very risky.” By supporting the development of these agribusinesses, the CAT helps them to become bankable.

    Already, the center has supported several agricultural ventures, including a project by Hortinet that seeks to reinvigorate Malawi’s dormant banana business through tissue culture (see “From Imports to Orchards”) and an initiative by JAT Investments, which aims to replace the button mushrooms that are currently imported into Malawi with domestically cultivated varieties (see “Fungi Fever“).

    The CAT is helping Hortinet to expand its farmer base from 200 to 700 contracted growers. “Without CAT’s support, we would not have had the capacity to supply that many growers with our banana plantlets,” says Hortinet Executive Director Frank Washoni. JAT Investments benefited from CAT assistance in procuring seeds (spawn) and infrastructure in support of mushroom production. “The CAT helped us procure seed, infrastructure and training, allowing us to grow our growers’ network from two to seven farmers club.” says JAT Investments Operations Director Temwani Gunda. “It we had to work on our own, it would have taken much longer.”

    In terms of weight, Alliance One Tobacco Malawi’s contracted farmers already produce four times more food than tobacco.

    The Tone at the Top

    To live up to their potential, the nontobacco crops will also need better policy frameworks. According to MwAPATA Executive Director William Chadza, export bans and foreign exchange quota currently disincentivize production. “Farmers are often unable to access hard currency to import agricultural inputs in time for the growing season,” he says. In addition, some government market interventions, frequent policy reversals and the unpredictable business environment limit private investments in the agricultural sector. Contradictory policies relating to land and crops present a hurdle as well, according to Chadza.

    Encouragingly, Malawi’s leadership increasingly appreciates the need to broaden Malawi’s economic base. Whereas the government in the past may have been reluctant to acknowledge the changing situation on the global tobacco market, it now appears more cognizant of the new realities. At the opening of the 2022 marketing tobacco season, Malawi President Lazarus Chakwera openly called for a diversification strategy. “The tone at the top is important,” says Nakhumwa. “If the leaders cannot acknowledge that there is a problem and we need to pivot, stakeholders will not rally behind you.”

    Perhaps surprisingly to some, diversification has also been embraced by the tobacco industry. LLTC is supporting growers with certified food crop seeds grown on company farms in the Kasungu district while researching and developing other food crops for exports. It has collaborated with Feed the Future USAID and will be rolling out low-tech irrigation systems to boost productivity. AOTM has made a big bet on groundnuts (see “A Gamble on Goobers”), helping its contracted farmers increase yields and quality with improved varieties, farming equipment and agronomic advice. In March 2022, the company opened a groundnut processing facility in Lilongwe with the capacity to process 50,000 tons per year.

    It took us more than 50 years to develop the tobacco industry to where it is now,” he says. “There is no way other crops will all of a sudden replace tobacco.

    The merchants’ investments in productivity, meanwhile, have enabled tobacco farmers to double their yields, allowing them to produce the same volumes of leaf on fewer hectares and release land for food and other cash crops. Tobacco industry leaders see no contradiction between their support for nontobacco crops and their primary business, arguing that farmer livelihood sustainability is in their interest. “Diversification makes sense,” says Simon Peverelle, managing director of AOTM. In terms of weight, he points out, the company’s contracted farmers already produce four times more food than tobacco.

    But even with government and industry behind diversification, it will take time for Malawi to overcome its heavy reliance on tobacco. Tobacco Commission CEO Joseph Malunga believes the golden leaf will remain a major crop in Malawi for years to come. “It took us more than 50 years to develop the tobacco industry to where it is now,” he says. “There is no way other crops will all of a sudden replace tobacco.”

    Nonetheless, Malunga acknowledges that Malawi needs to spread its eggs over more than one basket. “It is dangerous for us as a country to rely on one thing because if something goes wrong, you are definitely in trouble,” he says. Rather than looking for commodities to replace tobacco, however, Malunga urges Malawi to promote crops that work alongside it, just like the leaf merchants have been integrating food crops into their tobacco operations.

    Malawi has a long way to go, but through the combination of government, industry and nonprofit initiatives currently underway, it should be able to gradually develop a more diverse economy with multiple crops and livestock generating income, so that a bad season in one sector won’t automatically reverberate across the entire country. The stakes are high, witnessed by the economic difficulties in the wake of last year’s short tobacco crop. Success will mean not only greater food security but also more hard currency to import the items that Malawi cannot produce at home. With luck, it may even boost tourism, as the country’s struggling hospitality sector will be able to stock more of the items its foreign customers expect.

  • Enduring Demand

    Enduring Demand

    Photo: Taco Tuinstra

    Malawi burley remains popular even as global smoking rates stagnate

    Even as cigarette sales stagnate in many markets, demand for Malawi burley remains robust. An important component in the toolbox of the tobacco blender, burley is a key ingredient not only in the popular American blend cigarettes but also in roll-your-own and make-your-own products along with pipe tobaccos.

    Due to last year’s short crop, leaf merchants are anticipating strong interest this season. In 2022, the country produced only 69.2 million kg of burley—against an estimated demand of 150 million kg. This year, the Tobacco Commission is expecting 106 million kg.

    While burley is produced in several countries, including in southeastern Africa, industry representatives are confident that Malawi can hold its own against other suppliers. “Malawi is still a preferred origin of burley,” says Joseph Malunga, chief executive of the Tobacco Commission. “Even regionally, our burley is better than that from other origins.”

    Malunga suspects that demand for Malawi burley will increase as the country tackles concerns raised by customers about agricultural labor methods. Traditional rural African practices, such as tenancy, in which a farmer provides workers with food and housing during the season but pays them only after the harvest, or requiring children to help out on the family farm, are frowned upon in Western countries where many tobacco buyers are headquartered.

    The commission has done a lot to communicate what customers want, but some farmers will get the message very late. It will be a gradual transition.

    Tobacco companies have been pressuring their suppliers to abandon these habits, and in 2019 the Malawi government banned tenancy. Leading buyers of Malawi leaf have systems in place that not only prohibit their contracted growers from deploying children or tenants but also include elaborate verification mechanisms. In 2020, such systems helped Limbe Leaf, Alliance One International and Premium Tobacco Malawi quickly convince U.S. Customs and Border Protection (CPB) that their supply chains were free of forced labor when the agency temporarily prevented Malawi tobacco from entering the United States based on concerns about forced labor. Impressed by the leaf merchants’ responsible supply chain management, CPB swiftly lifted its ban on tobacco imported by those companies.

    Recognizing the progress made, some customers who left due to compliance issues are now coming back, according to Malunga. “They see that we have been doing our homework.”

    But while the tobacco produced under contract with leaf merchants generally complies with the standards expected by Western governments and customers, the picture is less clear for the independently cultivated tobacco sold at auction, which accounts for approximately 10 percent of Malawi tobacco production.

    The country’s tobacco industry is dominated by smallholder farming. With nearly half a million individuals cultivating leaf in Malawi, many of them living in remote areas and many of them illiterate, it will take a while for the message to reach everybody. “We have made big strides—to the extent of having laws,” says Malunga. “But you cannot expect these practices to stop overnight. The commission has done a lot to communicate what customers want, but some farmers will get the message very late. It will be a gradual transition.”

    Don McAlpin, managing director of Limbe Leaf Tobacco Co., which is affiliated with Universal Corp., hopes the change will come sooner than later. For Malawi to maintain its appeal on the global market, it will be essential for the noncontracted growers to meet ESG targets, he says. “Any perceived concerns about sustainability or ESG issues in Malawi create a reputational risk to the Malawi brand and could impact Malawi tobacco regardless of the percentage that is contracted and compliant.” –T.T.

  • Staking a Claim?

    Staking a Claim?

    Photo: Tobacco Reporter archive

    Rethinking the modified-risk tobacco products approval process.

    By Cheryl K. Olson

    It seemed an excellent test case for a new system. After role-playing a U.S. Food and Drug Administration Tobacco Products Scientific Advisory Committee (TPSAC) member, listening to Altria’s presenters rehearse their pitch, that was my impression. I thought that Copenhagen Snuff would likely sail through the modified-risk tobacco product (MRTP) application process.  

    Sold in some form since the 19th century, the product was well understood. From a regulatory perspective, it was comfortably dull. The reduced-harm claim Altria sought to put on Copenhagen’s label seemed indisputably true: “If you smoke, consider this: Switching completely to this product from cigarettes reduces risk of lung cancer.” 

    In February 2019, the TPSAC review panel voted 8-0 that the claim was scientifically accurate. Said panel chair Robin Mermelstein, “I am hearing a consensus that this was an understandable statement. It was clear,” and “I think it is a reasonable place to start in messaging.”   

    Forty-nine months later, the FDA finally authorized Copenhagen Classic Snuff as a MRTP.

    “No tobacco product is safe or ‘FDA approved,’ so those who do not use tobacco products shouldn’t start,” said the director of the FDA’s Center for Tobacco Products (CTP), Brian King, in the March 2023 press release. “But tobacco products do exist on a spectrum of risk, with those that are smoked having the greatest risk. In this case, the FDA’s scientific review found that if an adult smoker completely switched from cigarettes to this smokeless product, it would reduce their risk of getting lung cancer.” 

    How could it take so long to approve the obvious: that complete switching to a (familiar) smokeless product from cigarettes reduces risk of lung cancer? This invites a fresh critical look at the MRTP process: its origin, utility and potential future.

    Some MRTP History

    The U.S. MRTP application process comes to us courtesy of Section 911 of the 2009 Family Smoking Prevention and Tobacco Control Act. It defines “modified-risk tobacco product” as one “sold or distributed for use to reduce harm or the risk of tobacco-related disease.” In addition to the usual scientific evidence for reduced health risks, complex studies of consumer perceptions and real-world product use are required. 

    Don’t have an MRTP authorization? Basically, your company can’t say anything on product labeling, advertising or other media “that would be reasonably expected to result in consumers believing that the tobacco product or its smoke may present a lower risk of disease or is less harmful” compared to other products. Or, that product or its smoke has fewer bad things in it. The act also prohibits the use of weasel words like “light,” “mild” or “low.”

    In October 2019, Swedish Match USA’s eight General Snus products were the first ever authorized for sale with a modified-risk claim. “Today’s action demonstrates the viability of the pathway for companies to market specific tobacco products as less harmful to consumers,” read the FDA’s press release, “but only following a thorough scientific evaluation by the FDA.”

    “It was a priority for CTP to demonstrate that the pathway works,” says Jim Solyst, then vice president for federal government affairs at Swedish Match. But this was four years after the same products received FDA marketing authorization (premarket tobacco product applications (PMTAs)) and took two rounds of TPSAC review.

    The MRTP process is gobsmackingly costly in time and resources. In a 2018 regulatory document, the FDA estimated that it would receive three MRTP applications per year “and that it will take the applicant 10,000 hours per response to conduct studies and collect the information needed to support an MRTPA.” After all that, the claim is only good for five years. (A new application might lead to an extension.) Also, postmarket surveillance studies are mandated to show how the authorized claim actually affected consumer perception, behavior and health.

    This may be why few companies have even entered the MRTP arena. The last TPSAC meeting to review an application took place in early 2020.

    Only four diverse sets of products had emerged successful: snus from Swedish Match, Philip Morris International’s heat-not-burn IQOS systems and their HeatSticks, very-low nicotine cigarettes from 22nd Century Group and Altria’s snuff. (R.J. Reynolds presented on its Camel Snus to the TPSAC but later withdrew the application.)

    At one point, it was logical that if you got a PMTA, it made sense to consider a MRTP. Now with the slowness of getting a PMTA, I don’t think companies have the MRTP as a vision of the next step.

    Lessons from the Past?

    When does it make sense to consider seeking a claim? “At one point, it was logical that if you got a PMTA, it made sense to consider a MRTP,” says Solyst. “Now with the slowness of getting a PMTA, I don’t think companies have the MRTP as a vision of the next step.”

    Solyst, who is now principal at JMS Scientific Engagement, points to distinctive factors that gave General Snus products an edge with the FDA. These included product-specific long-term studies from Sweden. “They had an incredible amount of human health data and consumer data,” he says.

    The MRTP section of the Tobacco Control Act echoes language from the influential 2001 Institute of Medicine report, Clearing the Smoke: Assessing the Science Base for Tobacco Harm Reduction. That report mentioned Swedish snus multiple times as an example of a potential reduced-exposure product. This, Solyst notes, “did provide a comfort level [for the FDA] to go ahead with an application.”

    Because of these special circumstances, it’s hard to draw firm lessons from Swedish Match’s experience for MRTP wannabes. Nonetheless, Solyst encourages a careful read of the General Snus MRTP decision document: “That indicates what CTP valued in the application.”

    As more products are authorized, patterns for success may become easier to spot, encouraging more companies to try.

    Willie McKinney

    Not So Obvious

    The FDA’s goal is to review and act upon each MRTP application within 360 days of receipt if it contains the required information. While the process may streamline with time, it’s unlikely that approvals will ever be rapid.

    One factor is the FDA culture. Willie McKinney, who served for three years as the industry representative on TPSAC, points to the example of thalidomide. In the early 1960s, Frances Oldham Kelsey famously prevented untold numbers of severe birth defects by questioning a drug application slated for routine approval. “That’s the ideal FDA reviewer,” McKinney says. “‘I saved lives, stopped a bad thing from happening.’”

    McKinney was at times surprised at negative votes on questions posed to TPSAC reviewers about MRTPs. “I came to the conclusion that ‘obvious’ means different things to different people,” he says. In transcripts from past TPSAC meetings, one sees examples of reviewer confusion about how novel products look or work and skepticism about industry-generated data.

    One former staff member at the CTP agreed, saying, “Not knowing the unintended consequences is a biggie.” That person did not feel that politics or bias play a role, however.

    “I have not had anybody say, ‘Hey, delay the review of this.’ It’s usually something that’s unclear,” they said. The involvement of outside reviewers complicates the process: “There are a lot of moving parts.”

    Pluses and Limits  

    From a public health perspective, a plus of the MRTP system is that it gets thoroughly tested information onto product packages and ads. Ideally, this helps people who do and don’t smoke attempt to meaningfully weigh relative risks. 

    “The idea of having a health claim is a good one,” says Solyst. “But it needs to be something that is effective, that results in smokers moving to lower risk products.”

    One problem is that Section 911 limits messaging to a brief statement about reduced risk of disease or exposure to a substance. As a tool to change what people do with nicotine, an MRTP claim is like one of those L-shaped Allen wrenches. It can work well for a simple, specific task.

    But is it adequate for the complex job described in the Copenhagen MRTP press release? By law, the FDA must ensure that the public understands the reduced risk or exposure message used in advertising and labeling. What’s more, they must “understand the significance that information has in the context of total health and in relation to all tobacco-related diseases and health conditions.” That’s a lot to ask from a one-sentence claim.

    Consider this: Strong headwinds of misinformation deter the switch from cigarettes to smokeless. It would be surprising to see large changes in perceptions and behavior intentions from one experimental exposure to a single short statement.

    As Joe Murillo, then senior vice president of regulatory affairs at Altria Client Services, noted in his 2019 presentation to TPSAC, the FDA’s own survey data found that over 90 percent of adults who smoked thought smokeless products were just as or more harmful than cigarettes. Potential harm to nonusers of tobacco is factored into the FDA’s MRTP decisions. Isn’t harm from inaction—of not correcting high-risk misinformation—just as important to consider?

    The Future of MRTPs

    Among other recommendations, the recent report from the Reagan-Udall Foundation for the FDA encourages the CTP to develop a “more clear and predictable framework” for PMTA and MRTP submissions and reviews. This includes “simplifying, standardizing, documenting and publicly disseminating review procedures.” It’s noteworthy that the FDA sought comments on its draft guidance for MRTPs in 2018 but has yet to publish final guidance. 

    An April 2023 letter to FDA Commissioner Robert Califf by a group of distinguished researchers and advocates (including Mermelstein) expands on the Reagan-Udall recommendations. “Introduce a simplified system for evaluating incremental improvements to authorized products so American consumers can benefit sooner from product innovations,” they write. “This should apply to both the PMTA process for authorizations and the MRTP pathway for modified-risk claims. FDA’s processes should encourage pro-health innovation, not obstruct innovation or deny Americans access to the best technologies available worldwide.”

  • Forging Ahead

    Forging Ahead

    Photo: Innokin

    Innokin continues innovating to reduce harm, improve the user experience and minimize the environmental impact of its products.

    By Stefanie Rossel

    Founded in 2011, Chinese vape product manufacturer Innokin is almost a veteran in the world of electronic cigarettes. The company set out with the goal to create a smoke-free world by combining technological innovations, leading designs and the highest standards of quality. Today, Innokin’s products are sold in 80 markets worldwide.

    With a focus on continuous research and development and a 12,000 square meter factory in Shenzhen, Innokin has created a comprehensive portfolio of vaping products. Among its bestselling devices are the Endura and Platform series, which were introduced in 2015 and 2017, respectively. The company is also known for the MVP Pod, a streamlined device targeted at new vapers, which debuted in late 2021. In the same year, the manufacturer teamed up with Fourier Technology to present Sensis, the first vaporizer using fourth-generation technology: In contrast to previous generation devices that are based on single direction-current technology, the innovation uses alternating current, which sends electricity through the coil in both directions. According to Fourier Technology, alternating current increases the efficiency of heat transfer between the coil and liquid, which improves flavors and extends coil life.

    In an industry that has become accustomed to seeing major hardware innovations every 12 months to 18 months, however, it was an e-liquid development that got Innokin in the headlines. In May last year, the company launched the Aquios Bar, formerly known as Lota Pod, a new sub-brand of vaporizers, for which it has partnered with Aquios Labs in the U.K. Aquios Bar was the first vaping solution to feature a water-based e-liquid.

    The pod uses a groundbreaking technology developed by Aquios. Named AQ30, the technology enables the production of liquids containing 30 percent water through a specialized formulation process. Compared to traditional vapes, water-based liquid creates a smoother, cleaner vaping experience, delivers nicotine to the bloodstream more efficiently and significantly reduces the dehydration associated with vaping.

    It allows the hardware to operate at considerably lower temperatures. Conventional e-liquids contain polypropylene glycol (PG) and vegetable glycerin (VG) as well as flavor and nicotine. PG and VG need to be heated to 189 degrees Celsius and 292 degrees Celsius, respectively, to produce a vapor that can be inhaled—a process that causes dehydration. Adding water to the liquid reduces the boiling point and vape temperatures, thus diminishing harmful substances in vapor.

    “With a significantly lower operating temperature of 119 degrees Celsius, devices using our AQ30 water-based technology have been found to produce 92 percent less acetaldehyde and 81 percent less formaldehyde compared to traditional vapes,” explains Innokin co-founder George Xia. “We hope that by continuing to invest in water-based vaping, we can create a truly pure vaping experience.”

    George XIa

    The Power of Water

    Previously, water’s low viscosity level made it unsuitable for use in vaping devices at any meaningful level. Aquios has been able to overcome this hurdle with a special adapted vaping device. Equipped with new heating, wicking and airflow systems, the Aquios Bar initially launched with a portfolio of three water-based devices, each with their own position for specific global markets and consumer needs, according to the company.

    Experts consider water-based vaping one of the most significant breakthroughs since the introduction of nicotine salts. Xia is convinced that as the vaping industry matures, policymakers and consumers will naturally demand more research into alternatives to combustible tobacco. “A key part of reducing harm is lowering the emission of HPHCs [harmful and potentially harmful constituents],” he says. “Research shows that lowering the operating temperature of vaping devices reduces HPHC emissions. Water-based vaping is one of the most effective ways of lowering vaping temperature, so we believe this technology has a key role to play in the future of vaping.”

    During the September 2022 GTNF in Washington, D.C., Innokin’s and Aquios Labs’ water-based solution was recognized with a Golden Leaf Award. In November, Innokin added the Innobar C1 to its product range, including a lineup of disposable devices and the reusable Innobar C1 pod system, all of which work with A30 water-based technology. Meanwhile, Innokin has launched its water-based vape products in a number of markets. “Our rollout started with key European markets including the U.K., Germany, Sweden, Italy and Poland,” says Xia.

    “With growing awareness for the technology, we are now aiming to scale up to reach markets that have already declared e-cigarettes legal and compliant worldwide. We believe that by doing so, we can offer even more individuals a safer and more enjoyable vaping experience. We are also in discussions with other vaping brands to integrate our technology into their product portfolios. The new Aquios Juice series, consisting of water-based e-liquids in individual bottles, is expected to be launched in several European countries, including the U.K. We’ve developed refillable devices that synergize with the bottled Aquios e-liquid, and we’ll launch them with the e-liquids.”

    Meanwhile, Innokin is working to further improve its water-based vaping by fine-tuning and expanding flavor profiles to meet the local demands in different markets. But there’s more in Innokin’s pipeline: “We are also exploring our offering of tobacco flavors as some regions move to restrict flavored vaping products. Water-based vaping is the ideal platform for tobacco flavors since the reduced PG and VG content allows us to represent the natural, complex aromas of tobacco more accurately. We are also exploring the possibility of introducing our water-based e-liquids to individual bottles and refillable devices to cover a wider range of vapers. Additionally, we are developing a new generation of ultrasonic vaping products, which allow the ultrasonic ‘coil’ to be separated from the device. This will reduce waste substantially and allow consumers to use ultrasonic coils for far greater lengths of time.”

    Making Vaping Greener

    At Innokin, innovation isn’t limited to enhancing vaping technologies. The company also focuses on sustainability and is constantly tweaking its hardware and product packaging. While disposable vapes have rapidly gained popularity and helped countless smokers quit cigarettes, they also present an environmental challenge. The EU is expected to ban single-use vapes by the end of 2026. “We have been taking meaningful steps to reduce the environmental impact of our products for a number of years now, and our core product offerings remain to be within the refillable category,” Xia says. “Within our disposable portfolio, we have developed products like the Innobar F3 and Aquios Bar, which use 95 percent less plastic than other leading devices.”

    Both the Innobar F3 and Aquios Bar feature a reinforced card shell design.

    “We welcome sensible regulations to reduce the environmental impact of vaping, and we see refillable products, along with pre-filled pod-style products, as an excellent platform for reducing waste,” says Xia. “We are now seeing consumers who made the switch to vaping via disposables demand solutions that have a lower environmental impact and cost. As such, the industry needs to offer affordable, simple permanent devices that deliver the same satisfaction as disposable devices. Our upcoming Klypse Zip pod device is designed to cater to this need, with an affordable price point, convenient refills and award-winning performance, building on the success of our original Klypse pod.”

    Introduced in early 2022, the Klypse is a mid-sized, easy-to-use pod system that makes refilling simple for new users. Featuring a refillable pod enables vape beginners to try out different e-liquids or even taper down nicotine strength if they’re seeking to quit nicotine altogether.

    In addition to making its devices more environmentally friendly, Innokin has introduced recyclable packaging across all product lines, carried out battery recycling programs and reforestation initiatives and partnered with e-waste specialists in major markets.

    Consumer education plays a key role in Innokin’s approach. From mid-April to early May this year, the manufacturer ran its “Vape for the Planet” campaign, teaching customers sustainable vaping practices. Xia says his company has been overwhelmed with the response to the campaign, which educated consumers about proper disposal of vaping products and how they can reduce their impact by switching to a refillable device.

    “We also gathered data via a survey to measure consumer sentiment toward sustainability in vaping, and this feedback has provided us with some good ideas about how we can reduce waste while continuing to serve our customers with excellent products,” he says. “We believe the vaping industry must come together as a community in order to solve the question of waste, and working with organizations such as the U.K. Vaping Industry Association will accelerate this process.

    “The main takeaways from this campaign are that consumers want more education about how they can vape sustainably and that most people are willing to take extra steps to recycle used products as long as they are provided with the necessary resources to do so. We look forward to discussing our findings with other key players in the industry and identify ways we can deliver a more sustainable future.”

  • A Blander Tomorrow

    A Blander Tomorrow

    Photo: Keith

    Bans on flavors in vapor and heated tobacco are likely to spread.

    By Barnaby Page

     Flavors are perhaps the biggest battleground of all in e-cigarette regulation—much more so than nicotine strength, for example. That may seem surprising on the surface given the widespread misperceptions of risk associated with nicotine itself (as opposed to smoking), but the underlying reason is revealing. Although occasionally there are other rationales associated with flavor bans (specific harmful ingredients, or a racial dimension in the case of menthol in the United States), nearly always the argument against flavors is a proxy for anxieties over youth vaping.

    To put it another way, if nobody thought that anyone other than adults would use mermaid-flavored caramel candy floss e-liquid, nobody would be very interested in banning it (and in fact, adult usage of these flavors is almost completely overlooked in the debate). It’s because kids use—or, more precisely, are perceived to be attracted by—these flavors that regulators, politicians, pundits and pressure groups pay so much attention to them.

    Underage vaping undoubtedly occurs; this is indisputable. Whether flavors (which in regulatory terms means nontobacco flavors) are in fact a significant driver of this is more debatable. It’s true that young people often use the more exotic flavors, but that doesn’t mean the nicotine users among them wouldn’t vape if those flavors weren’t available.

    Of course, those who are vaping nicotine-free flavored liquids presumably wouldn’t find nicotine-free tobacco-flavored liquid very appealing, and they probably wouldn’t vape at all if their favored flavors were unavailable. But these nicotine-free users are not the main concern.

    Similarly, it’s true that kids say they like the flavors they use. But this is hardly unexpected; nobody would use a flavor they don’t like. Again, it doesn’t conclusively point to what would happen in the absence of flavors, and this is an area where more research is needed—research that will become more viable on a large scale as more and more flavor bans are implemented.

    The results may prove to be unexpected: for example, work by Abigail Friedman at Yale suggests that the San Francisco flavor ban may have pushed young people not toward tobacco-flavored vapes but toward combustibles, and while one research project in one city is of course not the end of the story, it underlines the importance of looking at the real consequences of regulation in this area. If flavor bans do not keep kids away from nicotine, there is little purpose to them.

    For now, though, limiting flavors is rightly or wrongly seen as key to limiting youth vaping, and prohibitions are spreading worldwide—perhaps not as quickly as the heat of the conversation might suggest but steadily nonetheless.

    The United States is in an unusual situation here, partly because of the considerable autonomy enjoyed by sub-national levels of government compared with many other countries and partly because of slow movement by the Food and Drug Administration. There can be almost no doubt that the FDA would like to ban flavors; after all, it has even backed the idea of a menthol ban in combustibles, which is far more contentious than any restrictions on e-cigarette flavors, and seems likely to be preparing to finalize a rule to that effect this fall.

    Where vapor is concerned, there is no formal prohibition as such (though it is always conceivable that the anticipated combustibles ban could in fact cover all tobacco products), but a de facto ban on vapor flavors seems to have been in operation via the premarket tobacco product application (PMTA) process. To put it bluntly, flavored products don’t get through, and indeed this has been formally alleged by R.J. Reynolds Vapor Co. in a case against the FDA, as yet unresolved.

    In this context, it might seem odd that the FDA did grant modified-risk tobacco product (MRTP) status to menthol-flavored IQOS products from Philip Morris back in 2020—MRTP of course being an overt acknowledgment of reduced risk, not merely an authorization to sell like the PMTA. This might reflect the fact that youth usage is much less associated with heated-tobacco products like IQOS than with vapor; in fact, heated tobacco was barely known in the U.S. in 2020, has worldwide generally given rise to much less anxiety over underage use and is generally not found in the more unusual, supposedly youth-friendly flavors. Or it might simply be an anomaly. Either way, the IQOS decision seems unlikely to be any kind of precedent for a softening of FDA attitudes toward flavored vapor.

    In the absence of an official FDA rule, formal regulatory activity against flavored vape products in the United States has most significantly occurred at state level—for example, with bans in California, New Jersey, New York and Rhode Island, an almost complete prohibition in Massachusetts and heavy restrictions in Maryland and Utah. Some other states also instituted emergency bans in 2019 that have now ended. There has also been much activity at county and municipal level (most notably in California and Massachusetts and to a lesser extent in Minnesota).

    Elsewhere in the world, again partly reflecting the allocation of powers to national and sub-national governments, there are countrywide bans.

    Among those nations that allow e-cigarettes as a product category but ban flavors, China is potentially the most important given its sheer size. However, the Netherlands—a country where skepticism over vapor in official circles is high—has also received much attention, not least because it could pave the way for other European countries to follow suit. Finland has already passed a bill prohibiting flavors in all inhalable products, and we believe Norway is also likely to enact a vapor flavor ban; Belgium is another possibility, though one we consider less likely.

    Much of the forecasting in this article is drawn from the Tamarind Intelligence Policy Radar, which presents the regulatory situation in more than 50 markets for alternative tobacco products as it is today and as it is projected to be in five years. It monitors more than 150 bills and policies, many of which seek to substantially increase the regulatory burden on novel tobacco and nicotine products. Based on this, other countries where we see a vapor flavor ban as possible include Canada and Argentina, although the latter is a less likely contender.

    Other countries have taken steps toward banning flavors in all alternative products. Nations such as Spain, Belgium, Russia and the Czech Republic have raised concerns about flavors in new tobacco and nicotine products in their policies, which include, for example, national tobacco plans and health strategies. However, it should be noted that we forecast some of these first steps toward a flavor ban to have a low likelihood to medium likelihood of adoption. This may be because the measure has not been a pressing issue for a government faced with elections in the near future, as with Spain, or because the policy has remained stuck in the legislative process for years, as is the case with the bill in Belgium.

    Comprehensive bans like these could be expected to also cover heated tobacco. Some countries, however, may choose to treat it separately; among these, we think a ban is likely in Taiwan and possible in the United States.

    In terms of sheer number of countries, however, by far the most important limitation on heated-tobacco flavors is the European Union ban, which entered into force late last year via a European Commission directive.

    Such directives do not have automatic legal power in all 27 EU member states, but the individual countries are obliged to incorporate them into domestic law, a process known as “transposition,” which must in this case be completed by October (and which also applies to the European Economic Area members Norway, Iceland and Liechtenstein). When this is complete (and though the deadline could be missed in some cases, it will almost certainly be completed), heated-tobacco flavors will be banned across most of Europe, leaving the post-Brexit United Kingdom—the most friendly of all European nations toward reduced-risk nicotine products—as the major outlier where flavors are still permitted.

    In this context, the ongoing revision of the EU Tobacco Products Directive (TPD) itself is also noteworthy. It was the 2014 version of the TPD that laid the groundwork for the e-cigarette regulatory frameworks in all EU member states (at that point including the U.K.), for example with limitations on nicotine strength, and with the next incarnation of the directive currently being drawn up, there is at the very least a possibility that it could include a flavor ban for alternative products, including vapor.

    If that happens, it might well be enough to sway undecided countries outside the EU and persuade them to enact their own flavor bans—perhaps even the U.K. It is also possible that, amid environmental concerns about the sudden rise of disposables, “flavor” will become a proxy for “disposable” in exactly the same way it has been for “underage.”

    At the same time, it is always conceivable that some yet unknown nicotine-delivery technology might escape these prohibitions if there are no concerns about youth usage.

    But it is unlikely that bans that do come into force will be reversed, regardless of their outcomes; perception is often as important as reality in regulating this area. Though it hasn’t happened yet, the alternative nicotine products sector may be facing a flavorless future.

    Tamarind Intelligence analysts Berta Camps Bisbal and Sergi Riudalbas also contributed research to this article.

  • Back to Normal

    Back to Normal

    Photo: Taco Tuinstra

    Following a record low harvest in 2022, Malawi has produced a more typical crop this season.

    After last year’s short crop, the Malawi tobacco trade is looking forward to more normal volumes this season. Typically, Malawi’s rainy season starts in November/December, but in 2022, the rains came much later, delaying the growing season by two months to three months.

    The drought coincided with transplanting in Malawi, causing a good percentage of the tobacco to dry out. Farmers contracted with one prominent leaf merchant alone suffered 35 percent plant mortality. As a result of the adverse weather conditions, Malawi produced 85 million kg of leaf last year—the lowest volume in a decade, according to the Tobacco Commission.

    This season, by contrast, is looking more promising. The trade is anticipating some 128 million kg of leaf, closer to the normal figure of 130 million kg. Burley accounts for most of the volume (81 percent), followed by flue-cured Virginia (16 percent) and dark air-cured tobacco (3 percent). Initial surveys indicate a good quality leaf as well.

    Nixon Lita

    Industry representatives cite favorable weather during the growing season, with rain falling in the right places at the right times and in the right volumes—until Tropical Cyclone Freddy struck southern Africa. The system—the longest-lasting on record—pulled warm air from the Intertropical Convergence Zone and the Congo over the southern and central parts of Malawi for much of February and March, resulting in perpetual overcast and rainy conditions in those regions. When it hit Malawi on March 11, it brought torrential rains and gale force winds, dumping up to 300 mm of rain in a 24-hour period. Cyclone Freddy caused massive landslides and flooding, killing more than 1,000 Malawians. Tobacco companies have been contributing to relief efforts through the Tobacco Processors Association.

    But while the storm devastated lives and infrastructure, it largely spared Malawi’s tobacco crop, and the market opened as scheduled on April 12. That is because most Malawi tobacco is grown in the country’s central and northern regions whereas the storm hit hardest in the south. According to Nixon Lita, chief executive of the TAMA Farmers Trust, the little tobacco that is grown in southern Malawi matures earlier than the leaf produced in the central and northern regions. “By the time the cyclone hit, many farmers had already reaped their tobacco,” he says.

    Despite the increased volumes, Malawi will still fail to meet demand (see “Enduring Demand“), which is estimated at 150 million kg this year. According to Lita, it’s hard to double production in 12 months, especially with the significantly higher cost of production (see “Coping with the COP”) this year. If burley shortage results in good prices, as predicted, it should encourage more farmers to plant tobacco next year. –T.T.

  • One Country, Two Systems

    One Country, Two Systems

    When it comes to encouraging people to quit cigarettes, mainland China, with its large number of smokers, has a higher proportion of low-hanging fruit than Hong Kong. | Photo: Taco Tuinstra

    China and Hong Kong are responding differently to the issues raised by e-cigarettes.

    By George Gay

    It has often been said that if the health risks of consuming tobacco had been foreseen, tobacco products would not have been allowed on the market. That is a big if, a rather shaky premise to be sure, but if one accepts the premise, the conclusion probably* stands up.

    So, looked at from one direction, Hong Kong’s reaction to e-cigarettes can be seen as logical whereas the reaction of mainland China looks inconsistent. The authorities in Hong Kong decided that e-cigarettes posed an unacceptable health risk, so, in April 2021, they banned the manufacture, import, distribution or sale of “alternative smoking products,” including e-cigarettes, before they became well established. Of course, accepting the validity of this position requires one to ignore the fact that Hong Kong seems to regard e-cigarettes as tobacco products and, therefore, not a new product that could be nipped in the bud; but logic has its limits.

    Mainland China, on the other hand, while also holding that e-cigarettes pose a health risk, decided to allow them to be manufactured, exported, imported and sold on the local market, subject to certain conditions. That the authorities believe e-cigarettes pose a health risk, perhaps akin to the risk posed by combustible cigarettes, can be assumed given the former are being regulated in a manner that, in part at least, mirrors the regulation of the latter.

    Hong Kong and mainland China have long invited comparisons in relation to their attitudes to tobacco, and one of the interesting questions posed by the current situation asks whether Hong Kong has taken a more ethical line on e-cigarettes than mainland China. In one way, I think it has because it has followed through on its assessment of vaping, but I also think that its approach has been wrong because it does not seem to take sufficient account of the good that e-cigarettes can do in helping smokers quit their habit.

    In other words, Hong Kong’s view is based on a quit-or-die approach to smoking whereas the approach of mainland China seems to give the nod to tobacco harm reduction. On mainland China, vaping might be treated largely the same as smoking, but there is a recognition that, at the same time, there is a difference. This approach might be seen as requiring an ethical tightrope walk, but, to my mind, it has the advantage of accepting that the world is a messy place in which logic has its limits and compromise is better than confrontation.

    Double Standards

    It is also the case that Hong Kong might be seen to have taken another knock to any ethical claims that it might have made in relation to e-cigarettes. According to a Nov. 28 story in the South China Morning Post (SCMP), the government has proposed scrapping a ban on the use of Hong Kong as a staging port for the export of “alternative smoking products,” such as electronic cigarettes from mainland China, an amendment that is due to come before the legislative council this year, I believe. The ban might have been seen as making an ethical stance on behalf of people living in countries where the shipments would have ended up, but the reason for proposing the abandonment of the ban showed that practical rather than ethical forces have been at work. Once it was realized that the ban had been part of the cause of a plunge in air cargo volumes out of Hong Kong between 2021 and 2022, a proposal was put forward that involved creating a secure area for transshipping such alternative products arriving from mainland China by road and sea and introducing various safeguards to prevent these products leaking onto the Hong Kong market.

    The Proof is in the Pudding

    Meanwhile, one upcoming and interesting comparison between Hong Kong and mainland China will be the success that each will have in reducing smoking—that’s smoking, not vaping. Presumably, vaping will drop away in Hong Kong while it is likely to increase in mainland China if, as elsewhere, some smokers take the opportunity to switch.

    The comparison will be difficult to make, however, because they are starting from different positions. In 2021, Hong Kong’s smoking rate dropped below 10 percent (to 9.5 percent from 10.2 percent) for the first time while mainland China’s smoking rate is thought to be about 25 percent, meaning, I suppose, that when it comes to encouraging people to quit smoking, mainland China has a higher proportion of low-hanging fruit than Hong Kong.

    No matter what, both will have to contend with the illegal trade in cigarettes if they are to reduce their actual rather than their recorded smoking rates. A report in The China Daily last year said that public security organizations nationwide had responded to 43,000 tobacco-related crimes and detained 44,000 suspects from 2017 to 2021. During the same period, the police were said to have seized 2.1 million counterfeit cigarettes, nearly 100,000 tons of leaf tobacco and about 1,700 machines used to make the fake cigarettes.

    It is, however, difficult to know what to make of these figures without knowing a little more; what, for instance, constitutes a tobacco-related “crime” in China? If tobacco-related crimes take in minor infractions (as the almost 1-to-1 ratio of suspects to crimes suggests), 43,000 crimes and 44,000 suspects during a five-year period across a population of 1.4 billion looks like small beer.

    Similarly, 2.1 million counterfeit cigarettes in a country that produces more than 2 trillion cigarettes annually looks insignificant, though, of course, the 2.1 million figure represents only the sum of snapshots in time, taking no account of the number of cigarettes that had been shipped out before the police arrived. A better indication of the scale of the counterfeit operations raided is possibly given by the 100,000 tons of seized leaf tobacco, which, even given that illicit cigarettes presumably contain more tobacco than licit ones, would make it possible to produce at least 100 million cigarettes. It is impossible, however, to take anything much from the seizure of 1,700 machines, given that it is not known what constitutes a machine in the view of those seizing these things.

    However, is it possible, I wonder, for the authorities to use such figures to their advantage? Given that tobacco is a monopoly operation on mainland China, and given that the authorities must have available to them more detailed figures than appeared in the newspaper report, including those to do with at least the basic financials of the counterfeiting operations, they could presumably calculate the tax-paid prices that would have to be charged at retail for licit cigarettes to put the counterfeiters out of business.

    That would surely be a more reliable and less challenging method than using, as now, joint agencies to target the supply chain of raw and auxiliary materials used in the production of fake products and the production and distribution of counterfeit cigarettes both locally and offshore. Such an approach would have its detractors, but little is likely to change while there is seemingly no attempt to face up to the realities of the illegal trade and try new methods of addressing it, especially those concerned with prevention.

    Head in the Sand

    Currently, many people seem to be in denial about the illegal trade in cigarettes. On Jan. 31, the chairman of the Hong Kong Council on Smoking and Health was quoted in an SCMP report as saying there was no evidence that the level of tax on tobacco had a direct relation with the sale of illicit cigarettes. But, on March 1, a report in The Standard suggested that an increase in sales of illicit cigarettes might have been due to rising tobacco prices caused by inflation. These cannot both be right. The idea that smokers buy illicit cigarettes in reaction to price increases caused by inflation but not those caused by taxation is not credible.

    In defense of the idea that tobacco tax increases do not cause illicit cigarette sales to rise, the government’s anti-tobacco advisers were quoted in the Jan. 31 SCMP story as saying the illicit trade in cigarettes had thrived for years even though the tax rate had remained unchanged. But this argument doesn’t hold up for a second. One interpretation of the fact that illicit cigarette sales had continued to rise while taxes remained the same would be that the existing tax level was seen by many smokers as having been way too high when it was introduced and still too high now. And this argument does not take account of the fact that once the illicit gates have been opened, it is devilishly difficult to close them. Illicit cigarettes become normalized in the eyes of many smokers, as speeding becomes normalized in the eyes of many drivers.

    There was also evidence for this in the Jan. 31 SCMP story, when it was reported that the results of a survey of 2,000 smokers and nonsmokers suggested that buying illicit cigarettes was “quite easy.” Smokers, it was said, could now have illicit cigarettes delivered to their homes by making a call or sending a text on WhatsApp or WeChat.

    One of the taxation arguments that has long bothered me was put forward in a Nov. 3 SCMP report when it quoted a lawmaker representing the wholesale and retail sector as saying poorer smokers would not be able to afford cigarettes after a then proposed price rise caused by a 30 percent increase in tobacco duty, an increase that was imposed in February. “I agree with a reasonable tax increase by following the inflation rate, or else [the frozen tax] will sound like encouraging smoking. But if the increase deviates too much, it is a discrimination against the poor as the rich will not be affected,” the lawmaker was quoted as saying.

    I realize there is a limit to logic, but this is a strange way to look at things if at least one of the objectives of the tax increase was to stop people smoking. Surely, if better-off smokers will not be affected by such a rise, it is they who will be discriminated against because it is they who won’t be forced to quit. A system that was fair across the board would have to be one that stretched the finances of all smokers to maintain their habit. And such a system would have to be linked to incomes. Under it, a billionaire, for instance, might have to pay about $10,000 for a pack of cigarettes. Harsh but fair.

    *Of course, what is never mentioned is whether tobacco would have been allowed on the market if the health risks had been known and if the economic potential of the tobacco industry had been foreseen at the same time.

  • Fungi Fever

    Fungi Fever

    Photo: Volodymyr Herasymov

    Mushrooms sprout new opportunities for Malawi

    As Malawi seeks to diversify its economy, button mushrooms are emerging as one of the promising alternatives. Not only are the fungi popular among Malawians, who like to eat them as pizza toppings and in other foods, the country’s climate and growing conditions are also conducive to its production. To date, domestic production has been minimal, however. In the 1980s, a government research station cultivated limited numbers, but the organization failed to invest in farmer training. Over time, domestic production fell by the wayside. Today, Malawi imports 92 percent of its button mushrooms from South Africa.

    Lilongwe-based JAT Investments seeks to change that by promoting domestic cultivation. According to founder and Managing Director Temwani Gunda, mushrooms offer many advantages to the farmer. For starters, they require less land than other crops. “You can grow them in a small shed,” she says, adding that this also protects them to a degree from the impacts of climate change.

    The labor, meanwhile, is easy compared with tobacco. “You don’t need to go into the fields and be exposed to the elements,” says Gunda. “This means it is an inclusive commodity; even old people manage them.” Selling for approximately MKW10,000 ($9.75) per kilogram, mushrooms also offer attractive yields. A shed of 3.5 meters by 5 meters can produce 250 kg of mushrooms. One growing cycle takes about two months, allowing farmers in Malawi to grow three times per year. “And that’s the production from just one shed,” says Gunda.

    Farmers venturing into mushrooms should also have no trouble selling them. A consultant hired by JAT Investments estimated domestic demand at between 70 tons and 75 tons.

    Farmers venturing into mushrooms should also have no trouble selling them. A consultant hired by JAT Investments estimated domestic demand at between 70 tons and 75 tons.

    The greatest challenge for Malawi mushroom producers is seed (spawn). Because there is no domestic production, it must be imported from South Africa or elsewhere. This adds not only cost and time but also risk—if the shipper does not properly control the temperature, the seed won’t germinate.

    With the help of the Centre for Agricultural Transformation (CAT), JAT Investments expanded its farmer base from two to seven farmer “clubs,” each of which contains between 10 and 15 mushroom growers. The CAT also assisted with seed procurement, infrastructure and farmer training, allowing the number of farmers to grow at a much faster pace than it could have managed otherwise.

    According to Gunda, growers, including many tobacco farmers, have been lining up to join the project—and they appear to have been pleased with the performance of the fungi. “Just one crop of mushroom allowed me to pay school fees and buy fertilizer for my maize,” says one JAT grower. A colleague lauds the fact that, unlike tobacco, mushrooms are good for health and don’t require him to chop down trees.—T.T.

  • From Imports to Orchards

    From Imports to Orchards

    Photos: Taco Tuinstra

    Rebuilding the banana value chain

    Until the late 1990s, bananas were big business in Malawi. The industry employed between 2 million and 3 million people and completely satisfied domestic demand. But then a nasty plant virus hit. Banana bunchy top virus (BBTV) wiped out production, forcing many former Malawi banana farmers to find alternative livelihoods. Today, the country relies almost entirely on imports. More than 90 percent of bananas consumed in Malawi are now purchased in Tanzania and Mozambique, which demand to be paid in precious foreign currency.

    Supported by the Centre for Agricultural Transformation (CAT), Lilongwe-based Hortinet is working to reestablish banana production in Malawi. Through its efforts, it aims to create employment, reduce imports and offer Malawi an additional source of income while diversifying the country’s economy and reducing its heavy reliance on tobacco exports.

    Bananas are a popular food in Malawi, so there is opportunity for import substitution, according to Frank Washoni, executive director of Hortinet. “Currently, we are exporting jobs,” he says. “This is something our smallholders could be doing if they get the appropriate support.”

    The strategy to deal with BBTV requires banana growers to uproot and burn their infected bananas and replace them with disease-free imported planting materials. The biggest challenge has been accessing clean planting materials. Until recently, there were no proper banana seed systems in Malawi. Because the existing crop strand had outlived its economic lifespan, there were no proper systems to supply banana growers with clean planting materials to reestablish their orchards.

    To address this problem, Hortinet in 2019 established Malawi’s first commercial banana tissue culture lab, allowing it to produce large quantities of planting materials in a short time. Hortinet gives plantlets to smallholder growers, negotiates production contracts and provides extension services. “At the end of the season, we buy the product—banana fruit—for either distribution or value addition,” says Washoni. Among other things, bananas can be used to make flour and chips.

    However, while Hortinet has the experience and technology, it lacked the means to scale up its out-grower project and supply the desired 700 farmers. So the CAT, as part of a five-year project, helps Hortinet train potential banana growers at its smart farm. The idea is that, after five years, Hortinet will have sufficiently grown to self-finance its continued expansion to more smallholder farmers.

    Washoni believes the potential domestic market is considerable. “According to the ministry of agriculture, we lost more than 25,000 hectares representing at least 10 metric tons of bananas each,” he says. “Today, we are importing 20,000 tons per year, supporting only the urban areas—so there is still a big deficit.”

    Hortinet is determined to make a dent in that deficit. By the end of next year, it wants to distribute at least 1 million plantlets and establish a minimum of 500 ha of banana production with its contracted smallholders. With a plan to add 500 ha each year, Hortinet will have supported the establishment of 2,000 ha by the end of four years.

    Washoni views bananas as a good opportunity for farmers looking to diversify. At the CAT smart farm, Hortinet demonstrates how profitable the fruit can be compared to other crops. While the initial payback period is longer than for tobacco, bananas offer multiple returns each season. “Once in the ground, you might harvest on a quarterly basis,” says Washoni. At 15 tons per acre, the potential yield per unit of area is also high. And other than water, bananas require few inputs. Farmers can get away with organic manure and limited amounts of inorganic fertilizer. What’s more, bananas require relatively little land. “Even on a plot of only 20 [meters] by 20 meters, it might make economic sense for the farmer to put in an orchard,” says Washoni.

    The next step will be to establish a structured market. Unlike tobacco, which has multiple players, a dedicated regulator and a well-developed system for selling and buying, there is no comparable infrastructure for bananas in Malawi. According to Washoni, it’s a work in progress. “Once we hit a critical mass, we will need an organized market,” he says. Right now, our priority is to get production going.”—T.T.