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BAT Donates Cigarette Destruction Machine

Photo: Taco Tuinstra

BAT has donated a Hammermill cigarette destruction machine to the Uganda Revenue Authority (URA) to support the national fight against illicit cigarette trade, reports the PML Daily.
Receiving the machine at the URA head offices in Nakawa, acting Commissioner of Customs Okaka Godfrey said that the Hammermill will provide a more convenient and cost-efficient way to destroy illicit cigarettes compared with manual methods.
The acquisition of the machine follows a report by Kantar suggesting that nearly one-third of the cigarettes sold in Uganda are illicit. More than half of these illicit cigarettes are manufactured in Uganda for export, with the rest being manufactured in other countries before being smuggled into the country.
The government misses out on an estimated USH30 billion ($8.01 million) in tobacco tax revenues each year due to the illicit cigarette trade. BAT attributes a recent 41 percent drop in tax remittances to the URA to competition from the illicit market.
According to BAT Managing Director Mathu Kiunjuri, the illicit trade problem has become worse recently. This year, the share of the illicit market has increased to 27.5 percent from 23.8 percent in 2021 and 15.4 percent in 2020.
Between 2019 and 2022, URA enforcement teams seized more than 293,099 cartons of illicit cigarettes valued at $340,000. The major brand intercepted was Super Match made in Uganda for export, followed by high end brands such as Dunhill, Business Royal and Sportsman.

December 1, 2022
Brazil Anticipates Larger Crop in 2023

Photo: Ronaldo Almeida

Farmers in southern Brazil have planted enough tobacco to harvest 604.73 million kg in 2023—7.95 percent more than in 2022, reports Kohltrade, citing the country’s tobacco growers’ association, Afubra.
In Rio Grande do Sul, the production estimate points to 256.73 million kg of tobacco, cultivated in an area of 117,675 hectares with a productivity of 2,182 kg per ha. Compared with the past crop, tobacco growers in the Rio Grande do Sul increased their area by 3.17 percent and production should be 3.8 percent higher, Afubra estimates. Average productivity during the 2021–2022 harvest was 2,168 kg per ha.
In Santa Catarina, the projection is 191.55 million kg, produced in an area of 77,489 hectares with a productivity of 2,472 kg per ha. The planted area increased 10.22 percent from last year, and production is estimated to be 11.49 percent higher. Santa Catarina’s farmers average productivity was 2,444 kg per ha in the past season.
In Parana, production should reach 156.46 million kg in an area of 66,576 hectares with an estimated productivity of 2,350 kg per ha. The producers of Parana increased their area under tobacco by 6.99 percent. Afubra estimated increased production will be up by 10.93 percent. Productivity in the past season was 2,267 kg per ha.
Afubra President Benicio Albano Werner said the increase in the production area was expected. “The past crop was for a large part of tobacco growers very profitable,” he said. “This encouraged some producers to increase their planted area.”

December 1, 2022
Australia Plans Major Crackdown on Nicotine

Photo: Taco Tuinstra

Australia plans to tighten the screws on vaping and smoking, reports The Guardian.
While Australia was on the forefront of anti-tobacco policies for many years—the country pioneered plain packaging, for example—federal Health Minister Mark Butler says the former government has been “asleep at the wheel” as vaping skyrocketed.
Vaping rates doubled in Australia between 2016 and 2019. In New South Wales, almost a third of 16-year-olds to 24-year-olds had tried vaping by last year, up from 15 percent three years earlier, according to a state government population survey.
To help remedy the situation, the Therapeutic Goods Administration will begin public consultation on changes to importation laws, premarket assessments of vapor products, labeling, advertising, flavoring and identification of nicotine-containing products. Many nicotine-containing products are misleadingly labeled as nicotine-free, according to authorities.
It is illegal to sell, supply or possess an e-cigarette or any liquid that contains nicotine in Australia without a doctor’s prescription. But suppliers have been getting around this by removing “nicotine” from the ingredients list, even though their products contain it.
New South Wales Health revealed it had seized more than 157,000 vapes containing nicotine in raids in the 18 months leading to September.
The government also intends to further tighten the screws on combustible cigarettes. Among other measures, it wants to require cigarette manufacturers to print health warnings, such as “smoking kills,” on every individual cigarette and produce cigarettes in less appealing colors. Health promotion inserts should be put in every cigarette pack and advertising regulations will be updated to include vaping products. The government also wants to ban flavored cigarettes, including mentholated varieties.
The proposed measures are intended to help Australia achieve a smoking prevalence of less than 10 percent by 2025 and 5 percent or less by 2030.
The public consultation on reforms will be open until Jan. 16.

December 1, 2022
A Persistent Problem

Photo: ITC

Iran’s large illicit tobacco market has gotten even larger in the wake of U.S. sanctions.
By Vladislav Vorotnikov
Despite efforts to crack down, Iran continues to struggle with rampant illicit trade. In 2021, nearly half of the Iranian tobacco market was controlled by illegal businesses, according to the Association of Tobacco Products Manufacturers and Exporters. The authorities are believed to consciously turn a blind eye to smugglers and underground workshops producing cigarettes of dubious quality.
Although domestic cigarette production expanded in recent years, nearly 5,000 tons of tobacco products, primarily cigarettes, are smuggled into the market each year, according to Mohammad Reza Tajdar, the head of the tobacco products manufacturers association. Domestic consumption is 12,000 tons while Iranian cigarette factories produced roughly 5,000 tons last year, Tajdar said.
Legal imports exist in negligible quantities, and the gap between production and consumption is filled through smuggling and illegal domestic production, according to Tajdar. The illicit trade has bedeviled Iran for more than a decade, but it picked up tremendously after U.S. President Donald Trump imposed harsh sanctions against the country in 2018.
Illegal cigarette workshops in Iran “spring up like mushrooms,” so the volumes illegally produced in Iran exceed even those supplied through smuggling, according to Hossein Ali Pouraqbali, the former head of the country’s tobacco production and standards department.
Occasionally, authorities raid underground workshops, but their campaign remains haphazard. Since the beginning of 2022, the average price of cigarettes in Iran has jumped by nearly 42 percent. Without the illegal workshops, the price would rise even further.

Meeting the Challenge

Since the introduction of sanctions, legal imports of most cigarette brands have nearly come to a halt. The Iranian government also discourages the import of Western goods to the domestic market, citing ideological reasons but mainly to preserve foreign exchange, which is in increasingly short supply.
Pouraqbali explained that smuggling is limited to a handful of brands that cannot be imported legally. He estimated that illegal import reaches 2,000 tons per year.
In the past years, the Iranian tobacco manufacturers association has been waging war on illegal cigarette suppliers but with little success. Tajdar claimed that a large share of goods supplied through illegal channels turn out to be counterfeit, which means that it doesn’t comply with any production standards.
One challenge the industry faces is ignorance; the average customer is unable to distinguish counterfeit cigarettes from legally produced cigarettes. And even if they could, it might not make much of a difference; opinion polls suggest that a significant share of customers would opt for illegal products even if they were aware of their status—as long as those products are less expensive than legal ones.

Bringing Order to the Market

To help bring the illegal tobacco trade to heel, lawmakers have been discussing the creation of an electronic tobacco product tracking system, but few expect it to be implemented in the foreseeable future. Iranians are very sensitive to price fluctuations of consumer goods, especially since Western sanctions have caused purchasing power to nosedive.
Iran is currently battling one of the worst political crises in its modern history, sparked by the Sept. 16 death of a 22-year-old woman after her detention by the country’s morality police. Initial protests have quickly grown into one of the largest upheavals since the 1979 Islamic Revolution. At least 328 people have been killed and 14,825 others arrested in the unrest, according to human rights activists in Iran.
In such an environment, authorities may hesitate to implement measures that are likely to increase cigarette prices and stoke further discontent.

Legal Business Facing Criticism

In addition to illegal traders, legal tobacco companies face several other challenges in Iran. Over the years, Iranian officials repeatedly expressed dissatisfaction with the dominance of the local tobacco market by Western manufacturers.
During a press conference in August, Hojjat-ul-Islam Syed Salman Zakir, a member of the Social Commission of the Islamic Council, complained that more than 75 percent of Iran’s legal tobacco market is controlled by Japan Tobacco International and BAT.
Such anti-Western rhetoric is common in Iran, especially since 2018. JTI and BAT often are targeted by government officials and lawmakers who frequently demand higher taxes and import duties. Some even question whether Western businesses should be allowed to continue operating in the country.

Hopes on the Local Factories

The Iran Tobacco Co. (ITC), the oldest and biggest local cigarette manufacturer, currently controls around 10 percent of the domestic market, a fact that Zakir described as “regrettable.” However, the authorities hope that the balance of power will soon swing in ITC’s favor.
“ITC is currently paying special attention to fulfilling its social duties and supporting the population’s health,” Zakir said, adding that foreign tobacco companies neglect to fulfill their social obligations. JTI and BAT, he noted, import tobacco from abroad while ITC in March of 2022 rolled out a comprehensive support program for Iranian tobacco farmers.
“This is a good incentive for farmers [to boost operation], and we hope for a rise in its [ITC] share on the market,” Zakir added.
Targeting the lower end of the market, ITC can produce 40 billion cigarettes annually to meet 50 percent of domestic demand. The actual production, however, dropped from 12 billion cigarettes in 2018 to 6 billion in 2021.
In the previous years, Iranian officials estimated that ITC purchased 15,000 tons of tobacco from local farmers, creating 20,000 jobs in the industry. The government estimated that the latter figure could be ramped up to 100,000 jobs with a corresponding increase in local raw tobacco production. However, this would require allocating state aid to tobacco farmers—a step the Iranian government has been reluctant to take in the past several years.

ITC Mulls Investment in Zimbabwe
The Iranian Tobacco Co. wants to invest in Zimbabwe to reduce the cost associated with buying tobacco through middlemen, reports The Sunday Mail. Among the areas the Iranians are targeting are irrigation, curing and mechanization. They also want to contract with farmers and set up factories in Zimbabwe.
The investments were discussed during a visit to Tehran by a delegation led by Zimbabwe’s First Lady Auxillia Mnangagwa.
“We get our needs through agents, and prices go higher for us and also causing Zimbabwean farmers to have little profit,” said Iran’s vice president of commerce and economy, Hamid Gharesheikh, during the meeting.
“We want to get companies to work with directly in Zimbabwe and do away with middlemen. We are under sanctions, and it’s difficult for us to import from other Western countries, but with Zimbabwe, we have a better understanding and for that, our cooperation will be helpful to both of us. We can also supply you with equipment such as tractors and implements for production. We can also supply dryers for curing and processing,” he said.
The proposed cooperation dovetails with Mnangagwa’s passion to economically empower Zimbabwe’s citizenry, especially women and youths, in the effort to attain upper middle-income status for the country by 2030.
During the meeting, Gharesheikh said Iran would prioritize women in its investments.

December 1, 2022
Cleaning Up

Photo: SWM

SWM’s new fiber-based filter media takes the plastic out of the cigarette.
By Stefanie Rossel
In addition to the health hazard they pose to users, combustible cigarettes also threaten the environment. Cigarette butts remain the most littered item on earth. According to World Health Organization estimates, 4.5 tons of cigarette filters are discarded in our planet’s natural habitats and waterways each year. Made from cellulose acetate (CA), cigarette filters take up to 18 years to disintegrate.
However, there is hope. In the tobacco industry’s move toward less harmful nicotine-delivery systems, sustainability plays an increasingly important role. In addition, the industry got a regulatory push toward using more environmentally friendly filters when the European Union introduced its Single-Use Plastics Directive in 2021.
The directive bans selected single-use products made of plastic for which alternatives exist on the market: cotton bud sticks, cutlery, plates, straws, stirrers, sticks for balloons, as well as cups, food and beverage containers made of expanded polystyrene and all products made of oxo-degradable plastic. The extended producer responsibility legislation, scheduled to come into effect in January 2023 for tobacco filters, appears to be behind schedule.
And there is more regulation to come: In March 2022, members of the United Nations Environmental Assembly agreed to propose by 2024 a legally binding treaty to end plastic pollution that includes the marine environment. Cigarette butts are the most common plastic litter on beaches. They represent a hazard for marine life as animals can ingest the trash, exposing them to harmful chemicals. These can also make their way up through the food chain, threatening human health on a global scale.
To help tobacco customers reduce the environmental impact of their products, SWM in June launched Evolute, a range of fiber-based filtering media that can replace CA in filters. Depending on the environment, filters made from Evolute degrade in a few weeks. In October, Germany’s technical inspection association TUV granted “OK biodegradable soil” and “OK biodegradable marine” certifications to Evolute.

Full Support Package

The new filter media are part of SWM’s ongoing efforts to provide its customers with alternative sustainable solutions and support, says Alice Jaussaud, product manager for Evolute filtering media at SWM. “We are going beyond the filter media themselves, offering the full support to design a cigarette with the purpose to work with customers and offer our expertise to the tobacco industry in its transition,” she says.
The company already has a natural fiber filter solution on the market, according to Cedric Rousseau, SWM’s tobacco solutions research, innovation and development director. Several big company brands use paper filters. “Paper behaves differently than cellulose acetate, so it calls for some adjustment in terms of design of the filter and the cigarette,” says Rousseau. “This is where SWM as a supplier of various materials to the industry can provide support to its customers to properly adjust the filter media and design of ventilation, filters and characteristics of the cigarette.”
While the company’s most recent development has just been introduced, SWM is already working on the next generation of alternative solutions. “The idea is to use the filter solution as a plug-and-play solution as compared to CA media,” says Rousseau. “Our vision is to offer the industry a wide range of different plastic-free media products so they can play depending on the market, the regulations and the consumer expectations in terms of sensory profile and taste.”
The Evolute range includes industrial and scalable products with proven filtration performance, filter pressure drop stability and perfect fit to crimped filter makers, according to SWM. In addition to conventional cigarettes, they are suitable for filter tips for roll-your-own, make-your-own, cigarillos and heated-tobacco products (HTPs), says Jaussaud.
The company has an R&D group focusing specifically on HTPs. “The filter of an HTP has a different role than that of a combustible cigarette,” says Rousseau. “Some HTP filters are more for the cooling, others for the filtration of the aerosol. With the dedicated group, we have a better understanding now.”
Drawing on its expertise with papers for the tobacco industry, SWM partners not only with companies that develop filters but also with filter-making equipment manufacturers.

Sustainable Plug and Play

The often-used argument that CA is the gold standard in terms of filtration properties and smoke chemistry may soon be outdated, according to Rousseau. At its Le Mans site, SWM has set up a sensory group to evaluate consumables for HTPs and combustible cigarettes. “Biodegradability and the environmental impact are important, but taste and tar retention are obviously important as well,” says Rousseau.
“We have observed that our standard paper filter that has been on the market for some time needs to be properly used because it has an impact on tar retention. Consequently, tar retention also has an impact on taste where we must develop the right design. The next generation of filtering media we’re currently working on should have the same performance, taste and experience as well as the same physical attributes as a CA but is paper based.”
Instead of a mere substitute for CA filters, SWM aims to provide an alternative with additional features, such as sustainability, Rousseau emphasizes. He is confident that the consumer is ready for such changes. “We are moving away from wanting to have something that behaves and tastes like CA filters to something that we believe consumers will be looking for in the future. We provide a lot of value with biodegradable cigarettes,” he says.
The EU Single-Use Plastics directive has been a clear catalyst accelerating the change to plastic-free filter alternatives, notes Jaussaud. However, she sees demand beyond the EU when talking to her customers. “Similar regulations are under discussion in the U.S., Canada, Australia and other countries,” says Jaussaud.
“What started as a regulatory push now looks more and more like a consumer demand,” she explains. “Consumers don’t want to see cigarette butts on the beach anymore, and they think it would be good to have something with less pollution. They are looking for such solutions, and manufacturers are considering that beyond regulation.”

Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

December 1, 2022
The Bullshit Asymmetry Principle

Photo: kurgu128

The idea that e-cigarette flavors hook kids is simple, compelling—and false.
By Clive Bates
In a fact sheet titled “Flavored E-cigarettes Hook Kids,” the U.S.-based Campaign for Tobacco-Free Kids asserts that “Flavored e-cigarettes are undermining the nation’s overall efforts to reduce youth tobacco use and putting a new generation of kids at risk of nicotine addiction and the serious health harms that result from tobacco use.” Let us call this “the activist proposition.”
The challenge with simple but false activist propositions is that refuting them can require a lengthy embrace of more complex arguments. Brandolini’s law, also known as the bullshit asymmetry principle, can be expressed: “The amount of energy needed to refute bullshit is an order of magnitude larger than to produce it.” In this article, we shall demonstrate Brandolini’s law by addressing the simple but false activist proposition about flavored e-cigarettes through a series of questions.

First, do flavors cause youth tobacco or nicotine use? The activist proposition builds in an assumption that flavors cause e-cigarette use. Lots of young people use flavored e-cigarettes. Therefore, it is claimed, flavored e-cigarettes must cause young people to use e-cigarettes. But how likely is that? We know from the past that a high proportion of young people can use tobacco if they choose to, mostly without flavors. According to the Monitoring the Future survey, for most of the 1990s, U.S. 12th-grade past 30-day cigarette smoking prevalence was at or above 30 percent. By 2021, teenage cigarette smoking had fallen around 4 percent, but nicotine vaping had reached 20 percent. Perhaps there is a persistent demand for nicotine or tobacco, regardless of whether it is flavored. Also, let’s look over time. In the United States, high school past 30-day vaping was 11.3 percent in 2016, rose to 27.5 percent in 2019 but fell to 14.1 percent by 2022. Yet there was very little change in the availability of flavored e-cigarettes to explain these swings. There are also countries where flavors are widely available but youth vaping is relatively low. Take the U.K., for example, which takes a positive approach to tobacco harm reduction and vaping. Thousands of flavored products are available, but according to a recent official evidence assessment, youth vaping remains below 10 percent. And the U.K. offers us a further important insight: “[D]ata showed that most young people who had never smoked were also not currently vaping (98.3 percent).” This tells us that vaping is highly concentrated in adolescents already open to tobacco use.

Second, so what does cause youth tobacco or nicotine use? Most of the evidence points to characteristics of the individual and their circumstances not tobacco product features. Tobacco use is driven by a complex mix of psychosocial factors, including genetics, parental smoking, poverty, delinquency, rebelliousness, low self-esteem, peer group, etc. A 2016 literature review identified 98 conceptually different potential predictors of smoking onset. A 2019 study looked at stated reasons for e-cigarette use and concluded there were two main drivers: “alternative to cigarettes” and the “larger social environment.” For some young people, tobacco or nicotine use may have functional benefits. It may modulate stress or anxiety, improve concentration or help control conditions such as attention deficit hyperactivity disorder(ADHD). For others, it may be just frivolous and experimental. In 2019, the U.S. Centers for Disease Control and Prevention asked young people why they vaped; the top reason was, “I was curious about them.”

Third, what would teenage vapers do if they were not vaping? Implicit in the activist proposition is the idea that removing flavors will remove the reason to vape and stop the user from vaping. At one level, there is some truth in this. If the products are bland, unpleasant or tasteless, perhaps no one will use them. But here is the problem: What if the demand for tobacco and nicotine has deeper psychosocial causes, such as those discussed above? Removing the flavored products does not make the demand go away. Would the teenage vapers just give up vaping and do more homework and piano practice instead? If the underlying demand remains, that is unlikely. Teenagers interested in nicotine might revert to cigarettes, cigars or other tobacco products. We have some evidence for this: When e-liquid flavors were banned in San Francisco in 2019, there was an increase in teenage smoking compared to other areas where flavors had not been banned. This is hardly a surprise—in one study, young adults were asked what they would do if e-cigarette flavors were banned. About one-third said they were likely to switch to cigarettes.
In 2022, Boston-based public health scientists Mike Siegel and Amanda Katchmar reviewed the body of evidence on youth smoking and vaping, concluding that it “suggests that youth e-cigarette use has instead worked to replace a culture of youth smoking.” Economic analysis also backs this idea—when prices of e-cigarettes increase, youth vaping falls, but youth smoking rises. That tells us that e-cigarettes and cigarettes function as substitutes. If regulators ban e-cigarette flavors, then they should not be surprised if more smoking is the result. For that reason, Siegel and Katchmar concluded “[W]e propose a reevaluation of current policies surrounding e-cigarette sales so that declines in e-cigarette use will not come at the cost of increasing cigarette use among youth and adults.” That is very troubling for the activist proposition—it means policies to address youth vaping cannot be evaluated without concern for their effect on youth smoking. It also means that some youth vaping may be a diversion from smoking and is beneficial. It follows that regulation discouraging vaping could easily be harmful.

Fourth, how would a ban on flavors work? The logic of the activist proposition is that a ban on flavored products would remove flavored products from the market, thus removing the reason for young people to vape. But that is not how prohibitions work in practice. A prohibition does not cause the prohibited product to disappear. But in practice, a prohibition causes the perturbation of a market. It causes changes to the behavior of consumers, legal and illegal suppliers, prices and availability. Foreseeable consequences include switching to cigarettes or other tobacco products; switching to other substances; switching e-cigarettes to the permitted flavors; illicit trade in flavored liquids; home mixing and informal selling; cross-border trade or internet sales; stockpiling and workarounds such as sales of flavors for aromatherapy. Prohibitions change the supply side, and rarely for the better. There should be no mystery about this: Despite longstanding prohibition, the Monitoring the Future survey shows that U.S. 12th-grade past 30-day cannabis use has been around 20 percent and daily use around 5 percent for about the past 25 years. Some of these responses to flavor prohibition will clearly increase harm compared to vaping. Because smoking is so much more harmful, it would only take a slight uptick in smoking to offset any benefit of significantly reduced teenage vaping. But there are also hazards arising from informal manufacturing and workarounds. Illicit supply will bring adolescents into contact with criminal networks as consumers and potentially as low-level participants.

Fifth, what is really going on with youth vaping? I believe there are two broad patterns of youth vaping and two distinct behaviors at work, but these are often conflated. The first is frivolous and experimental use, where young people try new things. This has characteristics of a frothy fad: infrequent use, transient and unpredictable. The second is more determined nicotine use: frequent, intense and entrenched. But this group is more likely to be the adolescents who would otherwise be using cigarettes or other tobacco products. The first group contributes to the “youth vaping epidemic” narrative but is not really a cause for great public health concern. The second group represents the migration of nicotine use in society to far safer technologies and is likely beneficial for public health. The activist proposition, however, requires policymakers to believe there is no latent demand for nicotine use and that removing products will eliminate nicotine from society. But it is much more plausible to think of the demand for nicotine in similar terms to alcohol, caffeine, cannabis and other recreational substances. People use nicotine for a reason, and there will be a long-term demand for it. The task for policymakers and regulators is to make that acceptably safe and to resist simplistic activist propositions that are likely to do more harm than good.

In November 2022, the Campaign For Tobacco Free Kids celebrated the success of a mass activist campaign to secure Proposition 31, a ban on flavored products in California. They may have won their political battle, and their aggressive promotion of the activist proposition has again prevailed. But nowhere in its advocacy literature does this powerful coalition level with California’s voters about the underlying drivers of youth nicotine use, the linkages between smoking and vaping, and the risks of unintended consequences. They can deny this real-world complexity, but policies built on bullshit have a nasty tendency to go wrong, to do more harm than good and to call into question the credibility of their advocates.

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

December 1, 2022
Chasing Unicorns

Photo: pimmimemom

In their quest for cutting-edge innovations, tobacco companies have set up venture capital subsidiaries.
By Stefanie Rossel
Incessant innovation is at the heart of tobacco companies’ transformation process. Eager to move their businesses away from combustible cigarettes toward less hazardous alternatives and opportunities beyond nicotine, cigarette manufacturers have invested billions of dollars into innovation and scientific research. They have substantially expanded their research and development teams, recruiting talent from sectors such as consumer electronics while acquiring companies in adjacent business areas, including pharmaceutics.
To avoid missing out on innovative trends and new technologies, however, tobacco companies in their transformation process need to think out of the box, or rather outside the organization, and keep an eye on the startup scene. For this purpose, the leading players have established platforms to serve windows on future technologies. In addition to using corporate venture capital (CVC), they are working with incubators, accelerators and universities.
Japan Tobacco International has chosen the latter approach. In March 2019, it teamed up with Silicon Valley-based Plug and Play Tech Center, a technology incubator, to run Vapetech, a program aimed at bringing together innovators and data experts to develop technology that improves the user experience and health benefits of vaping. Each year, Plug and Play selects about 20 startups that will develop ideas and solutions for a more enhanced vaping experience, JTI said in a statement. Startups with new devices or technology applicable to the Internet of Things (IoT), biometrics, data and lifestyle will enter a three-month program to develop their products and services and have access to investment and corporate partnerships.
“We need new innovative products coming on in future years, so the Vapetech process will be really instrumental,” explains Suzanne Wise, senior vice president of corporate affairs and communications at JTI. “We surround startups with the right ecosystem and provide them with all they need. It’s a process where you get people completely from outside the industry, with different mindsets, who are looking at what we are facing as challenges, and they just come up with stuff that we say, gee, why not us?”

Wanted: Extraordinary Solutions

With PM Equity Partner (PMEP), Philip Morris International was the first tobacco company to set up a CVC division in 2016. CVC is a variant of venture capital where the required capital comes from a corporation outside of the financial sector. In contrast to risk financing, which primarily aims to generate a return for the venture capitalist, CVC also pursues strategic goals.
Established companies use their CVC arms to develop new technologies or new business models, to explore other markets or for diversification. Staying ahead of competitors in a specific market is another motivation for CVC. In turn, startups benefit not only from the funding but also from getting access to technological know-how, distribution channels and cooperation partners.
PMEP invests in early stage and growth-stage companies with technology-based business models and proven commercial traction, such as existing revenue or contracts, that fit into the focus it shares with its parent company: the ambition to replace cigarettes with smoke-free alternatives and explore new markets beyond nicotine.
Candidate companies should be able to make a positive, significant and sustainable contribution to PMI’s core business and science-centric, technology-driven smoke-free vision, and they should operate in one of the four investment corridors defined by PMEP: life sciences, industrial technologies, consumer engagement and product technologies. Aspirants could, for example, offer innovations in inhaled therapeutics and computational research methodologies, industrial robotics and automation, or technology-based process optimization. Or they could bring in their solutions for bioauthentication, user identification or innovative customer care.
“The startup should have developed an innovation in one of these areas that substantially differs from other technologies currently used in its respective market segment,” explains Alexander Stoeckel, head of PMEP. “Furthermore, it should have left the startup phase behind and ideally have customer relations or a testable prototype because usually we test the startup’s innovation together with PMI’s respective departments and decide on an investment after we have understood which contribution this technology could contribute to our success as PMI.”

Strong Funding Basis

Being the CVC arm of a well-known company such as PMI helps generate business, according to Stoeckel. The fact that PMEP’s parent company is a tobacco corporation hasn’t been any hindrance yet, he says. “Founders are regularly surprised to find out how professional and broadly positioned PMI is.”
The CVC team is in constant communication with PMI’s division heads to identify their challenges, suggestions, problems and innovation requirements in order to find startups that develop or already market matching solutions. In return, the investee companies will be able to make use of PMI’s extensive R&D capabilities, operational and marketing excellence, and deep involvement in supply chain. PMPE says it provides its entrepreneurs with long-term support not only in financing but also for mutual benefits at strategic and commercial levels. More precisely, it helps entrepreneurs strategize, steer partnerships, help with negotiations and raise and utilize capital.
In October 2021, PMI allocated a further $200 million to the CVC’s initial $150 million investment. According to the company, ideal investments are between $2 million and $10 million in Series A stage companies, with flexibility to also consider investments in seed or late-growth companies. (Series A funding is the first round after the seed stage; companies need to have a strong plan for developing a business model that will generate long-term profit.)
To date, PMEP has invested in 13 companies, according to Pitchbook.com. Among the companies still in PMEP’s portfolio is BOW Group, a startup specializing in wearables, connected vehicles and smart home products. The company is supporting PMI to deliver on its commitment of a consumer-centric ecosystem. Another investee company, Biognysis, enables PMI with its disruptive technology to identify biomarkers and understand the biological impact of switching to PMI’s IQOS heated-tobacco product.

Driving the Change

BAT created BTomorrow Ventures (BTV) in 2019 and established a £150 million ($176.33 million) fund to help accelerate BAT’s transformation. As BTV’s managing director, Lisa Smith, pointed out during the recent GTNF in Washington, D.C., “Transformation requires innovation, and BTV has set up a number of innovation ecosystems. It’s a highly competitive market, and finding the best innovators out there is difficult. Our role is to be the outward-looking ‘handshake’ to the outside world to show that we are the preferred partner of choice.” BTV’s job, she said, was to channel these innovators to the right part of its business. “There are many tasks in transformation, such as to quickly move the environmental, social and governance (ESG) agenda and to build the science and credibility to be able to operate in the beyond-nicotine world.”
The CVC therefore invests in specialist categories, including consumer brands, digital transformation, new technologies, future sciences and sustainability. BTV has also established an accelerator and growth platform called BTV Labs and divided them it three categories: Consumer Delight Lab (focusing on consumer brands), Futures Lab (focusing on science, technology and digital) and an ESG Lab. In its portfolio are businesses from the functional food and beverage, electronic equipment and instruments, and cannabinoid sectors. To date, BTV has invested in 22 companies. Unicorn-nest.com estimates that the average round size was $3 million. With building a community a core part of BTV’s value proposition, the corporate venture unit stages “Binspired” events, a collaborative forum for CEOs or founders, investment partners and senior executives. In addition, it runs the “Battle of Minds” in partnership with BAT, which is a “business pitch” competition for students, graduates and early stage startups from around the globe.
Lexy Prosszer, BTV’s investment principal who previously worked in BAT’s merger and acquisitions department, says that BTV was established to accommodate a different type of deal. “M&A was not set up to deliver on that in terms of speed, scale and credibility to get these entrepreneurs at the table to want a conversation with us and believe that BAT has got the right intentions to change and transform. With BTV, we’re meeting a real need that the corporate [sphere] has.”
According to Prosszer, collaborating and engaging with startups has contributed to shift in mindset among BAT employees, encouraging them to do things faster. “They’re excited, engaged and love working with the entrepreneurs. Much has been achieved. It’s been a cultural shift to being open to how an entrepreneur might do things and how that can be leveraged to us to get our result faster.”
Through BTV, observes BAT Finance and Transformation Director Tadeu Marroco, the company suddenly has access to understanding better products that otherwise would take ages to develop internally. “We can be closer to them and see how they perform in the markets. For entrepreneurs, it means that they can leverage on the massive strengths that BAT has as a multinational company with massive distribution capabilities.”

Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

December 1, 2022
Shifting Alliances

Financial analysts debate the outlook for Altria and other tobacco companies during the recent GTNF in Washington, D.C. | Photo: Chris Ferenzi Photography

With a new partner in heated-tobacco products, Altria prepares to compete in a radically different U.S. tobacco market.
By George Gay
During the GTNF in September, Bonnie Herzog of Goldman Sachs admitted that she had been wrong about eight years ago to predict that within 10 years, sales of reduced-risk products (RRPs) would overtake those of combustible cigarettes on the U.S. market.
To my way of thinking, no discredit attaches to this admission because there was no shame in having been wrong in this prediction—at least no shame that could attach to Herzog. What sane person would have argued with her? Eight years ago, after decades of hand-wringing by politicians, health professionals and society at large over the deaths and diseases caused by the consumption of combustible cigarettes, surely everybody was, as a matter of urgency, going to get behind these RRPs to ensure they were developed to their full potential, their benefits were widely communicated, and they were made readily available at prices that were attractive to smokers. After all, here was a solution to a long-term, seemingly intractable problem that would involve almost no outlay from the public purse. It had to be embraced by people of every political stripe. Yeah, right.
Basically, Herzog made two mistakes eight years ago. She ignored the rule that says you never make predictions about events that will unfold within your lifetime. And, I guess, she assumed the U.S. is run on a set of straight, rational rails rather than, like the rest of the world, along a meandering path of hypocrisy.
Despite the dog’s breakfast that has been made of the U.S. market for RRPs, the battle for this market was one of the major factors considered by analysts when, during the GTNF investor panel, they considered the relative merits of investing in the U.S.-listed tobacco companies, Altria and Philip Morris International. It was by no means the only factor, but I would like to concentrate on it because it demonstrates the dangers of making predictions.

Unclear and Unraveling?

During the panel discussions, PMI was said by one of the panel members, Pam Kaufman of Morgan Stanley, to be unique within the tobacco industry in respect of the success it had enjoyed in executing its strategic transformation. The company now generated 30 percent of its revenue from reduced-risk, smoke-free products, and the Swedish Match acquisition was going to be a game changer, helping PMI to move to a position where 50 percent of its revenues came from smoke-free products by 2025.
Specifically, on the U.S. market, Swedish Match could be used as a distribution platform for PMI’s heated-tobacco product (HTP), IQOS, bypassing the existing distribution agreement with Altria, which, at the time of the panel discussion, was not in operation because a U.S. International Trade Commission ruling in response to a patent infringement challenge by BAT’s U.S. subsidiary, Reynolds, was preventing IQOS being made available on the U.S. market.
At the same time, Altria’s strategy around RRPs was seen by Kaufman as being unclear and unraveling. Altria, which was not known for its internal development, she said, lacked a clear reduced-risk exposure because it was reliant on its stake in Juul, with which it had a no-compete agreement and which was facing a lot of challenges, and because of its agreement with PMI on IQOS, which was in question. Kaufman said she was certain that Altria was now investing greater resources than previously in RRPs, but, while it was talking about showing a new HTP by the end of this year, this was far from commercialization as the product would have to go through a Food and Drug Administration premarket tobacco product application process. PMI was years ahead of Altria, which was in a tough position.
Herzog was more upbeat on Altria’s future in the field of RRPs. She said that people underestimated Altria because it didn’t share as much information as other companies did. She reminded her audience that PMI and Altria were once one company and that Altria owned a lot of the early technology and rights to IQOS, so, maybe, she suggested, given the time when Altria was distributing and selling IQOS for PMI in the U.S., there had been some “learnings and understandings.” She questioned whether it was possible that Altria had built a better product.
Herzog was more positive, also, about Altria’s ability generally to compete with PMI coming onto the U.S. market through Swedish Match, citing the fact that Altria had dealt with a formidable competitor before: with BAT coming in fully with Reynolds. It was a question of how Altria could transform its product portfolio more toward RRPs, whether those products were already on the market, like On! and those in which it had an interest through its stake in Juul, or the result of things on which it was working. Altria was in the final stages of design of its own oral tobacco and its own HTP.
Herzog conceded that it was going to take time to bring some of those products to market, given the processes required by the FDA, but it was nevertheless the case that Altria had other products in its arsenal that it could ultimately leverage.

Rapid Developments

Writing this story toward the middle of November, it’s obvious that two months can be a long time in respect of the U.S. market for RRPs. Since the panel discussions were held, PMI has secured its takeover of Swedish Match. PMI and Altria have agreed on terms under which Altria will receive from PMI $1.7 billion (on top of $1 billion paid at the inception of the IQOS distribution agreement) to relinquish, from the end of April 2024, its right to distribute IQOS in the U.S. on behalf of PMI. Altria has, while maintaining its economic interest in Juul, which is currently appealing against an FDA order to remove its products from retail shelves, extricated itself from its no-compete agreement and so is free to bring its own e-cigarettes to market or to explore acquisitions in this field. And Altria has signed a joint venture agreement with Japan Tobacco to market HTPs in the U.S. with Ploom-branded devices and Marlboro-branded consumables. They also signed a long-term, nonbinding global memorandum of understanding to explore commercial opportunities for a wide range of RRPs.
The question is how much of a difference these developments will make to the U.S. market for RRPs, and especially to Altria, whose future has been painted as being bleak by some observers, even after these recent developments. My guess—and this is not a prediction—would be that these developments, on their own, will make little difference immediately and perhaps for some time. IQOS, which has been granted a modified-risk status under which consumers may be given certain information, such as that the product generates lower levels of harmful chemicals than combustible cigarettes, is still not available for sale in the U.S., though, clearly, it is likely to reenter the market relatively soon.
At the same time, it is likely to take considerably longer to put Ploom and a new HTP from Altria through the FDA procedures necessary for market commercialization. But it is worth bearing in mind a point made by Rupert Wilson of Strategic Business Consulting during the panel discussion. HTPs, he said, had done well on markets where e-cigarettes, for whatever reason, were not a major market contributor, such as Japan, but less well on markets where e-cigarettes had been well received, such as the U.K. The U.S. is a strange market in that e-cigarettes are available but development of them has been held back by regulations, but I would guess that there are just enough e-cigarettes—and other RRPs—available to mean the U.S. is not going to simply become a battleground for HTPs. They will become a significant, but not an exclusive, part of the RRP market.
There are other factors in play that are probably more important. PMI, which has concentrated heavily on HTPs, is expanding its RRP offering, but even with the help of Swedish Match, which is experienced in dealing with FDA applications, these products will take time to clear FDA hurdles. And Altria could presumably acquire a vaping company that has devices already approved for the U.S. market.
Some observers point to the fact that Altria, unlike PMI or Swedish Match, is heavily exposed to the U.S. market for combustible cigarettes, which is in decline, especially the premium sector of that market, which seems like not a good place to be during a cost-of-living crisis. But evidence was presented during the panel discussion that demonstrated how, in the past, Altria had been able to increase profits significantly in the face of plummeting cigarette volumes caused in part by steeply rising prices.
Overall, I tend to agree with Jon Fell of Ash Park Management, who, during the panel discussions, while not dismissing the competitive challenge being thrown down by the arrival of PMI on the U.S. market, said that companies already on that market were highly competitive themselves and that it would be rash to assume they could be brushed aside.
It would surely also be rash to make predictions when who knows what developments might be announced in the future. During the session usually devoted to possible mergers and acquisitions, the GTNF panelists spent nearly all the available time talking instead about companies investing in R&D, forming alliances, finding new technology partners, bringing people in from other industries to provide new perspectives and moving into new business areas. Something unforeseen must come out of that.

George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.

December 1, 2022
A Taste of Things to Come?

Nveed Chaudhary | Photo Courtesy of the Broughton Group

What the recent marketing denial order for Logic’s menthol vapes implies for flavored e-cigarettes
By Stefanie Rossel
On Oct. 26, the U.S. Food and Drug Administration wrote a new chapter in the story of electronic nicotine-delivery systems (ENDS) regulation. That day, the agency for the first time rejected a premarket tobacco product application (PMTA) for a menthol e-cigarette. Logic Technology Development received marketing denial orders (MDOs) for its Logic Power Menthol E-Liquid Package and its Logic Pro Menthol E-Liquid Package.
In a press release accompanying its decision, the FDA said the rejection was based on a full scientific review. The applications, the FDA argued, “lacked sufficient evidence to demonstrate that permitting the marketing of the products would be appropriate for the protection of the public health.” The evidence provided within the application, it said, did not demonstrate that these menthol-flavored e-cigarettes were more effective in promoting complete switching or significant cigarette use reduction relative to tobacco-flavored e-cigarettes among adult smokers.
In its statement, the agency also referred to the 2022 National Youth Tobacco Survey (NYTS), which had been released shortly before the Logic MDO. “For nontobacco-flavored e-cigarettes, including menthol-flavored e-cigarettes, existing evidence demonstrates a known and substantial risk with regard to youth appeal, uptake and use,” the FDA wrote.
Tobacco harm reduction advocates were dismayed. The MDO shattered their hopes that mentholated vapor products would be allowed to remain on the market as a less risky alternative to mentholated cigarettes, which the FDA wants to prohibit. They were also surprised given that the FDA in late 2021 authorized 22nd Century Group to market its reduced-nicotine VLN Menthol King brand as a modified-risk tobacco product.
According to data by the Centers for Disease Control and Prevention, menthol-flavored products accounted for 37 percent of all cigarette sales in the U.S. in 2019 and 2020.

Misplaced Priorities

Critics also lambasted the agency’s focus on the risk of youth uptake at the expense of the opportunity to move adult smokers to lower risk products. Christopher Russell, director at Russell Burnett Research and Consultancy, made up a quick calculation based on recent NYTS data. Of the 2.55 million U.S. students who had used an e-cigarette in the past 30 days according to the survey, 84.9 percent had used flavored vapes. Of the current flavor vapers, 26.6 percent consumed menthol ENDS, which corresponded to 2.12 percent of U.S. youth having vaped menthol in the past 30 days. “MDOs for menthol e-cigarettes,” he concluded, “equals banning menthol to 100 percent of adults in order to protect under 3 percent of youth.”
Neil McKeganey, co-director of the Centre for Substance Use Research, went a step further, quoting a Scottish study carried out by his institution that looked at ENDS use among representative samples of U.S. youth and adults in 2021 and 2022. Out of the 1,215 youth aged 13 to 17 surveyed in 2022, he said, 0.2 percent had ever used a Logic Power and 0.5 percent had ever used a Logic Pro.
When the Scottish researchers looked at youth e-cigarette use over the last 30 days, the levels of Logic use shrank to 0.1 percent of youth reporting having used the Logic Power during that period whereas the level of Logic Pro use was so low that it was not even recorded.
“In dispatching the MDOs for these two products,” he stated, “the FDA seems to have set aside a commitment to review the data around individual devices and liquids and to formulate a response in terms of the brand of products being used and justify the denial orders issued by reference to the NYTS data.”
Jim McDonald of Vaping360 predicted a rise in illicit trade if the FDA blocks the legal path to market for menthol vape products. The FDA, he said, ignored the fact that most youth vapers use unauthorized gray market flavored disposable vapes, many of which are menthol flavored. “They will continue using these products, too, while the FDA pursues its goal of eliminating legal vaping, locked into the belief that its ‘authority’ has some effect on the market,” wrote McDonald.
In March, the FDA authorized Logic devices with tobacco-flavored refills. To date, the agency has not approved a single vapor product with nontobacco flavors.
Shortly after receiving its MDO, Logic Technology Development secured a stay of the FDA order in court, allowing retailers and wholesalers to continue selling Logic menthol products for the duration of the stay. Even if the court requires the FDA to reevaluate the evidence, this does not guarantee a more favorable outcome for Logic and the future of menthol vape in the United States.

Understanding the FDA’s Requirements

Despite Logic Technology Development’s travails, Nveed Chaudhary, chief scientific and regulatory officer at Broughton Group, is confident the recent MDOs do not mark the beginning of the end for menthol and other nontobacco-flavored e-liquids in the U.S.
While he agrees with McKeganey that the FDA’s positions are being driven in large part by the data from cross-sectional studies like the NYTS, Chaudhary believes the fundamental issue is how the PMTA studies were designed, how the data has been interpreted and how the arguments have been presented to the FDA. “Based on the original PMTA guidance and then the Final Rule, many, if not all, of the applications for menthol and nontobacco-flavored products were considered to be ‘equal,’” he says. According to Chaudhary, the relative benefits of all the ENDS flavors together were compared with the risks of smoking combustible cigarettes. The youth access measures introduced were the same across all flavors of a given platform.
“What has become very clear from the FDA’s recent communications, especially through the MDOs, is that they do not consider all flavors of ENDS to have the same risk profile—in this case, the risk of promoting on-ramping amongst youth,” says Chaudhary.
“Therefore, the expectation from the FDA has evolved. Given the data from studies such as NYTS, the FDA are now saying that the PMTA applications need to demonstrate that there is additional benefit of the menthol over tobacco flavors for current smokers—essentially that the additional benefit outweighs the continued risk of youth finding menthol more attractive. Over time, as the industry presents this data to FDA and FDA begin to approve menthol-flavored products, I can imagine a situation where the same would apply to other nontobacco and nonmenthol flavors—only that, for these flavors, an additional benefit for smokers compared with menthol that outweighs the risk on youth use would be required.”

Remediating Deficiencies

Chaudhary believes that “with the addition of a few relatively inexpensive studies and an overhaul of the dossier to build the arguments that FDA want to see,” Logic Technology Development should be able to convince the agency of the additional benefits of nontobacco flavors.
Attempts at rectification, however, may prove futile. In January 2020, the FDA banned all flavors except tobacco and menthol in cartridge-based e-cigarettes. In September 2020, the agency signaled that it would not authorize flavored products without extraordinary evidence. With Logic Technologies Development being part of Japan Tobacco International, one of the world’s leading players, it may furthermore be assumed that the company submitted a very comprehensive application.
While acknowledging that many of the applicants are large multinationals with the financial power to conduct large complex studies, Chaudhary says this does not mean that the studies that the FDA is now looking for were in fact conducted. “It all goes back to the industry’s understanding of the PMTA guidance and final rule back in September 2020 and the way in which the FDA have chosen to enforce the rule today,” he says. “The ongoing view of FDA is that that NYTS illustrates a preference for menthol flavors amongst youth. Therefore, since the original studies were designed to compare all flavors of ENDS to combustible cigarettes; they are not geared to demonstrate additional benefit of menthol flavors compared with tobacco flavors. I would say for any new applications, that has to be a central question to which the application must provide answers.”
Chaudhary deems it likely that much of the data required to build these arguments already exists in the comprehensive PMTA applications—perhaps with some gaps that could be potentially filled with relatively inexpensive studies. He expects the FDA to apply the same logic to flavored disposable products, which are exempt from the agency’s 2020 flavor ban and have recently experienced a surge in sales. “I would imagine that unless any company has constructed their PMTAs to show the additional benefit of flavors compared to menthol and menthol compared with tobacco flavor, they will also receive MDOs,” says Chaudhary.
“I think we all agree that this is awful news for U.S. smokers who will be denied the wide range of options that they need to stop smoking,” he continues. “It seems that the only way to re-offer smokers these critical choices is to ensure that we as an industry are responsible. We must ensure that we understand the evidence the FDA want to receive and provide this data to them so that menthol and ultimately other flavors can be authorized back into the marketplace, and all smokers can continue their off-ramping journeys.”
Chaudhary says the industry needs to move forward, put aside grievances that have arisen as a result of how the FDA has enforced the PMTA final rule and provide the agency with the data it wants to see to ensure that smokers can have these products in their hands at the earliest opportunity.
“Any integrated technology that can minimize or even eliminate underage use of e-cigarettes would lower the risk of youth use and therefore lower the bar for the additional benefit data that the FDA are now asking for,” he says.

Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

December 1, 2022
Innovation Inside

Continuous innovation is the foundation for the advancement of Smoore and the e-cigarette industry. | Photo: Smoore International Holdings

Of the few vaping products that survived regulatory scrutiny, many have been manufactured by Smoore.
By Timothy S. Donahue
The U.S. premarket tobacco product application (PMTA) process is one of the world’s most rigorous regulatory pathways to market for nicotine products. Out of nearly 7 million applications, only 23 e-cigarette-style products have been approved for marketing by the Food and Drug Administration. Most of the approved products have been manufactured by a single company.
Smoore International Holdings, through its subsidiary, Shenzhen Smoore Technology, manufactures the Njoy Ace, Njoy Daily, Logic Power and Logic Pro devices. The Njoy Ace is the most technologically advanced vaping product to receive marketing approval in the U.S. It is the first e-cigarette authorized by the FDA that is equipped with ceramic coils that are manufactured by FEELM, the atomization brand owned by Smoore Technology. The Ace marketing orders mark the first approval by the FDA of a pod-style vaping product.
Garnering the marketing orders required plenty of forethought and investment from Smoore. Based on PMTA requirements, Smoore established a comprehensive analytical testing and safety assessment system, including the vaping industry’s first corporate toxicology laboratory, which explores the health impacts of exposure to e-cigarette vapor by means of cytotoxicity tests. These test the reaction of living cells to different components of e-cigarette vapor. The company has also developed the third generation of in-house safety standards, Smoore 3.0, which covers all of the necessary PMTA tests, including testing for harmful and potentially harmful constituents.

In a conversation with Tobacco Reporter, FEELM Marketing Director Sofia Luo attributed the success of Smoore products in the regulatory process to the company’s detailed and lengthy research and development process, which includes a rigorous testing and safety assessment system.
“FEELM ceramic coils have more than seven years of research and development. It is the first black ceramic atomization coil that presents high harm reduction performance in the electronic atomization industry. It provides more flavor than a cotton coil,” Luo said. “‘FEELM Inside’ technology has also been upgraded and optimized continuously since its debut. We believe that only innovation from bottom to top can lead to industry breakthroughs and allow us to provide outstanding products for our clients.”
Because of their innovative atomization technology, FEELM coils significantly increase Smoore clients’ chances of garnering an FDA marketing order and meeting China’s e-cigarette standard. Currently, the top four Chinese e-cigarette brands with the highest production quotas (amounting to 80 percent of the total) are partnered with the FEELM brand.
A quality coil is a much-needed component for generating flavor in vaping products. Looking at the current regulatory landscape, tobacco will likely remain the dominating flavor in both the U.S and China. Tobacco taste-only policies could also impact other regions. According to Luo, Smoore has upgraded its ceramic coils, which can be specifically tailored toward tobacco flavors.

“To comply with the Chinese national standard for e-cigs released this year, domestic brands use materials directly extracted from tobacco for e-liquid production, making it harder for coil manufacturers to produce a suitable device,” explains Luo. “We developed a comprehensive technology solution [that helps Smoore’s] Chinese and overseas clients to study [and develop new innovations] and produce better e-cigarette products. This continuous innovation is the foundation for the advancement of Smoore and the rapid development of the e-cigarette industry.”
Innovation is important for the industry. Smoore has been a frontrunner in innovation and has applied for 4,300 global patents. The company must also be diligent in protecting its intellectual property. Last October, Smoore filed a complaint under the U.S. Tariff Act accusing 38 American and Canadian companies and individuals of infringing on three of its patents and one of its trademarks. As of April 20, 17 of the 38 defendant companies had signed consent letters or settlement agreements.
To stay ahead in innovation, Smoore has recruited over 1,500 R&D experts, accounting for more than 40 percent of its total staff. The company has applied for more than 500 vaping-related heating patents. Recently, Smoore launched the FEELM Max, the world’s first ceramic coil disposable pod solution. The ceramic coil allows for a higher level of safety and harm reduction compared to previous devices.
Smoore presented its FEELM Max disposable technology solution at the Indonesia Electronic Atomization Exhibition (IECIE 2022), which took place at the Jakarta International Convention and Exhibition Center in late October. Speaking at the exhibition, Smoore Vice President Clayton Shen highlighted the importance of technological innovation in driving progress in the vaping industry.
During his presentation, Shen explained that the closed system is the fastest-growing category in the next-generation tobacco market and will claim a significant market share over time. According to Smoore, ceramic coils solve longstanding coil challenges such as leaking liquid and a burnt taste. FEELM’s ceramic coils, said Shen, are used by many of the leading vapor product manufacturers, such as Relx and Njoy.

Founded in 2009, Smoore was one of the first companies to join the e-cigarette industry and later became China’s first billion-dollar vapor company. Smoore International Holdings, parent to Shenzhen Smoore Technology, is also the first vapor company to be listed on the Stock Exchange of Hong Kong. Globally, Smoore is considered one of the most valuable vapor industry manufacturers. According to Frost and Sullivan, Smoore is No. 1 in the global vaping device market with a 22.8 percent market share in 2021.
Smoore is parent to Vaporesso and FEELM, two vaping brands that have gained global recognition for their innovative products. Vaporesso is an open system product brand created in 2015 and is “dedicated to establishing a smoke-free world while raising the quality of life for its users,” according to Luo. “Based on its continuous innovation, strict quality control and substantial commitment, Vaporesso creates products that can fit all levels and styles of vapers.”
FEELM is a closed system technology brand that has been devoted to providing comprehensive atomization technology for global tobacco giants and independent e-cigarette brands, according to Luo, adding that FEELM manufactures FEELM Inside and FEELM Air, the latest in closed pod systems, and FEELM Max, a disposable system.
“This year, FEELM has started to bring the advanced technology of ceramic coils to the field of disposable vapes, hoping to bring our consumers of disposable products the same atomizing experiences as a closed pod system. Compared to other disposable products, FEELM presents a better performance on safety and harm reduction,” Luo said. “Developing and upgrading atomization technology to better optimize the user experience has been a goal, and we wanted to support our clients in launching disposable vapes with ceramic coils in the global market rapidly. This has provided end consumers with more choices.”

When Smoore International announced its financial results for 2021, it reported annual revenues of RMB13.75 billion ($2.16 billion), representing a year-on-year increase of approximately 37.4 percent. The company credited its FEELM brand and its innovative vaping solutions for its growing success. “The driving force of the atomization industry is technological innovations, which brings fundamental breakthroughs in product safety and flavor reproduction,” said Smoore board chairman Chen Zhiping during the presentation.
In its effort to provide consumers more choices in harm reduction products, Smoore has now launched Metex, its heat-not-burn division. The company’s goal is to create a new heating technology R&D platform “that connects the present and the future, balancing the beauty of technology and life,” according to the Metex website. Metex aims to provide its business partners with one-stop supply chain solutions, from core heating technology research to product development and final production.
While Smoore began as an e-cigarette company, the company increasingly views itself as a technology company. Recently, it changed its email address from @smoorecig to @smooretech to better reflect the company’s growing goals. Luo said that changing the email suffix was a way to “better convey our technology” concept to the public, and at least 10 percent of the company’s profits every year are reinvested into its science and technology components, including Smoore’s 14 research institutes that the company has established around the world.

Smoore is growing rapidly. The company expects the e-cigarette market to continue growing at a significant stride over the next five years. Industry experts say product innovation, too, is going to continue at a rapid pace. Luo said that smoking alternatives are becoming increasingly popular worldwide as more consumers and governments realize the significance of e-cigarettes in supporting harm reduction. Improvements in the manufacturing process, she says, will help increase the options for consumers, and manufacturers will inevitably move from semiautomated production lines toward fully automated production lines.
“Regarding the technical development in the overall e-cigarette market, we believe that improving safety, taste optimization and improving the efficiency of nicotine delivery are the major trends in the future. We also are conducting in-depth research on these important technologies internally,” Luo said. “As for the device development trend, we believe that consumers prefer to purchase environmentally friendly and carbon-reducing products as we move toward the future. Consumers need more diversified choices.”
Smoore’s new FEELM Max disposable pod line includes products featuring concepts that help minimize environmental concerns, according to the company. FEELM also published its Carbon Neutral Plan, and the company is committed to implementing increasingly high sustainability standards into its business strategy. “We are moving toward carbon neutrality,” Luo said. “It’s part of [our] strategic plan moving forward.”
With atomization technology being the foundation for Smoore, the company is looking toward more diversification over the next five years and growing outside the vaping industry. Luo said that the company is increasing its research and development investments for atomization improvements in the medical and beauty/cosmetics industries, for example.
“In addition to vaping products, Smoore is committed to integrating atomization technology into more industries, distributing these technologies to other industries,” Luo said. “Our medical atomization and beauty atomization products are now being tested. After their launch, they will broaden the business categories of Smoore and increase the scope of our clients. We are very excited about enhancing our future development through multiple driving incentives and wider roads. And we firmly believe that atomization makes life better.”

Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

December 1, 2022