Category: Also in TR

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  • The Looming Backlash

    The Looming Backlash

    Photo: Swedish Match

    Cracking down on Zyn will only harsh the buzz around the office.

    By Peter Clark

    The calls from Representative Chuck Schumer to “crack down” on Zyn nicotine pouches may harsh the buzz around the office. 

    A recent Bloomberg article found that this product has been gaining popularity among office workers. In the third quarter, Philip Morris International saw a 66 percent jump in sales.

    Schumer may aim to shield developing brains from nicotine, but only 1.5 percent of middle schoolers and high schoolers use nicotine pouches. Flavored nicotine products are critical to adults quitting smoking because they break the connection between nicotine and tobacco.

    If regulation is too heavy-handed, adults will be clamoring for their trusty pack of Marlboros. This initiative is a drag on workplace productivity for the following reasons: more smoke breaks, less focused employees and time lost to illness.

    Restricting Zyn pouches may make workers revert to cigarettes, and this is bad for business. The average smoke break is between 10 minutes and 15 minutes long. These constant breaks add up to approximately an additional week of vacation time.

    Not only is this unjust for nonsmokers, but employers feel the pinch. Studies have estimated that smoke breaks cost companies $3,077 ( per employed smoker) annually. Banning flavors and reducing the nicotine content in Zyn will have workers running for the nearest designated smoking area. 

    Schumer’s demand for regulation overstates the risks and overshadows the benefits. This fear-mongering stems from what Jeffrey Singer, a senior fellow at the Cato Institute, refers to as “Nicotinophobia.” The association between the dangers of cigarettes and harm reduction products that contain nicotine.

    Zyn pouches contain isolated nicotine salt but no tobacco. The danger lies in thousands of chemicals composing cigarette smoke. E-cigarettes also deliver nicotine without tobacco smoke. Public Health England has deemed them 95 percent safer than traditional cigarettes. If we have a safer alternative, it is foolish to ignore its benefits as a nootropic. 

    Studies have found that smokers report that nicotine has “beneficial effects on concentration and memory.” Nicotine also enhances performance on complex tasks. A double-blind study by Nature found that administering small amounts of nicotine (1 mg) boosted performance on intricate tasks. Past research even suggests that nicotine improves “IQ-related tasks.” Nicotine’s impact on IQ has caught the attention of tech mogul Peter Thiel, who has flirted with the idea of using nicotine patches for the nootropic effects.

    Banning or restricting nicotine pouches would have a negative impact on the productivity of former smokers who are Zyn converts. When a nicotine addict tries to quit, they experience temporary cognitive decline. Experts in the field of addiction treatment have observed that withdrawal feels “like the opposite of the drug.” Nicotine is no exception. A 2017 study conducted by the Pennsylvania State University found that nicotine deprivation among smokers had an adverse impact on working memory, “which is critical for our understanding of motivated decision-making.” Other researchers have found that nicotine withdrawal is also associated with decreased reaction time and a decline in verbal and spatial memory. 

    If Zyn users revert to cigarettes, employers will also suffer from reduced productivity due to smoking-related illnesses. The U.S. economy suffers over “$365 billion in lost productivity each year” because of tobacco-related ailments. Not only do chronic diseases contribute to lower productivity, but smokers are also at higher risk for infections—a 12 percent higher risk for viral infections and a 48 percent greater chance of “being diagnosed with respiratory illness,” leaving co-workers to pick up the workload of their sick peers, putting them under unnecessary stress.

    Lawmakers need to realize that targeting Zyn for the sake of America’s youth is misguided. Few kids are using this product, but the harm to adults extends beyond smokers. The impact of smoking-related loss in productivity reverberates throughout the economy. Making Zyn products less appealing to smokers will have our workforce taking excessive breaks, being less focused and being more likely to call out sick. If Schumer wants to tackle a public health crisis facing teens, he should look into automobile accidents, the leading cause of death among teens.

    Peter Clark is an Arizona-based writer and commentator. His work has been published by AzCentral, FEE, AIER, & Real Clear Markets. Follow him on X @blog_logic.
  • All Puff

    All Puff

    Photo: Sevenstock Studio

    Concern about secondhand smoke does not warrant Britain’s generational tobacco ban.

    By Charles Amos

    In recent weeks, I have spoken to hundreds of people about the British government’s plan to ban the sale of tobacco to anyone born after 2009. Most of the responses in favor of it I expected to hear; however, I was surprised at the number of occasions people brought up secondhand smoke as a sufficient reason for prohibition—very often, though this argument was raised only after I had undermined their claim that smoking costs the government lots of money and after I had pointed out the paternalism that was typically their initial justification. Given the propensity of the public to fall back on this point, it is important that it is rebutted.

    A main reason why people object to secondhand smoke is that it is inflicted upon them without their choice. When allied to the idea that it is harmful, many will invoke John Stuart Mill’s harm principle—the idea that the only justification for limiting individual liberty is to prevent harm to others—to justify the tobacco ban. The cost of secondhand smoke has been estimated to be in the region of £700 million ($882.72 million) by Policy Exchange. Nonetheless, the overwhelming majority of this cost evades the central reason people oppose secondhand smoke because it comes from the earlier death of partners or visitors of smokers who choose to be with them. Now relative to smokers not smoking, these partners and visitors are worse off; this worsening can hardly warrant prohibiting smokers from smoking though. Relative to her nephew putting up a handrail on the stairs, a doddery aunt is worse off without it; are we to require he puts up the handrail? No. Hence, it must be admitted that making someone worse off relative to the best situation for them cannot warrant forcing people to provide this best situation.

    Given that we have disposed of the overwhelming majority of the cost of secondhand smoke, we can now focus on the life lost due to the unchosen inhaling of secondhand smoke alone, e.g., when walking past a smoker on the street. Assuming 10 or so occasions in which secondhand smoke is inhaled at a hundredth of the strength of a puff inhaled by the smoker himself gives an annual figure of about 6 seconds lost, or about 2 pence of cost. This is almost certainly an overestimate too; indeed, the first person to publish research on the link between primary smoking and lung cancer, Richard Doll, said, “The effects of other people smoking in my presence is so small, it doesn’t worry me.” Health studies have affirmed this verdict: In 1998, a seven-year study by the World Health Organization found no statistically significant link between secondhand smoke, importantly, including of the chosen type, and lung cancer, and a 2002 study by the Greater London Assembly similarly found the impact of secondhand smoke to be minuscule too. 

    I suspect there will remain those who will still argue that smokers have no right to impose any costs on them whatsoever—and that, hence, smoking should still be banned. This moral reasoning proves too much. If it is accepted, a couple of pence of expected cost, at most, warrants restricting public smoking; analogously, it warrants banning driving, barbequing and coughing in public too, for all of these impose similar or greater costs as well. As English judge Baron Bramwell argued in the Bamford v. Turnley court case of 1862, concerning the passage of smoke over property lines, justice should accept “a rule of give and take, live and let live.” Either that or our moral license to do anything would be seriously limited. Even Mill claimed only harms “without justifiable cause” can be prohibited, and surely, living life is as justifiable a cause as any other.

    At this point, it may be argued that the difference between driving, which exposes people to smoke and the risk of a fatal accident, is that drivers pay their way via fuel duty while smokers do not pay their way via tobacco duty. This is false. As Christopher Snowdon and Mark Tovey have found, smokers contribute about £9 billion in tobacco taxes and save the taxpayer another £10 billion in reduced pension and healthcare costs while their cost in healthcare, litter collection and putting out fires only comes to £4.6 billion, meaning, when we include the estimate of £700 million for secondhand smoke—which is a vast overestimate of the relevant figure—we still find smokers save society about £14 billion a year.

    Plus, it’s pretty rich to ban smoking rooms in pubs and restaurants, where smokers literally internalized their negative externalities, and then, when smokers revert to smoking outside and impose a minuscule externality as a result, to use this minuscule externality as a justification to ban smoking altogether. In reality, it points to the fact that the war on smokers has never really been motivated by stopping harms to others; rather, it has been motivated by an intolerance of smoking itself. And, of course, this whole article has ignored the fact that secondhand smoke in public places can never warrant banning smoking in private places anyway.

    In sum, anyone who accepts that people should be free to drive, barbeque or cough in public must, by the same reasoning, accept that people should be free to smoke in public too. Ultimately, the only reason the public revert to opposing smoking on the basis of the tiny cost of secondhand smoke is their main arguments have failed. Yet even their argument of last resort fails, and with it goes any last justification for the tobacco ban. If people really want to defend the tobacco ban, they should be honest and give their real justification alone, that is: “We’re happy to push people about for their own good.” A questionable justification at best.

    Charles Amos writes The Musing Individualist Substack and formerly attended both King’s College London and The University of Oxford.
  • Northern Exposure

    Northern Exposure

    Vape and modern oral sales are rising, but combustibles remain king of the North American market.

    By Timothy S. Donahue

    It’s constant but unknown. While the nicotine market remains profitable, it is changing. As more major tobacco companies embrace next-generation products, combustible sales will suffer. The evolving regulatory environment will also continue to play a major factor in the North American nicotine market.

    According to Statista, in 2024, revenue in the U.S. nicotine market will reach $107.5 billion. It is projected to experience a compound annual growth rate of 0.62 percent between 2024 and 2028. The largest segment in the market remains combustible cigarettes, with an expected value of $82.7 billion in 2024. The Marlboro brand continues to dominate U.S. cigarette sales with a 50 percent market share.

    E-cigarette revenues are projected to reach $8.8 billion. Statista expects the vape market to experience an annual growth rate of 3.24 percent from 2024 to 2028. Retail sales of nicotine pouches are also seeing unprecedented growth. According to Euromonitor, the U.S. pouch market generated $8.58 billion in 2023 compared to $7.23 billion in the previous year. The U.S. modern oral nicotine market is expected to reach $11.03 billion by 2027.

    The Canadian tobacco market is much smaller than the U.S., reflecting that country’s lower population. Nicotine sales in Canada are projected to generate a revenue of $12.3 billion in 2024. The market is anticipated to experience a compound annual growth rate of 1.10 percent between 2024 and 2028. In Canada, too, combustible cigarettes continue to account for the majority of tobacco sales. The traditional cigarette market is expected to reach a volume of $10.6 billion this year. In 2024, the revenue in the e-cigarette market in Canada is estimated to reach $1.4 billion.

    Nicotine pouches were approved for sale in Canada on July 18, 2023, as a natural health product. Modern oral nicotine pouches are currently outside the scope of the federal Tobacco and Vaping Products Act and the provincial Smoke-Free Ontario Act 2017, which regulate tobacco and vaping products by restricting their advertisement, display and public use. However, that is expected to change soon.

    During an education seminar at the Total Products Expo (TPE) that took place in Las Vegas Jan. 30 to Feb. 2, 2024, Brad Seipel, executive vice president at MARC Research, noted that many of the next-generation tobacco products disrupting the market today have been on the market for over a decade. Innovation in the industry, he said, is being driven with a focus on tobacco harm reduction and a move away from traditional tobacco. “We are now living in a post-tobacco market. It is a nicotine market,” Seipel said.

    Brad Siepel (left) and Jason Carrington (Photo: Chemular)

    Bonnie Herzog, an analyst with Goldman Sachs, observed in an industry report that retailers are seeing customers making fewer trips to the store, which is being driven by consumers switching to alternative nicotine products like modern oral. These products often last longer than a typical pack of combustibles. She also explained that the illicit market for disposable vape products continues to be a growing concern for the nicotine industry and retailers alike as the U.S. Food and Drug Administration’s crackdown on flavors and noncompliant products has driven traffic to the gray/black market or retailers willing to sell unauthorized vaping products.

    She said a broad majority of retailers believe the situation is worsening with the impact felt strongest in urban areas and states with the strictest flavor bans. “Many retailers highlighted that the illicit disposable [e-cigarette] market is impacting cigarette volume, and [Altria] estimates the growth of these illegal products contributed to cigarette industry declines in the range of 1.5 percent to 2.5 percent over the last 12 months,” she said. “Retailers don’t believe the situation will change without more enforcement and are broadly pessimistic given the ubiquity of the offering, tracking/enforcement difficulty and relatively light penalties reducing deterrence.”

    One respondent to the survey pointed out that enforcement fines issued by the FDA are manageable ($19,192 per violation), and the extent of policing hasn’t resolved the issue. Others noted that retailers selling these products (i.e., on the gray market) are making hefty margins on those sales, which are helping them offset losses on (cigarette) sales.

    During Keller and Heckman’s E-Vapor and Tobacco Law Symposium, held Jan. 29–30 in Las Vegas, Brian King, head of the FDA’s Center for Tobacco Products, said his agency carried out a series of coordinated blitzes against Elf Bar and other “illicit” brands at several retailers that resulted in warning letters. The agency then issued civil money penalties following subsequent reinvestigations against retailers found to still be selling illegal products. Many of the recipients of these penalties were small businesses.

    “We do know that we need that comprehensive approach,” said King. “And so, we’ve also taken action on the borders, particularly for products that are coming in internationally. We do have import alerts in place. Those do address products that have been accurately declared. Of course, we know that there are entities that are misdeclaring products as well. Towards that end, we work very closely with colleagues at Customs and Border Protection. We did have an operation that was conducted earlier this year where we seized over $18 million worth of products, including Elf Bar, Funky Republic and several others. It was about 1.4 million units of illegal e-cigarettes. Ultimately, this is one example of ongoing activities. There will be more.”

    TIm Phillips (Photo: Chemular)

    Also speaking at TPE, Tim Philipps, with Tamarind Intelligence, said that a major issue is enforcement. While the FDA’s premarket tobacco product application (PMTA) process is expensive and onerous, it also seems pointless because there is little effort to stop products that skip the regulatory process from being marketed. According to Phillips, even the FDA’s current blitz barely skims the surface of the deepening gray/black markets.

    “The products that you’re getting offered in retail environments, they haven’t gone through a regulatory process, and there’s no signs of that happening, frankly,” he said. “The FDA is stepping up some of its enforcement activity. We’ve seen more and more of this happening, and I think it will keep increasing. But the reality is the market’s not being regulated at all. The same is happening, by the way, in the U.K. and all across Europe. We’re seeing a lot of products come in. The reason is that a lot of these products are being distributed directly to retailers or directly to consumers (from the manufacturer). And that’s been a great success.”

    A looming federal menthol ban could also boost the gray/black markets for nicotine products. The FDA has submitted proposals to the White House Office of Management and Budget (OMB) to ban the use of menthol in cigarettes and other tobacco products and prohibit all nontobacco flavors in cigars. The FDA is also expected to definitively define a “characterizing flavor.” The OMB is currently reviewing these proposals. Before the product standards can be implemented, the OMB must review their potential economic impact.

    The FDA has stated that it expects to announce the final ruling on the menthol ban in March. However, with the U.S. presidential election approaching this November, many industry experts are uncertain if any action will be taken at all. Unsurprisingly, several respondents to Herzog’s retailer survey expressed fatigue with ongoing uncertainties related to the potential federal menthol ban, the FDA’s efforts to enforce bans on illegal disposable vape products and flavors and the agency’s slow progress in completing PMTA reviews. The rapid growth of local flavor bans is also an expanding concern.

    “A number of retailers who are currently not subject to [local] flavor bans anticipate the potential in the near future given rapidly evolving legislative agendas,” Herzog stated. “The looming decision by the FDA on a federal menthol ban on (cigarettes) has also led many retailers to take a wait-and-see approach on carrying gray market vapor products, which are higher margin and more affordable for consumers.”

    The future of nicotine products still holds promise. Seipel said that the dissolvable and heat-not-burn segments have plenty of room for growth as the awareness and usage of those products haven’t yet gotten traction in the North American market. Seipel said as long as there are combustible smokers, there is going to be room for innovative products that help them switch to less harmful alternatives.

    “There’s also [an] opportunity in innovation for helping female smokers …. We have to remember that there are way more people out there that need help [quitting smoking],” he said.

    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.
  • A Misguided Crusade

    A Misguided Crusade

    Photo: Swedish Match

    The campaigns against lower risk nicotine products serve political goals at the expense of public health.

    By Catharine Dockery

    Cigarette smoking remains the leading cause of preventable death in the United States and many other countries. Shouldn’t our leaders do everything they can to prevent deaths and reduce harm? 

    Unfortunately, U.S. Senator Chuck Schumer and the Food and Drug Administration have missed a profound public health opportunity by not encouraging reduced-harm nicotine products such as Zyn. Instead, they are targeting these lifesaving products and proposing wide-reaching bans.

    While youth usage of nicotine is a deeply concerning issue, product prohibitions are an ineffective distraction from the failure of the FDA to act proactively to protect Americans. Flavored recreational nicotine options are essential tools to present combustible cigarette smokers with less harmful options they enjoy. Public health officials need to stop scapegoating harm reduction products targeted to adult smokers and instead focus on addressing youth use.

    Other public health organizations, such as the U.K. National Health Service (NHS), have recognized the potential of harm reduction products in saving lives and promoted recreational nicotine options. For example, their “swap to stop” program has offered new noncombustible tobacco products to smokers in an effort to move them to lower risk alternatives. The NHS website offers that “[i]n recent years, e-cigarettes have become a very popular stop-smoking aid in the U.K. Also known as vapes or e-cigs, they’re far less harmful than cigarettes and can help you quit smoking for good.”

    In the United States, by contrast, government officials and public health agencies are spurning a significant opportunity in reduced-harm nicotine products. In 2023, nearly half a million adults died in the United States from the effects of cigarettes.

    Research demonstrates that flavored nicotine products provide a less harmful option for adult cigarette smokers who are trying to find a substitute for their habit.

    A 2021 study found that among U.S. adults who smoke, despite only 29 percent being aware of nicotine pouches, nearly 17 percent expressed interest in trying the products in the coming six months.

    To the extent adult smokers are able to substitute pouches for cigarettes, it’s absolutely appropriate to view these products as lower harm options on a continuum of risk.

    Some research indicates that e-cigarettes can be more effective than nicotine-replacement therapy products like gums and lozenges at helping smokers quit, showing the role of these products in the public health fight against tobacco-related harm.

    Policymakers’ efforts to restrict harm reduction products are often done under the guise of protecting children. But in no other industry do we consider product bans a reasonable control to address underage use. It would be unheard of to ban alcohol to prevent underage drinking. 

    Product bans have been largely unsuccessful in addressing youth vaping, a failure made clear by the fact that the top 2 youth e-cigarette brands of 2023 are illegal (Elf Bar and Esco Bar, used by 57 percent and 22 percent of youth surveyed, respectively). The FDA has completely failed to enforce bans on these illegal brands with flavors and designs designed specifically to appeal to underage users. The numbers are clear—10 percent of middle school and high school students use tobacco products, and the vast majority of those (7.7 percent) use e-cigarettes. 

    We also need to engage with the facts of youth nicotine abuse. E-cigarettes are far and away the main method of consumption among underage users, used by 7.7 percent of students in 2023 relative to the 1.5 percent using nicotine pouches. Significantly more effort is needed to crack down on illegal sales, particularly online sales, of these products. If product bans can’t solve youth usage issues, can we really justify the public health costs of denying vital options to smokers?

    On this issue, we’re repeatedly offered a false choice between youth nicotine abuse and robust options for adult smokers. This is a purely political characterization of the problem. There are a multitude of actions that can be taken to protect youth from the dangers of nicotine. Significantly stronger enforcement is needed at retailers, both for age verification and to prevent the sale of illegal products.

    A strong FDA focused on hands-on enforcement is needed to ensure that nicotine companies operate responsibly and avoid appealing to underage consumers. We also need stronger import controls on these products, with illegal imports often coming from unfriendly nations. These common-sense actions can protect youth without dramatic costs to adult smokers.

    The public health conversation around nicotine has been unfortunately politicized, and we’ve lost sight of the most important goal: saving lives. Product bans and public policies targeting reduced-harm products would have material impacts on the options available to adult smokers while doing little to address the underlying factors enabling youth nicotine use in this country. Targeting some of the lowest risk tobacco products available is an unacceptable government overreach, serving political rather than public health goals.

     
     
    Catharine Dockery is the founder and general partner of Vice Ventures, a private equity firm that invests in good companies operating in superficially “bad” industries.

    Vice Ventures is the most active private equity nicotine investor in the U.S. The company approaches the sector through a harm reduction lens.

    Prior to founding Vice Ventures, Dockery was a member of Walmart’s mergers and acquisitions team. She also has experience in equity trading and high-yield research.

    Through her work on Vice Ventures, Dockery has been recognized in various media including in 2020 as a headline member of the Forbes 30 Under 30, an index that recognizes notable young people in various industries.

    Dockery graduated from The Gallatin School of Individualized Study at New York University, where she concentrated in the intersection of neuroscience and finance. She grew up in New York and loves a slightly dirty martini with olives on the side.
  • Tension in Panama

    Tension in Panama

    Photo: Claudio Teixteira

    The exclusion of Brazilian representatives from the recent WHO event sparks a debate on transparency.

    By Claudio Teixeira

    At the recent Conference of the Parties (COP10) to the World Health Organization Framework Convention on Tobacco Control (FCTC), held in Panama Feb. 5–10, the exclusion of Brazilian representatives from the state of Rio Grande do Sul, the epicenter of the tobacco industry, generated a wave of criticism for secrecy, exclusion and a lack of democratic transparency. The incident, marked by the refusal to accredit deputies, a state secretary and the press, reveals deep tensions in the global debate on tobacco control, casting doubt on the inclusiveness and openness of the international decision-making process. The controversy at COP10 underscores the challenge of redefining the fight against smoking concerning people, economies and local traditions.

    On the first day of COP10, an incident involving a group of parliamentarians from Rio Grande do Sul, a state in the extreme south of Brazil, highlighted the exclusionary, opaque and nontransparent nature of this important international event in addition to tensions between global health policy and the multiple interests at stake.

    The event aims to advance tobacco control policies, a topic of global importance given the impact of smoking on public health. Delegations from the state parties can participate. However, according to its regulations, the COP can invite other interested parties, such as intergovernmental and nongovernmental organizations, to participate as observers in its meetings. The exclusion of official representatives and the Brazilian press from the meeting generated controversy and heated discussions about democracy, transparency, the need for dialogue and the future of an entire production chain.

    Rio Grande do Sul, a region with a long tradition in tobacco production, found itself at the epicenter of this debate. In this southern state of Brazil, tobacco is not just an agricultural crop; for many rural families, it represents the backbone of their livelihoods, with the sector generating $2.4 billion in exports in 2023. Tobacco is strategically positioned in the regional economy, surpassed only by soy in export volume.

    The exclusion of political representatives and the Brazilian press from COP10 triggered a wave of outrage, highlighting a clash between those who can decide how global public health efforts will proceed and local communities’ social and economic realities.

    ‘Regrettable, Authoritarian and Intransigent’

    State and federal deputies along with the secretary of rural development of the government of Rio Grande do Sul, Ronaldo Santini, expressed their frustration, describing the WHO’s action as “regrettable, authoritarian and intransigent.” The refusal to allow their participation in the event was seen not only as an anti-democratic act but also as a sign of contempt toward communities that economically depend on tobacco cultivation.

    Federal legislator Marcelo Moraes was emphatic in his statement, underscoring the need to expand the debate to include additional dimensions, such as the economy and social aspects. He cited the situation in his region, where the livelihood of more than 70,000 households is sustained by tobacco production and more than 40,000 jobs are generated in its industry.

    Moraes expressed his skepticism about the seriousness and democracy of the convention, criticizing its tendency to marginalize sectors directly involved in the discussion. “This debate needs to be broader,” he said. “I don’t believe this convention is serious, I don’t believe this convention is democratic … it simply excludes those who have a direct interest in this discussion happening here.”

    The congressman also expressed his concern about the ongoing ban on electronic cigarettes in Brazil, noting the considerable number of users who turn to the illegal market to obtain these devices. He highlighted how this situation results in a loss of revenue for the country, which could even benefit from the export of these products. Moraes argued that the ban does not reduce the number of users and advocated for regulation that allows adjusting aspects of the product, which in turn could mitigate health risks and make it less attractive to minors and nonsmokers.

    Regarding the refusal to grant accreditations to participate in the event, the deputy pointed to the organization of the event as responsible, highlighting the role of Vera Costa e Silva, the former general secretary of the event and current leader of the National Commission for the Implementation of the Framework Convention on Tobacco Control in Brazil. The deputy suggested, with a sense of certainty, that her influence within the organizing group could be the reason for the exclusion, given her refusal to allow opposing voices in the discussion.

    Voices Unheard: The Exclusion of Rural and Worker Rights in Global Tobacco Control Dialogues

    Heitor Schuch, a federal deputy respected for his dedication to the rights and interests of workers and rural communities, seems to have a deep commitment to these sectors due to his frequent participation in various legislative commissions, addressing crucial issues such as family agriculture, rural development and environmental conservation.

    Under the scorching sun, outside the premises of the Panama Convention Center, the current leader of the Industry, Commerce and Services Commission in the Chamber of Deputies, Schuch did not hide his discontent and discomfort due to the refusal to allow him access to COP10 as an observer. The Gaucho legislator has clearly expressed his perception of a lack of welcome toward them, reflecting the climate of tension and exclusion that surrounded the event.

    Schuch highlighted that the World Health Organization, through the Secretariat of the FCTC, seems to focus unilaterally, ignoring the critical need for dialogue and transparency in international conversations on tobacco control, where all voices, especially those directly affected, should be heard and considered. He stressed that the WHO is omitting the voices of rural producers, industrial workers and residents of the municipalities where the tobacco-producing companies are located. For Schuch, the exclusion of these important sectors from the conversation is not surprising as it once again evidences a disinterest in including multiple perspectives in the debate.

    On the same day, the deputies’ nighttime visit to the Embassy revealed a complex stance by the Brazilian ambassador, Carlos Henrique Moojen de Abreu e Silva, regarding the exclusion of the delegation.

    Initially, Abreu e Silva offered his support to the delegation, but later, at the COP10 plenary, he emphasized the importance of adopting policies aimed at reducing tobacco production, including tax reforms and the continuation of the vaping ban in Brazil.

    These statements added a new dimension to the already tense debate on tobacco control policies, demonstrating the complexity of reaching a consensus on an issue that requires inclusive and thoughtful dialogue, taking into account both nicotine consumers and those involved in the tobacco production chain.

    Silencing the Press: The Unprecedented Exclusion of Journalists from COP10 and the Quest for Transparency

    Deputy Heitor Schuch shared that, although he had faced similar situations in the past, the recent exclusion of eight Brazilian journalists took him by surprise. He underscored a critical difference this time, highlighting that, unlike previous occasions, in Panama, there was an explicit prohibition against the presence of media.

    This fact highlights a new layer of opacity and control over information emanating from crucial events like COP10, where transparency and access to information should be fundamental pillars. The decision to block press access affects not only freedom of expression but also questions the openness and accountability of international discussions on public health policies.

    Schuch expressed his discontent with this measure, describing it as “regrettable,” especially because Brazil actively engages in promoting press freedom, ensuring its access to all kinds of events and activities. The participation ban in this context, according to the deputy, represents a clear concern that deserves serious and urgent dialogue with Brazil’s Ministry of Foreign Affairs.

    This call to action underscores the need to uphold the principles of transparency and freedom of information, fundamental in any society that prides itself on being democratic, especially in international forums where policies with significant global impact are debated.

    Among the media outlets whose accreditation remained “pending” are names like Ola Jornal, Folha do Mate, Radio Acustica FM, GZH, RBS TV and C3PRESS/The Vaping Today. This uncertainty regarding press participation reflects a broader conflict surrounding access to information and freedom of expression, essential in any debate of public relevance.

    The withholding of accreditations for these media further highlights the opacity with which the event was handled, raising questions about the willingness to facilitate an open dialogue and broad media coverage on public health issues and global tobacco control policies.

    One of the journalists excluded is Leticia Wacholz, the respected editor of Folha do Mate, a newspaper deeply rooted in the life of Venancio Aires city for its dedicated coverage of local interest issues. Her exclusion sets a disconcerting precedent, especially considering her previous participation in COP7 in India and COP8 in Switzerland, where she was accredited without any issues.

    This time, at COP10, the lack of a clear justification from the organizers leaves a void of uncertainty about the basis of this decision. “We meticulously fulfilled all the requirements, submitting the necessary documentation within the established deadlines, and yet, we have been denied entry,” explains Wacholz, visibly frustrated by this unexpected barrier that prevents them from carrying out their journalistic work from Panama, where they moved intending to inform their community about critical developments.

    The journalist underscored the importance of representing a region known for its tobacco industry, insisting on her commitment to offer balanced coverage that includes both public health implications and the interests of her community. “We know, of course, that we are journalists from a tobacco-producing region, but we also want to listen to the health side; it is very important to listen to the health side as well,” added Wacholz. She is aware that the decisions made in Panama will significantly impact her community.

    Her determination to gain access reflects a widespread concern for transparency and the right to information, cornerstones in public debate and the democratic exercise. Wacholz noted that she still hoped for a definitive resolution regarding her exclusion. She commented that the delegation of deputies was in the process of establishing communications that could pave the way for dialogue, possibly with the National Implementation Commission of the Framework Convention, representing the country’s delegation at the conference.

    The possibility of a meeting that opens doors to an understanding could not be confirmed, leaving in suspense the opportunity for excluded representatives and media to participate as observers and cover the global dialogue on tobacco control.

    This uncertainty underscores the critical importance of a firm commitment to inclusivity and transparency for the press in international forums, where policies affecting communities and economies worldwide are discussed. The lack of access for the Brazilian press at COP10 highlights the critical need for a review of the “approval” procedures by the FCTC Secretariat.

    Exclusion and Silence: The Controversial Interpretation of Conflicts of Interest at COP10 and Its Impact on Tobacco Control Dialogue

    A journalist who preferred to remain anonymous commented: “It’s not just individuals considered persona non grata, but all opposing voices are labeled under Article 5.3 of the FCTC, which excludes the participation of organizations or representatives with any connection to the tobacco industry. A journalist coming from a tobacco agricultural and industrial region like Rio Grande do Sul, who wishes to work and inform their community about what is being debated here, seems automatically placed in that conflict of interest, even if they have nothing to do with the tobacco industry.”

    This statement highlights the complexities and sensitivities around debates within the framework of the COP, illustrating how the interpretation of conflicts of interest can not only limit the diversity of perspectives but restrict the essential media coverage for a complete understanding of the topics under discussion.

    In Rio Grande do Sul, where these journalists and official parliament representatives originate, tobacco cultivation is at the pinnacle of family farming enterprises. The region boasts 65,000 producers dedicated to this crop, who in the 2022/2023 season achieved an impressive production of 300 tons, translating into revenues of BRL4.6 billion ($928.61 million). Additionally, the tobacco industry provides direct employment to approximately 25,000 individuals, underscoring its predominant influence on the local economy.

    The incident at COP10 highlights a global dilemma in the redefinition of Tobacco Control: the pressing need to rethink strategies worldwide and incorporate innovations in tobacco control that generate a tangible impact on the reduction of the global rate of diseases attributed to tobacco use. The organizers, under the pretext of avoiding the influence of the tobacco industry, have chosen to silence any critical or divergent voice and requests for debate, thus evading democratic scrutiny.

    The question spontaneously arises: How is it possible to implement effective public health policies in a framework of lack of transparency, closed dialogue and total secrecy?

    The challenge lies in finding a balance that benefits public health without compromising local economies, especially those revolving around controversial crops like tobacco. The exclusion of representatives from Rio Grande do Sul at COP10 uncovers not only a lack of commitment to democratic principles and diplomacy but also underscores the urgency for the WHO to foster open dialogue and develop policy strategies that harmonize global health goals with the economic needs of communities.

    This entails the implementation of integrative strategies that encompass the realities of people. It involves investing in education, ensuring the right to information, promoting safer alternatives to cigarettes and establishing an open and constructive dialogue forum, where all stakeholders, from nicotine consumers to small tobacco farmers and politicians representing thousands of people, are assured that their voices and needs are considered.

    In response to this situation, federal deputies Heitor Schuch, Marcelo Moraes and Rafael Pezenti along with state legislators like Edivilson Brum, Ze Nunes, Marcos Vinicius and Silvana Covatti expressed their protest through a note of repudiation, officially and firmly positioning themselves against the undemocratic stance of the FCTC Secretariat, since the event is financed with public funds. The WHO did not provide a specific justification for why the Brazilian deputies were prevented from attending COP10.

    Claudio Teixeira is a journalist, director of C3PRESS Agency and editor of The Vaping Today. He lives in Brazil.
  • Contemplating the Fallout

    Contemplating the Fallout

    Photo: bennyrobo

    What will the U.K.’s ban on disposable vapes mean for the next-generation nicotine industry?

    By Paul Hardman

    Prime Minister Rishi Sunak recently announced that the U.K. government would ban disposable vapes as part of its plan to tackle the rise in youth vaping. The new measures come as the government responds to a recent consultation on smoking and vaping, which, it says, indicated “overwhelming support” for a ban on disposables. What does this decision mean for the next-generation nicotine industry? And what may come next?

    As well as banning disposable vapes, the U.K. government will implement new powers to restrict vape flavors, introduce plain packaging and change how vapes are displayed. As part of the measures, the government is introducing new fines for shops in England and Wales that sell vapes illegally to children, with Trading Standards officers able to hand out fines on the spot on top of the up to £2,500 ($3,155.58) fines that local authorities can already issue.

    The government may use powers already established under the Environmental Protection Act to enforce the ban, which is expected to come into force at the end of 2024 or early 2025.

    Tackling Youth Access

    Back in 2019, the U.K. government launched its Smoke-Free 2030 ambition, which seeks to reduce tobacco smoking prevalence to below 5 percent by the end of the decade. Alternative methods of accessing nicotine, including vapes, are critical to achieving this smoke-free vision. However, the government’s position on vaping has come under increased scrutiny, partly because of a recorded growth in youth uptake.

    According to an ASH survey, titled “Use of e-cigarettes (vapes) among young people in Britain,” in March/April 2023, the proportion of children experimenting with vaping had grown by 50 percent year-on-year, from one in 13 to one in nine. In 2023, 20.5 percent of children had tried vaping, up from 15.8 percent in 2022 and 13.9 percent in 2020. Popular flavors among respondents included fruit (60 percent) followed by sweet or soft drinks (25 percent).

    The government reports that disposable vapes have been “a driving force behind the alarming rise in youth vaping, with the proportion of 11[-year-old] to 17-year-old vapers using disposables increasing almost ninefold in the last two years.” Some may feel that this trend has been driven by their convenience—they can be purchased, used immediately and discarded. It could also be due to their affordable prices, bright colors and flavor appeal. However, this convenience is important for offering smokers a safer, accessible alternative to combustible cigarettes. Therefore, a balance must be struck.

    On the other hand, pod-based systems are generally less convenient as these often require charging before use. Typically, pod-based systems carry a higher price tag for the whole system than a disposable product, and investment into a certain type of system is therefore required. Once the device has been selected, the user is tied to a particular range of pods. A consumer opting for the more expensive tank-type e-cigarette will need to navigate changing coils and different e-liquid types and strengths, making these more complex than using a disposable vape.

    In our experience, disposable products also tend to contain the highest allowed concentration of nicotine, 20 mg per milliliter, in the form of nicotine salts, which have been shown to be absorbed more rapidly than nicotine freebase and may result in greater nicotine dependence than products with slower uptake.

    The report also references the environmental impact, mentioning that 5 million disposables are discarded each week, the equivalent to the lithium batteries of 5,000 electric vehicles. These are stark figures and put the environmental impact into context.

    The Impact of the Measures

    Though the measures are specifically designed to tackle youth vaping, there will naturally be an impact on the industry as a whole. We may see surging youth popularity for modern oral nicotine pouches, new product categories emerging or a trend toward heated tobacco. It is important that these products do not follow the same path as disposable vapes in terms of youth appeal so that their access can be retained for adult smokers wishing to quit combustible cigarettes. This means robust regulation, regulatory enforcement and responsible behavior from manufacturers and retailers.

    Manufacturers of disposable vapes will now be looking for ways to engineer their products so that they can remain on the market. The technology used in disposable vapes is not necessarily disposable; the batteries are capable of many charge cycles, and it would not be difficult to engineer replaceable tanks. It may be that disposables manufacturers switch to reusable systems, such as pod-type vapes, and keep the look and taste as similar as possible to current products. The “new powers to restrict vape flavors” may be important in ensuring these amended devices are not as appealing to children.

    The government will need to set out a legal definition of disposable vapes and clarify how the ban and restrictions will be implemented. For instance, at this stage, it is unknown whether there will be any additional requirements regarding the notification process and whether manufacturers must submit additional product information to remain compliant with the Tobacco and Related Products Regulations 2016 (TRPR).

    Unless more detail is provided in the legislation, loopholes could appear that manufacturers and retailers might seek to exploit. For example, it is illegal to sell vapes to under-18-year-olds in the U.K., but retailers could still give out disposables to children as free samples. Following recommendations by the Khan review, in April 2023, the government announced that it would be closing this loophole.

    There are concerns among U.K. ministers that some manufacturers may adapt their disposable vapes to circumvent the ban. According to The Guardian, ministers are “eliminating ruses such as attaching charging points to them [disposable vapes].” Interestingly, when asked about manufacturers adding USB charging points to unrefillable vapes to avoid the ban, Health Secretary Victoria Atkins commented: “That’s incredibly cynical [to ask], and it shows, if you like, the battle that the government is prepared to take on.”

    There are also concerns that on-the-spot fines will not be sufficiently high to prevent unscrupulous retailers from selling to under-18-year-olds. After all, it is currently illegal to sell any e-cigarette to youth, but the problem prevails. With £30 million announced to fund HM Revenue and Customs, Border Force and Trading Standards, it will be interesting to see if the amount is sufficient to tackle the issue of illegally imported and sold products.

    It will also be interesting to see if any further measures are introduced for products popular with young people, perhaps to target reusable vapes that are specifically designed to look like something else a child might have on their person, such as a highlighter pen or mascara.

    Nicotine Pouches as “Vaping Alternatives”

    The government mentions that “Vaping alternatives—such as nicotine pouches—will also be outlawed for children who are increasingly turning to these highly addictive substitutes.” While introducing an age restriction is a sensible move, we will have to wait to see what additional regulations will follow for nicotine pouches. For example, whether there will be a cap on nicotine strength and a sensible approach to flavors/graphics and advertising—the sorts of restrictions that ought to be in place for all consumer nicotine products may help reduce youth appeal.

    It is important that nicotine pouches do not fall into the same traps as disposable vapes did. These products can be considered one of the lowest risk consumer nicotine products available, and their access must be maintained to aid adult smokers working to quit or reduce smoking.

    Where Manufacturers Can Go from Here

    In a letter to the Prime Minister, the U.K. Vaping Industry Association expressed its “profound dismay and disappointment” with the decision to proceed with a disposable vape ban. According to the letter, “This decision jeopardizes the significant progress made in reducing smoking rates in the U.K. and poses a threat to the well-being of millions of adults who have successfully quit smoking with the help of vaping.”

    However, it’s possible that a disposable ban could leave a gap in the market for tobacco harm reduction products that are not youth-appealing but appeal to smokers and are sufficiently effective in their nicotine delivery and taste to substitute traditional combustible cigarettes. Of course, all new consumer products will need to comply with the TRPR as well as the new measures that ban disposables, standardize packaging and restrict flavors.

    The Medicinal Pathway

    As the consumer nicotine market faces greater restrictions, we may see a growing number of manufacturers working to get their vapes approved as medicinal products in the U.K. As part of the U.K. government’s vision for a smoke-free future, the Medicines and Healthcare products Regulatory Agency is actively looking to approve e-cigarettes as nicotine-replacement therapies. If licensed as a medicinal product, e-cigarettes do not need to comply with the TRPR limits, such as the 20 mg per milliliter limit on nicotine concentration. The medicinal product route also makes products exempt from the new measures simply because they are not consumer nicotine products. However, the various requirements around marketing and advertising of medicines would apply instead.

    By following the Marketing Authorization Application (MAA) approval pathway, manufacturers can bring flavored, higher concentration nicotine e-cigarettes to U.K. smokers but with a more controlled marketing infrastructure that limits youth access. For instance, products that receive a marketing order under a General Sales license are subject to the same sales restrictions as over-the-counter pharmaceutical products like paracetamol, preventing minors from buying them.

    The medicinal product route gives smokers wishing to quit the confidence that the product has been developed, manufactured and tested to strict medicinal standards. With the ability to use higher concentrations of nicotine, there is the potential to make a product more effective in terms of nicotine delivery compared to consumer products.

    Early in an MAA application, manufacturers can partner with a scientific and regulatory compliance partner to support them through the process, from product design to regulatory approval, to improve their chances of success.

    Summary

    Backed by “overwhelming support,” the new ban on disposables is not without reason but not an approach Broughton advocates. As observed with other products and also reflected by the vaping industry in the U.S., prohibition is rarely effective and could set a dangerous precedent for the entire category. We agree with the sentiment of the new measures with regard to youth access but believe more detail is needed to prevent exploitation and to reassure manufacturers on how they can remain compliant with the TRPR and other relevant standards. Meanwhile, a blanket ban on disposables could spur innovation and the development of new medicinal products but only if manufacturers can access the right support.

    Broughton is modifying its compliance framework as new regulations develop to ensure that its nicotine consulting service complies with the latest guidance. To find out how this framework can support you, visit the Broughton website, www.broughton-group.com.

    Paul Hardman is a managing consultant at Broughton, an independent life sciences contract research organization offering analytical testing services integrated with scientific consultancy and global regulatory support.
  • Defending Liberty

    Defending Liberty

    Photo: Wieslaw

    The U.K.’s proposed generational tobacco products sales ban was variously described as nuts, insane, ludicrous, mad, illiberal, impractical and petty minded by speakers at a House of Commons reception on Feb. 7.

    The reception, which was lively, going on boisterous at times, was hosted by the Conservative MP Giles Watling on behalf of the Freedom Organisation for the Right to Enjoy Tobacco (Forest), whose director, Simon Clark, told the gathering of about 50 invited people the purpose of the event was to bring together a broad coalition of groups to show the breadth of opposition to the ban: the Institute of Economic Affairs, the Taxpayers’ Alliance, the Adam Smith Institute, the Consumer Choice Centre, Students for Liberty and the LSE Hayek Society.

    Watling, a non-smoker but at one time a 60-Marlboro-a-day man, described the proposed ban as insane and said it was not good for the Conservative Party. There were better things that it should be doing than this piece of legislation.

    The idea that there were more important things for the government to be doing was taken up forcefully by Baroness (Claire) Fox of Buckley, who sits in the second chamber, the House of Lords, as a non-affiliated life peer. After outlining some of the huge and urgent domestic and international issues facing the government, she said she found it unbelievable that the prime minister had dedicated precious legislative time and energy on the most ludicrous anti-smoking law.

    Clark, who organised the event, said that, in his view, smoking was a bellwether for liberty and that the war on smoking should be of concern to anybody who cared about individual freedoms. Freedom was all about supporting things that you yourself might not like, he added, before describing how a Forest banner showing a cartoon depiction of the prime minister, Rishi Sunak, pushing a pram under the heading, “Say No to Nanny,” had been confiscated by parliamentary security on the grounds that it might be offensive to some people.

    The generational tobacco sales ban as it is currently proposed would make it illegal to sell tobacco products to anyone born on or after Jan. 1, 2009, which, Clark said, would lead to the ludicrous situation where, for instance, at some point these products could be sold legally to a person of 30 but not to a person of 29.

    This would seem to put retailers in an invidious position and, given the U.K.’s dislike of identity cards, might perhaps sink the proposed ban if it were focused on any other product. But there was a sense that the ban would be difficult to stop. Fox made the point that the government might find it difficult to extricate itself from the proposed ban, even if it wanted to, because it was the one thing around which all the political parties had united.—George Gay 

  • Setting It Fre

    Setting It Fre

    Image: Turning Point Brands

    Turning Point Brands prepares to roll out its FRE nicotine pouch nationally in the U.S. this year.

    By Timothy S. Donahue

    It’s looking like a FRE market in 2024. Turning Point Brands (TPB) is expected to release its 2023 financial results in late February. While the Louisville, Kentucky, USA-based nicotine product conglomerate remains one of the best stock bets in the tobacco sector, its 2024 goals are taking a more “modern” approach. TPB is getting ready to go full force with its premium modern oral nicotine product and is expecting that this year more consumers will trade in their combustible sticks for its FRE white pouch nicotine product.

    Graham Purdy, president and CEO of TPB, said during an earnings call that the company is excited about FRE’s U.S. national rollout in 2024. The product will compete in a billion-dollar-plus market that continues to grow rapidly. The company spent much of 2023 shoring up FRE’s supply chain to ensure consistent product quality, according to leadership.

    “[We have been] analyzing consumer feedback and testing online [and] select in-store marketing and merchandising programs to ensure a successful national rollout. Given our progress to date, we are now focusing on prudently ramping up our sales and distribution efforts to achieve steady growth over time,” said Purdy. “Our early learnings and performance in test markets have given us more confidence to now leverage our sales and distribution expertise to profitably expand FRE’s profile in-store count similar to what we achieved with Stoker’s Moist Snuff over time.”

    While confident about FRE’s prospects, Purdy expects market share gains to be “small and incremental.” “I think Q4 is sort of the time of the year where we [start] expanding out the foundation. I think our expectation for the product is to look similar to Stoker’s over time as we compete against the large players in the category,” Purdy explained. “It’s really a store output focus on the product, similar to some of the past practices we’ve had with other categories, specifically Stoker’s …. We focus on the stores that have the highest volume.”

    TPB reported a 5.6 percent drop in sales for the third quarter, ending Sept. 30, as it faces stiff challenges in a tight market. The company, known for its Zig-Zag and Stoker’s brands, reported a decline in consolidated net sales to $101.7 million, which is believed to be due to the current economic challenges faced by the consumer goods sector.

    Zig-Zag, a stalwart in TPB’s portfolio, suffered a 10.2 percent sales decrease compared to the same quarter last year. However, sales in the Stoker’s segment, TPB’s smokeless tobacco division, which includes FRE, rose by 10.1 percent. This illustrates modern nicotine’s growing popularity among consumers seeking traditional tobacco alternatives.

    It isn’t surprising that TPB is embracing FRE’s potential. The global modern oral market is booming. In a recent report, Polaris Market Research valued the worldwide nicotine pouches market at an estimated $1.6 billion in 2022 and projected the segment’s revenue to reach more than $26.8 billion by 2032.

    Summer Frein, chief revenue officer at TPB, said FRE has been well received in the marketplace and that consumer engagement has been encouraging. “We continue to focus on maximizing the value of our brands, executing against the plan we’ve established and growing our business with both our retail and end consumers,” she said. “We continue to focus on maximizing [the] value of our world-class brands and extensive distribution capabilities.”

    Asked during the conference call whether the company would go after stores with higher volumes and potentially higher price points, Frein said the company considers FRE a premium brand that can hold its own against bigger brands.

    “We have a strong belief in our point of difference … which is higher nicotine strength options available for our consumers, which we continue to see resonate both in-store and there’s been a strong response online, and [we] plan to profitably compete in the segment against those big brands,” she said.

    Purdy added that despite this year’s challenges, which included navigating wholesale inventory reductions at Zig-Zag Canada, and continuing with some additional difficult comparisons, he feels good about 2024. “Particularly our progress in the [alternative] channel and FRE,” he said. “We remain focused on demonstrating further progress for the balance of the year and into 2024.”

    TPB is also going to continue expanding into the alternatives markets, such as cannabis products. Purdy said that as additional states greenlight medical and recreational cannabis, his company will focus on providing a better shopping experience for consumers. In addition to more legal dispensaries and manufacturing and processing facilities, other retail outlets like head shops are drafting off this trend, he explained. “Our alternative B2B business saw Zig-Zag sales accelerate, growing over 40 percent during the quarter,” he said. “We also continue to be proactive in optimizing our capital structure.”

    Frein said the company’s future isn’t based exclusively on next-generation nicotine products. Online sales are also growing. While it may be making progress on its multiyear roadmap to establish FRE and continue Zig-Zag as lifestyle brands, it’s particularly focused on the cannabis market with Zig-Zag. After all, Zig-Zag continues to increase its brand awareness, and TPB’s leadership wants to build on Zig-Zag being well-known in the alternative market segment.

    The company is also focusing firmly on FRE being a premium product and continuing to boost its growing online sales segment. Frein said the nicotine market can be challenging and often takes a company in multiple directions simultaneously.

    “In our B2B alternative segment, we had a strong quarter with increased sales of Zig-Zag papers and cones. We also saw a double-digit rise in both the number of customers and orders on our alternative platform, with an increase in average order size. We made significant progress across the business this past quarter as we saw growth in every subcategory with the alt channel, which includes head shops, smoke shops, dispensaries, including … distributors, cultivators and manufacturers and processors,” Frein emphasized. “Additionally, we are seeing increased engagement across our digital platforms. The total online traffic sessions on our dedicated B2C site are up 33 percent [compared] to a year ago.”

    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.
  • Inscrutable Islands

    Inscrutable Islands

    Photos: Taco Tuinstra

    Home to an infinite number of tobacco varieties, Indonesia is among the world’s most diverse leaf origins.

    By Taco Tuinstra

    Forget Zimbabwe. Forget Brazil. If you want to understand Indonesian leaf tobacco, you may gain more insights by studying at the Hogwarts School of Witchcraft and Wizardry, the fictional magical boarding school in J.K. Rowling’s Harry Potter series, where nothing is what it seems. At least, that was the advice one aspiring leaf trader received upon arrival in the archipelago. His mentor was joking, of course, but the analogy isn’t entirely frivolous: The baffling Indonesian market is not the easiest place to start your career in leaf tobacco. Unraveling its mysteries takes time and dedication.

    In 2022, Indonesia’s growers harvested 225.58 million kg of leaf, according to the Ministry of Agriculture, but it’s not the volume that is likely to confound the trainee. Rather, it’s the seemingly endless variety of tobaccos. Whereas the novice in Zimbabwe or Brazil will be learning about one or two internationally recognized tobacco types, his counterpart in Indonesia will have to memorize a bewildering list of local names and regional variations, many of them unique to the island nation.

    Indonesia is home to a seemingly unlimited number of tobaccos. AOI’s team alone procures 17 different tobacco varieties across Java, Madura and Lombok.

    “You may have one seed variety that’s cured, grown and handled under very similar practices—but if it’s from a different area, it will have a different name,” explains Michael Green, country manager at Alliance One International (AOI), which procures 17 different tobacco varieties across Java, Madura and Lombok. Likewise, a seed planted on one side of a mountain will yield a very different tobacco than its identical counterpart sown on the other side.

    That may have something to do with Indonesia’s size and topographical variety. Sprawling across three time zones and at least 17,000 islands, the country boasts majestic highlands, lush rainforests and barren volcanic landscapes, among other features. Projected onto a map of the United States, Indonesia’s extremities would extend 1,000 km from the mainland into the Pacific Ocean and the Atlantic Ocean, respectively.

    Yet leaf tobacco production is concentrated in a relatively small region of this vast nation: Flue-cured Virginia on the islands of Lombok and Bali, burley in the Lumajang regency of East Java and dark fire-cured tobaccos in Central Java’s Klaten and Boyalali regencies. In addition, there are countless sun-cured varieties, which are typically named after the region where they are grown. Prominent sun-cured tobaccos include Jatim and Kasturi. Many of these are used to manufacture Indonesian clove cigarettes (kretek), although Kasturi is also exported to the European Union and the United States, where it is used in chewing tobaccos.

    Indonesia projected on map of the United States

    Among foreign tobacco buyers, Indonesia has historically been known for the dark air-cured tobaccos cultivated in East Java. With a volume of 8 million kg in a good year, the largest of these is Besuki Na Oogst (NO), which means “late harvest” in Dutch, the language of Indonesia’s former colonial rulers. Besuki NO is widely employed in machine-made cigars as well as in the bobbins used in the manufacturing of such cigars.

    In addition, there is Besuki Tembakau Bawah Naungan (TBN), or “tobacco under sheet,” in Bahasa Indonesia, the country’s lingua franca. This plant was developed in the 1970s and 1980s and is grown under shade for cigar wrappers. The reduced exposure to direct sunlight results in thinner and more elastic leaves, which not only facilitates handling but also contributes to a smoother smoking experience. Shade-grown tobaccos are typically more uniform in appearance than sun-grown varieties, with fewer blemishes and imperfections—and thus highly valued by premium cigar manufacturers. A crossbreed of the Besuki and Connecticut styles, TBN is among the world’s most expensive wrappers on the market today.

    Indonesian dark air-cured tobaccos also include Vorstenlanden and Sumatra. Interestingly, the famous Sumatra cigar wrappers that were originally derived from seeds native to the eponymous Indonesian island are now cultivated primarily in Central America.

    Indonesia’s largest tobacco product by far, however, is Rajangan cut rag, which accounts for up to 70 percent of the country’s total leaf production volume. Rajangan is widely deployed in kretek production, with individual varieties named after the region where they are produced. Unlike the cut rag produced elsewhere, Rajangan tobaccos are cut while they are still green and then dried in direct sunlight on mats. Ranging in color from lemon to brown, this product may remind some Western visitors of the straw used to decorate Easter baskets.

    Shadegrown tobaccos are typically more uniform tin appearance than sun-grown varieties, with fewer blemishes and imperfections–and thus highly valued by cigar manufacturers.

    Multiple Players

    Contrary to the situation in many other leaf origins, where growers cultivate tobacco primarily for exports, at least 70 percent of the tobacco planted in Indonesia is smoked locally. With an annual consumption of nearly 300 billion sticks, according to TMA, Indonesia is not only one of the world’s largest cigarette markets, but it is also a unique place in terms of taste preferences, with kreteks outselling white cigarettes by a factor of 10. Despite the efforts of some multinationals to steer Indonesian smokers toward “international” cigarettes, the transition from dark tobaccos to blond tobaccos that occurred in southern Europe and elsewhere never took place in the archipelago.

    Numerous leaf merchants, serving both domestic and foreign customers, operate throughout the archipelago. Aside from AOI, whose footprint stretches from Central Java to Lombok and includes a processing factory in Mojokerto, there are well-known players such as Universal (known as Universal Tempu Rejo locally), Premium Tobacco and Hail & Cotton, which goes by the name Mayangsari in Indonesia. In addition, the country has multiple home-grown players, including Sadhana and Mangli Djaya Raya (MDR).

    Sadhana was established by former Sampoerna executives after the 2004 sale of their company to Philip Morris International. The leaf dealer exclusively supplies Sampoerna, which has evolved into the cigarette market leader since becoming part of the multinational. MDR is a privately owned Indonesian operator, established in 1960 and acquired in 2007 by Njoto Permadi. Today, the business is run by his son, Christian A. Njoto Njoo. MDR is the only company with a redrying facility in Jember, the heart of Indonesia’s dark air-cured tobacco business in East Java. Since 2009, MDR has also had a dedicated cigar business, manufacturing products for both the domestic market and the international market.

    Steeped in Tradition

    Tobacco cultivation is a massive, labor-intensive business in Indonesia, involving as many as half a million growers. Averaging between 0.25 ha and 0.5 ha, plots tend to be small and scattered. Farmers either grow under contract with one of the leaf merchants or sell their produce on the open market through middlemen. Contract growing provides buyers with a high degree of oversight of the production process. By providing their farmers with the appropriate crop protection agents (CPAs), personal protective equipment, inputs and knowledge of good agricultural practices, the leaf merchants ensure that tobacco meets both their own standards and those of their customers, which sometimes exceed those set by the Indonesian government. For example, some CPAs still permitted in Indonesia are no longer accepted by many international cigarette manufacturers.

    Jasper Kuitems

    Farmers who grow tobacco under contract benefit not only from greater yields, better quality and consistent prices but also from the certainty that they will sell their crop. Contracting also helps growers cope with adverse events such as crop failures and natural disasters. For example, after the Mount Raung volcano erupted in 2015 and covered much of the region’s tobacco in ash, Mayangsari had to take on the additional expense of washing tobacco—but it kept buying. Farmers selling in the free market, by contrast, were stuck with their ash-covered crops because many middlemen decided to take a break that year. “We support our contracted growers in both good times and bad times,” says Jasper Kuitems, leaf manager for Mayangsari.

    Despite the advantages of working with growers directly, most buyers also purchase leaf on the open market. Not only is contract growing an expensive and big logistical undertaking, but it also represents competition for the middlemen, who represent a powerful constituency in Indonesia. Buying through both channels allows merchants to supplement their contracted volumes and helps maintain social harmony in their communities.

    Tobacco is a notoriously demanding crop, requiring more human interventions throughout the growing cycle than, say, corn or rice. Nonetheless, it remains a solid cash crop for both contract growers and free-market farmers in Indonesia, as evidenced by the fact that landlords charge tobacco growers higher rents than producers of other crops. “If done correctly, tobacco offers an attractive return on investment,” says Green. Of course, everything depends on supply and demand. When prices are poor, farmers may look at alternative crops; in good times, they may plant extra tobacco.

    Demand has been strong in recent years, particularly for Indonesia’s dark air-cured tobaccos. According to Martijn Schaap, acting country manager for Universal Tempu Rejo, this is partly a result of two consecutive poor Besuki NO harvests and partly due to cigar makers’ reduced inventories in the wake of the Covid-19 pandemic. The growing popularity of cigar smoking in China has, too, boosted demand for Indonesian dark air-cured leaf.

    No machine can mimic the fine motor skills required to sort, open and stack the delicate cigar tobaccos.

    Post-Harvest

    The Indonesian tobacco industry’s contribution to employment is not limited to the field. A significant share of kretek cigarettes continues to be constructed by hand, and the government favors manual production with lower tax rates. Its policies have helped reverse a long-term trend toward mechanized manufacturing, and handmade products now account for nearly one-third of the market, according to Sampoerna, which in November 2022 announced a major investment in new factories for hand-rolled cigarettes.

    The leaf merchants, too, employ large numbers of workers post-harvest, particularly in the dark air-cured segment. After the leaf is delivered to the buyer, it is separated based on quality, moisture, length and color, among other parameters. Unlike in Latin America, where the bundles go directly into the fermentation rack, Indonesian companies open the leaves one by one—a painstaking process involving hundreds of women, who are said to be more patient and dexterous than their male counterparts.

    Martijn Schaap (right)

    After opening, the leaves are stacked into fermentation piles that can reach up to several meters in height and weigh up to 12 tons. During fermentation, which can last several months, enzymes and microorganisms break down organic compounds within the tobacco leaves, triggering various biochemical changes. The combination of temperature, humidity and pressure causes the leaves to obtain the desired color, flavor and aroma. To achieve uniform fermentation, the piles must be regularly “turned”—restacked from the ground up to ensure an even distribution of moisture and temperature, along with proper aeration. Timely restacking is crucial because if the temperature in a bale rises too high, it will turn the tobacco black and cause it to fall apart.

    The labor-intensive nature of their operations causes tobacco processors’ payrolls to swell significantly during the season. While Indonesian wages are low by international standards, they have been rising rapidly. In 2023, the minimum wage in the Jember area jumped by 8.5 percent compared with an overall inflation rate of 3.08 percent nationwide. The industry expects another hefty minimum wage increase, of approximately 10 percent, in 2024.

    The rising cost of labor presents a challenge for the cigar leaf companies because few of their activities lend themselves to mechanization. Tobacco farm plots tend to be too small and too dispersed to effectively deploy farm equipment, and no machine can mimic the fine motor skills required to sort, open and stack the delicate tobacco leaves yet. Universal did recently purchase a new seeding machine, however. Due to more accurate seed placement and other improvements, the new device offers significantly higher germination rates than the company’s existing seeder.

    The rise in labor cost presents a challenge for the cigar leaf tobacco merchants because few of their operations lend themselves to mechanization.

    Taking Responsibility

    Like their counterparts elsewhere, leaf dealers in Indonesia are investing heavily in environmental, social and governance (ESG) projects. AOI, for example, has been fitting its contracted farmers’ curing barns with new gasifying systems that burn biomass rather than wood. Not only does this reduce pressure on Indonesia’s forest cover, but it is also more efficient because biomass has a higher calorific value than wood. On a cost-per-kilo basis, it’s about 30 percent cheaper than using wood, according to Green.

    This year, AOI and its processing joint venture partner ITS have planted 5,000 trees in cooperation with a local organization, Trees4Trees. The project aims to plant 60,000 trees by 2030. In addition, AOI installed four deep water wells and tanks, assisting almost 300 families on Madura Island. The company intends to expand the project into other AOI regions where water scarcity is common through the dryer months.

    The company has also engaged professional storytellers to educate the communities where it sources tobacco about the importance of health and safety, fair treatment and avoiding child labor. To date, the program has reached almost 20,000 participants. AOI aims to maintain an audience of more than 5,000 participants annually. In Jember, meanwhile, the tobacco sector is building playgrounds and supporting schools to keep children out of the fields.

    The industry has also invested in waste management, which represents a considerable problem in Indonesia, where 40 percent of the country’s 142 million urban residents still lack basic waste collection services. In the Jember region, Universal has helped set up facilities that purchase waste from local communities, reducing litter and offering villagers an additional source of income. The money generated by the waste depots helps pay for the playgrounds, among other projects. Universal also sponsors initiatives that help people in the communities where it operates set up small businesses. The goal, says Schaap, is to make the projects self-sustainable so that they will endure and grow to serve the community as a whole.

    Mayangsari recently made a remarkable contribution to tackling the waste problem. A regional superstition that burning disposable diapers brings bad luck to the baby prompted many mothers in the Jember area to dispose of used nappies in rivers, where they would leach chemicals, spread bacteria and cause blockages in waterways, including irrigation canals. By supplying more than 2,000 young mothers in its growing communities with reusable diapers, Mayangsari not only helped decrease diaper waste by more than 300 tons but also reduced the occurrence of diaper rashes, urinary tract infections and, importantly, household expenses. According to Kuitems, the money saved by not having to buy disposable diapers for six months is equivalent to 150 kg of rice, enough to feed two adults for an entire year.

    A Tilted Playing Field

    While the leaf dealers’ investments in ESG make them good corporate citizens, the business case is not always straightforward. According to the merchants featured in this article, it can be challenging to communicate and recover the added value provided by such projects. Whereas programs in the coffee and cacao business allow suppliers to charge a premium for responsibly sourced products through certification labels, there is no equivalent in the tobacco business. “A smoker cannot tell the difference between a responsibly sourced cigar and another product from its packaging,” says Kuitems.

    Another challenge is that not everyone plays by the rules. Leaf dealers that pay minimum wages, forgo harmful crop protection agents and provide their growers with personal protective equipment must compete with players who don’t (and thus enjoy lower operating costs).

    This means that responsible companies must work twice as hard as their less conscientious counterparts. “It forces us to operate as cleverly and efficiently as possible,” says Kuitems. While acknowledging the challenges, the merchants who contributed to this piece said they remain firmly committed to their standards—not only because their blue-chip customers insist on it but also because it is the right thing to do. The extra work, they noted, comes with the territory. It’s just one of the ways in which the complex Indonesian leaf tobacco market will keep the traders on their toes.

    Taco Tuinstra is Tobacco Reporter’s editorial director.Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors.On his watch, Tobacco Reporter has won several awards for editorial excellence.Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.
  • The Potential of Pouches

    The Potential of Pouches

    Photo: Stefanie Rossel

    Some markets have been more receptive to modern oral products than others.

    By Stefanie Rossel

    The modern oral nicotine category continues growing but struggles to reach a wider global audience. Modern oral nicotine products, which are white, pre-portioned little bags comprising a nicotine-containing carrier material, are considered the advanced, cleaner version of Swedish snus, a pasteurized oral tobacco that is available as loose products or pouches and is credited with helping Sweden achieve its record-low smoking prevalence by offering smokers a less harmful way to consume nicotine.

    According to Euromonitor International, global sales of nicotine pouches grew from 17.09 billion units in 2022 to an estimated 20.77 billion units in 2023. The overwhelming majority of sales, however, take place in the U.S., where an estimated 14.97 billion units were sold in 2023 compared to 12.61 billion units in 2022. Sweden ranks second, with 1.8 billion units sold in 2022 and an estimated 2.2 billion units sold in 2023. It is followed by Denmark with a forecast 745.3 million units in 2023 (versus 589.2 million units in 2022), Pakistan and Austria with estimated sales of 695 million units and 477 million units, respectively.

    As far as value is concerned, Euromonitor estimates the category to be worth $10.29 billion globally, up from $8.47 billion in 2022. By 2027, the business intelligence firm expects the segment’s value to reach $15.99 billion. Despite their relentless expansion, modern oral nicotine products remain a niche within a niche—they are a small part of a larger oral tobacco market, which accounted for only around 2 percent of the global nicotine industry in 2022.

    Raphael Moreau

    In the U.S., retail sales of nicotine pouches generated $8.58 billion in 2023 compared to $7.23 billion in the previous year. Raphael Moreau, head analyst at Euromonitor, expects the U.S. modern oral nicotine market to reach $11.03 billion by 2027.

    “The U.S. has benefited from a solid legal framework, with the Food and Drug Administration controlling the market chain, requiring authorization to market, nicotine health warnings and premarket assessment,” Moreau says. “Generally, the U.S. has a strong tradition of oral, i.e., chewing, tobacco. This definitely helped. Nicotine pouches are convenient and discreet to use, and they are taking share from chewing tobacco and Swedish-style snus, which has boosted U.S. sales.”

    As consumers become more familiar with the product, Moreau anticipates the market to continue growing rapidly. In 2023, just under 3 percent of the U.S. adult population consumed modern oral nicotine products. “Over the next five years, we will see an increase because of more awareness of the brands,” he says. “There is a wide flavor selection, which appeals to consumers who can’t use flavored vape products anymore as they are banned. The return to office work after the Covid pandemic will also contribute to the category’s growth: When working from home, people were more likely to vape. At the office, pouches are more convenient. Besides, the products are used as a cessation aid away from cigarettes and other combustibles.”

    Moreau suspects that the majority of modern oral nicotine is used in combination with other tobacco products. “This also has caveats because potentially, consumers may just try them and not become regular users, so prediction is difficult,” he says.

    With a 77 percent category retail value share in the third quarter of 2023, Zyn remains the U.S. market leader.
    (Photo: Swedish Match)

    Zyn Pulls Further Ahead

    With a 77 percent category retail value share in the third quarter of 2023, Zyn is the U.S. market leader by a large margin. Shipment volume of Zyn nicotine pouches amounted to 104.5 million cans during that period, a 65.7 percent increase compared to the third quarter of 2022, according to Philip Morris International. PMI became the owner of the Zyn brand through its acquisition of Swedish Match for $16 billion in late 2022. The move has given PMI a comfortable lead in the U.S. nicotine pouch market, where it previously had no presence to speak of, and will help the company to achieve its goal of becoming substantially smoke-free by 2023.

    At PMI’s Investor Day Conference in September 2023, Lars Dahlgren, president of smoke-free oral products and CEO of Swedish Match, forecast “stellar growth” for the product also because Zyn is cheaper than cigarettes, retailing at $5 per can compared to a price of $8 for a pack of cigarettes. According to news platform Seeking Alpha, the brand is popular among Generation Z, which has otherwise been a hard market for traditional tobacco companies to crack.

    In addition to Zyn, some other brands have made gains recently, according to Moreau. With a retail volume of 15.4 million units and a value share of 11 percent in 2022, Altria’s On! Brand ranks second behind the market leader, followed by Swisher International Group’s Rogue nicotine pouches, with 7.9 million units sold during that period.

    The “attractive category dynamics” in the highly competitive U.S. nicotine pouch market also holds potential for new players. In June 2023, ITG Brands acquired a range of nicotine pouches from Canada-based TJP Labs in order to facilitate its entry into the U.S. modern oral market. Following further consumer testing, ITG Brands plans to launch 14 pouch product variants in 2024.

    “The category still is very young, so there is no strong brand loyalty, and consumers are likely to try new brands,” comments Moreau. “This makes the market attractive to new entrants. And there’s quite a lot of room for them, as the category is growing very fast.”

    Regulation Required

    Except for the Nordic countries, where consumers have been familiar with snus for two centuries, the modern oral category is still underdeveloped in the rest of the world.

    Japan Tobacco International, present in the segment with its brand Nordic Spirit, sees vast untapped potential. Nordic Spirit was developed in Sweden and has rapidly grown since its launch in 2018. The product is available in the U.K., Ireland, the Philippines and Switzerland. “While the tobacco-free nicotine pouches category is still in its infancy, we already see that many adult tobacco and nicotine consumers globally will be interested in trying the product, helping the new category to grow significantly over the coming years,” says a JTI spokesperson. “For example, smoke-free nicotine pouches have become increasingly popular in the U.K. Responding to this growing trend, the Nordic Spirit brand has witnessed growth and increased its market share to around 45 percent.”

    According to Euromonitor, U.K. consumers bought 92.1 million nicotine pouches in 2022. In 2023, the category there grew 54.6 percent.

    Pakistan, however, was the country with the largest year-on-year growth rate, with sales in 2023 expected to be 70.7 percent, up from the 127.8 million units sold in 2022. In Pakistan, an estimated 10 million people use smokeless tobacco, which corresponds to more than 40 percent of the country’s total tobacco market. In December 2022, BAT announced that its modern oral nicotine brand Velo, which it had launched in Pakistan in early 2020, had achieved a monthly volume of more than 40 million pouches in the country, making it the company’s third-largest market for nicotine pouches.

    Most growth in the category will come from Asia-Pacific and Eastern Europe, according to Moreau. In Poland, for instance, the category increased by 69.5 percent in 2023. “The Czech Republic is also interesting because it had quite strong demand in 2022 and 2023,” Moreau says. “This is likely to stay [this way], particularly since nicotine pouches are regulated in the country now.”

    In May 2023, Czechia’s Ministry of Health issued a decree, modeled on tobacco and e-cigarette legislation, which regulates the composition, appearance, quality and characteristics of nicotine sachets. It also defines the legal age for sale and requires manufacturers and importers of nicotine sachets to register their products with the Ministry of Health. The legislation entered into force on July 1, 2023.

    Other countries, by contrast, have been less accommodating, with the Netherlands and Belgium banning modern oral products in April 2023 and October 2023, respectively. The European Commission, too, is reportedly mulling a ban on nicotine pouches for the common market. The products are also prohibited in Australia and New Zealand.

    “History has repeatedly shown that bans of legal products often do not lead to their intended goals and instead encourage criminal gangs to increase supply of illegal products to make up for the shortfalls,” warns JTI’s spokesperson. “Instead of an outright ban, we should aim for an evidence-based regulatory framework that acknowledges the potential of nicotine pouches to reduce the risks associated with smoking. At the same time, we must ensure that oral nicotine products aren’t marketed or sold to minors under any circumstances.”

    In Germany, modern oral tobacco continues to operate in a regulatory gray area. Nicotine pouches are classified as food in the country, which makes them subject to European food law. Because the EU has not approved nicotine as a food or food ingredient, this means that nicotine pouches cannot be legally traded in Germany.

    Despite the German Federal Institute for Risk Assessment’s October 2022 acknowledgement that tobacco-free nicotine pouches could reduce the health risks compared to smoking, the products’ legal status remains unchanged. “It will only change after a decision at EU level,” says Moreau. “Germany is a typical case where an uncertain or hostile landscape and a lack of familiarity with the products are two negative factors that are feeding each other. Whenever the legal status is unclear, not exactly defined or restrictive, retailers will basically avoid selling them. Therefore, consumers will not be aware of the products, and they will not trust them. In Germany, nicotine pouches are still available online, but the products are obviously now not as widespread as [they would have been] if they were sold in stores.”

    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.