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  • Fit for the Future

    Fit for the Future

    Chris Cooksey (right), president of Hail and Cotton’s North America operations, suspects company founders E. A. Hail and M. R. Cotton would be proud f the firm’s impressive growth and continued commitment to excellence.
    (Photos courtesy of Hail and Cotton)

    Thanks to its agility and relentless focus on personal service, Hail & Cotton remains in excellent shape even after a century in business.

    By Stefanie Rossel

    In our fast-moving age, few companies can claim to have reached a century. Tobacco merchant Hail & Cotton International Group (HC) is a prominent member of this exclusive club. A lot has changed since the days when E. A. Hail and M. R. Cotton started the company in Louisville, Kentucky, USA.

    “Their focus was on [the] dark fired and dark air-cured tobaccos that were grown in Western Kentucky and Northern Middle Tennessee,” relates Chris Cooksey, president of the company’s North America operations. “They were buying their tobaccos directly from growers and grower associations and then processing and selling it on to European manufacturers for cigarette and cigar consumption. As the European market grew, so did Hail & Cotton, going on to become the largest leaf dealer of U.S. dark fired tobacco. We think Mr. Hail and Mr. Cotton would be very proud that Hail & Cotton not only remains in existence but [also] with the company’s impressive growth and continued tradition of excellence.”

    Today, HC has fully integrated operations and sourcing capabilities from 20 different countries—including all the world’s major tobacco producing countries—on five continents. “This means not only has our reach greatly expanded but so has our product offering,” says Andy Spies, president of international operations.

    Today, HC’s product portfolio is highly diverse: Various dark air-cured types and dark fire-cured tobaccos are still on offer, but they have been complemented by flue-cured, burley and oriental tobaccos for applications in cigarettes, pipes, cigars, chewing tobacco, moist snuff, snus, roll-your-own and water pipes.

    “We pride ourselves on the wide variety of quality tobaccos we offer, but we also take great pleasure in offering other value-added services such as fermentation, sweating, blending, cut rag and long-term third-party dry storage services,” says Spies. “Besides our growth, but not unique to HC or the tobacco industry, the modern business environment has transformed dramatically over the last 100 years. No longer is a business trip to another continent a long journey over the ocean by ship or are sales conducted merely on a handshake. The whole world is a different place in terms of communications, transport, governance, finance, regulation, etc. We have all therefore been forced to change, and HC will continue to adapt and transform ourselves so we remain up to date and relevant in this changing, dynamic yet still great industry.” 

    Andy Spies

    Unique Management Structure

    Since 1999, Hail & Cotton has been part of U.S.-based Luckett Holdings (formerly Luckett Tobaccos). Following the takeover, Hail & Cotton consolidated its operations by relocating its threshing facility and corporate headquarters to Springfield, Tennessee. Since then, the company has constantly modernized its processing facilities and built or acquired industrial properties to accommodate customer requirements for receiving, purchasing, processing and packed storage of tobaccos of U.S. and other origins.

    More than a decade ago, a merger greatly expanded Hail & Cotton’s reach. In 2011, the company acquired CdF International Group—which in turn had emerged from the combination of Spanish leaf merchant Compania General de Tabacos de Filipinas with Netherlands-based Lippoel Leaf in 2007. Today, the company also has joint equity partnerships with CTA in Brazil and BHC in Zimbabwe. Together, they service a customer base of approximately 350 all over the world.

    For many years, HC has been contracting directly with most of its farmers, depending on origin. The company has nearly 30,000 growers in its operations around the world. “Tobacco growers in all parts of the world face different challenges each year,” says Eric van der Linden, president of dark air-cured operations. “In countries where we contract tobacco, our agronomy teams work with our growers to help improve farming practices that not only improve yields but also aim to protect the resources that are important to sustaining their farms for future generations. We also participate in various industry organizations and undertake several country-specific projects and initiatives aimed at preserving the environment and enhancing our farmers’ sustainability and livelihoods.”

    The company stands out not only because of its long tradition and diverse product range but also because of the way it is managed: In contrast to other businesses, which are often led by one person, HC has three presidents with each of them heading one division. “Indeed, this is unique, but to us, it makes a lot of sense,” says Cooksey. “Our three divisions are very different not only in geography and product offering but also in dynamics. This model enables us to exercise our unique traits and expertise in different types of tobacco and countries that benefit our customers when they are looking at new projects for different products. When you work with a group that has no politics and all [are] pulling in the same direction with the same goals and passion that you [have], it is an incredible and very rewarding experience. We can count on each other without any reservation. This same tone runs throughout the company and generates an extremely powerful teamworking and united culture. The synergies we provide for each division continue to strengthen our company, enhance our products and increase our growth. It has also allowed us to build a great network and develop good friendships with our colleagues from different parts of the world. It is what sets our company apart from others.”

    Trialing Times

    Eric van der Linden

    Each of the three presidents has more than 30 years of industry experience—a long time during which the leaf sector has seen significant changes, among them the phasing out of tobacco subsidies, increasing restrictions for tobacco products, the financial crisis of 2008 and a continuous decrease in global cigarette consumption.

    “You can also add regulation, legislation, anti-tobacco lobbies, increased competition, competing products and increased stakeholder expectations on environmental social governance (ESG),” comments Spies. “Declining consumption and consolidations are, however, probably the biggest challenges. Declining consumption is set to continue, and it makes it difficult not only for leaf dealers to plan but for our customers as well. When you factor in a decline in manufacturers of tobacco products due to consolidations and mergers, it adds another layer of complexity. Despite these challenges, HC has continued to grow each year over the past 10 years and is determined to continue this trajectory. Challenges and change and how a company responds to them is what builds a stronger company, and HC is stronger today than it has ever been.”

    The Covid-19 pandemic has brought with it new challenges for companies worldwide, such as a container shortage, rising shipping costs and extended delivery times. HC has not been exempt from the issues brought on by the virus, according to van der Linden. “From labor shortages to shipping delays and everything in between, it has been a challenge,” he says. “We took as many steps as possible, such as positioning tobacco in strategic locations closer to ports to be able to move when possible. We do not believe there is one strategy that we have implemented that sticks out. What does stand out is our positive attitude and perseverance in maintaining a steady supply of product to our customers.”

    Fit for the Future

    Taken together, the challenges of the past years have actually been positive for the company, according to Cooksey. “We have greatly expanded our footprint and our client portfolio. Thus far, we have continued to experience growth in a declining industry. This is a testament to our employees’ passion, knowledge, experience and teamworking culture. We are fortunate to have so many people in this company who care about what they do and how they do it.”

    Fresh blood in the team is welcome—the company is currently seeking to attract new talent, Cooksey explains. “We think we provide a few uniquely positive things: Young people get excellent training; they gain experience and are then held accountable earlier than, say, in a bigger, multinational company. We run a flat reporting structure, and we promote a culture that demands mutual respect and teamwork. We all work very hard, but we also like to still have fun, and we think that goes a long way in your job and career.”

    To make the company fit for the next 100 years, HC is working with an international consultancy to effectively address and tackle ESG in the future. “HC fully recognizes the importance of ensuring that we understand our impact on the environment and human rights,” says Spies. “The issues facing the tobacco industry are not unlike those facing other agricultural businesses globally—such as ensuring that the potential and actual impacts to people and environment in the supply chain are understood and addressed in order to operate responsibly.”  

    In terms of size, Mr. Hail and Mr. Cotton may not recognize their company today—but they would definitely recognize the way in which it is run: still focused on its service to the customer and the grower, adaptable to the ever-changing industry and committed to growth. The founders would have been pleased to see that HC is well prepared for the future and will continue to play an important role in the tobacco industry.

    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.
  • Choppy waters

    Choppy waters

    Photo: BAT

    Machinery makers navigate supply chain challenges and customers’ changing product portfolios.

    By George Gay

    I was rummaging around in my office the other day, looking for something that I didn’t find, but as is often the case when rummaging, I did find many things for which I wasn’t looking. One of those things was a 20-year-old CD with the name of a tobacco machinery company on it and the title “Past, Present and Future,” and given that I was due to write a machinery story, I decided to take a look. The CD contained a PowerPoint presentation with 44 slides, 20 of them dedicated to the past, 23 to the present and one to the future. The future slide was unique not only in respect of it being the only one to address the future but also because it was blank except for the words “The Future.”

    I don’t blame the presenter for being cautious. Predicting the future of the tobacco industry and its various sectors has always been fraught. The industry has been written off, prematurely, more times than I care to remember. But there is no doubt that, nowadays, the storm clouds appear to be more threatening, partly because they are coming from both within the tobacco industry and without. The range of regulations that govern the industry is becoming wider and more radical at a time when, partly in response to those regulations, the industry has chosen to transform itself.

    So where is the industry, and, in particular, the tobacco machinery sector headed? It hardly seems worth stating that the future of the tobacco machinery business is linked to the future of the tobacco business, and, since the tobacco business is in decline, the tobacco machinery business must be in decline. End of story. But, of course, the situation is far more complex than that.

    One obvious caveat that has to be added to this story concerns the offshoot the tobacco industry has grown, comprising lower risk tobacco and nicotine products. The problem here, however, is that it is not easy to predict whether this offshoot will flourish or atrophy. And, even if it does flourish, it is not easy to predict what the conversion rate of smokers to the consumption of these new types of products will be. It has to be remembered that if the traditional tobacco business is in decline, the opportunity for converting smokers diminishes, though this could be offset if nonsmokers were drawn to these products.

    While some countries are encouraging, or at least not discouraging, such new products, others with huge populations are banning (India) or discouraging (China) them. In some countries, and for some time, entry to the new products markets will probably remain prohibitively expensive for many consumers, and there is the looming problem associated with environmental issues.

    Optimization

    Nevertheless, asked what the situation would look like in three years’ to five years’ time, Norbert Schulz-Nemak of TMQS had no hesitation in saying new-generation products (NGPs) will have taken a higher share of the overall market simply because such a conversion is a strategic goal of multinational companies. But combustible cigarettes would still be around because they were relatively cheap to buy and relatively easy to consume.

    Was it the case, though, that the tobacco industry might split into a number of tobacco industries operating quite differently in various regions or countries in response to local regulatory environments and, therefore, the different products on sale within those regions or countries? It is not difficult to imagine a U.K. market without tobacco but with e-cigarettes completely divorced from an India market without e-cigarettes but with tobacco.

    But in response, Schulz-Nemak said TMQS believed the only split would be in respect of technology. Tobacco manufacturers would continue a process started some time ago whereby they had concentrated the manufacture of their various products within specific manufacturing sites, thus optimizing the use of those sites. Focusing within individual sites on the machinery and processes necessary only for specific products provided for clear structures and logistics. Obviously, added Schulz-Nemak, there would be exceptions, but generally speaking, such developments were logical.

    Maintaining Existing Equipment

    Despite the transitions that the industry is going through, tobacco manufacturers large and small will clearly aim to maintain production levels and efficiencies within their traditional operations while keeping their businesses flexible enough to deal with future market trends. And this, according to TMQS, is leading many companies to be more cautious in their planning than they had been previously.

    Catering for an increasing portfolio of NGPs and vaping products involved a costly exercise in bringing in new machinery, said Schulz-Nemak. And this was occurring at a time when combustible cigarettes still accounted for the major output of manufacturers—combustible cigarettes whose production lines also needed investments, both routine and regulation-specific, such as those requiring the manufacture of biodegradable filters.

    Schulz-Nemak said that, in the case of secondary machinery, TMQS could help optimize production while keeping expenditure down. This potentially meant eliminating the need to invest in new machinery and then, perhaps, having to invest in new supporting infrastructure, different spares and materials. TMQS could offer machinery improvements, including those extending the life of equipment. It could provide everything from routine maintenance to repairs, conversions, extensions and modernizations. And it could offer support with spare parts and assembly groups.

    Filling the Gaps

    One change that has happened in the recent past is that tobacco manufacturers have tended to reduce their traditional product portfolios, which, presumably, has pushed more production toward the long-run end of the manufacturing continuum, and which, in turn, would have helped maintain demand for high-end, high-capacity machinery. But there is a flip side to this. When products are removed from the market, the holes created are seen as opportunities by entrepreneurs. This phenomenon is to be observed in many industries, and while it tends to be more subdued in the case of tobacco because taxes often dominate the retail prices of cigarettes, it happens. This raises the question of whether the inevitable gaps left in the market will see the emergence of more niche players requiring more modest machinery, either new or rebuilt, and simpler factory layouts. 

    In fact, Reto Iten of Iten Metals told me recently that the strength of demand for relatively old, slower cigarette making machinery was currently “amazing.” Demand was being driven by niche manufacturers that might want to produce, for instance, a CBD cigarette or an environmentally friendly cigarette, perhaps one using organic tobacco or one using only locally grown tobacco. With the right machines, such manufacturers, which were active on relatively small but attractive markets, could use high-quality cut rag to make good-tasting cigarettes.

    So why aren’t we all getting in on the act? Well, according to Iten, to be successful at such niche manufacturing, you have to be willing to make a certain level of investment. A secondhand maker that had been the subject of only an overhaul would probably produce more hassles than cigarettes. And buying the sorts of equipment sold by his company—rebuilt, as-new machines based on original OEM drawings—was not easy at the moment because of a number of factors, not the least of which was the lack of donor machines. In fact, Iten said he had plenty of inquiries at the moment but nothing to offer, so recently, he had been in discussions about how to overcome the current shortages of donor Molins Mk8 and Mk9 makers, especially their machine bases, since the mechanics and electronics of these machines were well known and could be reproduced fairly easily.

    Machinery rebuilders have been struggling with supply chain disruptions. For example, PLC components that used to be available immediately off the shelf are now subject to delivery times of six months or more.
    (Photo: gen_A)

    Materials and Manpower

    For start-ups, Iten recommends a standard industrial cigarette maker, such as the Mk8. For such machines, it was not difficult to find consumables and spare parts, many of which were off the shelf, and for others of which the original drawings were available so that they could be made by a proficient engineering company. Because of the Mk8’s ubiquity, even skilled operators were often available locally, but the machine’s most important advantage was that it produced a quality product.

    But there are other problems with delivering rebuilt machinery, one of which comprises recent interruptions to deliveries of suitable raw materials. Not all materials were currently available, said Iten, so there were times when effort had to be expended finding substitutes, which increased costs and lead times. And these disruptions are occurring not only in respect of mechanical parts and materials. Electronic components, including PLC components, that used to be available immediately off the shelf are now subject to delivery times of six months or more. “The planning of a project has become really messy,” said Iten in an emailed reply. “It is simply not possible to keep a delivery time agreement these days.”

    In fact, Iten described the delivery interruptions, which had started in 2020 with a lack of container availability and had become worse since May 2020, as “incredible.” Now, before a machine rebuilding project was started, it was necessary to have ordered all of the e-parts for the PLC control. A shortage of manpower was another factor—one that was causing some workshops to be operating under capacity.

    Iten said he expected the current problems to last through 2022 and even expand. It was not possible, he added, to gauge what would happen during 2023, but it was likely that things would remain difficult.

    Meanwhile, TMQS also helps niche tobacco manufacturers set up their operations. Schulz-Nemak said TMQS could rework machinery and set it up so as to operate easily and flexibly to meet a wide range of production needs. It could provide additional machinery, high-quality parts and assembly groups.

    And when it came to setting up small operations, TMQS could combine forces with experts in different fields to create the optimum, cost-effective production lines.

    The writer would like to thank Chris Crawley, global business development consultant to the tobacco industry, for his input on this piece.

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

    Pathways To Acceptance

    Photo: Artinun

    Scientists, regulators and industry must work together to help change perceptions of nicotine.

    By Phil Saunders

    A recent story in Tobacco Reporter highlighted that more than 60 percent of U.S. doctors are confused about the tobacco harm reduction risk continuum. Many incorrectly believe that all nicotine products are equally harmful, making them unlikely to recommend e-cigarettes to people trying to quit smoking.

    Elsewhere, the picture isn’t that different. For example, a survey released earlier this year showed that in England, one of the most pro-vaping countries in the world, only 40 percent of local authorities actively offer e-cigarettes as part of stop-smoking services. This might seem more positive, but it still leaves the remaining 60 percent unconvinced.

    There are some positive developments in Australia, which recently scrapped its earlier plans to ban e-cigarette imports. Hollie Hughes, chair of a committee established to examine vaping, recently stated that she believes vaping to be “an incredibly powerful cessation tool” that is part of the discussion on reducing smoking rates in the country. But there are still many countries with extremely high smoking rates where e-cigarettes are completely illegal, including India, Mexico, Brazil and Singapore.

    There is obviously still a long way to go to get a unified acceptance of the role reduced-risk nicotine products can play in tobacco harm reduction.

    Perception is Key

     Fundamentally, the issue is that nicotine is perceived as the bad guy. That is why 60 percent of doctors in the U.S. don’t understand e-cigarettes. For years, the popular discourse has equated tobacco and nicotine as completely interchangeable in terms of smokers’ health and the damage it does to society. Widespread misperceptions around nicotine remain the industry’s biggest challenge and are the No. 1 issue that public health bodies and regulators will need to address to change the status quo.

    Recently, U.K. Secretary of State for Health and Social Care Sajid Javid announced that anyone born after 2008 in the U.K. will not be allowed to purchase tobacco products and that the minimum age will raise every year. A similar approach is also being considered in Denmark. But Javid is not considering including e-cigarettes in this approach, which may be an acknowledgment that he at least doesn’t see nicotine as the biggest issue impacting smokers’ health.

    What is obvious is that the scientific community, regulators and the wider electronic nicotine-delivery system (ENDS) industry must work together to help change perceptions about nicotine and educate people about the difference between tobacco and nicotine.

    A Supportive Regulatory Environment

    Taking England as an example of an environment supportive of vaping, the Tobacco and Related Products regulatory framework for e-cigarettes as consumer products is a light touch compared with the premarket tobacco product application (PMTA) in the U.S. As a result, the U.K. offers one of the world’s fastest consumer routes to market for new vape products and has a thriving vape retail sector and a falling adult smoker rate.

    The U.K.’s Medicines and Healthcare products Regulatory Agency is now also actively encouraging the use of e-cigarettes to support smoking cessation. The Department of Health and Social Care 2017 Tobacco Control Plan states that the scientific evidence is clear that e-cigarettes are less harmful to health than smoking cigarettes. The U.K. has now set a target to be “smoke-free” by 2030 with vaping and next-generation alternatives seen as a key enabler in reaching that goal. A review commissioned by the government recommends that the National Health Service increases efforts to encourage smokers, particularly pregnant women, to switch to vaping and e-cigarettes.

    Scientific Substantiation

    Undoubtedly, we need to be led by science. Regulatory submissions, conference presentations, scientific posters and papers must continue to add to the body of evidence demonstrating the role of noncombustible next-generation nicotine-delivery products in tobacco harm reduction.

    “Real world” evidence and behavioral studies are also invaluable, particularly to convince regulators and medical professionals of smokers’ switching habits and that these products don’t encourage “on-ramping” of nonsmokers, particularly youth. Peer groups and professional bodies also have their role to play in supporting this aim to be driven by science rather than opinion and media headlines.

    In the U.S., the huge amount of data now available due to the rigor of the PMTA process is also invaluable. Companies have spent millions of dollars on scientific studies to demonstrate to the Food and Drug Administration that their products are appropriate for the protection of the public health.

    However, there is still the issue of a lack of independent scientific research into vaping as most universities shun research into tobacco-related products. The FDA’s first PMTA marketing orders for consumer vape products in the U.S. are the closest the ENDS industry has to independently verified in-depth scientific evidence that vape products can be evaluated as less harmful than smoking cigarettes.

    Industry Opportunities

    The next step in product acceptance is to see companies start to further develop consumer products for a medicinal regulatory pathway. Acceptance as a medicinal device to help smokers quit would further legitimize vaping as reduced harm. Achieving this could also lead the way for nicotine strengths to be prescribed at higher dosage levels to support smokers to give up more effectively through a medically monitored offramping process.

    Looking to the Future

    There are still significant global differences in the acceptance and understanding of the role of e-cigarettes in supporting tobacco harm reduction. The confusion between the different roles tobacco and nicotine play in causing smoking-related diseases, however, remains a common limitation.

    Robust regulatory frameworks for both consumer and medical ENDS will help build legitimacy for the sector with both regulators and consumers. In this way, regulation is an important tool to help build confidence in the sector.

    Whichever market is chosen for a product, an in-depth understanding of that country’s regulatory frameworks and ongoing investment in gathering scientific evidence is essential. The start of manufacturers looking to gain regulatory approval for their ENDS as medical devices will be an important next step in the industry’s journey to acceptance.

    Phil Saunders is the strategic partnership manager at Broughton.
  • All Hands on Deck

    All Hands on Deck

    Photo: The Global Forum on Nicotine

    Tobacco harm reduction is gaining momentum but continues to face many hurdles.

    By Stefanie Rossel

    “Tobacco harm reduction: Here for good“ was the theme of this year’s Global Forum on Nicotine (GFN) conference, which took place in Warsaw June 16–18, 2022. Around 50 speakers and panelists discussed the issues that will determine the future of safer nicotine use and tobacco harm reduction (THR). The meeting was preceded by a day of satellite events and once again featured the International Symposium on Nicotine Technology, which highlighted the latest technological advances in the rapidly changing nicotine delivery landscape.

    Two hundred years after the first snus brand was launched in Sweden and almost 20 years after the Chinese pharmacist Hon Lik invented the modern electronic cigarette, THR continues to face challenges. While THR is making good progress in high-income countries, low-income and middle-income countries (LMICs), where about 80 percent of global tobacco users live, are mostly excluded. In India, for example, where smokers of bidi cigarettes and consumers of hazardous oral tobaccos such as gutka represent 85 percent to 90 percent of tobacco users, bidi packs do not even carry health warnings. While gutka is officially banned, prohibition is not enforced. Instead, health authorities focus on the harms of vaping. Although vape products are banned in the country, they are readily available on the black market.

    Thailand legalized the cultivation and consumption in food and beverages of cannabis in early June but continues to prohibit vaping under strict penalties. Vapers risk a jail sentence of up to 10 years. An observational study in South African hospitals not only demonstrated that inpatients had a lack of knowledge of nicotine-replacement therapy (NRT) but also that doctors in LMICs are often not trained to explain to patients how to use NRTs. Research comparing THR in Russia, China, Indonesia and India found that once smokers have understood that combustible cigarettes are harmful, the key challenge is changing behavior. In Russia and China, consumers are generally aware of reduced-risk products (RRPs) whereas in India and Indonesia, nicotine is considered the most harmful constituent, and few people know that RRPs exist.

    Uncontrolled Influence

    Most LMICs have ratified the World Health Organization’s Framework Convention on Tobacco Control (FCTC), which takes a dim view of vaping. This position is backed by one of its largest donors, billionaire and former New York City mayor Michael Bloomberg. In his keynote presentation, journalist Marc Gunther demonstrated that philanthropy is an excise of power that requires scrutiny.

    By pumping millions of dollars into nonprofits and anti-vaping groups worldwide while funding university researchers, a media initiative and a nonprofit health consultancy through the Bloomberg Philanthropies foundation has created an effective global anti-vaping campaign that is not driven by science, according to Gunther. For example, The Union a Bloomberg-backed nongovernmental organization headquartered in Paris, recently published a paper calling for a ban on all e-cigarettes in LMICs. Most damaging, Gunther said, was the relationship between Bloomberg and the WHO, which the billionaire has generously funded with many millions of dollars for a variety of projects, including $5 million for its tobacco work in 2019.

    While few countries ban RRPs outright, the products often face prohibition by stealth. This month, Germany started applying a tax to e-cigarettes, which came on top of the previously applied value tax. With e-liquids now being taxed by volume, their price has almost doubled, which prevents smokers from switching as it conveys the impression that a product taxed so high must be equally as harmful as combustible cigarettes.

    In the U.S., the Food and Drug Administration picks the winners and losers through its tobacco product authorization process with little regard for consumers. The agency’s requirement for comprehensive scientific documentation of a product’s contribution to the protection of public health represents a hurdle that only the largest and most amply funded nicotine companies can manage.

    Prohibiting elements that make vapor products appeal to smokers, such as nontobacco flavors, are also a kind of stealth prohibition that has no effect on overall smoking or vaping prevalence. U.S. states that ban flavors miss out on tax revenues and Master Settlement Agreement money while the number of smokers stays the same and vapers buy their products in neighboring states. Prohibition by stealth, panelists agreed, stifles innovation and, given the discrimination against vape products compared to combustibles, may be potentially illegal in trade law terms.

    Academic Freedom Under Threat

    Misinformation about RRPs and the question of who can be trusted remains one of the biggest issues in tobacco harm reduction. While the trust in science has generally increased through Covid-19, countless flawed studies on less hazardous nicotine products continue to circulate, contributing to misperceptions among consumers. Google Scholar ranks studies according to popularity rather than quality, so even two years after e-cigarette or vaping use associated lung injury (EVALI), studies attributing the outbreak to nicotine vapes rather than illicit THC products still feature prominently in search results. But even research professionals are often interested only in the title, abstract and conclusion of a study and thus fail to detect flawed methodologies.

    A recent example of misinformation is the claim by several emission studies that the aerosol of vape products is polluted with heavy metals. By providing a concise explanation of the ingredients of e-liquids and the complex chemical processes that take place in a device during vaping, Miroslaw Dworniczak, a Polish chemist and author, refuted this assumption, concluding that despite the presence of some potentially dangerous compounds, e-cigarettes were far less risky than regular cigarettes. Mexican physicist Roberto Sussman, who examined 12 studies on metals in e-cigarette emissions, found that all of them were methodologically flawed.

    Having become ideological rather than evidence-based, the health debate about vaping is full of contradictions. Mark Tyndall, an infectious disease specialist from Canada, compared his experience working with HIV with the experience in vaping. It took 40 years for HIV to lose its association with fear, blame and stigma—issues that smokers and vapers are facing too. Medical treatment of AIDS was the greatest breakthrough—vaping, he claimed, could be a similarly efficient weapon to treat smoking.

    Stigma is also present in the academic world, and it goes far beyond suspicion of tobacco-funded studies. Scientists detected “the ghost of Senator Joseph R. McCarthy,” the paranoid U.S. communist hunter of the 1950s, as they often confronted hostility from fellow academics and institutions. Experiences of suppressed academic freedom ranged from a lack of institutional support for THR research to “mobbing” and exclusion from faculties.

    Here for Good, but …

    So, is tobacco industry transformation a myth or a reality? Sharing her view from the corporate side, Flora Okereke, head of global regulatory insights and foresights at BAT, said that her company’s efforts to help smokers switch to less risky products—and therefore doing something for society—had given employees a sense of pride. Peter Stanbury, a political economist, evaluator and management consultant, pointed out that companies such as British Petroleum are also in the process of transformation, driven internally by people who realize that change is required and externally by regulation.

    In advancing tobacco harm reduction, regional networks in THR consumer advocacy play a vital role. Nancy Loucas, founder and executive coordinator for the Coalition of Asia Pacific Tobacco Harm Reduction Advocates, related how her organization, faced with challenges such as government interests in tobacco growing and manufacturing, notably in China and Indonesia, and foreign philanthropist influence in the development of policy, achieved a paradigm shift in several countries by working with an expert advisory group.

    Tobacco harm reduction, panelists agreed, is here to stay; consumers have a right to it. But accessibility of THR will remain a problem, and more restrictions are on the horizon.

    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.
  • African Ambition

    African Ambition

    Adam Molai (Photo: Pacific Cigarette Co.)

    The Pacific Cigarette Co. continues to gain momentum.

    By Daisy Jeremani

    The Pacific Cigarette Co. of Zimbabwe has made significant progress toward becoming one of Africa’s No. 2 cigarette makers as it now produces more than 3 billion sticks per year, according to company founder and chairman Adam Molai.

    In a recent interview with Tobacco Reporter, Molai said Pacific was on track to becoming the largest indigenous African cigarette manufacturer by 2020 and the second-largest cigarette manufacturer on the continent, but its growth was disrupted by the Covid-19 outbreak.

    “Significant gains have been made toward this objective, growing from inception to over 3 billion sticks per annum. However, the Covid-19 pandemic merely delayed—it did not destroy or disrupt—our ultimate goal. Our vision for global success through value addition and tobacco beneficiation remains undeterred, and we continue to strive to create value for the African economy and enhance the lives of Africans,” he said.

    Born into an entrepreneurial family, Molai attended some of southern Africa’s most prestigious schools, including Peterhouse Boys, northeast of Harare. He worked at Ernst and Young in Zimbabwe and proceeded to the University of Buckingham in the U.K. where he graduated with a business degree in August 1992. Four years later, he left Lakehead University in Canada with a first-class commerce degree.

    Molai returned home and ran some small businesses, but his biggest break came at 31 years old when he, together with Nick Havercroft, founded Savanna Tobacco, later renamed Pacific Cigarette Co. They launched it in 2002 as a threshing enterprise in Africa’s No. 1 tobacco growing country. This entailed buying tobacco stems from farmers, processing them and exporting them. They did not immediately have the resources to import a cigarette manufacturing plant, but investing in threshing and starting to export were the first serious steps that propelled Pacific to be the brand it is now.

    Molai and Havercroft recognized the opportunity that lay in processing tobacco into cigarettes, and through innovative financing structures to raise foreign currency in a market plagued by foreign currency shortages, they were able to import the required equipment and became the first indigenously owned cigarette maker in Zimbabwe. In addition to the challenge presented by the foreign currency shortage, they also had to overcome the difficulties presented by the then poor relations between Zimbabwe and Germany, which is home to some of the world’s leading tobacco equipment manufacturers. At that time, Europe and the U.S. were sanctioning Harare over the land acquisition program and human rights issues. Despite this, Molai was still able to pay for the company’s first cigarette maker and packer to start producing Pacific Blue cigarettes for export in 2004

    While this represented a big break at a personal level, breaking into a market that had been dominated by established brands for decades presented a considerable challenge, according to Molai. Competitors tried to derail and sabotage the newcomer in a variety of ways, at times using underhanded methods, he says.

    Nonetheless, Molai persisted. “Although it was challenging competing with established global multinationals with infinite resources, we used this as a learning experience,” he said.

    “Our competition provided us with the best education on business. They triggered the tenacity, resilience and boldness which has facilitated our growth and expansion into the region.”

    A few years later, Molai turned the company’s focus to tobacco contract farming. He won government approval to establish contract farming in a country still dominated by auction sales. Critics labeled him an economic saboteur who wanted to use contracting to help white farmers, most of whom just had been evicted from their farms under the land acquisition program, externalize funds. But he was not deterred, having realized that the new, resettled farmers lacked the technical know-how, inputs and financing to seriously grow tobacco.

    After two years of lobbying and hard work, the company was finally licensed to contract but with extremely stringent conditions that gave it no recourse against any defaulting farmers. This first contract scheme was called Zimbabwe Tobacco Growing Co., later rebranded to Northern Tobacco.

    “I believe our foremost contribution to the tobacco industry is not cigarette manufacturing,” says Molai. “The most important contribution we made was fighting for permission to introduce contract farming of tobacco in Zimbabwe.”

    Other companies launched their contract schemes later, and today, more than 100,000 farmers produce some 95 percent of the local crop under contracts.

    Four years ago, Pacific partnered with China Tobacco Shaanxi Industrial Corp. (CTSIC), in an effort to serve the Chinese market. In January 2022, Pacific invested $9.5 million to relaunch two of its brands, Pegasus and Branson, to ensure that they would be able to not only cater to the premium segment but also offer world-class quality cigarettes at an affordable price. The Branson brand family was expanded with Branson flame, toasted and mint varieties while Pegasus now comes in a toasted flavor and a Chinese blend named Hong Ma. 

    Molai recognizes that the Chinese blends are still in their infancy but says the company is working to ensure that it is able to grow that market given that China has the world’s largest population, which is getting increasingly affluent and traveling or settling in other countries.

    “As a disruptor and a trendsetter, Pacific will continue innovating to keep ahead of the competition,” he says. “The relaunch of some of our brands was not only driven by our Chinese partnership but also part of our DNA to ensure we satisfy our customers.”

    Pacific’s deal with CTSIC, he said, was the first of its kind, where Chinese brands got licensed to an African entity. The partnership, which is in line with Zimbabwe’s “Look East” investment policy, remains a key part of the strategy to build Pacific’s market share, considering that China has the world’s highest number of smokers and there are an estimated 10,000 Chinese living in Zimbabwe.

    It takes time to establish and grow a brand, says Molai, so Pacific is working tirelessly to gain the trust and loyalty of consumers.

    “Our aspiration was to get African cigarettes into the Chinese market,” he says. “Africa is the only continent without a quota to supply cigarettes into China, and with Zimbabwe being the largest tobacco player on the continent, it was therefore my responsibility, on behalf of our continent, to make this happen.”

    Pacific is also making inroads into neighboring South Africa, and they recently launched their Acacia brand and intend to continue expanding. As Covid-19 hit in March 2020, Pacific had to innovate and began a campaign centered on its mission that “People are the recipe for maximizing stakeholder value,” so they have been cementing and capitalizing on the relationships that they have on the market to ensure that they get the desired product placement and sales traction.

    Speaking on the prospects for the African economy, Molai said the economy can only grow when businesses identify opportunities for beneficiation and increase their levels of domestic value addition, creating employment and industrializing while enhancing and developing its people. Value addition is especially imperative for Zimbabwe, which exports 98 percent of its tobacco raw and processes just two percent of local production into cigarettes.

    “My personal objective was to democratize the tobacco industry from a highly racialized industry to one whose participation mirrors the continental demographics. This has been largely achieved with indigenous Zimbabweans now major players from growing to cigarette manufacturing.

    “It is our responsibility, and as Pacific, we remain committed to the well-being and long-term sustainability of Zimbabwe’s golden crop by manufacturing and distributing products of international quality,” he said.

    The businessman said his personal ambition has now expanded beyond tobacco and is now also focusing on the industrialization of Africa and beneficiation of other value chains so that the continent becomes an alternative supply chain to the world. Covid-19, he added, has exposed the risk concentration of current supply chains, thus Africa has a phenomenal opportunity to industrialize and create opportunities for it’s very young and unemployed youth.

    In November 2020, his self-titled foundation launched JUA Kickstarter, a $1 million initiative to support startups on the continent. With support from partners, the fund was doubled in January 2021. Announcing the development, Molai recalled the grueling journey he traveled to launch a successful brand and felt the need for him to assist startups.

    “With 65 percent of our population below 35 years of age, this population represents a significant threat or opportunity for our continent,” he told Tobacco Reporter.

  • Inching Closer

    Inching Closer

    Photo: New Africa

    The FDA has taken a major step toward banning menthol cigarettes in the U.S., but there’s still a long way to go.

    TR Staff Report

    It’s hard to overstate the significance of the U.S. Food and Drug Administration’s plan, announced on April 28, to ban menthol cigarettes in the United States. While authorities have banned menthol cigarettes in other jurisdictions, such as Brazil (2012), Canada (2017) and the European Union (2020), the impact of those measures was less severe because relatively small shares of smokers preferred menthol cigarettes in those markets. In the U.S., by contrast, menthol products accounted for a whopping 37 percent of all cigarette sales in 2020, according to Statista.

    Public health advocates dislike menthol because it reduces the irritation and harshness of smoking, which makes it easier for consumers to take up the habit. According to the FDA, menthol also interacts with nicotine in the brain to enhance nicotine’s addictive effects. “The combination of menthol’s flavor, sensory effects and interaction with nicotine in the brain increases the likelihood that youth who start using menthol cigarettes will progress to regular use,” the agency writes on its website. “Menthol also makes it more difficult for people to quit smoking.”

    Unlike in other markets, the debate about menthol cigarettes in the U.S. is also about racial disparities. According to the FDA, nearly 85 percent of African Americans smoke menthol cigarettes compared to 30 percent of white smokers who smoke menthols—a situation industry critics attribute to decades of “predatory marketing” of menthol cigarettes to Black communities.

    “By issuing proposed rules today to prohibit menthol cigarettes and all flavored cigars, the FDA is taking historic and long-overdue action to protect our nation’s kids, advance health equity and save lives, especially among Black Americans and other populations that have been targeted by the tobacco industry and suffered enormous harm from the predatory marketing of these products,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids.

    The FDA expects its menthol ban to reduce the appeal of cigarettes and reduce deaths and disease among current menthol smokers by decreasing cigarette consumption and increasing the likelihood of cessation. “Published modeling studies have estimated a 15 percent reduction in smoking within 40 years if menthol cigarettes were no longer available in the United States,” the agency writes. “These studies also estimate that 324,000 to 654,000 smoking attributable deaths overall (92,000 to 238,000 among African Americans) would be avoided over the course of 40 years.”

    Not everybody is convinced a menthol ban would achieve the desired health effects, however. “We strongly believe that there are more effective routes to deliver tobacco harm reduction than banning menthol in cigarettes,” said BAT Chief Marketing Officer Kingsley Wheaton in a statement. “Evidence from other markets, including Canada and the EU where similar bans have been imposed, demonstrates little impact on overall cigarette consumption.

    “The scientific evidence shows no difference in the health risks associated with menthol cigarettes compared to nonmenthol cigarettes, nor does it support that menthol cigarettes adversely affect initiation, dependence or cessation. As a result, we do not believe the published science supports regulating menthol cigarettes differently from nonmenthol cigarettes,” said Wheaton.

    Guy Bentley, director of consumer freedom at the Reason Foundation, says supporters of menthol prohibition have been disappointed by lackluster results in other jurisdictions that have banned the products. “The most common result of menthol prohibition has been for the majority of menthol smokers to switch to equally dangerous nonmenthol cigarettes, continue to buy illicit menthol or use devices to flavor nonmenthol cigarettes,” Bentley wrote on the Reason Foundation’s website.

    Morgan Stanley expects most American smokers to switch to nonmenthol cigarettes, obtain their mentholated cigarettes illicitly or switch to mentholated vapor products in the wake of a menthol ban. In addition, the investment bank predicts that consumers may “self-mentholate.” This practice would be legal, and menthol is readily available for purchase online on platforms such as Amazon.

    According to Morgan Stanley, menthol bans in Europe and Canada did not have a measurable impact on the cigarette market, though the category was significantly smaller. “The impact in Europe was moderate because it was less aggressive in enforcing menthol rules, had loophole clauses (e.g., menthol filters), a low menthol smoker population (about 5 percent), and [it] did not skew toward a certain demographic group like it does in the U.S.,” the bank wrote in a note to investors. “The most significant impact was in Poland (about 25 percent menthol [smokers]), which saw a rise in illicit trade from neighboring countries.”

    However, a study of Canada’s experience, published in Tobacco Control, noted that among daily smokers, menthol cigarette smokers were more likely than nonmenthol smokers to have quit smoking in the wake of that country’s menthol ban. If the United States’ experience mirrors that of Canada after it banned menthol cigarettes, 1.3 million people would quit smoking, and potentially hundreds of thousands of premature deaths could be averted, Geoffrey Fong, principal investigator of the International Tobacco Control Policy Evaluation Project, was quoted as saying by The New York Times.

    Regardless of its impact on public health, a U.S. menthol ban would considerably impact the operations of tobacco manufacturers operating in that country. According to Morgan Stanley, BAT is most exposed to the category, with menthol cigarettes representing 55 percent of U.S. volumes and 60 percent of U.S. profits (and about 30 percent of group profits). The investment bank estimates that menthol represents 19.5 percent of volumes and 15 percent of profits for Altria group.

    While the FDA’s April 28 announcement is significant, Goldman Sachs notes that there is still a long way to go for the plan to become reality. The agency must still take multiple steps before it can issue and implement a final rule, starting with a 60-day public comment period, which ends on July 5. After that, the Office of Management and Budget must review the proposed rule to ensure the FDA adequately addresses all public concerns, including unintended consequences, followed by a statutory delay of between one year and two years before implementation. Legal challenges could delay the ban even further. “Ultimately, it is a complex and lengthy process that, based on precedent, could likely take several years to be successfully implemented, if at all,” wrote Goldman Sachs in a note to investors.

    Expect tobacco companies to generously share their views during the comment period. “We are reviewing the details of the proposed regulations and will continue to actively participate in the rulemaking process by submitting science-based comments to FDA,” said Wheaton.

  • Not a Bot

    Not a Bot

    Photo: UVA

    Consumer advocates are for real.

    By Cheryl K. Olson

    “My initial reaction is that I’m surprised. That’s not a sentiment I’ve heard from industry before,” said Danielle Jones, president of the board of the Consumer Advocates for Smoke-Free Alternatives Association (CASAA). I was passing on what I’d been told by industry sources: that consumer advocates should take the lead in correcting widespread public perceptions about nicotine harm reduction.

    “From a personal standpoint, it’s a little disheartening,” she added. “Because that’s a lot of responsibility to put on underfunded nonprofit advocacy groups.” However, unlike industry, “we can’t get in trouble for saying whatever we want.”

    Who are these harm reduction consumer advocates­: Are they grassroots voices or artificial turf? What are they doing to change the narrative and to help individual smokers? What else could they be doing—and what is fair or reasonable to ask of them?

    Not a ‘Smokers’ Rights’ Repeat

    My first exposure to the CASAA was an email from its member coordinator, Kristin Noll-Marsh, in response to a Tobacco Reporter column. She asked me to join a “live YouTube advocacy show” as a guest that weekend. I was wary of lending my credibility to a consumer advocacy group that might turn out to be a corporate public relations facade. Although faux “astroturf” organizations are not unique to the tobacco industry, public health people remember well Big Tobacco’s late 20th century global strategy of founding “smokers’ rights” groups to fight the spread of smoke-free policies.  

    Happily, the CASAA turned out to be the real thing: a 501(c)(4) nonprofit advocacy organization dedicated (as its website says) to ensuring “the availability of a variety of effective, affordable, reduced-harm alternatives to smoking.” Founded in 2009, it sprang from an online forum for vaping enthusiasts stunned by attacks from anti-tobacco organizations on a product that had (by plan and by accident) turned them into nonsmokers. They were advocating for vaping as harm reduction years ahead of the legacy tobacco companies.

    After our invigorating podcast conversation, I reviewed the CASAA’s impressive collection of online resources and got to know Danielle Jones, who helms the CASAA’s all-volunteer board of directors. (She’s a graphic designer by profession.) I’ve often said that most people in public health and politics don’t know smokers; it’s easy to treat them as abstractions instead of fellow humans. The CASAA puts faces on those smokers, collects their stories and seeks to amplify their voices. I’m embarrassed it took me so long to notice. 

    “Our approach, which is limited by funding,” Jones said, “is all about organically bringing people into the tobacco harm reduction conversation.” The CASAA works largely through social media (Facebook, Twitter and Instagram), including scheduled podcasts recapping news and events. The group also works to raise the profile of research and opinions from other sources.  

    The CASAA sells apparel, noted Jones, “so advocates can wear messages that provoke conversations out in the wild.” Projects in its pipeline include creating information pages about vaping geared toward the needs of physicians and researchers.

    I asked Jones what the CASAA doesn’t do. It doesn’t endorse vaping products or companies. It also avoids engaging with youth, she said, “even to correct misinformation or help with school projects—we get a lot of those requests—as we would almost instantly be accused of trying to market or promote vaping to kids.”

    ‘I Want a Good Face for Vaping’

    Alongside consumer groups such as the CASAA, there is an ecosystem of individuals influencing nicotine product opinions and behavior via social media. Jones referred me to Nicholas “Grimm” Green, a YouTuber and harm reduction advocate.

    Back in 2009, Green was looking for something to cut back on but not to quit smoking. He enjoyed “the ritual of it, inhaling, exhaling, the smoke, everything about it.” 

    He stumbled across an online review by “this charming old bald man who had discovered vaping.” Soon, with the right device and flavor (root beer), “it was almost effortless to switch completely,” Green said. “And I knew I just had to tell other smokers about it.”

    His mission to change the public perception of vaping involves a portfolio of activities. He reviews products on multiple social media channels, trying to “cater toward smokers” to help them find the approach that works for them, whether they become vapor hobbyists or want something more cigarette-like. He does a weekly YouTube livestream covering vaping news and opportunities to advocate (such as phoning politicians about particular legislation), often coordinating with the CASAA.

    Green strives to respond effectively to misinformation on Twitter and Facebook, “engaging people as often as possible” through polite sharing of stories and research studies. “When you see [anti-vaping organizations] tweeting stuff about vaping causing brain damage, there’s a gut reaction to want to just yell at that person and call them names and tell them how wrong they are,” Green admitted. “But that’s not something that changes minds.”

    He also works to amplify voices that others are likely to heed. “You retweet the more credible voices,” he said. “It means more if there’s a pro-vaping article or stance coming from the University of Michigan or any of these professors than a guy on YouTube with a throat tattoo.” Green is a fan of body art.

    “I know what I look like,” he said. “So I try not to put myself out there so much. I want a good face for vaping in the United States of America.”

    I mentioned that 2018 AP file photo, shown repeatedly next to news and opinion articles about vaping: a blond teen with acne and peeling black nail polish, sucking on a vape device. “That’s how they want to portray vaping,” said Green. “They don’t want to show you the 65-year-old grandmother who smoked her entire life who now loves strawberry cheesecake e-liquid.”

    ‘Not a Bot’

    A 2021 academic paper, “#FlavorsSaveLives: An Analysis of Twitter Posts Opposing Flavored E-cigarette Bans,” illustrates the divide between academics and advocates. The authors tracked patterns of tweets pertaining to vaping, including flavor bans and safety fears, in 2019 to 2020. They noted that the state of California and the U.S. Congress “have investigated the role that social bots play in driving online discussions about e-cigarettes.” The spike in posts containing “not a bot,” they said, were “most likely to note that the backlash against e-cigarette regulation is not coming from automated accounts but instead real-life people who can vote.” Although the paper is not anti-vaping, its tone suggests that the authors never met any of those real-life folks whose tweets they analyzed.

    Green was one of them. He recalled that, largely in response to e-cigarette or vaping use-associated lung injury misinformation, “we more or less mobilized a pretty large army of vapers to get on Twitter and make their voices heard. And when they saw this enormous spike in actual people getting on Twitter, those news reports came out that we weren’t real people. We got called bots.”

    “That stings,” he said. “All we were doing was trying to defend our choice to not smoke cigarettes. So all these vapers started changing their Twitter handles to their real name plus ‘not a bot.’”

    This throws some cold water on the idea that consumer advocates have inherent credibility. The emotions and history associated with nicotine complicate changing minds. Although organizations like the CASAA will accept funding from anyone, industry ties and control are often assumed. “People commenting online get called bots, paid shills, all the time,” affirmed Jones. “Our opinions as users of the products are constantly dismissed and trampled on as having some tie to Big Tobacco.”

    “Vapers are so desperate for any recognition or public mouthpiece that we get susceptible to astroturfing,” said Green. “I don’t want to name names, but organizations have come in that have been associated with other, not-so-great organizations and tried to get vapers to do things or sign things or text things.” (The World Vapers’ Alliance and The 95 Percent were most recently outed as astroturf.) However, Green is optimistic that a steady drip of genuine engagement will pay off. “There is no magic bullet that will suddenly change the course of history for vaping. It has to be a slow, grassroots, honest consumer-based initiative.”

    The Consumer Perspective

    I asked Danielle Jones what the CASAA might do if it had more funding. Her wish list included “PR campaigns in print, digital and television, hold events and potentially hir[ing] a lobbying firm to help educate legislators.” They could expand their paid staff beyond one-and-a-half employees. Funding of research studies, by others and by the CASAA, are also on her list. She noted that researchers have recruited subjects through the CASAA’s lists but did not seek to involve the CASAA in their work.

    The consumer perspective is newly prominent in health research. For example, the Patient-Centered Outcomes Research Institute (PCORI) has received millions of dollars from the U.S. Congress for effectiveness studies that give weight to patient circumstances and preferences. The nicotine user’s perspective surely deserves the same courtesy.

    Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Associates. She spent 15 years on the faculty of Harvard Medical School.
  • Plain in Vain

    Plain in Vain

    Photo: Taco Tuinstra

    Standardized cigarette packaging is not the miracle cure for reducing smoking prevalence, studies indicate.

    By Stefanie Rossel

    December 2022 will mark the 10th anniversary of the introduction of plain cigarette packaging in Australia, which was the first country to require tobacco manufacturers to market their products in generic unbranded packs. By lowering the appeal of tobacco products to consumers, legislators hoped standardized packaging would help reduce smoking prevalence.

    Since then, more than 20 countries and territories have followed suit, including France and the U.K. (both 2017), Saudi Arabia and Turkey (both 2019), and Hungary and Myanmar (both 2022), according to a report released by the Canadian Cancer Society (CCS) in conjunction with the ninth session of the Conference of the Parties to the World Health Organization Framework Convention on Tobacco Control (FCTC) last November. CCS Senior Policy Analyst Rob Cunningham said there was a “strong, unstoppable global trend for countries to implement plain packaging.” Noting that the pace of implementation was accelerating, he concluded, “These developments are very encouraging as plain packaging is a key measure to protect youth and to reduce tobacco use.”

    But is it really? Above all, plain packaging is an inexpensive measure that can be implemented more easily than other FCTC tobacco control measures, such as establishing a national tobacco cessation system. But how successful has plain packaging been in the past decade in achieving its goal? If standardized packaging is the lifesaving measure that organizations such as Tobacco-Free Kids make it out to be, surely its impact should be measurable?

    Lack of Unambiguous Evidence

    There is abundant scientific research on the effect of standardized packaging, but study outcomes remain inconclusive or even contradictory. Often, study design is limited and does not take external factors into account, thus distorting the results.

    A 2016 study commissioned by the Australian Department of Health and authored by Tasneem Chipty, for example, concluded that the combination of plain packaging and updated and enlarged graphic health warnings is succeeding in reducing smoking prevalence. Chipty estimated that plain packaging policy contributed approximately 0.55 percent of the 2.2 percent decline in smoking prevalence over the 34 months following implementation. What the author did not consider, however, was a hefty increase in tobacco excise introduced at approximately the same time as standardized packaging.

    Similarly, researchers of the Tobacco Control Research Group in 2020 found that the underlying rate of decline in tobacco sales almost doubled after the U.K. started requiring plain packaging in May 2017. According to the study, monthly sales declined from 3.29 billion cigarettes in May 2015 to 3.16 billion cigarettes in April 2018. According to the U.K. Office for National Statistics, however, smoking prevalence had fallen significantly more in the years before the introduction of generic packaging as many smokers had switched to reduced-risk alternatives.

    Weak Designs

    A July 2021 study by Luiss Business School, Luis Guido Carli University and Deloitte Financial Advisory commissioned by BAT, which looks at the efficacy of plain packaging in the U.K. and France, sums up the weaknesses of many studies in this field.

    Claims about the success of generic packaging, the authors say, are often based on survey data that measure the impact of the measure on downstream psychosocial variables or “intermediate outcomes,” such as perceptions relating to the appeal and harm of tobacco products and attention to health warnings, and self-reported beliefs and intentions regarding future smoking behaviors. Whether these variables impact behaviors in due course is left unexamined.

    In addition, the authors claim, proponents of standardized packaging often refer to continuing reductions in smoking rates and consumption-related data that has not undergone any econometric analysis. Without accounting for potentially confounding factors, such as price increases, seasonal trends and preexisting consumption trends, it is impossible to draw firm conclusions from such data alone.

    According to the authors, econometric analysis is also required to assess research suggesting that plain packaging, contrary to its objective, increased tobacco use. Several studies concluded that generic packaging reduced brand loyalty, prompting smokers to move from premium to discount brands, which in turn allowed them to purchase more cigarettes for the same amount of money. However, such studies omit confounding factors, such as tax increases, according to the Luiss Business School researchers.

    The Holistic View

    To generate more useful data, the Luiss Business School study takes a broader view. It is also the first study to investigate consumption data for more than three years of generic packaging in each of the two countries examined, which is a longer time frame than that studied in previous analyses and thus allows for more robust conclusions on the initial impacts of plain packaging, according to the authors.

    Unlike previous studies on the situation in France and the U.K., the Luiss Business School report performed a set of different econometric models, including a structural break analysis to understand whether the implementation of generic packaging in the two countries caused a real change in the cigarette consumption trend. The authors say they found no such structural break as a result of plain packaging.

    Additionally, the researchers ran a regression model estimation where cigarette consumption is regressed on a set of covariates including plain packaging. After controlling for alternative explanations, such as price, generic packaging had no statistically significant impact on cigarette consumption in the U.K. and France, according to the researchers.

    The authors also compared cigarette consumption trends in France and the U.K. with those in Italy and Germany, which still allow branded tobacco packaging. Again, the estimated effect of plain packaging was indistinguishable from zero. In France, however, the measure was associated with a statistically significant—and unintended—increase in per capita cigarette consumption of 5 percent (relative to the counterfactuals and up to October 2020, the end of the investigated time series).

    Altogether, the study authors conclude, there is no evidence that standardized packaging has reduced cigarette consumption in the two investigated countries after more than three years of full implementation in each jurisdiction. They also point out that their analysis doesn’t include shifts to the consumption of reduced-risk products.

    Eurobarometer data shows that the share of e-cigarette users rose from 2 percent in 2017 to 6 percent in France in 2020 and from 2 percent to 4 percent in the U.K. over the same period. Both countries also had a share of 1 percent of current heated-tobacco product users in 2020. According to the survey, stopping or reducing tobacco consumption was the most frequently cited reason for taking up e-cigarettes.

    This data suggests that the impact of reduced-risk products might have also contributed to the decline in cigarette consumption in the U.K. and France. Not including the shift to these products would likely bias the analysis in favor of finding an effect of standardized packaging, according to the study.

    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.
  • Coming Clean

    Coming Clean

    Photo: Yakiv

    Stakeholders debate the challenges presented by cigarette litter.

    By Stefanie Rossel

    Cigarette butts are the most littered item on earth. The World Health Organization estimates that two-thirds of all smoked cigarettes are discarded into the environment. For 2021 when consumers smoked 5.21 trillion cigarettes, according to Euromonitor International, this corresponds to approximately 3.47 trillion littered cigarette butts.

    Made of cellulose acetate (CA), a polymer that is slow to degrade in the environment, cigarette filters take up to 18 years to disintegrate. In addition, used cigarette filters are full of toxins, such as nicotine, formaldehyde, arsenic and ammonia, which can leach into the ground and damage living organisms that come into contact with them.

    With regulatory pressure on single-use plastic (SUP) consumer goods increasing globally, tobacco companies hence face a new challenge: In a world where CA is still considered the gold standard for filters as far as smoking chemistry is concerned, they will have to find a way to make their products more sustainable. During a webinar staged in late April by Schweitzer-Mauduit International (SWM) and Essentra Filters, participants explored this and other challenges relating to cigarette filters.

    Shane McGuill

    Shane MacGuill, head of nicotine and cannabis at Euromonitor, said environmental sustainability was a double-edged sword for the tobacco industry, presenting both threat and opportunity and driven by a potent combination of consumer, investor and regulatory demand. According to his company’s research, 66 percent of consumers try to have a positive impact on the climate through day-to-day actions whereas 46 percent expect to be more worried about climate change in the future.

    MacGuill predicted that more investors will look at sustainability in tobacco; presently, around 40 percent of MSCI ESG (environmental, social and governance) indexes exclude tobacco. Between 2016 and 2018, he noted a 30 percent compound annual growth rate of ESG integration.

    In the tobacco and nicotine industries, product waste is one of the key drivers of sustainability legislation. The EU’s SUP Directive, introduced in 2021, emerged from a desire by European regulators to significantly reduce waste from cigarette butts by 2030.

    It places extended producer responsibility (EPR), a reinforced application of “the polluter pays” principle, on cigarette manufacturers to mitigate the impact of discarded cigarette butts. The regulation, MacGuill pointed out, was likely to be replicated in other regions.

    Supply chain integrity is another factor driving sustainability regulation; leaf cultivation is linked to environmental impacts such as deforestation, lack of crop diversity, chemical use and water utilization. Highlighted in the WHO’s 2017 report, these issues will likely attract increased scrutiny, MacGuill forecast.

    The most environmentally damaging stage of the cigarette production process is manufacturing and supply, for which legislation thus far has been limited. MacGuill noted that major tobacco companies have significantly stepped up self-regulation and focused on reducing their carbon and energy use, aiming, for instance, to achieve net-zero carbon emissions from their value chains by 2050. Product waste ambitions, however, currently remain largely limited to packaging.

    Increasing Awareness

    Alice Jassaud

    As end users, smokers play an important role in promoting sustainable cigarette consumption. A survey in Canada, Brazil, Germany, South Korea and France commissioned by SWM and Essentra Filters found that smokers generally are interested in sustainability, but only half of them know that filters contain plastic. Plastic content was overestimated in Germany while South Koreans underestimated it. Half of the smokers had a correct perception of the time needed for a plastic filter to decompose whereas South Koreans tended to overestimate it. According to the survey, filters were mostly dispensed in the trash or ashtrays in the countries investigated. Most smokers said they were willing to accept changes in the visual appearance of filters with accelerated biodegradability features. “There is a great opportunity for the industry to change tobacco products’ perception and their impact on the environment,” said Alice Jaussaud, product manager for filtering media solutions at SWM.

    Hugo Azinheira

    Hugo Azinheira, global innovation and marketing director at Essentra Filters, compared the biodegradability of various existing filters. In recent years, the industry has focused its R&D efforts on developing filters made of sustainable alternative materials. The sustainable filters used in the comparison, Azinheira said, were biodegradable while at the same time offering similar levels of performance and filtration as traditional materials.

    Carried out according to ISO 14855-1, a protocol to evaluate biodegradability of plastics under controlled composting conditions, the test compared biodegradation to reference cellulose after 105 days. While 100 percent of the reference cellulose had decomposed after this period, only 8.7 percent of CA had disintegrated. The latter item was the only one still visible at the end of the test. The four samples made of alternative material all reached a biodegradation above 90 percent after 105 days.

    Stricter Rules to Come

    Frédérique Martinache

    Regulation trends in the EU and beyond indicate that there is a strong political will on sustainability issues, said Frederique Martinache, product compliance senior specialist at SWM. Since 2014, the U.N. Environmental Assembly (UNEA) has been calling on states to address the environmental impact of marine plastic litter and pollution of SUP products. Regulatory approaches include imposing SUP bans, implementing taxes and/or economic incentives for sustainable alternatives, introducing EPR schemes and setting product standards and labeling requirements.

    In March 2022, UNEA member states agreed to propose by 2024 a legally binding treaty to end plastic pollution on land and in the water. Cigarette butts are the most common plastic litter on beaches. They represent a major hazard for marine life as animals can ingest the trash, exposing them to harmful chemicals. These can also make their way up through the food chain, threatening human health on a global scale.

    To promote the development of regulatory strategies that specifically address the impact of cigarettes on human health and the environment, the U.N. Environment Program has launched the Clean Seas campaign in which it partners with the Secretariat of the WHO Framework Convention on Tobacco Control (FCTC). Article 18 of the FCTC addresses protection of the environment and the health of persons in relation to the environment. This year’s WHO World No Tobacco Day focused on the adverse impact of tobacco cultivation and cigarette production and use on the environment, encouraging regulators to step up legislation, including implementing and strengthening existing schemes to make producers responsible for the environmental and economic costs of dealing with tobacco waste products.

    In the EU, tobacco filters have been required since July 2021 to bear labels informing consumers about the presence of plastic in the products, means of inappropriate waste disposal and the negative impact of littering. By Jan. 5, member states must have set up EPR schemes to fund litter cleanup initiatives, awareness campaigns and data gathering and reporting projects. Innovation and product development to provide viable alternatives to filters containing plastics are encouraged. By July 3, 2027, the European Commission shall propose binding measures to reduce the post-consumption waste of plastic filters.

    For the time being, the greatest regulatory pressure on filters comes from the EU and Norway, which has also implemented the SUP directive. But other jurisdictions are mulling measures as well. The U.K. Department for Environment, Food and Rural Affairs, for example, is considering the adoption of an EPR scheme. In the U.S., the Break Free from Plastic Pollution Act of 2021 intends to phase out throwaway plastics made from fossil fuel, hold the plastic industry responsible for its waste and pause construction on any new plastic-making plants. Apart from this federal legislation, there are a number of state initiatives. While Canada is contemplating regulation, the Australian government in 2021 launched the National Plastics Plan, which calls for an industry-led cross-sectoral stewardship taskforce to reduce cigarette butt litter in Australia.

    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.
  • Out of the Box

    Out of the Box

    Photo: 3dsculpto

    Roya Ghafele believes the industry should think more creatively about intellectual property.

    By George Gay

    Having spoken with Roya Ghafele, I cannot imagine her giving a PowerPoint presentation, though I could imagine her giving two or three separate presentations simultaneously on the same subject with each delivering different, cogent arguments and plausible conclusions. This is not to say she is uncommitted. When it comes to the big picture, she is almost unbending. She believes in the efficacy of, among other things, capitalism, markets and private property, including intellectual property (IP), on all of which she is fully qualified to comment. But, encouragingly to my way of thinking, she is not afraid of embracing contradictions. She clearly understands that the devil is in the details and that people and companies have to make choices when considering questions about, for example, IP management strategies.

    The good news is that Ghafele has an encouraging message for the tobacco industry. Because the industry, at least the product manufacturing sector of the industry, is relatively new to patents, it has, she says, an opportunity, indeed, a responsibility, to use them to advantage—to the advantage of the companies involved and the public at large. But there’s a snag. Ghafele believes that realizing this opportunity and fulfilling this responsibility won’t be easy. It will involve avoiding pitfalls set by some deeply ingrained but unhelpful thinking around patents—thinking that could slow the industry’s transition at a time when progress toward less risky products, the main subject of patents within the tobacco and nicotine manufacturing sector, needs to be fast.

    Ghafele’s academic and professional credentials are too numerous to list here but suffice to say her doctorate was awarded the Theodor Koerner Research Prize by the president of Austria, and she previously worked for both the Organization for Economic Co-operation and Development and the U.N.’s World Intellectual Property Organization. She is the founder and managing director of the law and economics consultancy OxFirst, which has won a number of prestigious awards for its work on IP.

    Roya Ghafele believes the nicotine industry should move away from the current disputative approach to patents and toward a collaborative approach, citing the example of Austria’s Empress Maria Theresa. Instead of indulging in the sorts of wars beloved of most people obsessed with empire building, Maria Theresa in the 18th century created strategic marriages for her children, thus ensuring the prosperity and expansion of Austria within a relatively peaceable Europe.

    One of the first points Ghafele made during a telephone chat in April was that, particularly in the tobacco industry, there needed to be a change in how those involved in such matters thought about IP. Not that current thinking was necessarily wrong, it was just that it wasn’t out of the box. She wants people to be creative about their IP and innovative in the way they think about patents. But what they had largely done so far, she said, was to follow the precise wording of the IP and patent rules set in stone since time immemorial. Companies had hired top law firms, and, given that litigating over patents was a lucrative business for lawyers, the result had been inevitable.

    This was not the place the industry needed to be, according to Ghafele. Tobacco companies currently sold toxic combustible cigarettes, a business model without a future, so the only chance these companies had to survive largely in their present form rested on changing the business model by using innovation to produce better, less risky products and innovation required, or at least was greatly assisted by, the creative use of patents. Litigation over patents would merely slow the transition to better products, which was not in the best interests of either the companies concerned or consumers.

    It is important to note, though, that this is not some pipe dream where companies turn into charitable trusts and markets turn into love-ins. Patents could be used as building blocks and instruments of change in order to grow businesses and make them better, Ghafele said. They could be used constructively to gain market share and trust and to fulfil the public health responsibilities companies have by providing as many consumers as possible with technologically better, less risky products and in the fastest time possible.

    If some of this sounds lacking in specifics, it’s not surprising, I think. The opportunities on offer are wide ranging, and they could be applied only in accordance with a number of variables that would apply uniquely to the business model of the company concerned, the products in question, the potential for technological development of those products, the company’s consumer profile and the public interest, to name just a few.

    But one problem with much of the above is that it seems difficult to understand how a company could use patents without at times litigating against those who infringe them, and Ghafele is well aware of this, admitting that what she was advocating sounded like the peaceful use of weapons—a contradiction. It was true that patents provided exclusivity in the market and a 20-year monopoly, but there were other ways of looking at things, especially if the field were opened up to the thinking of people from outside the usual IP establishment, even people with crazy ideas.

    Ghafele, an Austrian, made the point that she thought we needed to move away from the current disputative approach to patents and toward a collaborative approach. And she gave as an example of what she meant the case of Empress Maria Theresa of Austria, who, in the 18th century, instead of indulging in the sorts of wars beloved of most people obsessed with empire building, created strategic marriages for her children, thus ensuring the prosperity and expansion of Austria within a relatively peaceable Europe.

    At a fundamental level, Ghafele is concerned about the way businesses approach the whole process of patent management. To her way of thinking, business cases need to be aggressively thought out before new technologies and patents are devised and sought, whereas, too often, patents are created before it is figured out whether the underlying technology would ever be needed by the company. This could be done way better by, from day one, expending energy on examining the business proposition. How is this technology and how are these patents going to help us gain market share; how are they going to help us expand into new markets; how are they going to help us gain more friends …?

    You can see this idea coming through in her wider thinking about IP, a term she prefers to intellectual property rights because the former puts the business center-stage while the latter tends to put the spotlight on the law. Ghafele sees IP and patents not mainly as rights but as assets, as presenting an “amazing economic opportunity” because private property, including knowledge, could be handled in many different ways. It could be used in trade, she said; it could be taken to another country; it could be used to better communicate a company’s value and thereby to attract investors; it could be used to communicate a public health interest and how it is doing good; it could even be used as a donation. To use such assets only as rights and to litigate was to undervalue them massively.

    Although Ghafele is committed to considering new ways of looking at patents, she is not in the business of doubting whether patents should have a place within a free market. Concepts around private property were essentially down to political choices, she said, and it was her take that having in place private property rights was a way of structuring markets. She made the point that research had shown that, in the absence of private property rights, markets, in developing countries for instance, didn’t work. And she added that she tended to the opinion that, historically, positive economic growth rates had shown a direct relationship with the presence of property rights, something that held for IP rights. This was the area of Ghafele’s ideas that I found the least convincing, partly because I fail to see how research into the economic benefits of the patents system could produce valid outcomes, and I did manage to extract something of a concession here. “On the other hand, does an economy have to grow?” she mused out loud. “Would we all not be more happy and less stressed out without chasing growth rates all the time?”

    But this was a short interruption to her flow, and she went on to say that innovation drove growth, so it was important to examine the whole spectrum of how to innovate, which included the management of patents but went beyond patents into areas such as open access innovation, a subject too vast to look at here. But again, she doubled back by saying that while growth was important, it had to comprise equitable economic growth. And that was why public interest considerations had to be built into patents management. There was nothing inherently good or bad in patents. It was how people managed patents that counted. And, inevitably, there was a lot of debate currently about where the consumer stood in all of this.

    Finally, Ghafele said it should be remembered above all that IP was an asset, an economic opportunity, and it needed to be traded in a way that this economic opportunity could help people. Behind all the jargon, the message, to the tobacco industry at least, was very simple: If you have property rights over your technology, you should use them in a responsible way—to save lives.

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