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  • Kicking up Dust

    Kicking up Dust

    Photo: Roman

    Where should smokers turn for sound advice on quitting? That question is surprisingly difficult to answer.

    By George Gay

    Often, some of the most interesting aspects of conferences are thrown up by questions posed from the floor. And this was the case at the September 2021 GTNF in London where, from memory, a participant asked how a smoker could know who to approach for sound advice on using vaping devices to help her quit tobacco smoking. At first hearing, the answer seemed fairly obvious, but the more I thought about it, the more I realized how difficult it was to respond usefully to this important and insightful question. But to come to this realization, it was necessary for me to walk a little way in somebody else’s shoes: to examine the question not from the point of view of a person steeped in the information garnered from many vaping conferences but from the point of view of the smoker in the street struggling through a blizzard of contradictory messages.  

    So how can our smoker know who to approach for sound advice on using vaping devices to help her quit tobacco smoking?

    It would be good to be able to answer this question by pointing to official government agencies in whatever country the smoker lives, but this is problematic. If I look around the world, it seems to me that the number of people who live in countries whose governments I would call reasonably trustworthy is small, and I suspect that many smokers would agree with me. And this is the vitally important point here. Remember, most smokers will have no inside information about the benefits or otherwise of smoking and vaping, so they will be able to base their judgements about these habits only on whether, in general, they trust the source of the information being provided.

    Since I live in the U.K. and know a little about the workings of this country, let me expand on what I mean. Some might say with justification that the U.K. government has consistently put out messages that, in effect, encourage smokers wanting but previously unable to quit smoking to try switching to vaping devices. But our smoker can be expected to accept this advice only if, as a general thing, she trusts the government.

    Is this likely? I would suggest not. There are many stories doing the rounds at the moment that point to the untrustworthiness of the U.K. government in both its national and international dealings, but let me mention just one that I feel is relevant. The high court recently ruled that the government’s operation of a VIP lane for suppliers of personal protective equipment (PPE) during the Covid-19 pandemic was illegal. No prizes for guessing who were some of the big beneficiaries of this scheme, which didn’t always provide satisfactory items of PPE. Given this, it would not be unreasonable, I believe, for our smoker to question whether vaping devices were not being recommended by the government for reasons other than those to do with her welfare and that of other smokers.

    The question under consideration concerns “sound” advice, and so I should declare an interest. What is written above about lack of trust stands, to my way of thinking, whatever is your definition of “sound” advice about smoking and vaping. Some of what appears below, however, is about what I would call “sound” advice: advice that encourages smokers to try switching to vaping if they want to quit smoking and if they are unable to quit using other methods.

    There are, of course, some people who, according to this definition, could provide a smoker with sound advice and who would do so without fear or favor. There were a number of such people who sat on various GTNF21 panels or who participated in the conference in other ways, people of integrity who are experts in their fields. This is all very well, of course, but the genius of the question posed was that it got behind all of this to ask how the smoker in the street can get to know of these people and how our smoker can know for certain that these people are giving out sound messages. After all, everybody who is reading this magazine will be aware of the huge number of counter messages out there, sometimes published in respected journals under the names of people with qualifications that stretch around the block. Some of the people who I would regard as being experts acting with integrity have been maligned and had their work misrepresented in “good” journals. And messages from governments are often counter; those from the U.S. Food and Drug Administration are confusing while those from the World Health Organization appear to be both confusing and counter, which is quite an achievement.

    Learning from the Private Sector

    None of this is reassuring. But, as somebody once said, when you ask questions, you kick up dust, and it’s no good then complaining that you cannot see. So, let our smoker press on to discover what she might learn from the private sector.

    Well, let’s see. At one end of the scale are those companies that really don’t give a damn about the smoker or vaper and that are in the vaping business for a fast buck. Then there are companies intent on making a profit out of tobacco or nicotine, but that would be happier doing good than doing harm while making that profit. Of course, they are always going to be trying to sell the brands they offer, which they probably believe are the best, but about which others may have different opinions, and they are often going to be seen trying to put a spoke into the wheel of their competitors, no matter how potentially beneficial their competitors’ brands might be.

    And then there are companies that probably start out from the position that they want to do good but realize that to do so they have to stay in business, which means turning at least a modest profit. I think it is probably fairly obvious that if you’re looking for sound advice, it would be best to stay away from the first group, assuming that, as in the case of the other groups, you can identify its members. Members of the second group might offer a lot of sound scientific and technical information but, in listening to them, you would need to know how to split that information off from the commercial messages. Those of the third group, meanwhile, especially those among it that comprise vape stores, might give you the best objective advice, though it has to be kept in mind that objective isn’t always right or sound.

    Tobacco Control

    What about turning to tobacco control? As is suggested above, there are those in the tobacco control community who want to do good and who are embracing harm reduction; there are those who want to do good but cannot bring themselves to recommend products whose efficacy relies on their mimicking combustible cigarettes; and there are those who want to do good but haven’t got much of a clue, who believe that nicotine ingested during vaping causes cancer. And, unfortunately, there are those in tobacco control who seem to be interested only in keeping their jobs open until they retire, which means attempting to put a spanner into the works of tobacco harm reduction. To those of us imbued with the definition of “sound” advice given above, it doesn’t take too long to work out who it would be best for the smoker to listen to, but, again, you come back to the question: How can the smoker know?

    Other Considerations

    Everything that is written above looks at this debate from the point of view of the smoker who is thinking of quitting tobacco smoking so as to become healthier. But there might be other reasons. The smoker in question might also want to save money and/or the environment. At this point, things get easier and more difficult. For instance, the smoker wanting to save money doesn’t have to rely on outside advice; she can do the math for herself. The cost of cigarettes and vaping devices and consumables is information available in the public domain, so costing the two habits roughly is fairly easy on the basis of puffs, as advertised in the case of vaping devices. There is a difficulty in the form of a big unknown, however. What will be the future tax strategy of our smoker’s government as it is applied to vaping devices? And probably nobody could provide sound advice in this case, especially as the hue of the government might change if our smoker is lucky enough to live in a functioning democracy.

    Looking at environmental issues is even more difficult up to a point. How you compare the discarding of toxin-containing acetate filters with that of batteries and plastics would test most people, but it seems reasonable to assume that, since vaping devices are relatively new and upcoming while combustible cigarettes are old and on their way out, more development is going to be applied to the former than to the latter. Well, at least that is the case in those jurisdictions that encourage rather than disallow development.

    It is necessary, I think, also to say something about choice, which is seen as the great emancipator of consumers, at least by those who believe in the notion that the free market is the answer to everything. Smokers, such people may argue, are fortunate because they are able to choose between the wide-ranging information available across all media. But of course, this is not choice, it is simply confusion for most nonspecialists.

    So all is lost? Perhaps, though, then again, maybe there is something that can guide the smoker through: questions. Peter Abelard said that the only means we have of judging between apparently conflicting authorities is reason. “Through doubting, we come to questioning, and through questions, we perceive the truth,” he said.

    In other words, the answer to the question lies in asking—lots of—questions. Yeah, I’d go along with that.

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

    Damage Done

    Soldiers of the South African National Defense Force guard confiscated cigarettes. (Photo: SANF)

    Eighteen months after lifting its cigarette ban, South Africa still struggles with inflated illicit sales.

    By Stefanie Rossel

    Sometimes the best intentions yield the worst possible outcome. In an effort to protect its citizens from the impact of Covid-19, the South African government banned the sale of alcohol, cigarettes and vape products from March to August in 2020.

    For the legal cigarette market, the move backfired: Illicit trade, which according to market leader BAT South Africa (BATSA) already accounted for approximately 33 percent of all cigarettes sold in South Africa before the ban, soared to unprecedented new levels. “With very weak enforcement by government during the ban, the legal industry adhered 100 percent to the ban, but it gave the illegal players a golden opportunity to take over 100 percent of the market during that time,” explains Francois van der Merwe, advisor to the South Africa Tobacco Transformation Alliance.

    One and a half years after the ban was lifted, illicit tobacco still claims an estimated 60 percent of the total market, one of the highest shares in the world and only comparable to Malaysia. Out of a total market of more than 32 billion sticks, only 12 billion to 13 billion cigarettes were tax-paid in 2021, according to van der Merwe.

    Francois van der Merwe

    An online survey by the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP) showed that 90 percent of smokers continued to purchase cigarettes during the lockdown. Unable to buy their pre-lockdown brand, 46 percent of smokers switched from a multinational company brand to a brand produced by a local producer. Most of these licensed companies are members of the Free-Trade Independent Tobacco Association. Critics contend they conducted illegal business by selling vast quantities of their products at a fraction of the minimum collectible tax of ZAR21.60 ($1.41) per pack of 20—sometimes for as little as ZAR6 per pack.

    According to BATSA, these companies manufacture and earn profit on vast volumes of cigarettes while paying the South African Revenue Services (SARS) only a small portion of the tax owed. BATSA estimates that this under-declaration costs the country’s treasury at least ZAR8 billion annually. For the 2021–2022 government fiscal year, this figure is expected to rise to ZAR21 billion. BATSA reckons that more than 90 percent of all illegal cigarettes in South Africa are manufactured locally.

    During the lockdown, illicit whites were freely available, although at hugely inflated prices. The temporary sales prohibition dramatically changed the purchasing environment, the REEP survey found. Before the lockdown, 56 percent of smokers had bought their cigarettes from formal retailers, but only 3 percent did so after the ban had been lifted. The percentage of smokers who purchased from small informal spaza shops in townships increased significantly. Street vendors, friends and family or “essential workers” became new sources of cigarette supply. The profitability of dealing with illicit cigarettes attracted a range of new players, including crime syndicates, but also civilians seeking to make a living amid a worsening economic crisis.

    The financial damage of the ban was immense: It cost the government ZAR5.8 billion in tobacco tax revenue from BAT alone. In addition, the government lost a court case filed by the tobacco industry regarding the constitutionality of the ban. BATSA said it lost more than ZAR2 billion due to the sales ban.

    Johnny Moloto

    Smuggling Prevails

    While alcohol sales largely recovered after restrictions were relaxed, legal cigarette sales continued to languish. “Consumers have become used to buying illicit products, and this will make it increasingly difficult to eradicate the illicit trade,” says Johnny Moloto, general manager at BATSA. “The fiscus is projected to lose ZAR19 billion in cigarette excise tax in the 2021–2022 fiscal year alone as a result, which the country cannot afford.”

    In November last year, Ipsos found that illegal cigarettes were available in almost half of stores (43 percent) nationwide. Cigarettes are selling for the equivalent of ZAR8 per pack, close to a third of the ZAR21.60 in tax that should have been paid. “It is clear that taxes on these products could not have been paid by the manufacturer,” says Moloto.

    While reliably measuring illicit trade is inherently difficult everywhere, it is even more complex in South Africa, where cigarette packs don’t carry security features, such as stamps, indicated tax payments and illicit manufacturers comply with health warning requirements. The Ipsos study therefore used the “mystery shopper” model, under which researchers bought the cheapest cigarettes in almost 5,000 stores nationwide. Its findings echo those of the REEP survey. The ban, it said, would feed an illicit market that “will be increasingly difficult to eradicate when the lockdown and Covid-19 crisis is over.”

    Ahmad Ismail, general manager for southern Africa at Japan Tobacco International, believes South Africa has now reached that point. “The legal industry declined by over 40 percent alone during the Covid-19 tobacco ban,” he says. “Illicit tobacco flourished with very little enforcement during the lockdown. We have also witnessed an increase in cross-border smuggling in and out of South Africa, which was a problem that we had not experienced in several years. It will take more than three years for the legal industry to recover—not fully—if government acts immediately.”

    “The failure of government to enforce its own regulations during the sales ban was a golden opportunity for illicit operators to establish their brands firmly in the market in the absence of the legal brands,” says van der Merwe. “By dropping their prices post the lifting of the ban, they simply retained their market share, and the legal tax-paying brands are struggling to regain lost market share. With the lower volumes of legal brands, this resulted in many thousands of job losses across the value chain, including the most vulnerable jobs on farms in rural areas, but also in factories processing leaf and manufacturing products.”

    At an annual tax conference in 2021, the SARS commissioner noted that the lockdown brought about a proliferation of illicit cigarettes that has now embedded itself as an alternative to the regular brands. He said the SARS was fighting a losing battle in this regard.

    Ahmad Ismael

    Concerted Efforts Needed

    Although the major legal cigarette manufacturers in South Africa have called on the SARS and law enforcement agencies to increase their efforts to prevent criminal networks from selling illicit cigarettes, little has been done so far. In May 2020, the SARS canceled a tender for a track-and-trace system. “One of the main challenges was the lack of consultation with the industry, as local manufacturers and wholesalers would have been required to implement the system and bear the cost of implementation,” says Ismail. “Another challenge was that South Africa did not ratify the Framework Convention on Tobacco Control (FCTC) Protocol on Illicit Trade (ITP) and that the tender was not in line with the FCTC approach. This would have enabled them to align the system with global guidelines and systems being implemented and allocate a budget dedicated to fully comply with the protocol guidelines following a recommended and tested process implemented in Europe.”

    In 2020, the SARS instructed all cigarette manufacturers to install production counters that report directly to the authorities how many cigarettes are coming off the production line in real time. Moloto, whose company believes not enough is being done to combat illicit trade at this point, argues that this measure had not been enforced. Ismail claims that while being a step in the right direction, the system still relies on the transparency of manufacturers to report on their production levels.

    Moloto says the South African government must act to stop the flow of illicit cigarettes before the problem becomes even more entrenched. Both BATSA and JTI have asked the government to ratify the ITP immediately. “South Africa has been a founding member of the FCTC where the former minister of health, Honorable Dr. Aaron Motsoaledi, signed the ITP in Geneva in January 2013,” says Ismail. “Putting in place a track-and-trace system would allow tobacco products to be traced from the manufacturer to the wholesaler and to retail and contribute to the reduction of massive illegal cigarette trade.”

    JTI believes that a full digital volume verification system, in combination with a track-and-trace system, would be the most effective and affordable migration. This would give the government real-time insight into what is manufactured and thus help it curb under-declaration and tax evasion.

    “Track-and-trace aimed at tracking cigarettes from manufacturing plants to point of sale on its own will not prevent illicit trade,” Ismail admits. “However, it will support law enforcement agencies and legitimate businesses working in collaboration to reduce the problem. Consistent audits by the SARS need to continue, seizures of illegal tobacco products must intensify, and law enforcement agencies need to work in a coordinated manner to increase prosecution or closures of operators that decide to conduct illegal practices.”

    In addition to the other measures, BATSA has called for a minimum legal retail price of ZAR28 per pack. “This is a simple way to allow the police to seize illegal cigarettes more effectively without having to prove that the manufacturer has not paid the taxes due,” says Moloto. “It could be implemented quickly through the declaration by the government of a minimum price for cigarettes. It would also help consumers to differentiate between legal and illegal products.”

    South Africa’s experience proves that prohibition does not work, according to Ismail. “Illegal trade cheats everyone: governments, society, consumers and legitimate businesses,” he says. “It robs governments of tax revenues, harms hardworking retailers and invites organized crime into communities.”

    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.
  • Fired Up

    Fired Up

    Nina Ritter-Reischl, in front of Glatz LIP paper machine
    (Photo: Julius Glatz)

    Having prevailed in an intellectual property dispute, Julius Glatz prepares to reenter the market for lower ignition propensity cigarette papers.

    By George Gay

    Julius Glatz is to reenter the market for lower ignition propensity (LIP) cigarette papers.

    This follows a four-year hiatus during which it was forced out of that market as a result of a patents dispute it eventually won in September last year, after a legal battle that, in total, lasted six years.

    Nina Ritter-Reischl, a managing partner at Glatz, told Tobacco Reporter during an exchange in January that, having overcome the difficulties of those four years, the company, which produces a large range of papers, mainly for the tobacco industry but also for other industries, was keen to return to the LIP market and, indeed, had already started work on doing so.

    And this won’t be a case of starting from scratch, of course. “As we were able to retain at least some of our core personnel, we can build upon their know-how and knowledge to produce LIP papers with the high standard our customers know us for,” said Ritter-Reischl. “Our customers will still find their former contacts in our technical, R&D and sales teams.”

    Meanwhile, the machine that Glatz used in the past to produce its LIP papers has been geared up at the production site where those papers were manufactured previously, in Neustadt, Germany, about 10 km from the company’s base in Neidenfels. “Our LIP machine has been maintained during the down period, some parts have been renewed, and our control technology has been upgraded within the last months,” said Ritter-Reischl. “Those investments were made to ensure production of all kinds of LIP papers.

    “As our application system is very flexible,” she added, “our production range and products are as well. We can therefore produce LIP papers to the specifications our customers were used to, or we can develop papers with new specifications according to our customers’ needs.”

    Of course, during the period when it wasn’t possible for Glatz to manufacture LIP papers, the company didn’t just sit on its hands; it used the time to concentrate on another type of demanding tobacco industry paper. “We were able during those four years to focus on another part of our core competences—our tipping base paper production,” Ritter-Reischl said. “Those papers also are very complex and demanding papers in the industry, and our quality and service for those is a benchmark.”

    That’s not to say, however, that the renewed opportunities that LIP paper production now offer isn’t massively important. In corresponding with Ritter-Reischl, I got the impression that Glatz was not only taking a huge amount of pleasure in being able to restart its LIP papers operation but also relishing the fact that this meant it could once again offer a complete range of tobacco industry papers. “Entering back into the LIP market, we at Glatz can offer our customers not only additional papers, [but] we can again provide them with the full-service range of all papers for the industry, from plug-wrap papers and tipping base papers to cigarette papers, including LIP papers,” she said. “We are able to offer all these papers manufactured to the highest qualities and within the most demanding specifications. And we can offer a flexible service delivered through short lines of communication by a dedicated team of traditional paper makers.”

    Currently, Glatz’s LIP papers production unit is making trial runs to produce papers of various specifications for a number of interested customers, but it expects to have to ramp up its production level to full manufacturing mode during the next few months.

    Ritter-Reischl, who is a lawyer, seemed frustrated that discussions and legal disputes over one LIP patent had taken so long but pleased that that period was now behind the company. “As the patent was held to be invalid, this pulled the rug from under all the accusations made against Glatz,” she said. “But, needless to say, this dispute and the interim consequences were a burden for us over the past four years, and only a company like ours with a very resilient financial, social and competitive structure would have been able to endure such a phase.”

    Julius Glatz is a family-owned medium-sized company with more than 135 years of experience in producing paper in Neidenfels, Germany. “We are a traditional and sustainable asset in the region, being ourselves aware of the responsibility we have toward our employees, our environment, our suppliers and, most important[ly], our customers,” said Ritter-Reischl.

    The company was started in 1885 by Wilhelm Adolph Glatz, Franz Julius Glatz and Hans Haehnle when, between them, they founded the Glatz papermill at Neidenfels in the Palatinate Forest. Almost 100 years later, in 1990, Glatz became the first fine paper manufacturer to offer thin printing papers and cigarette papers of TCF (totally chlorine-free) quality. And, in 1994, Glatz became part of the first Sino-German joint venture in the field of tobacco industry papers with the founding in Yunnan province of Yunnan Hongta Blue Eagle, which quickly went on to produce premium cigarette paper of international quality standards.

    Now, as it navigates 2022, Glatz can look forward to the boost that being able once again to participate in the LIP papers market will bring. But the question arises as to what the future holds for Glatz beyond LIP papers, and Ritter-Reischl started answering this question by admitting that, overall, the outlook for the traditional tobacco industry was not exactly rosy. Everyone knew, she said, that the tobacco market in general was difficult, as regulations and tobacco product taxes were increasing while the number of smokers was decreasing. Nevertheless, she indicated, Glatz was optimistic about the future, and part of that optimism seems to be coming from what is perhaps an unexpected source. “Due to the coronavirus pandemic, customers have come to realize how important local sourcing, flexible service and short communication tracks are,” said Ritter-Reischl. “And those are all services and assets that we can offer firsthand.”

    Another reason for optimism at Glatz was that the idea of sustainability was becoming more and more important and into focus, said Ritter-Reischl. “As a family-owned business with a history of 135 years in paper making, [we] are sustainable by our very nature,” she said. “We value our employees and suppliers, we take care of our environment, and our customers are always in focus as we conduct every aspect of our business.”

    Of course, individual businesses can expand even when the markets they serve are not expanding by, in one way or another, increasing their market shares or by diversifying. And in this regard, Glatz sees opportunities arising in the future as paper products come to replace other materials, such as plastic. “Our thin papers with their special haptic properties can be used in other industries to substitute for foil or other wrappers,” she said. “Therefore, alongside our tobacco papers specialization, we have the opportunity of diversifying into other aspects of fine papers. And this will be one of the options we will focus on in the future and that will help keep us optimistic in the face of the challenges to come.”

    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.
  • A Balancing Act

    A Balancing Act

    Photos: Taco Tuinstra

    Embracing tobacco harm reduction might help Indonesia ease the tension between dependence on tobacco revenues and rising healthcare costs.

    By Stefanie Rossel

    Tobacco or health—for Indonesia, the choice embodied in that slogan presents a real dilemma. On the one hand, the world’s second-largest cigarette market and fifth-largest producer of leaf tobacco is highly dependent on the revenue from the sector. Statista expects revenue from the cigarette segment to reach $24.86 billion in 2022, up 5.8 percent from 2021. On the other hand, the country is facing increasing healthcare costs for the treatment of tobacco-related illness. An October 2021 study by the Indonesian Development Foundation found that tobacco-induced morbidity, disability and premature deaths were responsible for economic losses of IDR375 trillion ($26.04 billion) in 2019—a fifth of the total state budget.

    Indonesia is unlikely to find a way out of this quandary soon. Smoking and tobacco cultivation have been deeply rooted in the nation’s culture since the 19th century. The market is unique in that it is largely dominated by kreteks or clove cigarettes, which represent around 95 percent of all cigarette sales. While tobacco consumption has been declining, Indonesians still smoked a whopping 300.2 billion cigarettes in 2019. With roughly 75 percent, the vast majority of cigarettes consumed are machine-made kreteks. Hand-rolled kreteks account for around 20 percent of the market.

    Indonesia has one of the highest smoking rates in the world. According to a national survey from 2018, the country is home to almost 100 million smokers. More than one-third (33.6 percent) of adults use tobacco. Smoking is a male habit; 62.9 percent of men are smokers compared to only 4.8 percent of women. Worryingly, smoking is also common—and increasing—among minors. Ministry of Health data show that 33.8 percent of youths under the age of 15 smoked in 2018, up from 32.8 percent in 2016. Other data suggest that an estimated 20 percent of children under the age of 10 have tried a cigarette.

    The Covid-19 pandemic, in combination with cigarette excise tax increases, has depressed incomes and pushed smokers toward lower priced products, a trend the industry has met with smaller packages. This, in turn, has driven up demand for higher tar kreteks.

    In 2020, five major corporations controlled almost 90 percent of the Indonesian cigarette market, according to the Southeast Asia Tobacco Control Alliance. Sampoerna led the market with a share of 32.5 percent followed by Gudang Garam (27.5 percent), Djarum (18.7 percent), Bentoel (8 percent) and Nojorono Tobacco Indonesia (3 percent). The remaining 10.3 percent are made up by an estimated 500 small-sized to medium-sized manufacturers.

    Tobacco is a major employer, providing work to 5.98 million people, of which 4.28 million work in the cigarette manufacturing and distribution sectors and 1.7 million in tobacco cultivation, according to the Indonesian Development Foundation. In 2019, this corresponded to 0.34 percent of total employment in the manufacturing sector. As in many tobacco-cultivating countries, leaf is grown mainly by small-scale farmers who rely solely on tobacco. The tobacco farming sector also struggles with child labor. In 2002, Indonesia committed to eliminating it in all forms by 2022. In 2019, the U.S. Department of Labor noted that Indonesia had made “moderate advancement” toward this goal (see “Homework Due,” Tobacco Reporter, February 2021).

    The tobacco industry remains a major employer in Indonesia.

    Incoherent Policies

    With tobacco playing such a large role in the country’s economy, Indonesia’s tobacco control efforts have been halfhearted. It is one of only nine countries that have yet to ratify the World Health Organization Framework Convention on Tobacco Control. Decentralized decision-making has led to fragmented policies. Responsibility for tobacco policy is spread among the president’s office, six national ministries and an independent agency.

    Nonetheless, some progress has been made. Since 2014, cigarette makers must print pictorial health warnings covering 40 percent of each pack. Smoking bans have been implemented for public transport, healthcare facilities, educational facilities, places of worship and playgrounds. Tobacco advertising on TV and radio remains permitted with certain restrictions. There is no minimum age limit to buy cigarettes, and selling cigarettes by the stick is common practice.

    Despite regular excise tax hikes, cigarette prices in Indonesia remain among the lowest in the Asia-Pacific region. The tobacco excise tax remains far below the 75 percent of retail price recommended by the WHO. Indonesia’s tobacco taxation system is also dauntingly complex. Until recently, cigarette tax rates were divided into 10 tiers based on product type, volume and price. The tiers are meant to protect smaller manufacturers and local jobs from competition. Under the government’s 2017 “tobacco roadmap,” the number of tax tiers were supposed to be cut to five by 2021 to reduce the incentive for smokers to switch to cheaper products. The plan, however, was withdrawn in 2019. In November 2018, the coordinating ministry of economic affairs launched a new tobacco roadmap emphasizing the importance of the industry and arguing for its protection until 2025.

    Effective Jan. 1, 2022, Indonesia increased its tobacco excise across cigarette types by an average of 12 percent. In addition, the number of tax tiers was reduced from 10 to eight. According to the ministry of finance, the tax reform aims to counter the rising healthcare costs caused by increasing smoking prevalence and to reduce the smoking rate among adolescents aged 10 years to 18 years.

    Harris Siagian

    Promoting Tobacco Harm Reduction

    To help the country escape move forward, the Indonesian Development Foundation has proposed a tobacco transformation program that seeks to address certain policy gaps. It has created a roadmap that, among other things, proposes to complement existing policies with harm reduction initiatives. By emphasizing reduced-risk products (RRPs), the foundation believes Indonesia can reach smokers who have been overlooked by the current policies.

    “The draft roadmap targets to diminish substantial economic costs and productivity losses associated with cigarette smoking by introducing a cost-benefit analysis approach to estimate the strengths and weaknesses of alternative, reduced-risk products,” explains Harris Siagian, one of the authors of the report. “It will measure and compare the costs of cigarette smoking-attributable diseases and the economic costs of reduced-risk product use.”

    The guideline also recommends increasing the affordability and accessibility of RRPs. According to its authors, the excise tax on RRPs should be lower than that for combustible products.

    Indonesia classifies noncigarette tobacco products as “other tobacco processing products,” or Hasil Pengolahan Tembakau Lainnya (HPTL). These include molasses-based tobacco products, snuff, chewing tobacco and RRPs, such as e-cigarettes and heated-tobacco products (HTP). All HPTL products are subject to the maximum excise tax rate of 57 percent.

    Among RRPs, e-cigarettes, which hit the market in 2010, are significantly more popular than HTPs, which were introduced to Indonesia in 2019, and the vape market is growing. According to the Indonesian Development Foundation Report, there were 2.2 million vapers in the country in 2020. Apart from provisions on import and excise tariffs, there is no specific and comprehensive regulation of HPTL products yet, and policies appear uncoordinated between regulators. While the Food and Drug Monitoring Agency would like to ban vape products altogether, claiming they could be a gateway to youth smoking, the health ministry wants to regulate e-cigarettes as conventional tobacco products. This, in turn, is opposed by the ministry of agriculture, which fears that such regulation would burden tobacco farmers.

    Indonesia aims to simplify its complex tax ystem.

    Complex Task

    To address such conflicts, the Indonesian Development Foundation committee team advocates incorporating RRPs in the national smoking cessation programs. “The products will be available to users, on an incentive basis, through registered outlets and clinics,” says Siagian. To help fund the initiative, the committee suggests using money from the revenue-sharing fund of tobacco products excise, which collects 2 percent of the total tobacco excise funds at the national level and distributes it to regional governments.

    The roadmap also takes farmers into consideration. Locally grown tobacco will be directed toward RRPs, and farmers will be encouraged to diversify into other crops. To help eliminate child labor, the program calls for strengthening local government initiatives to provide basic education access and other supportive measures for children involved in tobacco farming.

    Affordability is a well-known challenge to the success of RRPs in low-income and middle-income countries. Nonetheless, Siagian is confident that RRPs will succeed in Indonesia: “Over the past 20 years, there has been a significant shift of the vulnerable lower middle-class population that has climbed out of poverty and into the aspiring educated middle class, and these demographic groups are shifting toward more health-conscious and hygiene products, including in their use of tobacco products,” he says.

    “The educated middle class, which currently accounts for 52 million people out of a total population of 273 million Indonesians, are favoring e-cigarettes as part of their lifestyle, and these population groups are more open to healthy-yet-stylish products, which means a great opportunity for RRPs. The Indonesian middle class has been a major driver of economic growth as the group’s consumption has grown at 12 percent annually since 2002 and now represents close to half of all household consumption in Indonesia, which means that price is not a major concern for these groups when purchasing RRPs. A suitable brand ambassador, product choices, accessibility and affordability will play an important role in RRPs for the middle-class groups.”

    Transforming Indonesia’s tobacco control policies will be a tough nut to crack. The Indonesian Development Foundation’s proposed roadmap, therefore, is a multi-step plan, with the first stage of implementation expected to be concluded within a two-year period—provided that the country’s development priority plan, which includes the elimination of child labor, remains under the control of the current government, says Siagian. “The overall program is expected to be accomplished in five years, with an additional three years of implementation under the next government as the continuation of the first-stage program,” he says.

     

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

    Pure Play

    Photo: Essentra

    Filter manufacturers consider their strategies in an increasingly challenging environment.

    By Stefanie Rossel

    In October last year, Essentra fueled speculation about the future of its filter business: The Singapore-based company, which manufactures plastic caps, work-holding clamps, fasteners and knobs, said it was studying strategic options for two of its three divisions, cigarette filters and packaging, in an attempt to become a “pure play” components business over time. The review is expected to conclude by the end of June 2022 at the earliest. Since the announcement, the company has appointed several new people to key positions, including Robert Pye as Essentra Filters’ managing director.

    SK Low

    “A strategic review normally covers the full range of strategic options for a business, i.e., the best structure for that business to reach its full potential and deliver value for shareholders,” explains Seng Keong Low (SK), global marketing manager at Essentra Filters. “These reviews can include a number of potential outcomes including sale, demerger and other outcomes. We don’t yet know what the outcome of the filters review will be, and no decisions have been made regarding any of the divisions. The filters business will still be in operation, just that it may or may not be under the banner of Essentra pending the outcome of the strategic review. The most recent appointments to the global filters leadership team are longtime filters leaders, which were decided before the announcement of the strategic review.”

    According to the company’s 2021 pre-close trading update, the filter division performed well in the fourth quarter of 2021, with revenue up 22.3 percent during that period. “The division continues to benefit from higher volumes from outsourcing contracts and a strong performance in Europe,” the update said. “Further progress has been made in the delivery of its ‘game changers’ with the China joint venture continuing to gain momentum after successful commencement in June. Our range of proprietary eco and heated-tobacco products continue to attract increased interest. The number of projects underway continues to grow.”

    At the end of 2019, Essentra announced the establishment of a joint venture in China, China Tobacco Essentra (Xiamen) Filters, which launched in June 2021. Shareholders in the joint venture are Essentra with 49 percent, China Tobacco Fujian Industrial Co. with 21 percent, and three Chinese investment management companies holding ten percent each. The JV manufactures specialist and next-generation filters locally at a new facility in Xiamen in Fujian province.

    Tackling Logistics

    While awaiting the outcome of Essentra’s strategy review, filter manufacturers must navigate the ongoing global logistics crisis, which has led to a shortage of shipping containers, significant in freight rate hikes and delays in the supply chain. “We have been working closely with all partners covering long-term plans that required more accuracy than before,” says Hyunyoung Park, sales and business development manager at Taeyoung Industry Corp. in South Korea. “Nevertheless, other activities, such as keeping a high level of stock or production capacity build-up, can help to mitigate the delivery issue. However, it is affecting factory operation severely.”

    Essentra says it is experiencing extended lead times on deliveries from many suppliers. “To ensure supply continuity, we are working several BCP (business continuity planning) plans, e.g., holding more safety stocks, working on finding more local solutions, etc.,” says SK. “To minimize supply disruption and delay to our customers, we are doing additional pre-build where possible, making advance bookings for deliveries and driving more end-to-end synchronization of our materials planning with finished goods delivery.”

    In addition to supply chain challenges, the price of raw materials, including wood, has risen significantly due to the Covid-19 pandemic. Wood, of course, is the basis of cellulose acetate tow used in cigarette filter production. “We have seen increases across our raw materials as well as other commodities, from packaging materials to spare parts,” says SK. “The increase in wood prices has affected our plug wrap suppliers, acetate tow suppliers, packaging and pallet suppliers. We are also seeing significant increases in power prices.” Because of these developments, Essentra Filters had to raise prices in 2021. “We have to find the right balance in accepting and passing on any price increases and constantly evaluate our positions with both suppliers and customers given any potential changes in the pandemic situation around the world,” says SK.

    Park has also observed an impact on prices due to the logistic and raw material situation. “Raw material price is affecting not only our factory operation but [those of] other manufacturers as well. However, the cost of logistics is underlying geographical influences, which made it difficult for the export business and increased chances to find alternative suppliers for cost saving or minimizing cost impact, and these activities will concern all manufacturers involved in the cigarette business except major players.”

    Growing Importance

    Another theme affecting the filter sector is sustainability. In July 2021, more parts of the European Union’s Single-Use Plastics Directive entered into force. While cigarette butts have been exempted from the rules for the time being, a provisional agreement in the legislative process seeks to further encourage innovation in the development of sustainable alternatives to plastic-containing tobacco filters through the introduction of extended producer responsibility (EPR).

    EU member states have until Dec. 5, 2023, to set up EPR schemes for tobacco filters, but to date, there is no implementation guidance for member states. Since July 3, 2021, all packs of filtered tobacco products in the EU have been required to display a pictogram against littering.

    Legislators in other jurisdictions are considering similar measures. In February 2022, Californian lawmakers introduced a bill that would ban the sale of single-use cigarette filters and vapor products. Under the bill, sellers would risk fines of $500 per violation, defined as the sale of one to 20 items. Ninety percent of the approximately 12 billion cigarettes sold in California each year are filtered. The state spends millions of dollars annually on cleaning up cigarette litter, according to proponents of the ban.

    “Sustainability has always been important to us at Essentra Filters, and we have long had nonplastic filters in our product portfolio,” says SK. At the end of last year, the company added two new varieties to its sustainable filter range: the ECO Active Filter, a plastic-free alternative to active carbon acetate filters that is 100 percent biodegradable, and the ECO Flute Filter, a nonplastic alternative to the company’s Combined Performance Superior Filters. The design of the Flute Filter is customizable for length, circumference, pressure drop and flute length and can be combined with other filter segments. “Our new ECO range is currently the largest step change in our sustainability efforts, and with an increasing number of customers asking us about sustainable, nonplastic filters, we are confident that investing our innovative efforts in sustainability is the correct strategy,” says SK.

    Park, who in a previous interview mentioned that Taeyoung’s research and development department was working on filter development with nonacetate tow and carrying out studies on the replacement of conventional filter materials, said that the company had made progress with that initiative. “However,” he added, “market feedback is more important for actualization. I believe this kind of development is continuing under rapidly changed business circumstances including environment, social, governance criteria.”

    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.
  • Laser Liaison

    Laser Liaison

    Photos: Heinen Koehl

    Heinen Koehl’s coding equipment combines serialization and aggregation in one unit.

    By Stefanie Rossel

    Last November, parties to the Protocol on Eliminating Illicit Trade in Tobacco Products gathered virtually to strengthen the treaty that had entered into force three years earlier. Among the decisions adopted was a roadmap to improve the global track-and-trace system. Currently, use of track-and-trace systems for tobacco products is probably most advanced in the European Union, where it is regulated under articles 15 and 16 of the Tobacco Products Directive. For cigarettes and roll-your-own products, the EU has mandated traceability and security features since May 20, 2019. By May 2024, it will be compulsory for all other tobacco products, including cigars, cigarillos and smokeless tobacco products, as well.

    For tobacco product manufacturers, placing individual identifying codes on each pack and then on each bundle is a challenging additional step in the production process. Heinen Koehl, a Luxemburg-based supplier of processing and logistics equipment for the tobacco industry, has developed several machines to facilitate that process. The Label Application System (LAS) and the Laser Coding Extension (LCE) have been designed for “pack-to-bundle” aggregation.

    “The LAS applies a bundle label onto the head side of each bundle and verifies this bundle with a camera. In contrast to the LAS, the LCE serializes each single pack within the bundle with a laser to provide it with a unique track-and-trace code,” says Stefan Hahn, managing director at Heinen Koehl. “This code is then verified with a camera system to carry out the aggregation. Contrary to traditional solutions available in the market, where various printing technologies such as CO2 or ink printers have to be implemented into existing bundle packers, we have developed a patented stand-alone solution. By using a special laser designed by expert company Koenig and Bauer Coding, we can apply the unique track-and-trace code to the pack through the overwrap without destroying the film. This is not only an advantage in production, but also for the security, availability and performance of the track-and-trace system.”

    Standardized Solution

    Easy integration is the greatest benefit of the LAS and LCE, which together can be built into the production line without changing the existing equipment. Since existing machinery doesn’t have to be adapted to additional hardware and functionality, the implementation time is significantly shorter than with other solutions. Similarly, the stand-alone combination can easily be moved to another production line or location without complex conversions of existing equipment, according to Hahn.

    “With our solutions, serialization and aggregation of individual packs into bundles is carried out in one unit,” he says. “Other technologies require several production steps between serialization and aggregation, which means potential risks for the track-and-trace functionality.”

    According to Heinen Koehl, the LAS/LCE combination is a standardized solution independent from packer type. This means that operators and maintenance staff don’t need special training. Maintenance is similar for both machines within a manageable expenditure of time.

    The LAS/LCE combination can be adapted to all bundle types and sizes and allows for easy format changes. It has been designed for all speed ranges with up to 100 bundles per minute and up to 1,000 packs per minute, respectively.

    While the LAS/LCE is presently being used for coding packs and bundles of cigarettes and cigars, Heinen Koehl has developed an additional machine especially for roll-your-own and pipe tobacco pouches based on the same technology. Known as LAS Pouch, this machine combines coding, verification, bundle label application and aggregation into one system that lasers the track-and-trace code on the pouch through the film.

    Heinen Koehl also offers solutions for the manual aggregation of tobacco products that can be adapted to customer requirements and minimize disruption of the production process.

    Suitable also for yet-to-be-regulated markets, Heinen Koehl is delivering its coding equipment to customers worldwide, including to clients in the U.S., Europe, Russia, the UAE, Saudi Arabia and Indonesia. As track-and-trace requirements spread around the world, Hahn says he sees great potential in other markets as well.

    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.
  • Holding the Line

    Holding the Line

    Photo: Schmidt Pest Management Consulting

    The war on tobacco insect pests continues.

    By George Gay

    On being asked recently whether the war against tobacco insect pests would ever be won, most of the experts and interested parties contacted, referring mainly to post-harvest tobacco in transit or storage, said no, qualified in one way or another. But Vernon Schmidt of Schmidt Pest Management Consulting wondered whether “winning” or “losing” was the best way to judge what was happening overall. The important point in the battle against the tobacco beetle and tobacco moth, he said, concerned whether industry players were working together, communicating well and implementing fundamental pest control strategies. In other words, was the industry stewarding its resources well to allow it to use the tools available to it wisely and thereby minimize tobacco and tobacco product losses?

    “Communication lines need to remain open, and cooperative research needs to be supported by the players within the industry in order for us to stay ahead of the insect pests,” said Schmidt in an email response. “This is the brilliance of Coresta and the work of its Subgroup on Pest and Sanitation Management in Stored Tobacco [PSMST].”

    Worryingly, however, he added a caveat that is unlikely to have come out of the blue. “Pulling out of cooperative endeavors and doing it on our own will not be a winning strategy,” said Schmidt, who was closely associated with Coresta and the PSMST in the past, and who is likely to be so again shortly after a break made necessary by his transition from an employee of Reynolds American to starting his own consultancy.

    And Schmidt had other warnings. There would be no success without the industry’s putting in the hard work of implementing fundamental pest control practices, and there would still be challenges, he added, even where the fundamentals were in place. Phosphine resistance remained a challenge and would continue to worsen if the industry did not address the causes. Insisting on quality phosphine fumigations remained a must, and consideration had to be given to eliminating ineffective fumigations, such as container fumigations, or, at least, implementing measures to improve them greatly by, for instance, requiring barrier sheeting be placed on the floors of containers before loading to minimize gas leakage.

    And in what seemed to me to be a minor bombshell, Schmidt admitted that the way in which phosphine worked as a fumigant still needed to be understood better and should continue to be investigated cooperatively. Such investigations, he added, would likely lead to a revision of the Coresta Fumigation Guide and require a new round of global training.

    Exploring Alternatives

    At the same time, the 30-year search for an alternative to phosphine should continue, again co-operatively, said Schmidt. There was promising work underway investigating a potential alternative to phosphine, sulfuryl fluoride, which offered a completely different mode of action from phosphine. This had the potential to break phosphine resistance where it existed and, additionally, preserve phosphine as an excellent tool for the industry.

    And moving away from fumigation techniques, Schmidt said controlled atmosphere (CA) and freezing treatments should be implemented where feasible.

    Rene Luyten, a director at b-Cat, which installs CA chambers, made the point that tobacco insects were difficult to control, partly because they were able to adapt to new circumstances. In other words, while it was possible to eliminate such insects in individual tobacco batches, there were often routes through which others could enter those batches. In part, this was down to the very nature of tobacco, which is a bulk product subject to transportation, division into smaller consignments and storage. Additionally, tobacco doesn’t exist in isolation but is sometimes stored alongside other products that also provide homes and breeding grounds for insects of concern.

    Indeed, Luyten said it was possible to have in-house clean tobacco free of insects or to receive clean tobacco on one day and the next day to have a huge issue with insects. Of course, the severity of the problem would depend, in part, on the location of the warehouse, with those in warmer climes likely to experience more insect activity. But such issues could arise in many places, added Luyten, even when everybody in the tobacco chain did their best to avoid infestation. Fumigators might comply with best practices that conformed with the guidelines laid down by Coresta. And warehouses might employ best practices in respect of storage, including the use of good sanitation programs. But it wasn’t always possible to have control of all factors, such as when a neighboring warehouse storing raw food didn’t employ strict and proper sanitation protocols.

    Controlled atmosphere technology offers a “green” solution for pest control.
    (Photo: b-Cat)

    Positives and Negatives

    Schmidt, too, saw positives and negatives stretching along the supply chain. A positive would see farmers eliminating carry-over tobacco, but the fact that farmers were unable to treat their post-harvested tobacco was a negative, he said. The receipt by processors of infested tobacco was a negative while the lethal effects to insects of processing was a positive. Reinfestation during transport was a negative while monitoring programs for transported tobacco provided a positive. Good segregation practices during storage constituted a positive, but undetected phosphine resistance was a negative. Continually improved cleaning programs at manufacturing plants constituted a positive, but insect harborages that could not be eliminated without dismantling equipment comprised a negative.

    There is at least one caveat you have to add to the idea that the war against tobacco insects cannot be won. It can be won in the sense that insects of all types and in all their life stages can be eliminated from tobacco just before it is manufactured. Luyten said an increasing number of tobacco manufacturing plants were installing CA technology, which he described as a “green and natural treatment method” offering a 100 percent mortality rate among insect pests in all their life stages. In fact, b-Cat’s main building program currently involves installing CA facilities, including remote control and monitoring systems, at manufacturing sites.

    Away from the major manufacturing sites, things are rather different. For instance, Guy Harvey, the CEO of Transcom Sharaf in Africa, who is based out of Mozambique, said businesses in that part of the world used only chemical fumigation, though this was not for want of trying other methods. Harvey said his company had completed trials on the use of CA in Mozambique but that it seemed the industry was not ready for it yet, which I took to mean that companies further down the supply chain were not willing to help pick up additional costs arising from CA. Certainly, in Harvey’s view, the capital costs of CA were holding back its use in Mozambique.

    This might be unfortunate, though it has to be remembered that fumigation can be effective. Nico Vroom, who runs the consultancy N.I.C.O, also believes the war against tobacco insects will never be won, but he believes, too, that infestations can be kept to a “manageable level” through the use of good fumigation practices and through the employment of recent technological advances, such as sensors for constantly monitoring tobacco.

    While complete victory in the battle against tobacco insects is some ways off, infestations can be kept to a “manageable level” through the use of good fumigation practices and through the employment of recent technological advances, such as sensors for constantly monitoring tobacco.
    (Photo: Transcom Sharaf)

    Ongoing Monitoring

    One respondent who didn’t give an unequivocal “no” in answer to the question about whether the industry was winning the war against insects was Steven Bailey, managing director of the Barrettine Group, which manufactures the Mobe Combo insect monitoring trap. Bailey said he thought it unlikely that the industry was winning the war, but that it might be holding its own. Traditional treatment methods using fumigants were limited to only a few. He was unaware of any new pesticides coming through beyond, perhaps, sulfuryl fluoride, he added, and due to high regulatory and approval costs, didn’t expect there to be any anytime soon. This, together with ongoing phosphine-resistance issues, was a concern, but CA treatments in conjunction with insect monitoring and traditional methods were helping the industry to stay on top of the problem. The importance of ongoing insect monitoring was therefore essential in pinpointing infestations so that control measures could be carried out as soon as identified, thus preventing any infestation from escalating. 

    One of the matters that gets little airing in respect of tobacco insects concerns responsibility. Who is or should be responsible for ensuring tobacco is taken in at its destination—at the manufacturer’s site—insect-free? 

    Well, according to Rainer Busch of NewCo, currently, the shipper is obliged to fumigate tobacco before loading, even though it is very difficult for the shipper to control what happens to that tobacco during transport and when it is opened at its destination. And if the tobacco was found to have insect infestation at its destination, to have been infested during transport, it was necessary to refumigate it or put it through another treatment. It would therefore be better economically and financially to avoid having to carry out two treatments by switching the fumigation or other treatment from the point of shipment to the destination.

    It would seem that while the industry might not be winning the war against insects, it is not losing all the battles. Evripidis Christidis of Missirian told me that the application of integrated pest management techniques was helping the industry to win in the region in which his company operates—the region where classical oriental tobacco is produced. In general, the amount of leaf tobacco currently lost to insects was proportionally less than it had been during past decades. But, he added, this sort of success required close attention being paid in five areas:

    • Personnel training and awareness;
    • Facilities management, including cleaning and sanitation, operating with open structures and creating barriers to insects, such as air curtains and mesh nets, and segmenting the green and final products;
    • Selection of suitable means of transportation;
    • Pest monitoring, with pheromone traps, and the use of UV lamps and space/surface fogging when necessary during tobacco storage; and
    • Pest control methods.

    Another factor that had helped the industry attain better results was the use of only specialized and licensed contractors to perform control and prevention activities, said Christidis. And yet another had been the introduction of Coresta standards for the fumigation in respect of resistant beetle populations, which basically involved higher phosphine concentrations and longer exposure times. A radical but expensive proposal would involve vacuum or nitrogen packing of the final leaf product.

    Learning Lessons

    The importance of Coresta was raised by most respondents, and so it is unfortunate that the Covid-19 pandemic has interfered with some of its work, including the PSMST’s Infestation Control Conferences that, until the pandemic struck, had been held annually around the globe. Of course, there have been other problems caused by the pandemic. Shipping delays have created tobacco transport congestion, and there have been interruptions caused by staff shortages, supply chain difficulties and other transport issues. But the pandemic has also caused a lot of rethinks, some of them positive. Luyten told me that while the start of the pandemic had caused concern, it turned out the past two years had been the best ever for b-Cat’s business. When travelling became almost impossible, it was discovered that internet communications using Teams or Zoom could easily stand in for some face-to-face meetings. “I do hope that everybody is having the same idea,” said Luyten, “that we have learned from this pandemic that travelling, which was a common thing, is not always needed. We all can save a lot of time and help the planet.”

    Which brings us, perhaps, to the most important question. In fighting tobacco insects, are we winning or losing the environmental battle? And there seems to be some good news here. Schmidt told me that industry practices had little negative environmental impact. Beneficial insects were not threatened by current common practices, he said, and phosphine readily broke down in ultraviolet light. At the same time, however, continued training on best practices would help with reducing the improper use of insecticides and excessive fumigant use.

    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.
  • Holography: Helping Stamp Out Tobacco Counterfeiting

    Holography: Helping Stamp Out Tobacco Counterfeiting

    IHMA says holography plays a key part in tobacco tax stamp programs. Image credit: OpSec

    Paul Dunn, chair of the International Hologram Manufacturers Association (IHMA), looks at how holography plays an effective part in tobacco tax stamp programs.

    Illicit smuggling and counterfeiting cost treasuries billions of dollars a year in lost revenue. And it’s not just a financial cost that affects governments—tobacco manufacturers can see brands tarnished, revenues tumble and market capitalization dented through the counterfeiting of their products. Current figures indicate that the trade in fake tobacco is worth upward of $50 billion annually worldwide, according to a 2020 World Bank report and accounts for approximately 600 billion illicit cigarettes per year.

    It’s against such a global backdrop that holographic security features continue to be widely utilized in tax stamp programs as effective weapons in the war on counterfeiting, assisting governments in securing tobacco excise duty as a critical source of revenue while also providing a highly effective way of controlling and limiting consumption.

    To help tackle the counterfeiting problem, nearly 120  billion tax stamps, in the form of securely affixed labels, are issued annually by hundreds of provincial and national revenue agencies around the world in more than 90 countries. The vast majority (90 percent) are used on tobacco products. This suggests that governments and law enforcement continue to see their value as central features in effective revenue gathering strategies.

    Tax stamps serve two purposes. The first is to provide a record of tax payment, and digitally based tax stamps enable products to be tracked and traced, providing a record of a tobacco product’s journey from the factory floor to the hands of the consumer. The second role is to provide evidence that the stamp—and hence the product it’s affixed to—is genuine. So, the physical integrity of the stamp—protected by security print, taggants and, in many cases, holograms—fulfills this latter requirement. The European Union Tobacco Products Directive (TPD) also includes the option of incorporating a hologram as an overt feature.

    Growth of tax stamps is driven by increased global cigarette consumption on the back of rapid population growth, particularly in developing parts of the world. And, of course, as demand has grown, so too has the trade in illicit products produced by ever more sharp counterfeiters and international criminal organizations. Many counterfeits are intrinsically unsafe and drive incidences in poisoning and deaths due to fake, illicit or substitute products reaching the hands of both innocent and complicit consumers.

    The Right Time

    Now, more than ever, the time is right for everyone with a vested intertest in having a strong and legitimate tobacco sector to come together over illicit trade and lost tax revenues. With the tobacco traceability requirements of the World Health Organization Framework Convention on Tobacco Control (FCTC) Protocol entering into force in 2023, countries that are party to the Protocol have less than two years left to implement appropriate systems. Tax stamps can be the foundation of a highly effective tobacco control program and should include strong holography-based authentication features.

    A tax stamp, which is defined by ISO 22382 as a “visible stamp, label or mark placed on certain types of consumer goods to show that the applicable excise tax has been paid,” can be an integral element of track-and-trace programs and best practice within the sector, effectively monitoring the location and movement of goods throughout the supply chain from manufacture to point-of-sale. A secure track-and-trace program works by assigning a unique individual identity to each item—a pack of cigarettes, for example—during the manufacturing process.

    Once assigned, the identity is stored in a secure database and updated every time there is a significant event, such as a change of ownership or payment of tax due, and supports authentication throughout the supply chain. This produces a comprehensive product history; it means that if the pack (or bottle, in the case of alcohol stamps) is found in a place or state that is irregular, its provenance can be fully traced back and the responsible party held accountable.

    The digital traceability features of tax stamps, combined with their material security features and tamperproof functionality, are the most robust means to ensure tax compliance, audit optimization and product protection.

    Governments and law enforcement agencies around the world are strident in their resolve to find better solutions for protecting tax-raising stamps against the indelible mark of the counterfeiter—a role holographic technology fulfills. The first country to issue a tax stamp featuring a hologram was Romania in 1995. Since then, the number of countries using holography to improve the security of their tax stamps has grown to more than 30. They include Russia, Kazakhstan, Ukraine, India, Indonesia, Sri Lanka, Mozambique, Zambia and several EU states.

    Out of the 22 Indian states that use tax stamps, 19  currently feature a hologram, while in the U.S., the state of Michigan has  developed stamps developed around a holographic security feature with in-built levels of additional security. While cigarette consumption has been in long-term decline in the state, the U.S. project yielded a significant rise in cigarette excise tax collections.

    Application Success

    In Africa, Mozambique is the latest country to adopt new holographic tax stamps and should any one of the continent’s highly populated countries decide to introduce stamps, then the volumes and the value of tax stamps in circulation would escalate significantly. Other parts of the world, large areas of South and Central America and Asia, are seeing more tax stamps emerging where economic prosperity has the best chance of maturing. In these places, in excess of 5 trillion cigarettes are smoked per year (96 percent of all tobacco sales), with volume expected to increase in line with population and economic growth.

    Clearly, these are huge volumes but also an enormous opportunity for resourceful counterfeiters ready to take advantage of regional markets where governments and security agencies either lack the wherewithal to tackle the problem or present resources are overstretched.

    According to Nicola Sudan, secretary general of the International Tax Stamp Association (and also author of the report), “holograms have been one of the cornerstone security technologies since the mid-1990s and, although the emphasis on tax stamps, particularly those used on cigarettes, is now on digital technologies for track-and-trace, authentication remains a core function, and holograms continue to serve that function.”  

    It’s clear that holography is a technology that governments and agencies can rely upon and value as an effective, reliable and dynamic security solution—a critical part of an effective tax stamp program. It’s also apparent that suppliers of components, products and systems to the tobacco sector can rely on this most resourceful and flexible of security devices to protect investments and brand quality.

    Paul Dunn is chair of International Hologram Manufacturers Association, which represents leading producers and converters of holograms for banknote security, anti-counterfeiting, brand protection, packaging, graphics and other commercial applications
  • Superior Solution

    Superior Solution

    FEELM CEO Frank Han

    Using a new ultra-slim bionic film ceramic coil, the FEELM Air represent a considerable improvement over previous closed-system devices.

    By Timothy S. Donahue

    The vaping industry won’t reach its full potential until its products can deliver nicotine to the body as effectively as a combustible cigarette. The new FEELM Air fully integrated vaping solution brings the industry one step closer to that goal. The FEELM Air offers several improvements on previous closed system vaping devices, including the next generation of FEELM’s industry-leading ceramic coils.

    FEELM Air brings together three new innovations for its ultra-slim bionic film (USBF) ceramic coil, calling the new coil the world’s thinnest ceramic coil vape pod solution. During a launch event in London on Jan. 18, representatives of FEELM and the flagship atomization technology brand’s parent, Smoore International, detailed several of FEELM Air’s technological breakthroughs in the vaping experience, including ultimate design, reliability, flavor and an exceptional interactive experience.

    There are three major improvements to FEELM’s latest coil technology that are the cumulative achievements of a team of 500 scientists and nearly seven years of research, according to FEELM. “FEELM Air is the outcome of cross-disciplinary research and a revolution to [the] ceramic coil,” said Frank Han, president of FEELM, at the opening remark of the launch event. “It replaces the single-layer film with a seven-layer bionic ultra-slim film. The thickness of the film is reduced from 80 micrometers to 2 micrometers, which is 40 times thinner than the last generation.”

    The overall improvements of FEELM Air are attributed to a new generation of USBF ceramic coils, which incorporate a seven-layer composite heating film made of bionic material for the first time in the vaping industry. FEELM representatives said that each layer leads to an equally enhanced functionality.

    The second innovation in the USBF coil is its use of a nanoscale vacuumed film-forming technique to help the heating film distribute heat more evenly across the coil for accurate temperature distribution. The final innovation is a microporous bionic structure that provides smooth ventilation as well as a strong e-liquid locking layer to prevent any leakage.

    Additional improvements to FEELM’s USBF coil allow the overall FEELM Air to bring major breakthroughs to the vaping experience, including an integrated micro-electromechanical system (MEMS), the industry’s highest level of energy efficiency and its smallest linear motor, according to FEELM.

    “It has the world’s first seven-layer composite heating film made of bionic material. Most of the existing ceramic coils are single layered, and now we have a seven-layered composite heating film,” a FEELM representative explained. “It can improve the harm reduction and improve the energy efficiencies, and each layer will lead to a corresponding functionality improvement.”

    FEELM Air improves the overall harm reduction performance by 80 percent of previous generation ceramic coils. The numerous major breakthroughs the new device provides include:

    • The hybrid composites heating layer and the nanoscale protection layer provide corrosion resistance, thereby reducing the emission of heavy metals by 78.6 percent. The temperature control layer with its thermal conductivity can reduce the emission of aldehydes and ketones by 80.7 percent due to localized overheating.
    • In terms of energy optimization, FEELM Air boasts the world’s highest energy efficiency of 1.3 mg/W by virtue of three layers of composite materials. The nano silver electro layer can reduce invalid energy consumption while the porous thermal resistance layer can effectively reduce heat loss.
    • The patented microporous flavor lock layer improves average flavor release by 33 percent. It’s terraced temperature zone and multilayered atomization allow for a tailored flavor release in different temperature zones and produces aerosols in smaller particle size for consumers to taste the flavor thoroughly and allow for a lower lung absorption than previous generation coils.
    • FEELM Air also uses a second generation of the company’s “puzzle leak-proof” technology that decreases leakage rates by 237 percent. It introduces an upgraded capillary structure and an innovative choke valve to prevent condensation alongside a superabsorbent lock layer that can effectively prevent e-liquid splashing.
    • The innovative FEELM Air also uses the world’s smallest linear motor, which offers a unique shock-wave mode that allows users to include delicate vibrations that allow consumers to feel the resonance in every puff. The power consumption of vibrations per charge is as low as 0.06 percent (equal to two puffs).
    • The FEELM Air also has the industry’s first superpower management system, TOPOWER, which allows for eight hours of vaping with only a 10 minute charge. The energy density is increased by 20 percent, and the battery life is increased by 30 percent over previous generations, according to FEELM. The device also adopts an integrated MEMS, which functions as a reliable airflow switch, to improve the sensitivity of the device while preventing mis-activation.

    “Ever since the launch of the world’s first black ceramic atomization coil with metallic film in 2016, FEELM has changed the whole competitive landscape, ushering in a new era of ceramic coil. It has largely enhanced harm reduction with accurate heating temperature control and revolutionized vaping experience with smooth and pure taste till the last puff,” said Han. “More importantly, FEELM has effectively addressed the industry’s pain points of leakage and dry hits.”

    To keep up with the enhanced vaping experience the FEELM Air provides vapers, the company announced the launch of its second generation of the FEELM taste evaluation model during the FEELM Air launch event. To better understand taste experiences while vaping, FEELM introduced its first taste evaluation model in December 2020 that gave FEELM researchers the ability to describe the taste of atomization scientifically. Composed of four dimensions—flavor, strength, note and vapor—and 51 specific indexes, the model establishes a system to evaluate the human senses of mouth, tongue, nose and throat.

    “Now, it’s five dimensions and 65 indexes. It’s more complicated in evaluating aroma, aftertaste, taste/mouthfeel, impact and vapor property. We built up an in-house sensory evaluation team. We have experts with certain backgrounds in tobacco science and vaping taste evaluations,” a FEELM representative said. “The team’s experience in the science of evaluating flavors ranges from five years to 13 years. They are the experts in evaluating vape ingredients.”

    During the event, Han also announced a brand refresh for FEELM. The new brand concept is composed of five words: feel, engine, exploration, lifestyle and memory, echoing the five letters of the brand’s name. He has also unveiled the new logo, which has the contour of a ceramic coil in the shape of a window. It symbolizes “FEELM’s ‘window to ultimate sensation,’” said Han. “The ‘open window’ stands for the infinite pursuit of a better sensory experience, representing FEELM’s commitment to ultimate sensation.”

    The FEELM Air may be the bridging device that brings vaping magnitudes closer to the nicotine delivery and sensory experience combustible cigarette smoking offers, only in a format that Public Health England has said is 95 percent safer. It’s too early to tell, but the FEELM Air may motivate an even greater number of cigarette smokers to switch to vaping than previous devices.

    “Vaping devices loaded with FEELM atomizers have been exported to over 50 countries in Europe, America, East Asia, Africa and Oceania with an accumulated sales volume of over 3 billion pieces,” Han said. “FEELM has never stopped the constant exploration for ultimate sensation. By virtue of FEELM Air, equipped with the ultra-slim bionic film ceramic coil, FEELM is ready to drive another paradigm shift in the global vaping industry, leading the second sensory revolution of ultra-slim devices and ceramic coils.”

    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.
  • Appropriate for the Protection of Health?

    Appropriate for the Protection of Health?

    Photo: 22nd Century Group

    The FDA’s focus on nicotine is coming at the expense of true harm reduction.

    Cheryl K. Olson

    I was gobsmacked last December when the U.S. Food and Drug Administration issued modified-risk tobacco product (MRTP) authorizations for two reduced-nicotine combustible cigarettes, 22nd Century Group’s VLN King and VLN Menthol King. Both contain non-GMO tobacco that’s very low in nicotine (VLN). If 22nd Century Group can reduce the disastrous health effects of smoking by offering low-nicotine combustible cigarettes, that’s great. What took me aback was the implicit message from the FDA on its priorities.

    VLN products such as these were supposed to be part of a smoking harm reduction landscape—one that includes approaches proven to reduce the risks of illness and death among cigarette smokers, such as vaping, heat-not-burn and smokeless tobacco. But this ideal, data-driven society in which addicted smokers bob gently down the famous continuum of risk via the path they prefer (perhaps starting with VLN cigarettes, perhaps with another product and ultimately landing at their low-risk nicotine maintenance or tobacco-free destiny) isn’t where we’re living.

    Such a Candide-like world would feature a rainbow of reduced-risk products that match the needs of individual smokers and smokers and people who influence them (such as doctors) fully aware of these products and of how and why they’re lower risk. They’d also know that traditional approaches to quitting (hello, “cold turkey” and nicotine-replacement therapy) have proved depressingly ineffective, especially among heavily addicted, low-income, longtime smokers: the folks who need our help the most.

    The FDA claimed to envision such an environment when Scott Gottlieb, then the agency’s commissioner, stated in 2017 that “Nicotine lives at the core of both the problem and, ultimately, the solution to the question of addiction and the harm caused by combustible forms of tobacco. … So, how can we take a new and comprehensive approach to nicotine?”

    Gottlieb continued, “Armed with the recognition of the risk continuum, and the reality that all roads lead back to cigarettes as the primary cause of the current problem, we need to envision a world where cigarettes lose their addictive potential through reduced nicotine levels. And a world where less harmful alternative forms, efficiently delivering satisfying levels of nicotine, are available for those adults who need or want them.”

    Instead, the FDA prioritized very low-nicotine cigarettes and dropped the ball on that last, essential part: the “less harmful alternative forms.” Those products, despite considerable and growing scientific evidence of their real-world effectiveness, have been left in limbo.

    A Passing Grade on the Wrong Test

    What exactly happened? An MRTP is simply a request to the FDA that a tobacco-related company be allowed to make some specified changes in how it describes a product or set of products to the general public through its packaging, marketing, advertising and other forms of promotion and communication.

    In this case, 22nd Century Group wanted to state that each of its products contains “95 percent less nicotine,” “helps reduce your nicotine consumption” and “VLN smells, burns and tastes like a conventional cigarette but greatly reduces your nicotine consumption.” They provided the scientific evidence to back up those claims.

    Among the hurdles for a successful MRTP authorization is that the manufacturer demonstrates that the product is “appropriate for the protection of the public health,” or APPH. In other words, that the requested modifications do or have the potential to do more good than harm if approved. That’s a core question that needs to be addressed in any tobacco-related application or authorization request to the FDA.

    The Tobacco Control Act of 2009 begins with the words, “To protect the public health ….” That shows the clear focus and intent of the legislation. While the phrase “appropriate for the protection of the public health” appears several times in the act, it’s frustratingly vague and subject to interpretation.

    What’s clear, however, is that the FDA should prioritize those aspects of smoking that are the most harmful to individual and public health. While reducing nicotine intake is appropriate for the protection of the public health, it should be nowhere near the top of the list.

    It’s Not the Nicotine That Kills

    Morbidity and mortality among smokers, including cancers and heart disease, are caused by the “tars” and other byproducts of combustion—what researchers often call harmful and potentially harmful constituents (HPHC). Because it’s addictive, nicotine is also considered an HPHC. As Michael Russell famously put it, “People smoke for the nicotine, but they die from the tar.”1

    In its February 2020 presentation on its products to an FDA Tobacco Products Scientific Advisory Committee panel, 22nd Century Group clearly states, “VLN cigarettes yield essentially the same HPHCs as conventional cigarettes. The benefits of VLN accrue from reduced cigarettes per day and reduced abuse liability.” That’s consistent with their authorization request since they’re only claiming a reduction in the amount of nicotine.

    Think about that for a moment. The premise that reduced nicotine in combustible cigarettes will reduce harm is based on an assumption that the number of cigarettes smoked will decrease. That’s because the other HPHCs—the substances that lead to illness and death—are the same in the very low-nicotine and the regular cigarettes. Will they?

    Compensatory Smoking

    Maybe. Maybe not. It’s an empirical question that requires research with these specific products. Researchers studying smokers who switched to earlier generations of low tar and low nicotine cigarettes, known as low-yield cigarettes, found that many engaged in what’s known as compensatory smoking.

    According to the Centers for Disease Control, “Most people who smoke are addicted to nicotine. They may compensate when smoking low-yield cigarettes in order to take in more nicotine.”5

    A historical review of tobacco industry approaches to marketing low-yield cigarettes concluded, “Unfortunately for the industry, smokers did not care much for the taste of reduced tar cigarettes and, as expected, the lower nicotine levels became a problem as well. Smokers were not receiving the same nicotine ‘satisfaction’ and therefore began to compensate for the reduction in nicotine by smoking more cigarettes, thus increasing their health risk.”2

    These earlier studies were conducted on combustible cigarettes with significantly higher levels of nicotine than the VLN products. Some well-respected smoking harm reduction experts such as Clive Bates theorize that the nicotine levels in this generation of cigarettes is so low that compensatory smoking will not be a problem. But how, then, is this different from the low success cold turkey approach? Also, what about dual use? There is nothing to prevent a smoker from using both types of products.

    What’s the Real Harm?

    But this distracts from the fundamental problem. The FDA’s focus is on the wrong chemical: nicotine. It’s often the first or only chemical most people can name when describing tobacco. That’s one of the reasons why the addictive quality of nicotine is so often conflated with combustible tobacco’s relationship with heart disease and cancer.

    Several studies of physicians’ knowledge about the clinical effects of nicotine find misperceptions are frustratingly common. Roughly four out of five doctors surveyed incorrectly linked nicotine to cardiovascular disease (83.2 percent), chronic obstructive pulmonary disease (80.9 percent) and cancer (80.5 percent).9 They should know better.

    This distortion of the role of nicotine among smokers, and some of the people who counsel them when they try to quit or at least reduce their medical risk, can interfere with their motivation to use some of the proven pathways away from combusted tobacco.

    This focus on nicotine reduction and the misunderstanding of its risks may be precluding addicted smokers from switching to products that significantly reduce harm. According to Public Health England, “One assessment of the published data on emissions from cigarettes and e-cigarettes calculated the lifetime cancer risks. It concluded that the cancer potencies of e-cigarettes were largely under 0.5 percent of the risk of smoking. Comparative risks of cardiovascular disease and lung disease have not been quantified but are likely to be also substantially below the risks of smoking. Among e-cigarette users, two studies of biomarker data for acrolein, a potent respiratory irritant, found levels consistent with nonsmoking levels.”

    My frustration is that the FDA, through its priorities and recent actions, is inadvertently reinforcing misinformation that interferes with the goal of protecting the public health by focusing on nicotine reduction at the expense of true harm reduction.

    Last year, I interviewed former industry scientist Justine Shaw Jackson for another Tobacco Reporter column; she spoke of the need to give people nicotine “without all the nasties in the smoke.” That phrase stuck in my head, creating a mashup of her words and Russell’s insight: “It’s not the nicotine that kills—it’s the nasties in the smoke.” Let’s embroider that phrase on pillows and send one to every doctor and nurse in the world.                

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