Category: Also in TR

also-in-tr.jpg

Decent Exposure

Illustrations: Pavel Losevsky and Milkos | Dreamstime
Powered by new data-driven planning platforms, “out of home” is emerging as the media channel of choice for legal and effective tobacco advertising.
By Shabnam Irilian
In the advertising world, there is likely no more heavily regulated industry than tobacco, where restrictions are onerous and plentiful. The advertising of traditional tobacco products has been banned from U.S. radio and television airwaves since the 1970s. Online advertising opportunities are minimal, with the most popular destinations and social media platforms—Google and Facebook, to name just two—also banning tobacco ads. And while vapor products and some newer alternative tobacco products do not always fall under these bans, there is a general reluctance among media owners and platforms to allow advertising for fear of a public or legal response.
With so few channels at their disposal, tobacco and nicotine brands often turn to “out of home” (OOH) advertising, which has long held strong appeal for companies operating within industries where marketing activities are restricted. They turn to OOH not just because of its availability but because of its ability to reach both larger mass audiences and smaller targeted ones as well. OOH is typically more cost effective, delivering greater cost per mille (the amount an advertiser pays a website per 1,000 views), which is ideal for emerging alternative tobacco brands that may not have deep pockets when it comes to advertising spend. Perhaps most importantly, OOH has a proven track record when it comes to influencing consumer attitudes and behaviors and spurring action.
But advertising using OOH does not come without challenges. For one thing, the industry itself is highly fragmented with multiple forms of inventory owned by a myriad of different media owners. There are currently 1.5 million screens and displays in the United States. Navigating an inventory of this size and dealing with the various owners is enough of a challenge for any brand, let alone one in a restricted category.
And speaking of restrictions, while OOH is certainly more available to tobacco and nicotine advertisers than other channels, brands and their agency partners must be aware of and operate within compliance of complex laws that govern where ads can be placed and content that can be displayed. These laws can vary dramatically from one state, city or municipality to the next, and they change with great frequency.
With all this in mind, the question turns to how tobacco and nicotine brands can leverage the OOH channel in the most effective, and legal, way. Here are some tips:
Combine compliance with sensitivity
The emergence of data-driven platforms has improved the OOH planning and buying process for all brands. For tobacco and nicotine brands, optimized platforms help identify compliant inventory, making the planning process even easier and faster. That said, just because you can do something doesn’t necessarily mean you should. Even if a particular screen is approved and legal for tobacco advertising, consider the environment and use common sense to determine whether your ad might be off-putting or create more problems for your brand than new customers gained.
Confront issues as a team with shared responsibility
As mentioned, the market for U.S. OOH inventory is highly fragmented, and the laws and restrictions governing advertising for tobacco companies are complex. Even with the best technologies and tools, it’s not impossible for problems to arise. Checking the box on compliant inventory during the planning process is not enough. Monitoring must and should continue throughout the duration of campaigns. Conduct drive-arounds where possible to visually confirm that your ads are properly placed within the context of the community. And work in tandem with your partners, from planners to buyers to creatives, to create an environment of shared accountability so that any problems that might arise can be addressed quickly and collaboratively.
Capitalize on all that specialists can offer
These days, it’s not uncommon to see stories of billboards being purchased by regular, everyday citizens for any number of reasons—marriage proposals, fundraising, congratulatory messages, etc. Yes, anyone can call a media owner and buy a billboard these days. But for brands that want to take a more strategic approach and drive real value from their investments in OOH, working with agency partners is the more advisable route, even more so for tobacco and nicotine brands that not only need to rely on the experience and expertise of industry experts but can benefit from the existing relationships agencies have with media owners to access premium inventory and favorable pricing. Plus, not only are OOH specialists equipped with the ability to select the compliant and legal inventory—they also have the data, tools and technology to overlay those selections with the inventory that will succeed in delivering the right message to the right audience at the right time, driving business outcomes.
Think of OOH as strategic
Finally, don’t think of OOH as the “nice-to-have” add-on to your broader strategic marketing efforts. OOH works well in concert with complementary campaigns and, when integrated with mobile and social media, can amplify the reach and value of your marketing efforts. Ensure that your OOH partners are involved in your strategic planning discussions at the very start of the process.
Shabnam Irilian is senior vice president of business operations for Talon Outdoor, an OOH agency delivering creative, technology-led and integrated OOH communications.

August 23, 2020
Counting Down

Photo: Tobacco Reporter archive
The nicotine industry prepares for a shakeout in the wake of the premarket tobacco product application deadline.
By Kenneth Robeson
Chris Allen
The phrase “time is money” has seldom been more apt for the tobacco industry.
The United States District Court recently granted the Food and Drug Administration’s (FDA) request for an extension of the premarket tobacco product application (PMTA) submission deadline for certain tobacco products, which the FDA requested due to the Covid-19 pandemic. Applications are now required to be filed by Sept. 9, 2020, for many e-cigarettes, cigars and other deemed tobacco products.
What does this mean for the tobacco industry? Several things—from a significant reduction in the products that retailers can place on store shelves to changes in management, manufacturing, R&D and marketing.
“Those working towards a PMTA have benefited most as this has either provided the time to complete existing studies or generate more data,” said Chris Allen, vice president of scientific and regulatory affairs for Broughton Nicotine Services, a privately owned laboratory delivering analytical, scientific and regulatory services for the electronic nicotine-delivery systems (ENDS) industry based in Lancashire, England. “Also, those that are intending to exit the market have a slight reprieve in that they can continue selling their products for an extra 120 days.”
In addition to a significant reduction in the product portfolio, said Allen, manufacturers are coming to the realization that they are going to need to invest “far more” in their quality-management systems as manufacturing guidance evolves. “Although it is not expected the manufacturing regulations will be as stringent as pharmaceutical GMP, it may be significantly higher than the standards that many companies currently work to.”

Advertisement
‘The reality’
Barnaby Page
“The deadline change was triggered by the Covid situation and requested by the FDA, which stated, among other things, that it had refocused some of FDA CTP staff on other emergency matters related to Covid,” noted Patricia I. Kovacevic, a global legal and regulatory strategist and attorney and the founder of consulting firm Regulation Strategy, which has offices in Tampa, Florida, USA, and London. “While the extra time appears beneficial to the entire industry, the reality is that most clinical studies, testing labs and so on would not have carried on, at least during the three critical lockdown months, April to June.”
Thus, Kovacevic added, there is “a slight benefit” for the industry to have additional time to refine PMTA submissions. “But those who were not ready with the substantive work needed for PMTAs—including various clinical and nonclinical controlled trials—would not see their situation improve much due to the extension.”
“For vapor, it doesn’t substantively change the picture,” suggested Barnaby Page, editorial director of ECigIntelligence, a provider of detailed global market and regulatory analysis, legal tracking and quantitative data for the e-cig, heated-tobacco and combustible-alternatives sector worldwide, and TobaccoIntelligence. “Any company which was not already reasonably well prepared to submit by 20th May is unlikely to be able to make it by 9th September.”
However, Page added, “for those who were close, it will be welcome given that the run-up to the 20th May deadline came at possibly the most disruptive point of the Covid pandemic.”
According to George Parman, director of communications for Altria Client Services in Richmond, Virginia, USA, his company submitted PMTAs for 35 On! Nicotine Pouch products on May 15, and the FDA accepted them for scientific review in the second week of June. They are manufactured by Helix Innovations, an Altria joint venture responsible for the global On! nicotine pouch product portfolio. To support the applications, Altria submitted more than 66,000 pages of documentation, including six primary studies.
The On! nicotine pouches are tobacco leaf-free and available in seven flavors and five nicotine levels. The product line was distributed in over 28,000 stores at the end of the first quarter, including the top five convenience store chains by volume. According to IRI, total oral tobacco-derived nicotine category sales in 2019 grew approximately 275 percent compared to 2018.
“We believe the scientific evidence in these applications demonstrates that the marketing of On! is appropriate for the protection of public health,” said Paige Magness, senior vice president of regulatory affairs for Altria Client Services, in a release. “On! nicotine pouches are a key part of our vision to responsibly lead the transition of adult smokers to a noncombustible future.” The FDA will now undertake a substantive scientific review of the applications.

Advertisement
‘Subjective term’
Maggie Gowen
And for those companies that will not be ready in time?
“Ready,” Kovacevic believes, “is a subjective term in this context.” Small manufacturers would not have had the resources needed to comply no matter what the deadline might have been “but would have enjoyed the additional time to participate in the market. The top five bestselling products manufacturers were preparing for this moment, some as early as 2013.”
If a company has not amassed the necessary science and assembled the right scientific and regulatory team beginning at least two years ago “or at least early last year, at this point it is too late to consider anything else but a last-moment attempt at litigation if even that were possible,” Kovacevic added.
Maggie Gowen, marketing director for Avail Vapor in Richmond, Virginia, USA, said that ENDS manufacturers who don’t submit a PMTA by the new date will be considered noncompliant. “It will be up to the FDA how they choose to enforce the industry after the deadline. Reasonable regulation is needed based on sound science.”
What comes next cannot help but be influenced by the Covid-19 pandemic, said Broughton’s Allen, who emphasized that ENDS products are designed to deliver chemicals deep into the lungs. “We may not like or agree with regulation, but it is inevitable for any major industry and there to protect us. There is undoubtedly a loss in consumer confidence in the safety of ENDS and no data on the risk of long-term use.”
The regulations, he added, must see to it that everything possible is done to ensure that “the safest of products are on the market [to] protect the public but also the long-term future of the industry.”
At the manufacturer level, ECigIntelligence’s Page predicted, there will be fewer companies, “probably many fewer, clear winners and losers from the PMTA process.” For retailers and consumers, the long-term changes “will not be so dramatic once the short-term shock of many brands disappearing has been adjusted to.” What he termed the “wildcard” is whether the FDA turns out to prefer certain kinds of devices to others. “For example, if it seems to favor open or closed systems. That could have a substantial effect on retailing if some channels end up with lots of legal products and others with many fewer.”
“The immediate—as in 10th September—impact on retailers and consumers is likely to be negligible,” Page said. “We don’t expect the FDA to start enforcement immediately on brands that have not submitted a PMTA application.” Over the longer term, of course, the number of available products will diminish. Just how long that “longer term” is remains an open question. “It could be a few months; it could even be a couple of years.”
Page and his colleagues think it likely that there will be “some tolerance” shown to applicants who miss the deadline “as long as they can demonstrate they are well advanced in preparing their application and are serious about doing it.” Retailers and consumers, however, “can’t really prepare with any confidence. The ball is in the manufacturers’ court right now and then the FDA’s.”

Advertisement
‘Appetite for enforcement’
Patricia Kovacevic
Most c-stores and major chains primarily sell products manufactured by companies that will have met the PMTA submission deadline, noted Kovacevik, and may legally continue to sell their products “for at least one year thereafter and longer if FDA issues a marketing order following the review of the respective products’ PMTAs.”
At the same time, she noted, the FDA’s “appetite for enforcement is relatively low in general, and the product universe is so vast, with so many SKUs—potentially millions of SKUs—that it will take FDA months, if not years, to figure out what products need to be taken off the market because a PMTA or other type of premarket application was not filed by the respective deadline, and to issue warning letters, then to follow up with more stern enforcement action.”
Another factor to consider is that a new administration in Washington, D.C., might bring “interesting developments not necessarily favorable to the ENDS industry,” Kovacevik added, “and change is always challenging.”
Consumer choice will shrink, Avail Vapor’s Gowen concurred, because not every manufacturer will be able to afford the “enormous” expense of the PMTA process. “There is a big fear that we will see a shift back to deadly combustibles, unfortunately.” There is, she conceded, “a lot of politics in play at the executive, federal, state and local levels.” There is also what she called “an enormous amount” of misinformation about the vapor industry, which “as a whole has been unfairly blamed due to a few bad actors, and that includes the CDC [Centers for Disease Control and Prevention]. If a company wants to remain a player in the marketplace, the hope is they will submit a PMTA by the Sept. 9 deadline.”
And for the remainder of 2020?
“It’s difficult to tell at this point,” Gowen concluded. “It will certainly be an interesting year, as if it hasn’t been interesting enough.”
August 1, 2020
The Forest for the Trees
Photo: MSA
Management Science Associates helps customers put their data to work.
By Taco Tuinstra
During TMA’s 2020 virtual conference, Management Science Associates (MSA) shared its insights into recent U.S. trade trends. MSA Senior Vice President Don Burke highlighted the most important developments in the nicotine market of the past 12 months, including new restrictions on flavors, a higher minimum purchasing age, the 2019 outbreak of vaping-related illnesses and, above all, the impact on sales of the ongoing Covid-19 pandemic.
Burke’s presentation contained an impressive amount of information but demonstrated only a fraction of MSA’s capabilities. While many firms offer data, MSA goes a step further by processing the information in a way that enables customers to make optimal decisions. Using analytic tools, systems engineering and data management, the company teases out the nuggets that allow clients to solve problems and identify opportunities.
“We help customers put their data to work,” says Burke.
MSA typically serves industries where there is either so much data that it is difficult to manage or industries where business critical data are not readily available. Big data, of course, has become a buzzword in recent years. What sets MSA apart is its ability to determine statistical significance from sparse data. Unlike other data companies, MSA takes no ownership of the data it processes. This is a critical element in the company’s business model: MSA is paid to process, cleanse, match, integrate, report and analyze data—but not for the data itself. According to Burke, this keeps MSA unbiased and allows the company to direct clients to the most appropriate data sources for their specific business issues and to integrate those sources with their own data.

Advertisement
Lessons from chemistry
MSA is the brainchild of Alfred A. Kuehn. In the late 1940s, Kuehn was a chemical engineering student at the Carnegie Institute of Technology (CIT, now Carnegie Mellon University) in Pittsburgh, Pennsylvania, USA and an employee of Gulf Oil R&D. To obtain added perspective and greater control over his research, he was recruited for a business degree at the Carnegie Tech’s Graduate School of Industrial Administration (GSIA), which today is known as the Tepper School of Business.
Alfred A. Kuehn
One of Kuehn’s professors, Herbert A. Simon, who would go on to win a Nobel Prize in 1978 for his pioneering research into the decision-making process within economic organizations, instructed his class to study human behavior and learning processes. Most students set up experiments with rats in mazes, but Kuehn took a different approach: He developed a model of buying behavior based on his experience with chemical processes.
During his research at Gulf Oil, Kuehn had worked on optimizing what was then the world’s largest oil refinery in Port Arthur, Texas, USA. Pondering professor Simon’s assignment, Kuehn realized there were many similarities between his work with petrochemicals and the task at hand. Chemical engineering distinguishes itself from other types of engineering by the fact that things are flowing. “In most other engineering areas, you are building an object, and it is static,” says Kuehn. “That means you need different kinds of measurements.” Kuehn viewed consumer behavior as a flow too. Just as crude oil is impacted by heat, pressure and mixing, consumer behavior is affected by advertising, promotions and price, among other factors.
Encouraged by Simon, Kuehn started teaching economics at GSIA, bringing science to marketing. Until then, marketing was often taught like law—through case histories. But whereas in law, case studies are important because they become precedents for future law, marketing is dynamic and what was effective last year may be irrelevant next year.
As he had done as a student, Kuehn took an unconventional approach in front of the classroom. “Instead of the normal methods of faculty members—they write a paper, often forget about it and then write another paper—I asked my students to implement the models we were developing,” he says.
Advertisement
Kuehn created and computerized a model of the detergent business to help Lever Brothers (aka Unilever) make business decisions. The project was so successful that CIT started using Kuehn’s marketing models as the basis for an instructional management game that was played by all MBA and professional executive students from 1960 until 1995. After that, only minor adjustments, such as changing the industry (watches instead of detergent) and geography (four countries instead of four U.S. regions), were made to the CIT game.
Today, some form of GSIA’s original academic and scientific underpinnings—referred to as “management science”—is taught at most leading business schools. Impressed by Kuehn’s research, the Ford Foundation began sponsoring Kuehn summer workshops in 1959 to teach quantitative techniques and model building to select marketing faculty members. Some of the participants of that first workshop subsequently edited Mathematical Models and Methods in Marketing containing Kuehn’s marketing/advertising model, published by Richard D. Irwin in 1961.

Advertisement
Solving problems
MSA’s first projects were solving steel industry and consumer packaged goods market research problems using analytic tools, systems engineering and data management technologies. Today, MSA serves a wide variety of additional sectors, including the pharmaceutical industry, casino gaming, the foods business and media companies.
The company’s work has become sufficiently important that during the Covid-19 crisis, the governor of Pennsylvania had MSA declared an “essential service,” allowing it to keep innovating even as many other businesses were forced to cut back operations. “Many of the services we provide are to businesses dealing with food, medical records and other vital industries—so the information we process and manage for our clients is critical to keep those organizations operating” explains Burke.
Brown & Williamson became MSA’s first tobacco client in 1969. Today, MSA serves a wide variety of tobacco companies from minor players to multinationals. Separately developed expertise in antitrust regulations enables the company to manage multiple clients within the same industry without running into anti-competitive concerns. MSA boasts a customer retention rate of more than 96 percent, according to Burke, with many relationships lasting more than 40 years. “The only time we have ever lost a tobacco customer has been due to a merger or acquisition,” he says.
The company’s services have expanded over time. Many MSA products now involve data-management and analytic platforms that manage billions of dollars in trade payments and other mission-critical retail execution applications. When the attorneys general of 46 states in 1998 signed the $246 billion dollar Master Settlement Agreement that ended their healthcare cost-recovery lawsuits against the tobacco industry, they entrusted MSA with the complex task of managing the constantly changing payments from many companies to all states.
MSA offers its tobacco customers various services. For example, the company collects manufacturer shipment data for a “first read” on the market and distributor shipment data from more than 2,000 distributors for a near census-level measurement of tobacco volumes by store and by item. It also gathers survey and retail scan data to provide the additional measurement of consumer takeaway.
The insights derived from that information vary by client, according to MSA, but many involve custom analysis of the effectiveness of promotions, assessment of price and price gap analysis, providing tools for forecasting the potential of new products or new product categories and current issues impacting the industry—menthol, flavor bans, new regulations, etc.

Advertisement
Examples of MSA services for the tobacco industry:
Every Monday morning, MSA processes and projects manufacturer shipment data to provide the first read on the U.S. tobacco industry for the previous week.
MSA collects data each week from approximately 2,000 candy and tobacco distributors to report to tobacco manufacturers the shipment volume of each item in the tobacco category to each retail outlet across all classes of trade.
MSA operates one of the largest CPG retail scan data programs, at the transaction level, enabling clients to view tobacco market basket information at retail every day and feature pricing and promotion performance, along with consumer demand trends.
MSA continually provides analytical data expertise to the tobacco industry to understand and improve overall industry performance.
Saving money
Perhaps one of the most striking examples of how MSA helped a customer save money is when Kuehn and the company, along with Andrew Brimmer, the first African American to serve as a governor of the Federal Reserve System, advised the U.S. government against developing a supersonic passenger jet in 1966. After France and Britain teamed up to develop what would later become the Concorde, the U.S. government asked Kuehn and MSA to evaluate the prospects for such an aircraft. MSA quickly determined that despite the prestige attached to having a supersonic transport, it would not be cost effective and successful from a financial and market perspective.
Kuehn, who was also a pilot, demonstrated that the complexities of traveling at speeds faster than sound are so great that a supersonic passenger jet would not at that time be economical. “The original design included drogue chutes,” he recalls. “Landing with drogue chutes would expose passengers to the same stress experienced by a fighter pilot, going from 300 miles per hour to 10 miles per hour within two miles. And then they were trying to get special consideration—that wherever they arrived they would get priority on the airfield at the expense of everybody else. Furthermore, you were also supposed to forget about the great problems associated with sonic booms.”
So MSA suggested that instead of building a supersonic transport, the U.S. develop long-distance subsonic jets that would offer time savings by skipping stopovers. “Going to London from the U.S. in those days, you landed in Newfoundland and Ireland—so if we had wide-body, longer distance planes that didn’t have to land, we could make up the time,” says Kuehn. Those long-distance jets went on to become the largest source of annual U.S. export earnings from 1969 until 1993 (after which, Tobacco Reporter readers will be pleased to learn, they were overtaken by shipments of charcoal filtered cigarettes to Japan, according to Kuehn). The Concorde, by contrast, retired in 2003, having swallowed millions of francs and pounds in state subsidies without turning a profit.

MSA’s RockPoint data center
Protecting data
Needless to say, when handling confidential information for competitors in an industry, data security becomes paramount. A tremendous amount of care and some redundancy are required to handle, store and analyze such information.
According to Mario Cafaro, MSA’s vice president of corporate IT, MSA’s two data centers are among the most secure in the U.S. They are backed up by two fully redundant Tier III equivalent data centers. These state-of-the-art facilities feature full SSAE 18 SOC compliance, highly secure tiers of multi-factor access controls, electric power from two utility companies, complete coverage through internal and external video monitoring along with numerous options for telecom, internet and cloud connectivity.
The company’s hometown, Pittsburgh, too, offers considerable security advantages. The region just north of the city has one of the lowest seismic ratings in the U.S., and the Appalachian Mountain range protects the area from East Coast hurricanes, for example. What’s more, the data centers are in stable, well-established neighborhoods unlikely to experience social upheavals. In the nationwide protests following the death of George Floyd in Minneapolis, two Pittsburgh Police cars were burned, but the perpetrator was quickly identified and then turned himself in with his parents present, according to MSA.

The human touch
While the rapid increase in computing processing power and the rise of artificial intelligence (AI) have turbocharged data analysis, MSA continues to rely heavily on human input. “There is no substitute for a thorough understanding of the data-generation process and a strong industry domain knowledge,” says Kuehn. “A technology-derived fact is simply a statement until humans, with strong domain knowledge, can appropriately apply it to a solution for an industry problem or opportunity.”
Informed business decisions, he explains, need to be based on appropriate definitions of problems or opportunities as well as data. “The creative approach to exploring and identifying problems and opportunities often includes as much “artistic thinking” as mere numbers,” says Kuehn.
Steve Gongaware, MSA’s senior vice president of business development, states that MSA is always alert to opportunity: “MSA is keen to offer its insights to new sectors, such as the budding businesses of legal cannabis and CBD.” Its experience working with the tobacco industry places the company in a strong position to do so. “Over the years, tobacco has evolved into a very regulated business, managed very differently than your typical consumer good,” explains Burke. “Once CBD and cannabis gain broader acceptance and mature in their life cycles, they too may likely become regulated industries. So our ability to work with competing firms, our ability to understand all the implications that go into appropriately managing competing businesses and providing value to each of those businesses, will allow us provide appropriate direction to customers in the legal cannabis/CBD space as well.”
In the meantime, MSA is helping its customers navigate the unprecedented environment brought about by the Covid-19 pandemic, which has upended existing consumer trends and made predictions ever more challenging.
“What is known this year is the great impact on tobacco consumption of the stay-at-home orders. Consumer confidence is required to return to closer-to-normal behavior and to reduce unemployment levels and potential government stimulus activities,” says Burke. “These variables, all difficult to predict, not only impact overall category consumption, but also each of the individual segments of the tobacco market.” (See box below.)
“What we have learned is that lockdowns carry a cost, so we must quickly learn about the tradeoffs. Determining what the impacts may be will require continued fast learning and rapid adaptation as the current social turmoil is unlikely to soon create stable market conditions,” he says.
If anything, the coronavirus crisis has demonstrated the importance of actionable insights—not just raw numbers—to achieve the understanding required to optimize decisions. With its impressive record of helping customers create great value from data, MSA is in a strong position to provide such insights. Whether it is the Covid-19 situation, the illegal THC vaping crisis or an analysis of supersonic jets, MSA has the data and analytical skills to provide the business knowledge that clients need to navigate uncertain situations.
This year’s trends
The most significant trend in U.S. tobacco sales noted by MSA this year has been the increase in unit volume. The stay-at-home situation, where consumers are free to use their tobacco products of choice rather than being restricted from smoking or chewing, has contributed to an increase in cigarette sales, marking a break with the typical 4–6 percent annual decline in recent years.
MSA is also continuing to find strong growth in the “modern oral” category, where items such as pouches, similar to snus, deliver nicotine without tobacco.
Also, the illegal THC vaping crisis in the last half of 2019, along with vapor flavor restrictions, resulted in declines in the vapor category for the first time in many years.
MSA has seen a significant increase in growth of lower priced tobacco options, including pipe and roll-your-own tobacco, as unemployment levels have increased, bucking the trend of the past few years when record low unemployment resulted in declines in these categories.
For more MSA insights, please view TMA’s webinar.
Taco Tuinstra is Tobacco Reporter’s editorial director.Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors.On his watch, Tobacco Reporter has won several awards for editorial excellence.Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.
August 1, 2020
Setting Priorities

Photo: PixaBay
The WHO needs to target more of its resources at communicable diseases.
By George Gay
Since it was suggested that the wellbeing of nonsmokers could be negatively affected by secondhand tobacco smoke, smoking has been banned in an ever-increasing number of public places, including workplaces, in more and more countries; and, in this way and to a large extent, the perceived problem has been solved while retaining most of the economic benefit the tobacco industry delivers.
Since almost everybody in the world has been under some level of threat of contracting Covid-19, the disease caused by SARS-CoV-2, people have been banned from an ever-increasing number of public places, including workplaces, in more and more countries; and, in this way and to some extent, the spread of the virus has been slowed, though those measures have caused, are causing and will cause for an as-yet-unknown time untold social problems and a reduced economic output such that, according to at least one headline, the world is going bust—whatever that means.
It takes about 40 years for a smoker to die of a smoking-related disease. It takes about three weeks to die of Covid-19.
And yet … it’s tobacco that seems to be uppermost in the mind of the World Health Organization (WHO). The Conference of the Parties to the WHO Framework Convention on Tobacco Control (FCTC) and the Meeting of the Parties to the Protocol to Eliminate Illicit Trade in Tobacco Products was due to be held in November, according to a note on the FCTC website dated Feb. 5 and still current well into April. But there was no mention of the Conference of the Parties to the WHO Framework Convention on Pandemic Prevention and Control, or of the Meeting of the Parties to the Protocol to Eliminate Trading on Markets Known to Present a Significant Risk of Zoonotic Diseases.
It’s true that, on April 27, the joint meeting was postponed until November 2021, but not, as one might have expected, because the WHO needed to have all hands to the Covid-19 pump, but: “In light of the COVID-19 global pandemic and its impact on the conduct of international global conferences and travel…” But surely, it cannot go ahead even then. I cannot believe that the countries that normally fund this event are going to put up the money for the ninth meeting of the Parties—not at this time. Not when their treasuries are in hock and it is clearly time to focus attention on a few of the health threats that, unlike the threat of tobacco, people cannot deal with themselves: pollution, pandemics and poverty, for instance.

Advertisement
Spectacularly unprepared
It is staggering that the world was as ill-prepared as it was for the onslaught of SARS-CoV-2 (hereafter referred to as the coronavirus). Representatives of most countries have come together for eight international conferences to discuss tobacco and latterly the illegal trade in tobacco, which you have to perform intellectual somersaults to view as a health issue. Did they not come together to discuss what to do in the case of a coronavirus outbreak?
It seems as though they didn’t since the world proved spectacularly underprepared despite the fact that the coronavirus is generally assumed to have arisen from the midst of a type of “wet market” (one that sells both live and butchered animals, some of them exotic) that is known to be one of the major risk factors for such virus outbreaks. It was underprepared despite the fact that the operation of this market was taking place within China, a country that plays a major role in the global market. And many countries were underprepared because they had fallen for the idea that the “free” market was sovereign. They had allowed to be outsourced their manufacturing capabilities, including those producing the personal protective equipment (PPE) that is vital during the sort of pandemic that has ensued, they had run down stocks of such equipment, and they had failed to put in place workable plans to ramp-up quick and local manufacturing of such PPE in the event of an emergency.
In other words, we are dying from a perfect storm of markets: wet, global and “free.” Or rather, we are dying from a perfect storm of these markets plus the effects of the interference in two of them once the going got tough. Once the authorities in some countries realized that they had been left exposed in respect of PPE and ventilators, globalization lost its sheen, border gates were slammed shut and the “free” in free market was taken a step further so as to include the “hijacking” of PPE.
The wet market in question was being operated in Wuhan, though it would be misleading to give the impression that if these sorts of wet markets were eliminated in China, the world would be safe. Similar markets are operated in other countries, and the risk of coronaviruses arises from many other sources, including the sorts of factory farming that supplies most of the meat consumed in the U.K., where I live. And while the problems caused by the coronavirus were exacerbated by China’s system, which tends to suppress what are viewed as negative messages, such systems are being taken up in other countries. In the U.K., we are building a cult of leadership—albeit one that is looking a little shaky at the moment—and have recently voted in a government that is itching to control the media, the message and, as a backstop, the courts. Given the narrowness and brittleness of the U.K. government’s ideology, it is not surprising that it has proved to be one of Europe’s most incompetent in the face of the coronavirus.
Change ahead?
But we shouldn’t despair. I keep reading how, after we come through this pandemic, things must change. For instance, it’s said that inequality must be reduced significantly. This is a nice idea, but given what happened after the 2008 financial crash, a little naive, I think.
One of the changes that is much touted has it that a lot of people whose jobs are now undervalued and underpaid will henceforth be recognized for the essential work they do and will be paid accordingly. Of course, this predicted change concerns mainly healthcare and other workers without whom basic services cannot be maintained, but let’s look at the tobacco industry. Will this brave new way of looking at the world change the lot of the tobacco grower, who, by definition, is an essential worker when it comes to producing tobacco products? I don’t think so. They will continue to live on a pittance while those performing nonessential jobs and those performing no jobs will snap up the big tobacco money.
But let’s look on the bright side. Perhaps one of the changes will deliver a different type of advantage. Perhaps we will try to hang onto the environmental benefits that have seen pollution reduced over many cities partly because people have been making fewer journeys during lockdowns. Again, it’s a nice idea but unlikely. Such change would require bold political and business leadership at a time when many of the countries of the world are led by people who have so little imagination that they cannot see we have a problem or who are so in hock to the current system that they daren’t change direction. In a scene that reflects the end of the film, Dr. Strangelove, some airlines, for instance, are jostling for public money so that they will be able to take to the skies again en masse once lockdowns are lifted. You can laugh at the idea of a “mineshaft gap” only when it’s part of a film.

Advertisement
Ramping up pressure
In fact, very little changes. Anti-tobacco crusaders have used the coronavirus to try to scare smokers (and, in some cases, vapers) into quitting. At a time of high anxiety, they have ramped up the pressure on smokers by putting forward the idea that they are at especial risk if they contract Covid-19. Looked at from one direction, this is common sense. Smoking affects the lungs—organs that the coronavirus attacks. But the one thing that we know about Covid-19 is that we know very little about it; so, I would suggest that it behooves anti-tobacco activists to take this into account before speculating. Indeed, it might be wise from their own point of view to exercise a little caution. They are going to look rather daft if, as seems possible at the moment, it is found that smoking and, more particularly, nicotine, is a defense against contracting the coronavirus.
I’m sure that some of the people using the coronavirus as a means of scaring smokers half to death are well meaning. But I cannot say the same for those who have been putting forward the idea that tobacco is not an essential item and so should not be on sale during lockdowns, especially since in many countries tobacco products are available at the sorts of shops that are open anyway because they sell food. This idea, I take it, comes from what must be the puritanical fringe. But the puritans too should exercise some caution—on two counts. They need to bear in mind that one crucial aspect of a lockdown is that you keep as many people on side as is possible. And they need to be aware of the fact that they, also, are going to look more than a little daft if smoking and nicotine turn out to comprise a defensive weapon.
And there are aspects of this idea that simply don’t make too much sense. We are told that smokers are addicted to their habit and find it nearly impossible to quit. So, what do politicians think is going to happen when they cut the official tobacco supply to addicted smokers, especially if those smokers suspect that smoking could be a defense against contracting the coronavirus? The likelihood is that there will be an increase in the illegal trade, which won’t, because of the nature of that trade, be observing social distancing. And it is a racing certainty that tax revenues will fall—at a time of special need for such revenue.
Targeting resources
But let me flip back to the beginning of this piece because I might have given the wrong impression. I support the institution of the WHO and do not think that the president of the U.S., Donald Trump, was wise to threaten to cut his country’s funding for the organization, though I can understand why he is feeling a little cross with it.
As is stated above, however, the WHO needs to target more of its resources at communicable diseases such as the coronavirus that is now running amok across the world. It can backpedal on tobacco. The tobacco and nicotine industries, with their ever-improving, new-generation products can do a better job than the WHO in reducing and, eventually, eliminating smoking. This is the sort of area where the “free” market does work.
What the WHO doesn’t need to do is be the cause of thousands of people flying around the globe to come together in November 2021 to discuss a problem that others can solve. Holding the FCTC meeting will cause pollution and, even at that time perhaps, before the world has figured out how to interact with nonhuman animals in a civilized manner, send out the wrong message about bringing people together for major international meetings.
Finally, it needs to be remembered that tobacco, unlike novel viruses, cannot pose an existential threat to civilization. For the WHO and its members to concentrate on tobacco is reckless.
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.

July 1, 2020
No Baggage

Photo: Swedish Match
Unburdened by the legacy of traditional tobacco products, nicotine pouches are starting to catch on in a variety of markets.
By George Gay
Having been asked to look into whether interest in and sales of nicotine pouches have increased in the wake of the Covid-19 pandemic, I have to own up to failure. In my own defense, however, I would suggest that the consumer buzz around these novel products had been getting louder from well before the onset of the virus and that any additional interest caused by the pandemic would probably have been difficult to discern against that background noise.
Having said that, I did find some evidence of increased interest in nicotine pouches brought on, at least in part, by the pandemic. Jason Carignan, president of Dryft Sciences, which offers its Dryft brand of nicotine pouches in the U.S., made some interesting observations about the way that nicotine users had been reacting in the face of Covid-19 and how they might respond in the future. “Consumers are responding well to Dryft’s convenience, simplicity and functionality at a time when wearing masks is more prevalent and remaining indoors is required,” he said as part of a statement issued in response to a number of questions posed by TR. “Online subscriptions are increasingly attractive with deliver-by-mail options, and we’re receiving positive feedback about our different flavors and strengths, as well.
“We are seeing new consumers arrive at Dryft with a desire to choose nicotine without toxins that accompany combustion—yes, that is true. But those consumers are also rethinking how nicotine is viewed in public health circles. They’re seeking fact-based discussion and research. They expect us to be responsive to their feedback. And they want the freedom to responsibly choose from alternatives in a future state that presents completely new nicotine products.”

The Dryft nicotine pouch has been well-received in the marketplace, according to its manufacturer. (Photo: Dryft Sciences)
Don’t inhale
Aside from these remarks, I think there is a robust, common-sense argument to be made for why interest in nicotine pouches might have increased since the start of the pandemic. The initial information made public about Covid-19 concentrated on how the disease attacked the lungs, and so it wouldn’t have been unreasonable for cigarette smokers to have been concerned that their habit might exacerbate the damage done to their health should they contract Covid-19; this might well have led them to cast about for a form of tobacco/nicotine consumption that did not pose the same level of risk as smoking does.
So where would they have headed? Well, I think that most reasonable people would conclude that vaping is hugely less risky than smoking is, but one of the current stumbling blocks here is that vaping too involves inhalation, albeit that in this case the inhalation avoids the toxic products of pyrolysis consumed in smoking. Add to this the fact that most smokers have been exposed to a cacophony of anti-vaping propaganda put out in many cases by people who should know better, and it is probably the case that smokers would look elsewhere for relief during the Covid-19 pandemic.
And what better product than a no-burn, no-inhalation one whose low-risk credentials are backed by a comprehensive body of evidence stretching back decades? The problem here, however, is that snus, for all its advantages, comes with baggage acquired over its long history. It is beset by a back catalogue of negative health-risk reports that, while they might have been disproven, continue to weigh it down and hold it back.
Which brings the smoker to nicotine pouches. These oral products, which contain no tobacco, are new enough not to carry such health-risk baggage and, indeed, it is difficult—but, alas, not impossible—to see where even those with an obsessive interest in stopping people enjoying tobacco or nicotine products could find fault. For instance, Swedish Match’s popular Zyn brand comprises only pharmaceutical-grade nicotine salt along with food-grade ingredients, a type of formulation found in at least some brands made by other manufacturers, according to the company. And whereas the health risk of even food-grade flavors can be brought into question when such flavors are inhaled in smoke or vapor, the consumption of food-grade flavors in nicotine pouches is obviously not open to the same questions.

Advertisement
No virgins
Of course, manufacturers of tobacco/nicotine products can always be accused of adding flavors to attract young people to their products, but a poll by Ipsos Sweden on behalf of Swedish Match seems to indicate that nicotine pouches are adult products, at least in Sweden, to which the poll was confined. According to the results of the poll, 70 percent of nicotine pouch users are between the ages of 26 and 55—or, as a teenager might put it, between old and ancient. Importantly, too, when it comes to gateway issues, the Ipsos poll throws up evidence that nicotine pouches provide a gateway out of traditional tobacco use. While there is a low level of dual cigarette-and-pouch use, there is a high level of previous cigarette use among pouch users. Only 7 percent of nicotine pouch users have never used a nicotine product before taking up pouch use, and most nicotine pouch users consume only pouches while 14 percent use both pouches and snus, and 9 percent use both pouches and cigarettes.
Dual use often gets bad press, but it can provide an important part in a smoker’s transitioning away from cigarettes or in providing needed relief when she finds herself in a position where she cannot indulge her usual habit. Spokesperson Deborah Perez said that JTI saw its nicotine pouch brand, Nordic Spirit, as responding “to the evolving preferences of adult tobacco and nicotine consumers who are looking for a convenient product that can be used in situations where smoking or vaping is not possible.” And in an email response to TR questions, Imperial Brands, which recently added its nicotine pouch product, ZoneX, to its “asset brands” category, said that it was “assessing opportunities in OND [oral nicotine delivery] as consumers increasingly adopt a multi-category approach to nicotine.”

To keep up with demand for its Zyn brand, Swedish Match recently expanded its Owensboro, Kentucky, USA, production facility by 16,000 square feet. (Photo: Swedish Match)
A smaller footprint
Meanwhile, the Ipsos poll results indicate that 55 percent of pouch users have a university education, and 80 percent are either employed or run their own company. And they also indicated that pouch consumers, who are more likely to live in urban rather than rural areas, consider themselves to be health conscious and believe it is important that the products they buy have only a small impact on the environment.
Certainly, nicotine pouches seem to be able to lay claim to having a small environmental footprint when compared with other tobacco/nicotine products, and, indeed, some other consumer products. But while their environmental credentials are important, their attraction is also visceral. Perez said that JTI’s pouch brand, Nordic Spirit, provided “a steady, long-lasting nicotine delivery.” Nicotine contents range from 9 mg/g for Nordic Spirit Spearmint Intense to 14 mg/g for Nordic Spirit Elderflower, Nordic Spirit Berry Citrus and Nordic Spirit Smooth Mint and 17mg/g for Nordic Spirit Spearmint Intense Strong.
In fact, the attraction of nicotine pouches is both visceral and practical. In the U.K. at least, where retail cigarette prices are high, nicotine pouches seem to be well ahead in the price stakes. According to Perez, Nordic Spirit sells there for £6.50 ($8.15) for a pack of 20 whereas, according to U.K. government figures, the average price of a pack of 20 king-size cigarettes is £11.10.
Given all of the above, it’s not surprising that, just over a year ago in the U.S., Swedish Match went national with Zyn, which it had launched there in 2015; nor that it opened a 16,000-square-foot addition to its production facility in Owensboro, Kentucky, to provide additional capacity to deal with the demand for this brand.
Perez, meanwhile, was able to report that Nordic Spirit, which was developed in Sweden and launched in 2018, has rapidly grown market share and is now available in Austria, the Czech Republic, Denmark, Sweden, Switzerland and the U.K. “While the tobacco-free nicotine pouches category is still in its infancy, we expect that many adult tobacco and nicotine consumers globally will be interested in trying the product, helping the new category to grow significantly over the coming years,” she said.

Advertisement
But perhaps one of the strongest indications that manufacturers have confidence in the nicotine pouch category came with the announcement by Altria in the middle of May that it had submitted “premarket tobacco product applications to the U.S. Food and Drug Administration for 35 On! products on behalf of Helix Innovations, an Altria joint venture responsible for manufacturing and selling On! nicotine pouches globally.”
“On! products, in seven flavors and five nicotine levels, offer the broadest portfolio of choices in the fast-growing nicotine pouch category for adult tobacco consumers seeking alternatives to traditional tobacco products,” Altria said in its May announcement, which quoted Paige Magness, senior vice president of regulatory affairs for Altria Client Services. “On! nicotine pouches are a key part of our vision to responsibly lead the transition of adult smokers to a noncombustible future,” said Magness. “We believe the supporting science is strong and are committed to working with the agency on these important product submissions.”
It seems reasonable to assume that no manufacturer, no matter how deep its products, would enter the labyrinthine caves of the FDA’s application processes unless it was confident the products it was submitting for review were almost assured of consumer acceptance and market success—or unless it were accompanied by Theseus, of course.
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.

July 1, 2020
Unidentical Twins

Photo: Keechuan | Dreamstime.com
South Korea and Japan, the world’s leading heat-not-burn markets, have different views on the technology’s potential for tobacco harm reduction.
By Stefanie Rossel
Six years after Philip Morris International’s (PMI) IQOS device hit the shelves, Japan and South Korea are the world’s two leading markets for heated-tobacco products (HTP). Euromonitor International valued Japan’s HTP market at $8.59 billion in 2019, up from $7.76 billion in 2018. South Korea’s HTP market totaled $1.61 billion in 2019, up from $1.53 in 2018 and more than $1 billion above third-ranking Italy. In contrast to South Korea’s overall tobacco sector, which is expected to grow only modestly through 2023, the country’s HTP market may increase by 21 percent annually to reach $4.4 billion, according to Euromonitor.
That South Korea followed in the footsteps of Japan surprised few. Both countries are perfect breeding grounds for high-tech reduced-risk tobacco products. Before the arrival of HTPs, their tobacco markets were dominated by combustible cigarettes. Both nations are health-conscious and tech savvy, sporting a love of gadgets. And both are economic powerhouses. With a population of 51 million, South Korea is the world’s 11th largest economy; Japan (population: 126.5 million) ranks third behind the U.S. and China. Both cultures value discretion and politeness, meaning that smokers are keen to avoid disturbing others, for example with secondhand smoke.
There are, of course, differences between the two markets. Japan has often been cited as a special case in its rapid adoption of HTPs as there is little competition from other reduced-risk products (RRPs). Nicotine-containing vapor products are banned in Japan.
Nonetheless, South Korea’s smokers eagerly embraced HTPs when they entered the market in 2017. Three types of electronic nicotine-delivery systems (ENDS) are sold in the country: e-cigarettes, HTPs and a hybrid product combining elements of both. Although e-liquid vapes were introduced earlier, HTPs quickly became much more popular. According to The Korea Herald, HTPs represented 13.5 percent of the country’s tobacco market in 2019 while e-cigarettes had a share of 4 percent. By comparison, the share of HTPs in Japan, where the products have been on the market since 2014, was estimated at 23 percent in 2019.
In both countries, the HTP market is dominated by first-mover IQOS although other players have joined the race over the past few years. In Japan, IQOS held 17.7 percent of the country’s tobacco market in the first quarter of 2020. Other products include Glo (British American Tobacco) and Ploom (Japan Tobacco).
In South Korea, HTPs include IQOS, Glo and KT&G’s Lil. With an estimated 50 to 60 percent, IQOS has the largest slice of the market.

Advertisement
Japanese success
South Korea appears to offer even greater potential for lowering the overall smoking rate than Japan. Smoking is predominantly a male habit in South Korea, and although prevalence has slowly fallen over the past decades, it is still high compared with the Organization for Economic Cooperation and Development average of 23 percent. According to statista.com, 40.6 percent of male adults in South Korea smoked in 2018 whereas the figure for female smokers was 6 percent according to the most recent available data, from 2017. In total, the average smoking prevalence stood at 21.7 percent in 2018, down from 26.1 percent 10 years earlier, according to a study by the Korea Centers for Disease Control and Prevention.
Until it became a testing ground for HTPs, Japan had similar figures. The share of men smoking decreased from 50 percent in 2001 to around 25 percent in 2018, with about 10 percent of Japanese women smoking, according to japan-guide.com. While sluggish at first, the decline accelerated spectacularly after the nationwide introduction of HTPs in late 2015. A study published in May 2020 on behalf of the Coalition of Asia-Pacific Tobacco Harm Reduction Advocates (CAPHRA) based on data from the Tobacco Institute of Japan and PMI confirmed that the remarkable reduction in combustible cigarette sales was triggered by the entry of HTPs.
David Sweanor, a professor at the Faculty of Law of the University of Ottawa and one of the study’s authors, calls Japan a success story in tobacco harm reduction. The Japanese experience, he says, proves how consumers’ interest and the regulatory environment shape markets. While Japanese regulations precluded alternatives to combustible cigarettes, such as nicotine vapor products, HTPs generated huge interest among smokers in Japan.
“As more [smokers] adopted the alternative, they helped speed switching by others,” says Sweanor. “I think this gives us an indication of just how much more rapidly countries could reduce cigarette use if there were many different low-risk alternatives available and policies and public education campaigns facilitated a widespread move away from [combustible] cigarettes. We have seen the most rapid decline in cigarette sales ever witnessed in a major market. A third of the cigarette market was gone in a remarkably short period of time, and this was accomplished with a noncoercive measure. People who smoke cigarettes were simply provided with a viable alternative.”
Sweanor insists there now is evidence that a range of low-risk products could help rapidly achieve the smoking rate targets of the World Health Organization’s (WHO) sustainable development goals. “To seek to ban or limit access to such products protects the cigarette industry rather than public health,” he says.
RRPs are the most disruptive influence on smoking in decades, according to CAPHRA Executive Director Nancy Loucas. In northern Asia, HTPs are the most popular form of safer nicotine products, she says. “So it is very disheartening that countries in Asia Pacific, like Korea and the Philippines, are looking to either ban and/or reduce access and choice of all forms of tobacco harm-reduced products for their smoking citizens.”

South Korea’s home-grown heat-not-burn device, Lil by KT&G (Photo: KT&G)
Different stance
South Korea’s government, however, turned out to be less receptive to the harm reduction potential of HTPs than Japanese authorities. In June 2018, the country’s ministry of food and drug safety announced the results of its own study of HTPs, claiming that five cancer-causing substances had been found in the products, with the level of tar in some of them exceeding that of conventional cigarettes. The public health agency also ruled out that HTPs could serve as smoking cessation tools if they produced similar levels of nicotine as traditional cigarettes. The announcement sparked a legal battle with PMI and an ongoing conflict between tobacco manufacturers and South Korea’s government over the latter’s attempts to impose stricter regulations on HTPs.

Advertisement
The product category also saw a significant tax hike. Unsure about how to treat HTPs, regulators initially taxed them at half the per-pack rate of combustible cigarettes and required them to carry a dedicated health warning featuring a syringe. After category growth and a WHO recommendation, the government increased the tax rate to 90 percent of that of cigarettes and changed the warning labels to match those of traditional cigarettes.
KT&G in January 2020 announced an agreement with PMI for the distribution of three HTPs and a vapor product outside of South Korea. Although the target markets have yet to be revealed, Japan is likely to be among them as it accounts for more than 90 percent of the global $5 billion HTP market, according to Euromonitor. And the category is expected to grow further in the country. The Japanese Ministry of Health, Labour and Welfare’s 2018 National Health and Nutrition Survey, which was published in January 2020, found that 30.6 percent of Japanese male current adult smoker and 23.6 percent of Japanese female current adult smokers were already using HTPs.
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.

July 1, 2020
Two-Stage Tobacco

Photos courtesy of Afzal Shisha U.K.
By separating their product into two components, ASUK and ASI can offer U.K. consumers shisha at a considerably lower price.
By George Gay
It’s easy to understand why traditional cigarettes have an enduring appeal for many of those who enjoy consuming nicotine. I don’t want this to sound like an advertisement for smoking, but cigarettes must surely deliver the highest pleasure-to-effort ratio of any tobacco or nicotine product.
Many snus users—and others—will balk at this, but I would argue that whereas the effort needed to consume snus is less than that needed to smoke a cigarette, this advantage is more than outweighed because the range of pleasures (lighting the cigarette, having something to hold, watching the cloud of smoke … ) enjoyed when smoking a cigarette is wider than that of consuming snus. Of course, the consumption of tobacco as a cigar or in a Western-style pipe reproduces this range of cigarette pleasures, but, assuming the cigar or pipe smoke is not inhaled into the lungs, the level of nicotine satisfaction will probably fall short of that of cigarette smoking.
Based on this sort of assessment, shisha consumption also fails to match that of cigarettes. The effort needed, from setting up a hookah to cleaning it afterward, is considerable. And somebody in the know told me recently, apropos of something else, that a five-a-day cigarette smoker who enjoyed a two-hour shisha smoking session might, at the end of the session, light a cigarette, apparently to enjoy the nicotine fix not provided by the shisha.

Advertisement
Splitting the product
The problem here, though, is that this sort of assessment is based on a number of assumptions. It assumes, for instance, that putting effort in is a negative, and this is not necessarily the case. Some vapers like the convenience of the pod system where they plug in and go, but others like to treat their habit more as a hobby. In other words, if you want a quick fix, you’ll probably go for a cigarette or a pod vaping system, but if you want to relax and are willing to set aside some time, you’ll probably choose to enjoy a big cigar or an open vaping system, perhaps in the company of like-minded people.
And this is where shisha’s star starts to shine. As is well known, shisha smoking is more often than not a social activity conducted in lounges where people gather with their friends to relax. For many, especially those who eschew alcohol, a shisha lounge can be the equivalent of a pub. And the act of preparing a hookah and smoking shisha is one in which at least part of this effort morphs into a ritual made pleasurable by the skills required.
Which is something that Afzal Shisha U.K. (ASUK) has plugged into in the U.K. where, because of a weight-based tobacco tax system, the retail price of shisha can prove to be prohibitively high and where, as a result, illicit products are believed to be widely available and used. ASUK has partnered with Afzal Soex India (ASI), one of the world’s largest shisha tobacco producers, to develop a novel product that, while it requires some additional effort on the part of the user, significantly reduces the excise duty that otherwise applies to shisha in the U.K.
During an interview in London in March, Faizan Aatif, a scientist (immunology and pharmacology) by profession and one of two partners in ASUK, told me that, whereas 1 kg of standard shisha typically contained as little as 160 grams of tobacco with the rest comprising a blend of casing, sugar syrups, honey, glycerine and flavors, duty was applied to the full 1 kg. This might seem unfair, but from the point of view of HR Revenue, I guess, it is the only way to calculate duty without allowing manufacturers to self-declare the amount of tobacco in their blends, a system that would be open to abuse.

Mohammed Sheikh (left)and Faizan Aatif
Aatif said it had taken a year of working with ASI’s R&D department to develop what he described as ASUK’s unique two-stage shisha tobacco, Afzal Ready2Go, which the end user buys as two separate components. One of these comprises the tobacco, which attracts duty, while the other comprises the liquid enhancer, which doesn’t.
It is not difficult to imagine how such a product reduces the tax payable and, therefore, the retail price. ASUK’s flavor-infused shisha tobacco, which is processed by ASI in India from a blend of neutral European flue-cured Virginia leaf, weighs in at 140 grams, while the liquid enhancer, which is also manufactured by ASI and which can be used with any of the flavored tobaccos, weighs in at 360 grams.
To make a 500 gram batch of shisha, the end user adds the liquid to the tobacco in a supplied, resealable bag and massages the bag to mix the two components thoroughly. The contents of the bag are then left to marinate at room temperature for a minimum of 48 hours, when it is ready to be smoked, though the optimum steeping time is two weeks, by which time all the juice has been absorbed by the leaf.
The U.K. tobacco duty rate as of February 2020 (before the March budget), was £125.20 ($156.25) per kg for “other smoking tobacco,” the classification applicable to shisha tobacco, so the duty on a traditional 500 gram pack would be £62.60, pushing the retail price to about £125, including VAT. But in the case of the two-component product, duty is applied only to the 140 grams of tobacco, so the duty payable is £17.53, allowing the retail price to be pushed down to £70 for 500 grams, which is enough for about 25 smoking sessions.
Aatif says that as long as the two-component product is allowed to steep for the required time, it performs as well as ASI’s regular products, which he described as world renowned. In part, this is because, unlike other two-component products, the flavor is applied to ASUK’s tobacco in a process that ensures it is uniformly distributed and absorbed by the tobacco rather than the liquid enhancer when the flavor distribution is dependent in part on the mixing and marinating process performed by the user. Of course, Aatif is aware that future regulations on tobacco and flavors might mean that ASUK will have to rethink the way that it offers its two-component product.
ASUK, which is the sole distributor of ASI’s shisha in the U.K. but which offers only the two-stage product, is run by Aatif with his business partner and childhood friend, Mohammed Sheikh, who is a healthcare professional—specifically, a dentist. But the word “run” hardly describes things. Aatif and Sheikh are the company’s only two full-time employees, though product dispatch is handled by the same warehouse people who dispatch the parts for Aatif’s core business, performance cars, and they employ social media influencers and shisha industry bloggers for promotions and events such as shisha lounge demonstrations of ASUK’s products.

Afzal Ready2Go is sold as two separate components. One of these comprises the tobacco, which attracts duty, while the other comprises the liquid enhancer, which doesn’t.
A passion for tobacco
One question that arises here is why a scientist and a dentist are involved with shisha, and the answer seems to be a passion for the product and its consumption, something that they did to relax in the evenings during their time at university. “We have a passion for shisha tobacco and have applied an incredible amount of science to the development of our product and making our tobacco the very best that it can be,” Aatif said in a note that he sent to me prior to our meeting. “We pride ourselves on our dedication to perfecting our bespoke blends.”
Additionally, Aatif says that he became disenchanted with science because Britain did not look after its scientists. But after speaking with him, I came away with the impression that the lure of entrepreneurship would have drawn him away in any case because his performance cars business, something he started as a hobby while still at university, is also a passion as well as a business. To be running one business on the grounds that you have a passion for what you are selling might be seen as the sign of a dilettantish businessman, but to run two on the grounds of passion needs real commitment.
But despite the passion, ASUK is run as a tight ship from which sales are made only to commercial lounges or through cashless, online retail transactions, e-commerce being another area of interest for Aatif. As well as having only two full-time employees, the company is run not out of some high-rent, big-city location but from of a space carved out of the car parts warehouse, which is based in Dundonald, a village in Ayrshire on the west coast of Scotland, but which is nevertheless only a 30 minutes’ drive from the Glasgow airport.
Aatif says ASUK’s sales are rising month on month at both lounges and retail, so while the first shipment from India of his two-component product amounted to 60 kg and came by airfreight, shipments are now of 500 kg and arrive by sea. He is confident about the future of his business to the extent that he is currently looking for a bonded warehouse, which will save his company from having to pay duty up front.
Although ASUK launched with a single paan-flavored product in London in January last year (and followed up with eight more flavors in 2019 and another four by February 2020), this isn’t the blind optimism of a newcomer. Aatif is well aware that shisha is a tobacco product that comes with all of the negative baggage that the category carries. Before ASUK was formed, he owned an architect-designed shisha lounge and is therefore able to act as an unofficial consultant to his lounge-owning customers, not only in respect of issues such as equipment hygiene and tax obligations but also on how to comply with regulations requiring that such lounges are 50 percent permanently open while providing a warm, welcoming environment, even during U.K. winters.

Advertisement
Health concerns into perspective
This shisha lounge requirement points to an issue that I ignored at the start of this piece when talking about the pleasure-to-effort ratio of various tobacco products. In saying that cigarettes delivered the highest pleasure-to-effort ratio, I took no notice of the fact that, for a lot of smokers, health concerns will be taking the edge off the pleasures associated with cigarettes. And this raises the question of how shisha smoking shapes up within the risk debate, a question that has a slightly different focus in the U.K. where, apparently, smokers prefer a lighter smoke—one that delivers flavors with few, if any, tobacco notes.
In writing the above, I have used the phrase “shisha smoking,” and in doing so, I have done only what Aatif did during our interview. But at one point, he said that shisha consumption was vaping rather than smoking. And there is truth in this because shisha tobacco is not ignited but heated—to a temperature of about 250 degrees Celsius in the case where modern charcoals are used. And this is useful in putting into perspective a widely circulated story that a one-hour shisha smoking session is the equivalent of smoking 100 cigarettes. The equivalence, Aatif said, was in the volume of smoke not in the constituents of the smoke. And this is a perfectly reasonable assumption to make even though there is little scientific evidence to support it. Those constituents cannot possibly be the same as anybody who has smoked a cigarette would realize when trying to imagine the effect of smoking 100 cigarettes in an hour, even if such were possible.
But there is a wider health issue at the moment—the coronavirus. If fear of Covid-19 reduces the footfall in U.K. shisha lounges significantly, that could cause a problem for a distributor of shisha, especially since shisha smoking is largely a social activity. Then again, perhaps people will merely switch to smoking shisha at home, and ASUK does also sell the wherewithal for that—hookah pipes, mouthpieces, charcoal …. And there are other opportunities that might present themselves. The Afzal Ready2Go product is at the moment exclusive to the U.K., but Aatif says that inquiries are coming from elsewhere. One door closes and another opens.
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.

July 1, 2020
Up and Coming

KT&G CEO Baek Bok-in (left) and PMI CEO Andre Calantzopoulos celebrate their companies’ agreement to commercialize KT&G’s next-generation products internationally. (Photos courtesy of KT&G)
KT&G prepares to join the world’s premier league of tobacco companies.
By Stefanie Rossel
From No. 5 to No. 4 in only five years: KT&G has set an ambitious goal. Currently the world’s fifth-largest cigarette manufacturer, South Korea’s leading tobacco firm aims to become part of the Big Four by 2025—a quantum leap, as the company described it in a recent exchange with Tobacco Reporter. To achieve that target, KT&G has devised a comprehensive strategy: It plans to solidify its position in its domestic tobacco market, expand its international tobacco business, diversify its operations and maximize both financial and nonfinancial values.
Originally a government-owned monopoly, KT&G faced fierce competition when South Korea’s tobacco market liberalized in 1988 and foreign cigarette manufacturers entered the country. Yet despite the challenge presented by new players, KT&G managed to maintain its leading position. In 2019, the company accounted for 64.1 percent of its domestic market, generating annual sales of more than $4 billion.
By turning its focus outward, embracing change and building a competitive edge, the company has grown significantly. A Korea CXO Institute survey published in February 2020 rated KT&G as the most profitable company among South Korea’s 30 biggest conglomerates. At 24.3 percent, the company had the highest average net income margin between 2008 and 2018.
But KT&G’s achievements weren’t limited to the balance sheet. Last year, the company received the top corporate governance award in the Korea Corporate Governance Service evaluation of environmental, social and governance (ESG) performance. Recognizing its high level of sustainable management, KT&G received top A+ grades in overall ESG for two consecutive years (2018 and 2019).
The cigarette manufacturer currently exports to more than 80 countries, a number that is supposed to increase to 200 within five years. The company, which outside South Korea is best known for its Esse super slims brand, started selling cigarettes overseas in 1988. In 2008, it established its first international plant in Turkey followed by a factory in Russia in 2010. In 2011, KT&G acquired Indonesia’s sixth-largest tobacco manufacturer.
“KT&G will expand its overseas tobacco business by region and by actively pioneering new markets it has not entered yet,” a spokesperson told Tobacco Reporter. “In order to successfully enter new markets, KT&G will strengthen the distribution network and marketing infrastructure of the major continental regions. KT&G will also focus on developing brands that meet the needs of local consumers. In fact, exports to new markets in Africa, South and Central America, and Asia-Pacific regions have sharply increased over the past few years, resulting in the diversification of the markets and shifting from dependence on the Middle East to frontier markets. KT&G will continuously strive to diversify its markets to various regions.”
Currently, KT&G has subsidiaries in Turkey, Russia, Indonesia and the U.S. In China, KT&G operates a local branch office. Subsidiaries in the U.S. and Indonesia are experiencing exceptional sales growth, according to the company. KT&G says it will expand distribution channels in the U.S. and Indonesia and initiate more proactive marketing activities in the two countries to ensure continuous sales growth.
In February of this year, the company signed a KRW2.2 trillion ($1.82 billion) contract with Alokozay of Dubai, one of the largest FMCG brands in the Middle East, for a period of seven years and four months. Industry officials said the deal would help KT&G avoid the huge costs required to set up an independent sales network in the region. The deal also brings predictability to the South Korean company’s business because it requires Alokozay to purchase certain volumes of KT&G products for the duration of the agreement.

Advertisement
New technologies
In its home market, KT&G plans to reinforce its leadership position by expanding its portfolio of low-tar and low-nicotine products along with low-odor products, which are known as “smell-down” products in South Korea. “The biggest trend that shaped the domestic tobacco market during the past few years can be defined as smell-down tobacco,” says KT&G’s spokesperson. “In 2017, heated-tobacco products [HTPs] were first introduced in the domestic market, and the consumers showed interest in the smell-down feature of the heat-not-burn products. KT&G discovered this consumer trend and concentrated its efforts in incorporating smell-down technology in traditional tobacco products.”
Last year, the company established a dedicated Smell-Care Research Center, which enabled KT&G to successfully developed various smell-down solutions, such as a cigarette-breath reduction technology, a finger zone that reduces cigarette smell on fingers and the “triple care” system, which minimizes cigarette breath and cigarette smell on fingers and cigarette smell on clothes. Since last year, KT&G has launched five smell-down products in South Korea. “All five products have received highly positive feedback from consumers and have helped KT&G reach the highest domestic market share in the past 10 years,” the spokesperson said.
However, the domestic operating environment has become increasingly unfavorable to KT&G. At the time of liberalization, South Korea was the world’s 12th-largest tobacco market, with cigarette consumption of 80 billion to 85 billion sticks annually. Amid increasing tobacco control measures, the country’s cigarette market has declined continuously over the past decade. In 2019, smokers consumed 3.45 billion 20-cigarette packs, down from 3.47 billion in 2018, according to a Korea Herald report. The figure represents a 20.9 percent decline from 2014, which is largely attributed to an 80 percent tax-driven cigarette price hike in January 2015. In 2016, the government started requiring tobacco companies to print graphic health warnings on the upper part of their cigarette packs.
Despite ever stricter regulations, South Korea still has a relatively high smoking prevalence of 21.7 percent, according to a 2018 Statista survey. It’s predominantly men who smoke (40.6 percent). After HTPs hit the market in late 2017, however, the smoking rate declined markedly. Within a year, South Korea became the second-largest market for HTPs behind Japan. In 2019, HTPs accounted for 10.5 percent of the country’s cigarette market, according to the Ministry of Economy and Finance. Sales of traditional cigarettes fell 2.4 percent to 3.06 billion packs in 2019 while sales of HTPs rose 9.3 percent to 360 million packs, according to The Korea Herald.

One of KT&G’s bestselling brands is Esse. The picture rights shows Esse variants sold in South Korea and the picture left shows Esse variants sold abroad.
Investing in the future
KT&G believes it held on to its No. 1 position in South Korea because it built a well-balanced portfolio of both traditional tobacco products and next-generation products (NGPs). The company has stepped up research and development in both categories. Its R&D investments reached KRW23 billion in 2019, having continuously grown every year from KRW12.6 billion in 2015. KT&G also recently established a task force focused solely on developing NGP technology and doubled its number of researchers. As a result, KT&G’s patent filings have increased tenfold over the past three years to 431 cases in 2019.
In 2017, the company entered the HTP market with its Lil brand of which it has launched several variants and updates since. The name Lil stands for “a little is a lot,” according to KT&G. The concept is meant to capture product qualities such as minimalism, simplicity, user-friendliness and sophistication.
The Lil family includes products such as Lil Plus, Lil Mini and Lil Hybrid. The latter product is the culmination of KT&G’s independent technology and has been widely recognized for innovation, according to KT&G. Lil Hybrid simultaneously uses tobacco sticks and liquid cartridges, allowing consumers to experience reduced cigarette smell and increased vapor production at the same time. The product was introduced at many international exhibitions last year in which it received great acclaim from international buyers around the world.

Unprecedented move
The brand is likely to become even more popular soon. In January, KT&G and Philip Morris International (PMI) signed a three-year agreement to commercialize Lil overseas. According to KT&G, the deal presents an opportunity for KT&G to introduce its NGP portfolio worldwide through PMI’s massive global sales network, which spans 180 markets.
In addition to the company’s current NGP product line, the contract also encompasses the products’ future versions. It also includes consumables, such as Fiit and Miix tobacco sticks, which are designed to be compatible only with Lil devices. KT&G and PMI are discussing the potential for a parallel brand association between Lil and PMI’s HTP, IQOS. The international expansion through PMI’s network is expected to start later this year in several yet-to-be identified markets.
The deal comes at a time when NGPs in South Korea are increasingly under pressure. In 2018, a controversial study by the country’s Ministry of Food and Drug Safety concluded that HTPs emitted even more tar than conventional cigarettes. The authors added that the products were not suitable as smoking cessation tools. Following the outbreak of vaping-related illnesses last year in the U.S., the South Korean government in October 2019 issued a “strong warning” against e-cigarettes.

KT&G’s Lil heating tobacco device has been widely recognized for its innovative technology. The name “Lil” captures product qualities such as minimalism, simplicity, user-friendliness and sophistication.
A market with potential
In its pursuit of new growth engines for a sustainable future, KT&G has successfully diversified its business into various nontobacco sectors, including health and beauty, bio and pharmaceuticals and real estate. The company has been especially committed to strengthening its ginseng and health functional food business through its wholly owned subsidiary, Korea Ginseng Corp. (KGC). It’s a compelling strategy; Future Market Insights valued the global ginseng market at $622.9 million in 2019. With demand for plant-based products rising at a steady pace, the research firm expects the ginseng market to reach $903.8 million by the end of 2027.
KGC has been continuing the tradition of Korean ginseng for more than 120 years, according to KT&G. During that time, KGC has not only maintained its leadership position in the domestic market but also evolved into a global company supplying ginseng and health functional food products to more than 60 countries. To establish a solid foundation for a long-term and sustainable future, KT&G says it will continue to expand its ginseng and health functional food business and its other business sectors.
In the ongoing Covid-19 pandemic, KT&G has fared well so far. By implementing preventive measures against infection, the company has managed to avoid disruption to its operations and supply chain. Of course, some of the company’s export markets have imposed national lockdowns, potentially altering the business outlook depending on the levels of supply chain disruption and lockdowns in those countries.
In the important Middle East market, however, KT&G has seen no significant disruption to logistics and retail sales. In the markets where the company has subsidiaries, the impact has been limited because it runs its own manufacturing facilities. While it is impossible to predict when the pandemic will cease, KT&G says it will minimize the impact by continuing to closely monitor the developments around Covid-19 and adjusting its strategy as necessary.
Tobacco Reporter’s spelling of brand names
Tobacco Reporter’s editorial style guide calls for product names to be capitalized even when trademark owners use different cases as part of their branding. The chart below shows the differences between our spelling and that used by KT&G for the brands mentioned in this article.
Tobacco Reporter’s spelling
KT&G’s official brand names
Lil
lil
Lil Mini
lil mini
Lil Hybrid
lil HYBRID
Miix
MIIX
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.

July 1, 2020
Their Favorite Enemy

Photo: Martin Büdenbender from Pixabay
The coronavirus crisis has reinforced anti-tobacco activists’ existing worldviews.
By Stefanie Rossel
The coronavirus pandemic could have been a chance for public health authorities and governments to promote tobacco harm reduction (THR). Instead, they resorted to well-known, tried-yet-unproven remedies, restricting sales channels or banning tobacco products altogether.
To warn against smoking, an activity linked to respiratory problems, appears to be a no-brainer when a deadly virus with the potential to cause acute lung failure is spreading rapidly around the globe. Yet many governments and public health authorities went much further. The Covid-19 outbreak amplified tobacco control policies that had been in circulation for decades, creating an opportunity to implement measures that would otherwise be unthinkable.
Based on the assumption, not scientific evidence, that people who smoke or vape may be at greater risk for Covid-19, anti-tobacco campaigners considered the pandemic the perfect opportunity to suggest that smokers and vapers quit both habits, preferably through willpower but otherwise with the aid of nicotine-replacement therapy (NRT).
In times of pressure, well-researched subjects, such as nicotine addiction, the differentiation between tobacco and nicotine and the method of nicotine delivery, appear to play an even smaller role than usual. How else to explain the decision of many jurisdictions to close vape shops during the first weeks of the pandemic? Even the U.K., a bastion of enlightenment in terms of tobacco harm reduction, ranked vape shops as “nonessential businesses.” As recently as 2019, Public Health England had reaffirmed its recommendation of vaping, which it considers to be 95 percent less harmful than smoking, as a cessation tool.

Advertisement
Critics warned the closure of U.K. vape shops would drive vapers back to cigarettes—a worry borne from a study carried out in May by The Guardian. The survey found that about 2.2 million people are smoking more than usual while 4.8 million are smoking the same amount and 1.9 million have decreased the amount they smoke. The rise in smoking has been attributed to heightened stress and anxiety related to the lockdowns. Smoking is also used as an excuse to go outside. The freedoms that come with working from home, without the restrictions that apply in the workplace, have also aided in the rise, the study’s authors said.
South Africa went furthest by banning tobacco and vapor product sales altogether. Imposed to slow the spread of the coronavirus, the prohibition had serious unintended consequences. The country’s illicit cigarette trade, which, according to Bloomberg, already cost the government ZAR7 billion ($401 million) a year in lost tax revenue before the prohibition, exploded following the ban.
A survey of 16,000 people conducted by the University of Cape Town found that 90 percent of smokers who wanted to buy cigarettes during the lockdown were able to do so, albeit at inflated prices. Not only did the ban turn thousands of consumers into lawbreakers, it also forced people to travel and interact with dealers who had potentially touched numerous other people while selling their wares. At the time of writing, the tobacco ban remained in place even as the government had started easing other restrictions, such as that on selling alcohol.

Advertisement
Critics warned the closure of U.K. vape shops would drive vapers back to cigarettes—a worry borne from a study carried out in May by The Guardian. The survey found that about 2.2 million people are smoking more than usual while 4.8 million are smoking the same amount and 1.9 million have decreased the amount they smoke. The rise in smoking has been attributed to heightened stress and anxiety related to the lockdowns. Smoking is also used as an excuse to go outside. The freedoms that come with working from home, without the restrictions that apply in the workplace, have also aided in the rise, the study’s authors said.
South Africa went furthest by banning tobacco and vapor product sales altogether. Imposed to slow the spread of the coronavirus, the prohibition had serious unintended consequences. The country’s illicit cigarette trade, which, according to Bloomberg, already cost the government ZAR7 billion ($401 million) a year in lost tax revenue before the prohibition, exploded following the ban.
A survey of 16,000 people conducted by the University of Cape Town found that 90 percent of smokers who wanted to buy cigarettes during the lockdown were able to do so, albeit at inflated prices. Not only did the ban turn thousands of consumers into lawbreakers, it also forced people to travel and interact with dealers who had potentially touched numerous other people while selling their wares. At the time of writing, the tobacco ban remained in place even as the government had started easing other restrictions, such as that on selling alcohol.

When Kentucky BioProcessing announced a breakthrough in developing a tobacco-based Covid-19 vaccine candidate, the WHO was quick to warn governments against engaging with the tobacco industry.
(Photo: Kentucky Bioprocessing)
Spreading misinformation
The South African government based its tobacco ban on advice from the World Health Organization (WHO), which maintains that although research is still being carried out, there is reason to believe that smokers would be more adversely affected than nonsmokers if they contracted Covid-19. Similar claims were made by authorities in other jurisdictions. Vaping, for example, was singled out as a risk factor for Covid-19 by New York City’s mayor, Bill de Blasio, the U.S. surgeon general and the U.S. National Institute on Drug Abuse. Even the U.S. Food and Drug Administration lumped vaping with smoking in the coronavirus context—but backtracked quickly in the absence of proof.
“Such misinformation ultimately harms the credibility of such bodies,” says David Sweanor, chair of the Advisory Board for the Center for Health Law, Policy and Ethics at the University of Ottawa. “Due to the role of the internet in compiling information and social media for sharing it, deception is no longer a viable strategy. It was never an ethical one. These bodies have been engaging in credibility self-immolation at a time when credibility and trust in government health bodies is essential to their role in countering Covid-19.”

Advertisement
While there are plenty of studies on the subject now, research into the relationship between tobacco use and Covid-19 remains inconclusive. Early in the pandemic, however, two meta-analyses found that smoking was not a risk factor for Covid-19 hospitalization. On the contrary, one of the researchers, Konstantinos Farsalinos, a cardiologist at the university of Patras, Greece, suggested that nicotine might even reduce the risk of contracting the coronavirus.
When examining Chinese data on Covid-19 patients, Farsalinos observed an unusually low prevalence of current smoking among Covid-19 patients compared to the expected prevalence based on smoking rates in China. While about one third of Chinese adults smoke, only 9.6 percent of hospitalized Covid-19 patients were smokers. Studies in the U.S., France and Germany noticed similar discrepancies between the share of smokers among hospitalized Covid-19 patients and their share in the general population.
The protective effect, Farsalinos speculated, could be linked to the downregulation of angiotensin-converting enzyme 2 (ACE2) expression. The coronavirus is known to use the ACE2 for cell entry. In a peer-reviewed paper published in Toxicology Reports, Farsalinos also suggested that by maintaining or restoring the cholinergic anti-inflammatory system, nicotine could control the release of pro-inflammatory cytokines and thus prevent or suppress a “cytokine storm.” Cytokines are proteins that help organize the body’s immune response to infections. A cytokine storm, often found in patients with a severe form of Covid-19, represents a failure of the inflammatory response to return to normal operation, which can potentially lead to catastrophic tissue damage.
Jean-Pierre Changeux, professor emeritus of molecular neurobiology at College de France and Institut Pasteur, went a step further. To test the protective properties of nicotine, he initiated a human trial in May. It involved groups of healthcare workers and patients wearing nicotine patches and other groups wearing placebo patches. According to Reuters, similar testing will be carried out on 400 hospitalized Covid-19 patients to understand if nicotine alters the progress of the disease. While the scientists emphasized that their research wasn’t meant to encourage smoking, French authorities limited sales of NRTs to avoid a shortage.

Konstantinos Farsalinos (Photo: David Parker)
Harmful approach
The idea that nicotine may have benign properties, that the much-demonized tobacco plant might contribute something positive, fits poorly with anti-tobacco campaigners’ worldviews. When British American Tobacco announced in April that its subsidiary Kentucky BioProcessing had made a breakthrough in developing a tobacco plant-based vaccine candidate for Covid-19 (see “Shots on Goal,” Tobacco Reporter, June 2020), the WHO was quick to warn governments against engaging with the tobacco industry. Partnership with the tobacco industry, the global health body stated, undermines governments’ credibility in protecting population health as there is “a fundamental and irreconcilable conflict between the tobacco industry’s interests and public health policy interests.”
The WHO’s May 11 statement on tobacco use and Covid-19 may be read in a similar way—as a preemptive discreditation of all studies that might not be in line with the organization’s ideology. “WHO stresses the importance of ethically approved, high-quality, systematic research that will contribute to advancing individual and public health, emphasizing that promotion of unproven interventions could have a negative effect on health.”
The organization has been criticized for its handling of the coronavirus crisis. It has been accused of acting too slow to halt the pandemic and of opaqueness under influence from China. “The WHO is not helping public health,” said Tim Andrews, founder and president of the Australian Taxpayers’ Alliance, in a webinar held by the Reason Foundation. “Just think of its failures in the Covid-19 crisis.”
The WHO has a track record of preventing reduced-risk products (RRPs), an approach that has killed millions of people, according to Andrews. The WHO, he says, has strayed from its original aims, a development that became visible when it initiated the Framework Convention on Tobacco Control in 2003. “As the policies of the WHO failed, people at the same time adopted RRPs, thus smoking rates declined,” said Andrews. “The WHO had two choices: either accept e-cigarettes or double down on their measures. They opted for the latter.”
The more e-cigarettes and heated-tobacco products prove to be effective harm reduction tools, the more the WHO regulates against them, according to Andrews. “If people are scared of RRPs, they will stick to combustible cigarettes,” he cautioned. “The WHO has been deliberately lying and spreading misinformation.”
How the misunderstanding of nicotine will impact THR in the long run remains to be seen. Sweanor remains confident. “I am optimistic that Covid-19 will lead to a reexamination of public health bodies and public health policies in general,” he says. Many of the failings with nicotine, such as acting on unscientific authoritarian impulses rather than focusing on pragmatically reducing risks for the most vulnerable, have been tragically repeated with Covid-19, according to Sweanor. “If basic public health principles and ethics could be reestablished in major health bodies such as the WHO and CDC [the U.S. Centers for Disease Control and Prevention], it could lead to breakthroughs not just on pandemic responses and nicotine but on a wide range of other pressing issues.”
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.

July 1, 2020
Silent Auction
Rules on social distancing make for a very different tobacco marketing season in Zimbabwe this year.
By Thulani Mpofu

Photos: Taco Tuinstra
All tobacco grown in Zimbabwe since 1936 has been sold at open auction and contract floors in Harare with thousands of growers thronging the southern end of the capital from March to August yearly to sell the “golden leaf.”
Some growers traveled to Harare for hundreds of kilometers sitting precariously on top of tobacco bales loaded in small lorries while others from nearby villages brought theirs in ox-drawn carts. Many slept for days in queues out of trading floors awaiting their turns to sell their tobacco.
Vendors selling food, clothing, radios and cellphones among other items plus agents for formal businesses selling farm inputs, vehicles and insurance policies added to the commotion around the tens of contract floors where contracted growers delivered their crop and the three open auction floors that serve self-funding growers. Bars nearby would remain open late serving growers who were known for lavish spending around their once-in-a-year paydays. Pickpockets, sex workers and beggars found business there too.
The Covid-19 pandemic has upended it all this marketing season.

Advertisement
To promote social distancing, trading floors have been decentralized from Harare to tobacco growing localities while trading floors that remain in the city do not allow more than 20 growers inside at any time.
Voedsel Tobacco International, a local contractor, has taken advantage of the decentralization to invest in a trading floor in Marondera, a small town 76 km northeast of Harare.
“This is Marondera’s first tobacco trading floor and our first out of Harare,” Innocent Mahufe of Voedsel Tobacco International told Tobacco Reporter.
“Because we are a contractor, ours is a contract buying floor. We are in Marondera to be closer to the farmer and decongest our main floor in Harare. In total, we have 16,000 farmers under contract, and of that number, we expect Marondera to serve 5,000 farmers in Mashonaland East [whose provincial capital is Marondera] and Rusape [in neighboring Manicaland Province].”
At the new trading floor that was opened on May 1, Voedsel Tobacco employed three qualified nurses who check temperatures for all staff and farmers who call in to deliver their tobacco.
“The nurses also sanitize our clients; they oversee the disinfection of the buying floor to ensure [the] utmost hygiene,” said Mahufe. “We also have an isolation room on site just in case anyone is found to be unwell. Social distancing is a must; the same with wearing a mask. We are fully compliant with government regulations to fight Covid-19.”

Zimbabwean authorities are keen this year to avoid the clusters of people like this one at the Harare Tobacco Sales Floors in 2018.
Because of tobacco’s central role in Zimbabwe’s economy, the leaf selling season is a huge moment for the country and always presided over by the national president, his deputy or a delegated minister. This year, the event was delayed from mid-March to April 29 to enable trading floors to set up systems that promote high personal hygiene and social distancing in response to the Covid-19 pandemic. By May 10, Zimbabwe had 36 Covid-19 cases, nine recoveries and four deaths. President Emmerson Mnangagwa declared the disease a national disaster and ordered a seven-week national lockdown beginning March 30.
Tobacco, affectionately known locally as the “golden leaf” not only because of its color when cured but also because of its high export potential, is Zimbabwe’s most lucrative crop and the second biggest foreign exchange earner after gold. In 2019, it generated $747 million in exports mainly to China, South Africa, the United Arab Emirates and Belgium, according to the regulator, the Tobacco Industry and Marketing Board (TIMB). Africa’s largest flue-cured Virginia tobacco growing nation and the world’s fourth biggest after China, Brazil and the U.S. produced 256 million kgs of the crop in 2019, a record since commercial tobacco growing started in the country in the 1890s.
However, because of erratic rainfall, the TIMB expects output to fall to between 225 million kgs and 230 million kg this year. The regulator says 148,084 farmers grew tobacco in the October 2019 to March 2020 farming season. Were it not for Covid-19, this mass of people would have traveled to Harare from the beginning to the end of the marketing season.
“Circumstances demand that we sell tobacco differently this year. This is a big crop for the economy, but the health of the people is supreme,” said Mahufe, whose company is planning to set up three more contract buying floors at Mvurwi and Karoi in Mashonaland West Province as well as at Rusape.
Two weeks prior to the start of the trading period, the TIMB ordered the three licensed tobacco auction floors—Tobacco Sales Floor, Boka Tobacco Floors and Premier Tobacco Auction Floors—and the 65 buyers and contractors to decongest their premises in Harare and decentralize their operations to the four major tobacco growing provinces—Mashonaland West, Mashonaland Central, Mashonaland East and Manicaland. They are bound to set up on-site isolation facilities, provide alcohol-based hand sanitizers and running water.

Advertisement
A farmer will be allowed to deliver tobacco for sale only once per week. Those selling fewer than 100 bales are barred from attending the sale of their crop but should appoint a representative who will represent other growers to be able to consolidate farmers’ bales to at least 100 and then to deliver them to the auction or contract floors. Farmers and their representatives entering the trading floors must be screened for body temperature and their identification and contact details must be recorded to facilitate easier contact tracing should the need arise in the future. Informal markets were banned.
Nigel Foto who farms in Macheke, 35 km east of Marondera under contract from Voedsel Tobacco International, is happy having sold 43 bales between $4 per kg and $5.60 per kg since May 1, but he would have wanted to sell his crop himself not through a representative.
“It’s a Catch-22 situation,” he said.
“Everyone must be careful with this disease, but to be forced to sell my tobacco in my absence is concerning. This is my sweat. I must be satisfied that it is rewarded as it should, but if I am represented by someone else, I cannot be convinced 100 percent that I got a fair price.”
Berean Mukwende, president of the Zimbabwe Farmers’ Union, is equally worried over the integrity of middlemen.
“The farmer must pay his representative whose reliability a farmer may not know. This is an extra cost to the farmer,” he said.
“I hope that will be reconsidered. Authorities must consider that small farmers, in their large numbers and few bales, contribute the bulk of national tobacco output. So their concerns must be heard.”

Zimbabwe has decentralized its tobacco sales this year to prevent large gatherings.
Andrew Matibiri (left) and Rudo Boka at the Boka Sales Floors
Official statistics indicate that 85 percent of tobacco growers in the country are small-scale producers who plant an average of one hectare under the crop yearly, reaping about 25 bales per hectare. They normally deliver a few bales at a time spread over the marketing season in an effort to capitalize on periodic price increases.
TIMB Chief Executive Andrew Matibiri said nine days into the marketing season that the anti-Covid-19 measures were doing well, with personal hygiene and isolation facilities in place and social distancing being upheld at trading floors.
“We have so far licensed four companies to decentralize to Karoi, two to Mvurwi, one to Marondera and two to Rusape,” he told Tobacco Reporter on May 8.
“Indications are that there will be two more companies buying in Karoi and one more in Mvurwi. In terms of hygiene, handwashing and so forth, we are satisfied that auction and contract floors are complying. Yes, all these present extra expenses as companies are having to lease or buy space at new sites as well as to put in place health systems, but we have no choice because of this disease.”
Minister of Agriculture Perrance Shiri, who was the guest of honor at the launch of the 2020 marketing season, said decentralized tobacco sales help growers cut transport costs and decongest the main trading floors in Harare.
“Please be consistent in turning your practical guidance into action to avoid continued spread of the disease. I urge everyone to continue to implement these guidelines up to the end of the season even after the lockdown is finally lifted in order to avoid resurgence in cases,” he said.
Deliveries were slow in the first nine days of the trading season partly because of restrictions in movement and farmers still familiarizing themselves with the new guidelines. Average prices were, however, higher this season than in 2019, according to the TIMB.
Tobacco farmer Monica Chinamasa said the quality of the crop that is delivered in the early stages of the trading period is typically poor as farmers sell the crop starting with the lower leaves that tend to be of poor quality thus attracting a low price and progressively reaping the leaves higher up the crop, which tend to be of higher quality and thus cost more.
Social distancing is the way to go in fighting Covid-19, she said, adding that the same holds true for decentralized sales.
“Authorities must be thorough with the regulations as this is all about people’s health, but my fear is on the sales representative,” she said.
“Yes, it is the farmer who chooses him, but that person cannot represent the farmer fully, especially when it comes to the price of my crop. Ideally, the farmer must be present when his or her bales are being sold.”
June 1, 2020