Category: Also in TR

Minimizing the environmental impact of tobacco packaging materials

By George Gay

It seems that every day we are confronted with news that yet another factor is adding to those that are already known to be leading us toward environmental catastrophe. And the timetable of the approaching catastrophe is shortening by the day; so, as another story in this issue suggests (see “Our Better Nature,” page xx), we now have perhaps only a decade to sort things out. Under these circumstances, it seems reasonable that we should be doing all that we can, as quickly as we can, to reverse or at least lessen the environmental damage that we have caused and continue to cause.

The tobacco industry uses packaging materials, some of which, with the right incentives, could be substituted with those more environmentally friendly. And, in the case of both traditional and substitute materials, it is useful to keep an eye on production processes so as to control waste because even though “waste” can be recycled, recycling processes have unavoidable inefficiencies.

But controlling waste in a time of falling volumes produces its own problems. Lower volumes mean lower demands for materials, such as packaging—something that, purely from an environmental perspective, could be seen as positive. But, as ITC Packaging told me, current market dynamics mean that even as volumes are falling, the number of stock keeping units and design complexity are increasing, and for a packaging company, this can conspire to produce higher levels of waste.

There are two major ways in which such waste can be minimized, ITC said. Process waste can be reduced by optimizing print paperboard layouts in conjunction with customers and tool suppliers. New technologies, such as digital printing, can be used for very short runs, including those involving limited edition packs. The consumption of ink can be reduced by using laser cylinders rather than electromechanical cylinders. Machine sensors can be upgraded to allow smaller print-register marks to be read, thus reducing board trim waste. And double-sided tapes can be used in reel-to-reel products to enable the complete use of board reels, despite joints.

Secondly, machine setup waste can be reduced by sequencing jobs of similar profiles, colors, etc., and by doing preparatory work in pit stop mode, whereby, for instance, ink preparation and tooling are carried out in parallel.

Presentation

But back to the materials themselves. I was recently looking back at the revised versions of EU Tobacco Products Directive that entered into force on May 19, 2014, that became applicable in member states on May 20, 2016, and that lays down rules governing, among other things, the presentation of tobacco and related products. Under the directive, unit packs of cigarettes must have a cuboid shape, while unit packs of roll-your-own tobacco must have a cuboid or cylindrical shape or be in the form of a pouch. At the same time, a unit pack of cigarettes must include at least 20 cigarettes, while a unit pack of roll-your-own tobacco must contain a minimum of 30 grams of tobacco. In addition, the directive specifies the materials packs may be made of and their form, down to the requirement that, for instance, flip-top lids must be hinged only at the back of the pack.

I take it that those who devised the above had in mind to lessen the negative health impact of tobacco consumption by ruling out smaller and gimmicky packs that, in their view, could entice people to smoke when they might otherwise not do so.

I don’t want to belittle the efforts of such people, but I find it almost impossible to imagine how they would be able to convince themselves that many people—anybody, even—would be saved from premature death by the imposition of such restrictions. Why, if the objective was to protect human life, wasn’t the emphasis put on environmental rather than aesthetic issues surrounding tobacco packaging?

For instance, the EU could have specified that all cigarette packs have either no inner liner or only easily recyclable or compostable paper inner liners. And it could presumably have specified that these inner liners were either plain or printed with environmentally friendly inks. Of course, it might be said that leaving inner liners out altogether might impact the freshness of the cigarettes, but, looked at from the EU’s point of view, that would be another plus—another way of making cigarettes less attractive.

And there is always the paper inner liner option. BMJ, for instance, which has been supplying the tobacco industry with paper and foil inner liners since the mid-1990s, has recently been offering printed paper inner liners. But as you would expect in a competitive cigarette market, the traditional, tactile and attractive foil inner liners are the preferred option. Only regulation is going to make the seismic shift that is necessary to help—in a minor way, admittedly—save the world.

Planning for the future

Unfortunately, I don’t think that we, the adults, will ever replace aluminum foil with paper or do all of the other things to all of the other packaging of all of the other products necessary to save the environment. We have allowed a certain type of capitalist to convince us that the market will sort things out—that there is no need for government regulations. This, of course, is nonsense. But the problem is that the argument against regulations starts to resonate with people when opponents of such rules can point to those that, for instance, specify that the hinges of flip-top packs must only be situated at the back of a pack. I mean, what’s the point? Once a pack is sold to the consumer, it is the consumer who decides what is the front, back or side. Some years ago, it became the fashion among a certain group of people in the U.S. to open soft packs at the bottom, which, you might say, became the top.

Apparently, only children can see through such nonsense. Toward the end of last year, an academic in the U.K. suggested that children as young as six should be given the vote, and I, like a lot of people my age, I would imagine, nearly fell off my perch with apoplexy. But after I’d downed a stiff mug of steaming cocoa, it became easy to see what he was getting at. According to a Dec. 6 story in The Guardian, the head of politics at Cambridge University, David Runciman, made his suggestion because the U.K.’s aging population meant young people were now “massively outnumbered,” creating a democratic crisis and an inbuilt bias against governments that planned for the future. And lowering the voting age to 16 was not radical enough to address the problem.

Certainly, the environment must be an example of how governments have failed to address even threats of catastrophes forecast to overwhelm us in just a few decades. I must admit that I’m not convinced that a 6-year-old would trade her plastic toy to help stop a glacier melting, but her 10-year-old sister might, or she might at least be willing to forgo the plastic packaging around the toy.

Children seem particularly exercised by the issue of plastic pollution, much of which is caused by packaging, some of which is unnecessary and some of which could and should be substituted. In part, this is no doubt to do with children’s fascination with nonhuman animals and the distress that the children feel when they learn of such animals suffering from the ingestion of plastics. Many adults, on the other hand, after years of eating bits of animals, have become desensitized to such suffering and don’t seem capable of grasping the scale of the problems we face. Certainly, they don’t seem collectively to be capable of addressing these problems in an even halfway effective manner.

But some help is at hand. Parkside told me that it had recently launched recoflex-PE, a fully recyclable single polymer flexible packaging laminate with barrier properties and sealing performance that mirror a range of commonly used laminates in the tobacco packaging sector that are not currently recycled.

“Designed to support a circular economy, recoflex-PE is made from 100 percent polyethylene (PE), which enables the packaging material to be recovered via the established carrier bag collection and recycling infrastructure in retailers,” the company said. “Consumers can simply take their packaging to retail stores with carrier bag collection points.

“The innovative laminate can be used for most flow wraps, pouches or bags that require a high barrier to protect product freshness.”

This is just part of Parkside’s response to environmental concerns over packaging. The company also said that it had developed Park2Nature, a range of flexible packaging materials that were fully home compostable and designed to disintegrate within 26 weeks in ambient conditions—materials that have been granted full accreditation from TUV (Germany’s Technical Inspection Association). “The packs are rigorously tested for eco-toxicity and a host of other criteria against [technical standard] EN 13432,” the company said.

“Parkside is the only company in the world today with a fully accredited compostable packaging range and was the first U.K. company to secure Australasian Bioplastics Association (ABA) accreditation for its compostable designs.”

Tipping papers are becoming ever more sophisticated.

TR Staff Report

As consumption of combustible cigarettes continues to slide, demand for cigarette components has dropped accordingly. The global market for tipping base papers is about 4.2 billion square meters today, compared with 4.7 billion square meters in 2013, according to the Tann Group, a leading supplier headquartered in Austria.

Yet, even as volumes shrink, the outlook for tipping papers in terms of value is more positive. Cigarette manufacturers’ increased focus on product differentiation, branding and innovation has shifted demand within the segment toward more sophisticated solutions. Tipping paper suppliers may ship less product overall, but what they sell tends to carry higher margins.

Part of this development is driven by cigarette manufacturers’ product innovation. The rise of heat-not-burn (HnB) products, such as iQOS, Glo and Lil, has generated demand for new types of tipping paper. These papers must meet different technical specifications than those designed for conventional cigarettes, but their role in product differentiation is the same. “As with conventional cigarettes, it all comes down to branding and making the product somehow unique,” says Michael Lindner, technical service manager at the Tann Group.

Fierce competition in the category of next-generation products has prompted customers to demand high levels of confidentiality from their suppliers, however. Bound by strict nondisclosure agreements, the suppliers that contributed to this article were not at liberty to reveal details of their HnB tipping papers.

The move toward more sophisticated tipping papers is also driven by regulation. Greater restrictions on tobacco packaging, in the shape of plain packaging, for example, have left the cigarette as the only platform for consumer communications in many markets. “As regulations for packaging are changing, tipping papers have become the medium for differentiation and marketing,” says Michaela Ehrmann, sales manager at Glatz Feinpapiere, a prominent tobacco paper supplier based in Germany. “It becomes more and more evident that the product is not the pack but the cigarette as such,” echoes Florian Elsigan, sales manager at the Tann Group.

Indeed, suppliers today offer customers a great variety of tipping papers to differentiate their cigarettes. Whereas plain cork used to be pretty much the only option, tobacco companies can now choose logo cork, cork-on-white designs, multicolored tippings, half-tone tippings, metallic/pearlescent coatings, hot-foil tippings and printed designs on colored base papers, among other varieties. There are even products that deliver multisensory experiences, with special surfaces appealing to the sense of touch and pleasant aromas catering to the sense of smell, for example.

Together, these options allow cigarette makers to create truly unique products in a crowded marketplace. “In the end, it is down to the combination of colors, varnishes, logos and other design features of the brand,” says Elsigan.

Increasingly, tipping papers are also used to protect the product against brand piracy. “We are regularly asked by cigarette manufacturers whether we can offer superior security features,” says Elsigan. Commercially well-established examples of such technologies include special-effect printing featuring color changes/shifts; thermo-chromic and UV active (fluorescence) functionalities; complex hot-foil stamping elements with micro-embossing; haptic and tactile tipping; and tipping variants comprising extraordinary substrates such as biodegradable transparent and translucent materials. Often, it’s a combination of such features that offers the best protection.

Rising cost

In the meantime, suppliers of tipping papers have been wrestling with rising energy prices and expensive raw materials. The cost of pulp—paper manufacturers’ most important input—has exploded over the past two years, reaching historical peaks. Driven by unforeseen stoppages at some large suppliers and ferocious demand from China, the price of pulp has risen by some 40 percent since the beginning of 2017, according to Glatz Feinpapiere. While the rapid increases appeared to have leveled off in early January 2019, market experts expect them to remain high for the foreseeable future.

Needless to say, this development has had a significant impact on tipping paper manufacturers’ businesses. Unable to fully pass on the increased cost of production to their customers, they have been forced to critically review their operations, identifying possibilities for efficiency increases through automation and effective supply chain management, for example. While acknowledging the challenges, the Tann Group believes the current environment also presents an opportunity: to dig deep and question established ways of doing things. Such probing can lead to new, valuable insights.

Tipping paper suppliers in Europe were also affected by drought in 2018, according to Glatz Feinpapiere. Low water levels in major rivers meant shipments that normally went by boat had to be diverted to trucks, which is more expensive. (Glatz is fortunate in that it receives pulp by rail on its own tracks.) The drought also caused crop failures, leading to a shortage of starch, a natural additive in the papermaking process. Multiyear contracts with customers meant the suppliers had to largely absorb such unexpected expenses.

Climate change means manufacturers may have to cope with extreme weather patterns more frequently in the future. Eager to minimize their environmental impact, tipping paper manufacturers place strong emphasis on the sustainability of their operations. “We truly believe that you can only act long term if you act sustainably,” says CSR Responsible Helena Macku from the Tann Group. Both the Tann Group and Glatz Feinpapiere hold various certifications recognizing the sustainability of their industrial and forestry operations. The Tann Group says it was one of the first tobacco paper suppliers to report on its activities following the guidelines of the Global Reporting Initiative. Glatz Feinpapiere is especially proud of its ISO 50001 certification, given that paper production is an energy- and water-intensive process.

In the meantime, the industry continues to invest to increase productivity and provide customers with cutting-edge solutions. Over the past three years, the Tann Group has invested almost €20 million ($22.8 million) in new machinery and upgrades to existing equipment. It has been replacing printing presses and slitting machines while installing new web inspection systems. The company has also built a state-of-the art factory in China to further strengthen its position as a leading supplier of tipping paper to the world’s largest tobacco market. Going forward, the Tann Group plans to optimize internal logistics and packaging as well.

Glatz Feinpapiere, meanwhile, has been implementing a new enterprise resource planning system, which was scheduled to go live in January. It has been streamlining its processes and evaluating its production flows to improve efficiencies. The company has also equipped its tipping base paper production line with a new press section so as to improve the processability and printability of its paper rolls. Over the past year alone, Glatz Feinpapiere has invested about €10 million into its operations.

Manufactures of tobacco adhesives adjust their operations to new products and changing requirements

By George Gay

Manufacturers of combustible cigarettes require their suppliers to deliver unprecedented levels of efficiency, while producers of next-generation products often demand different technologies altogether. Tobacco Reporter asked several makers of tobacco adhesives how they are responding to changing industry needs.

H.B. Fuller—Anticipating Customer Demand

When it comes to volume sales of adhesives to the tobacco industry, it is clearly the combustible products and packaging sector that is at the forefront. But when it comes to buzz, look no further than the next-generation product (NGP) segment.

Asked during an email exchange in January whether there were any emerging applications for tobacco adhesives, Jude Liddle, marketing manager for the Europe, India, Middle East and Africa region (EIMEA) for H.B. Fuller, said NGPs remained at the forefront of innovation for the major tobacco companies. H.B. Fuller was therefore dedicating R&D efforts in this area to support the production efficiencies of tobacco companies and machine manufacturers and to ensure product performance kept pace with the growing demand. “In 2018, we introduced a new range of adhesives that are performance optimized for NGPs,” she said. “In this relatively new area, machines and production methods are being reviewed and improved, and we are working closely with customers and OEMs to ensure the adhesive products continue to deliver the high performance required as this growing market develops.”

Meanwhile, Andrzej Dabrowski, business manager for tobacco in EIMEA, said the NGP segment was growing, fueled by frequent new product launches, and nobody was able to predict how it would develop over the coming years. Although the new cigarette sticks for NGP devices looked similar to traditional cigarette sticks, he said, there were two main areas of difference: the design of the stick and, in particular, its filter, as well as the way the stick was used by the consumer. NGP sticks were heated and not burned, and this posed different challenges in respect of ensuring adhesives remained functional while the cigarette stick was being used. In addition, the filters had a more complex construction than those of traditional cigarettes, and this created new challenges related to adhesive performance requirements.

But the challenges posed by NGPs are by no means the only ones faced by adhesive suppliers. Dabrowski said that even in respect of traditional cigarettes, new filter designs and functionality were being developed, such as those used in respect of recessed or capsule filters. This resulted in these filters becoming more complex in their construction, and this, in turn, raised further challenges for the adhesives used.

In addition, there are even the complexities involved in making things simpler. Liddle said that customers wanted to buy and stock-manage fewer adhesive products, so complexity reduction was important. “We already have proven products on the market that are successfully used across multiple applications, such as side seam, tow anchor and packaging,” she said. “For example, we have one customer who buys only three adhesives products from H.B. Fuller and successfully produces all their cigarette and filter products with just these three adhesive solutions.”

To some extent, complexity varies according to the geographic destination of tobacco products. Parallel to the trend toward standardized packaging in some areas of the world, which was simplifying adhesive demands, said Dabrowski, companies in many regions were utilizing the wide variety of carton finishes available to differentiate their products. These finishes often included more difficult to bond surfaces, such as transfer-metalized or laminated hinge lid blanks, which required manufacturers to adapt their machine speeds or change their adhesive. “At H.B. Fuller, our global range of specialized water-based packaging adhesives enables customers to operate their machines efficiently whilst achieving secure bonds on the packaging,” he said. “Our close collaboration with carton board suppliers ensures we stay up to speed with the latest developments in this dynamic market.”

Liddle added that H.B. Fuller was excited about its new Ipacoll 2900 packaging adhesive that was launched late last year. This high-performance adhesive, she said, enabled customers to achieve fast production speeds of up to 1,000 packs per minute, even on challenging packaging materials, such as lacquered and varnished surfaces.

“And we achieved this high performance level without using boric acid,” Liddle added. “This is a substance listed as one of very high concern by the ECHA [European Chemicals Agency], and we no longer use it in our development work. It made the challenge of achieving the very high wet tack required for fast production speeds in combination with strong adhesion more difficult to achieve, but our team of scientists based in our technical center in Nienburg, Germany, rose to the challenge.”

In addition to removing ingredients that have been found to be undesirable from adhesive formulas, there are the challenges of maintaining supplies of needed ingredients, of identifying possible new ingredients and keeping down the costs of both. H.B. Fuller said adhesive raw materials were currently readily available and that it was committed to ensuring continuity of supply to its customers. At the same time, the company worked closely with its raw material suppliers and was always evaluating new raw material products to assess their potential use in new adhesives. Raw material costs, meanwhile, were said to have been rising steadily over the past couple of years, and this trend was expected to continue, though the company said that it leveraged its global scale to manage these costs as well as those to do with freight and inventory management.

Serving the tobacco market involves managing a number of issues not directly concerned with adhesives. “Like many companies active in the tobacco industry, we are monitoring the impact of plain packaging and the expected increase in illicit trade,” H.B. Fuller said. “As always, we properly vet any new potential tobacco customer to ensure we only supply adhesive to genuine tobacco product customers and not those producing counterfeit products.”

And what is the range of tobacco industry adhesives that manufacturers look for? H.B. Fuller said it supplied the full range of adhesives required to manufacture cigarettes and their packaging as well as other products, such as those for tube making and tobacco pouch sealing. Its tobacco adhesive products included thermoplastic hot melts and synthetic and natural, water-based adhesives.

Finally, the ultimate question management must ask how the worldwide market for tobacco adhesives is holding up given that cigarette volumes are falling. “Even within a declining market, there is still opportunity for successful companies to grow,” said H.B. Fuller. “The important thing is to understand changing customer and market needs and have the desired products available when they’re needed—if not before. Our relationships and collaboration with the major tobacco companies, machine suppliers and paper suppliers ensure we are best placed to make the most of the opportunities within this challenging market.”

CB Kaymich—Helping Manufacturers Control Costs

If you were to research the issues that cigarette manufacturers have regarded as priorities since the 1970s, when C.B. Kaymich introduced the industry’s first gravity-fed polyvinyl acetate (PVA) side-seam application system, one of those that would turn up consistently would be cost control.

So it was no surprise when, in January, Kaymich, which specializes in adhesive application and fluid-control systems, said, in answer to a question from Tobacco Reporter, that one of the major issues currently affecting its customers was their need for a level of cost reduction that would allow them to remain competitive.

Of course, what is not mentioned here is that these customers are having to remain competitive against companies that are also working on cost reduction, which at least explains why this issue remains a constant at the top of the issues table.

Rona Treeby, Kaymich’s sales and marketing executive, said her company understood the pressures that its customers were facing, so reducing costs while maintaining the quality of Kaymich’s equipment and service was a key goal.

“We continue to work with our customers to achieve this and know that our Gemini product already offers customers significant cost savings when compared to other units,” said Treeby, before adding that the Gemini’s superior uptime could provide payback in less than 30 shifts.

The Gemini is a flavors application unit, but Kaymich says, too, that the company is enabling cost savings to be made in respect of its adhesive application equipment. “Kaymich’s adhesive side-seam products offer customers the opportunity to standardize parts across a wide variety of application systems,” said Treeby. “This reduces their spares investment as Kaymich parts can then be used across their different machines. As well as providing cost savings, this also gives customers the additional practical benefit that running with one type of parts means operators only have to become familiar with one type of technology.”

At the same time, Kaymich says that it continues to develop innovative equipment for the application of hot and cold adhesives while striving to help manufacturers in their quest for cost reductions. And it offers customized and bespoke products and systems when off-the-shelf products do not match specific needs.

It offers too what it describes as a cost-efficient way to apply adhesives through its cigarette side-seam application systems that are said to be suitable for installation on most cigarette makers. “These are designed to apply PVA fed by either gravity or pump and give an accurate application of adhesive with no stoppages for cleaning purposes, making this a low-maintenance and cost-efficient way to apply adhesive,” said Treeby.

Among other equipment, Kaymich offers filter tow spray retention systems designed to apply adhesive over a wide area to anchor the tow to the paper, and spray valves designed to apply PVA to board within cigarette packing.

Interestingly, it is worth noting that, amid all the innovation, some things remain, even if they are now presented in updated forms. The industry’s first gravity-fed PVA side-seam application system mentioned at the start of this piece is still available today, a testament, Treeby said, “to the quality of the product and its ability to meet customer requirements within the competitive 2019 marketplace.”

SPI Developments—pushing boundaries

Until recently, the tobacco industry was correctly known as being conservative. Over the years, the outward appearance of its products stayed much the same, and even though those products became better engineered, that engineering was carried out in a manner so closely controlled that changes often went undetected by outsiders and even by some smokers.

Not any longer. Things are changing fast—to the point where the chairman of SPI Developments, Paul Leverick, who has been in the industry for more than 40 years, can enthuse about an “explosion” of new, radical products having resulted in formidable challenges for the adhesives application systems that his company supplies.

Of course, the difference in mood has been created almost entirely by the rise of noncombustible products and by the fact that the tobacco industry has become the tobacco and nicotine industry. As Leverick said, every major tobacco manufacturer now has a vapor product and a heat-not-burn product or is in the process of developing such products. Every time a manufacturer came up with a new product initiative, there was a scramble by others to match or better that initiative. “It’s a massive market,” he said.

And this massive market isn’t boosting only the adhesive application sector; it is also giving a lift to flavor mixing and flavor application, areas where SPI is also active. But whereas the company is involved in what Danielle Roxborough described as a few interesting flavor-related, equipment development projects, a lot of its development activity is currently focused on adhesive equipment.

During the past 18 months especially, Roxborough said that SPI has been receiving inquiries that have gone beyond those of the past, as customers and potential customers have sought to access not just the company’s equipment but also its adhesive application expertise. SPI was being asked questions about how adhesive should be applied to new and proposed products, especially heat-not-burn products, where the adhesive should be applied and what type should be used.

These projects aren’t interesting only in a technical sense; they are also interesting in a commercial sense. Roxborough said that demand for adhesive equipment is probably higher now than it was three or four years ago, which is something to hang onto in an age when the tobacco industry is seen by many people as being in the doldrums.

Leverick is not getting carried away, however. He has been around too long for that. He readily pointed out that what was happening could be correctly interpreted as a fragmentation of the market. Nevertheless, he cannot hide his enthusiasm. One or two real gems were emerging from that fragmentation, he added.

Likewise, he is positive even though some of the projects that SPI has been asked to become involved in seem from the outset not to be practical or even possible. He is thankful that customers and potential customers arrive at SPI’s doors with such inquiries, partly, he said, because it means that SPI’s researchers have to think deeply against the background of the company’s long history and understanding of the science and principles behind how adhesive is applied and what happens when it is applied. In doing so, even challenging goals can be achieved, sometimes by approaching the challenge in a different way from that originally proposed by a customer.

SPI has long operated on the basis of equipment modules from which it can build customized systems for different manufacturers. Now it is concentrating on building more intelligence into its equipment to extend the range of customization that it can offer while, at the same time, moving toward the goal of many manufacturers—increasing automation of their processes and decreasing the need for human intervention. Roxborough said that some of these ideas are coming from outside the tobacco industry—from the automobile industry, where sensor technology reports back on the status of an engine, and even from the home, where lights and drapes can be automatically controlled.

Leverick generally welcomes such trends because he believes that progress comes from pushing the boundaries of technology, though he cautions that there are limits to what can or should be done, partly because of the costs involved. He said that part of the latest drive for automation is happening because, with the development of new types of products, designers are starting with a clean sheet of paper; but he added that, inevitably, some of the advances will find their way back into more traditional processes.

If there is a negative side to these developments, it is that it is difficult to predict what will happen in the future. Some of the new products will work, while others will fall by the wayside, and the only way to handle the current situation is to remain flexible, according to Leverick.

But SPI has another advantage beyond its flexibility. Last year, it was acquired by ITM, which Leverick described as a progressive company prepared to plow money back into development, resources and people while allowing SPI to continue to be creative. It is also ethical in its approach to the environment.

Being part of the ITM Group has increased SPI’s exposure and credibility, especially in areas beyond combustible tobacco products, and it has allowed the company to become more closely involved in development projects. Roxborough said that ITM had opened doors, which meant, in part, that SPI was often invited to join a project on the ground floor, from where, knowing what the ultimate goal was, it could help steer the project rather than follow in its wake. The acquisition came at an exciting and opportune time, she added.

The acquisition has also helped SPI widen its horizons so that it is now involved in projects that leverage its tobacco industry-garnered expertise but that have nothing to do with the tobacco industry. One project, which SPI is unable to talk about yet but which it says has been driven by environmental issues, seems particularly interesting. It has used its cigarette industry adhesive application expertise to improve an old, nontobacco industry process for manufacturing products in what is said to be a revolutionary way. SPI has promised more details in the future.

The legalization of cannabis may prove to be a transformational development for the tobacco industry.

By Shane MacGuill

Socially, culturally and practically, cannabis and tobacco have long had a symbiotic relationship. The emergence of recreational cannabis use occurred around the same time tobacco consumption became mainstream. Millions of cannabis joints have incorporated millions of cigarettes. And for decades, one has been associated with the other through the gateway effect (initially tobacco as gateway to cannabis but latterly, in the U.S. at least, indications of the reverse: cannabis use as tobacco cessation). They have also been disdained in tandem.

However, the corporate relationship between the tobacco industry and a putative legal cannabis segment has often been uneasy and rarely reflected the simple cliche of the Marlboro Marijuana. Until very recently, tobacco companies have never spoken openly about involvement in a legal cannabis industry except to foreswear any interest or plans, while internally there has often been a genuine lack of consensus about whether legally available cannabis represents competition, complementarity or opportunity for the industry. As the industry’s own regulatory complexity and reputational difficulties have grown along with the size of the legal cannabis prize, this lack of consensus can only have deepened. What is clear is that any future tobacco industry involvement in legal cannabis will be multifaceted and considered rather than direct and bombastic.

Given the aforementioned Marlboro Marijuana, it is perhaps appropriate that Philip Morris USA’s parent company Altria has made the first substantive forays into legal cannabis on the part of tobacco brand owners, with its recent $1.8 billion investment in Canadian licensed producer Cronos Group. The future, however, is far from the cliche. Altria’s virtually synchronous investment in the U.S.’ leading nicotine vapor brand, Juul, points to a synergistic destiny in which tobacco companies have morphed into pleasure substance providers and are using technology, such as vaporization—to deliver a range of substances (nicotine, cannabis and potentially beyond) responsibly to consumers.

Why tobacco should be interested …

But first, the fundamentals. There are a number of compelling reasons that support the interest and involvement of the tobacco industry in legal cannabis. There are also some challenges to raise.

Beginning with the supportive factors, in markets across the world, whether cannabis is legal or illegal, many cannabis consumers are also tobacco or nicotine users. In legal markets, many tobacco users will choose to experiment. This means that the industry can add value by meeting its consumers where they are. Further, as will be elaborated on below, some of the consumption missions for tetrahydrocannabinol (THC) and cannabidiol (CBD) overlap with the motivators for tobacco and nicotine use—stress relief, relaxation and social signaling.

Like tobacco, cannabis is (currently at least) a seed to the value-added product industry, which involves the cultivation, processing and compilation of consumer products. It is also one that is likely, over time, to see price points for raw cannabis leaf declining. The tobacco industry possesses expertise in the efficient and cost-focused production of materials in an agricultural supply chain, controlling costs and driving margins on the finished product.

While there are a range of eventual scenarios in terms of cannabis regulation (with regimes varying across the regions), it is certain that in several it will tend toward the more restrictive. Legal cannabis legislation will require substantial compliance procedures and efficiency, something that is the cornerstone of current tobacco business. Specific tobacco industry expertise such as that related to track and trace is also likely to be highly valuable in a cannabis context.

Finally, a corollary both of overlap with the tobacco industry’s current consumption profile and its experience of operating in heavily restricted environments is the unique toolset and capability it provides tobacco businesses to build brands within the cannabis space. The legal cannabis segment will be driven forward both by niche, specialist producers and the development of large, mainstream brands with limited room for maneuver—the latter being ripe for the contribution of tobacco companies.

Conversely, the current barriers to entry for tobacco companies revolve around the partial legislative environment, lack of final consensus on harms and the robust competition in legal cannabis.

While, in the longer term, the extent of regulation governing legal cannabis will give the industry, with its institutional knowledge of compliance, a competitive advantage, in the near term, partial regulation mitigates against major company involvement. The industry’s eagerness to be seen to act with integrity is amplified even further as it seeks to transition into a reduced-risk product environment. Many within the industry are likely to calculate that becoming involved in the sale or marketing of cannabis without more widespread scientific, cultural and political consensus on its appropriate regulation would only set back its wider strategic priorities.

While there is also a general—and generally accurate—perception that marijuana consumption is less harmful than tobacco, or indeed even alcohol use, partly due to its prohibition, some areas remain unresolved. Marijuana smoke (created by the predominant delivery mechanism) is in itself of course a carcinogen, while there are significant, documented concerns regarding the impact of use of marijuana on the mental health of some users, particularly younger ones. These perceived ambiguities may sit rather uncomfortably with the quest for precision in which the industry is engaged regarding the characteristics of its reduced-risk nicotine-delivery platforms.

Finally, much as legal cannabis is likely to be attractive to the industry, it will also be attractive to other industries, significantly sharpening the competition that tobacco companies can expect. Most notably, there is a substantial interplay with alcoholic beverages, an industry whose volumes are potentially most directly impacted by wider access to marijuana products. In time, one can also expect interest in medical marijuana from pharmaceutical companies, while even packaged food majors are likely to eventually play a role.

Cannabis’ role in tobacco’s future

However, perhaps the most important benefit that legal cannabis can offer to the tobacco industry is continuity and the opportunity to realign with evolving consumer expectations. Leaving aside for one moment issues of addiction and physical harm, the core consumer mission that the tobacco industry has always addressed is the deliverance of moments of pleasure, stress relief and mental well-being. Of course, this core mission has understandably been obscured by the immense damage that the delivery of nicotine in combustible format causes.

The transition to the vapor delivery format (in the context of technological and demographic change) is revolutionary across several dimensions as it allows the industry not only to continue to provide nicotine to its consumers in a risk reduced context, but it also offers the possibility of a total reinvigoration of the core mission of the industry. Wider penetration of reduced-risk vapor devices among consumers not only for the consumption of nicotine but also in other areas, including cannabis, offers the industry a bridge from being primarily tobacco providers to providers of a range of pleasure substances—including but not limited to nicotine. In the future, current tobacco entities will find themselves supplying or facilitating the consumption (through vapor) of cannabis and potentially medication, vitamins, stimulants and even other legalized but currently illegal drugs.

In parallel, in a few key categories to which every tobacco and nicotine consumer is exposed in her/his daily life—packaged food and beverages—some of the major trends revolve around fragmentation and blurring—the fragmentation of brand preference into a portfolio of smaller “craft” or artisanal brands and increased consumer acceptance—demand even—for the blending of previously siloed categories or the transposition of a common purpose into a unique vehicle. A related phenomenon is the concept of platform blending, where consumer packaged goods brands enter the consumer food service space and vice versa, with major consumer food service brands migrating into packaged food propositions (all in the service of capturing more “consumption occasions”).

The implications for tobacco from these trends are clear: Not only will nicotine consumers in the future be more prone to device use and to habitual substance delivery format adventurousness, but they will also be primed to expect the unexpected in terms of their consumption or the offering of preferred suppliers. This extends the potential range of substances that consumers could vaporize and in the longer term could help to free consumer perceptions of the role of tobacco and nicotine companies in their daily lives.

Vapor innovation

In concrete terms, as legalization of cannabis for recreational use spreads in North America and internationally, we will see increased use of vapor devices for its consumption. Tellingly, according to Euromonitor’s current forecasts to 2022, nicotine consumption will have largely left the open system category in the U.S. with significant device sales remaining—related to the vaporization of cannabis. Within the cannabis industry, there is already a belief in overlap between vapor consumers and consumers of cannabis products, and there is more and more cross-pollination between nicotine vapor and cannabis innovation.

Omnibus vaporizers (such as Tri from ReVIEpro), progenitors of a sort of “hardware substance hub,” allow consumers to use nicotine, CBD and various forms of cannabis (and potentially other substances, limited only by largely resolvable technical puzzles). The Qwik-T tank turns a vapor mod into a machine for dabbing (consumption of cannabis concentrate).

Developments are not confined to more malleable open vapor systems. Pax Labs (the company from which the Juul was spun out) produces a product containing some technical similarities to the Juul, called Pax Era, on which THC-infused liquid pods can be vaporized. Pax produces only the hardware and outsources the pod production to cannabis companies (a possible initial business model for reticent tobacco brand owners). Finally, Hempods are Juul-compatible refill pods filled with CBD liquid rather than nicotine (which is not authorized by or linked to Juul Labs).

A subplot of this unfurling upending narrative is the nascent use of CBD e-liquid in both closed and open vapor systems. Liquids containing CBD (but no nicotine) could increasingly attract those consumers who are looking to reduce or cease nicotine consumption. The flavor profiles of CBD liquids also tend to be stronger and clearer, which may appeal to newer entrants to the vapor category who are unmotivated by nicotine use.

Current offerings on the market are in the range of (virtually homoeopathic) 3 mg/mL (30 mg in a 10 mL offering) up to 60 mg/mL (600 mg in a 10 mL bottle). Brand positioning that plays on CBD’s proximity to its psychoactive cousin, THC, is common as it stands (e.g., OG Kush by Harmony), though a more neutral, wellness-orientated branding (e.g., Elda’s IzyVape) may draw more diverse consumer types.

Summary

In summary, a central tenet of the industry’s current transformation strategy is the concept of delivery fragmentation, that consumers will employ a range of delivery formats for nicotine (whether that be varieties of vapor or other smokeless products). So the industry has metabolized platform agnosticism—in fact, it has arguably done so too well because it is possible that future fragmentation in nicotine is overstated. However, what appears to be less well appreciated in the context of the industry’s future is the concept of substance agnosticism.

Especially given that nicotine is likely to be less addictive in any format beyond combustion, in future it will be competing against a range of substances for a share of any given consumer’s daily consumption. This means the industry must reflect on what benefits nicotine itself provides versus competing substances (and perhaps also which of those it can complement), but it also affords the industry the opportunity to establish itself as a provider either of hardware substance hubs (its own vapor products) for the consumption of substances such as legal cannabis or of substances beyond inhaled nicotine (such as legal cannabis) or, more ambitiously, both.

In the medium/longer term, wider cannabis legalization will likely further drive declines in combustible cigarette consumption as, for example, some combustible cigarette smokers experiment with CBD as a form of smoking cessation and the consumption of cannabis in devices strengthens consumer expectation and desire to use the same devices for nicotine intake. For all of these reasons, there is reason to view cannabis legalization as a transformative dynamic for tobacco, which will likely solidify and accelerate a transition to reduced-risk delivery systems, which is just now beginning to take place and which, in parallel, offers the industry longer term continuity of purpose.

Shane MacGuill is head of tobacco research at Euromonitor International.

Thanks in part to their country’s embrace of vaping, U.K. smokers and vapers now have a wide variety of products to choose from.

By George Gay

Having watched the Brexit fiasco unfold, people living outside of the U.K. could be forgiven for thinking that the country has taken leave of its senses, a view that is shared by many of us living in the U.K. But I would argue that there is at least one area in which the U.K. has kept a level head and could be seen to be leading the world—and that is in respect of accepting some lower-risk products as part of a tobacco harm reduction strategy aimed at steering smokers away from combustible cigarettes, which is an ambitious and vital undertaking given that many institutions claim that tobacco smoking is the leading cause of preventable deaths.

And significantly, I think, this effort is not confined to the usual stakeholders; it has brought closer, if not together, tobacco manufacturers, vapor product suppliers, public health experts, formal and informal groupings of members of Parliament (MPs), the government and consumers. Not everything is fully aligned, of course, but there is a sense in which things are gradually coalescing.

This push for a transition from smoking to vaping has been going on for some time, but 2018 seemed to see it step up a gear—right from the start of the year. On Jan. 2, 2018, Philip Morris Limited (PML), the U.K. and Ireland affiliate of Philip Morris International, ran announcements in several U.K. newspapers saying that its New Year’s resolution was to try to give up cigarettes. This, to my way of thinking, was a clever campaign. In using the idea that it was trying to give up cigarettes, PML was aligning itself with smokers—it, too, was hooked and was feeling their pain. And it was letting smokers and other stakeholders know that quitting smoking was not something that could be achieved easily. After all, New Year’s resolutions are often based more on hope than expectation.

And, later in the year, the idea that quitting was not easy was built upon when the company, which had opened its fourth iQOS store in London in February, launched another campaign in which it recognized that quitting smoking was also something that could not necessarily be done alone—presumably either by individual smokers or individual companies.

But no matter. There was a feeling in the air that smokers and companies wishing to help smokers switch to vaping were not alone; they had official support. In a press note issued in August alongside its report titled, “E-cigarettes,” the House of Commons Science and Technology Committee said regulations should be relaxed in relation to the licensing and prescribing of e-cigarettes and in respect of the advertising of their health benefits. It also added that their level of taxation and use in public places needed to be reconsidered.

Meanwhile, reflecting part of what the committee had recommended, the U.K.’s Advertising Standards Agency (ASA) said in November it had changed its rules so that health claims were no longer banned from advertisements for electronic cigarettes. Such a change by the ASA did not mean that the suppliers of vapor products were free to make health claims as they saw fit—only that they would be able to do so should they fulfill the requirements of other agencies. Still, it seemed to be a step in the right direction.

Also in November, and reflecting another aspect of the committee’s findings, a report by a group of cross-party MPs focused on the vexed question of vaping bans. The All-Party Parliamentary Group for Vaping’s report titled, “Vaping in Workplaces and Public Places,” pointed out that though the U.K. did not ban vaping in public places, many employers and those in charge of public places did ban it. So it recommended in part that employers should have specific workplace vaping policies that balanced the needs of current vapers and smokers looking to switch to vaping with those of nonvapers—policies that were different to their workplace smoking policies.

Then, in December, again reflecting the committee’s report, the government agreed to review e-cigarette regulations once EU legislation ceased to apply. The Department of Health and Social Care said it was committed to a review to reappraise current regulations to ensure they continued to protect the nation’s health. It said it would look to identify where it could sensibly deregulate without harming public health or where current EU regulations limited its ability to deal with tobacco.

New devices

Of course, as welcome as all of these recommendations and proposals are, none of them make sense without smokers having access to alternative devices to combustible cigarettes, and they make little sense if those devices, which, after all, are still relatively new, are not the subject of frequent innovation so as to render them attractive to smokers—from the social smoker to the hardened smoker. Luckily, possibly in part because of the U.K.’s embrace of vaping, smokers and vapers were well served in 2018 by the major tobacco manufacturers, which delivered a range of new and updated alternative devices within the limitations of the EU’s Tobacco Products Directive.

Such commitment to innovation was well summed up in British American Tobacco’s (BAT) December launch of two products in which its new Puretech blade technology had replaced the coil and wick heating mechanism traditionally found in e-cigarettes. In a note posted on its website, BAT said that it was launching two new closed-system electronic cigarettes, Vype iSwitch and the Bluetooth-enabled Vype iSwitch Maxx, as it sought to provide an even more satisfying option for adult smokers looking for a potentially reduced-risk alternative to traditional cigarettes. Importantly, given that the switch from smoking to vaping has slowed, it said that the new products were aimed at smokers who had yet to find a vaping alternative that satisfied them. And it added that the power and design of the technology delivered nicotine more effectively—even with lower strength nicotine e-liquids.

Earlier in the year, BAT had launched the Vype ePen 3, which it described as being incredibly simple to use, an important feature given that some smokers are put off switching by what they see as complex devices. “With click in and out pods, Vype ePen 3 is designed to be a convenient and simple-to-use device, while a wide range of flavors and nicotine strengths provide a choice for each vaper,” BAT said in a note that accompanied the launch.

Meanwhile, Imperial Brands’ 2018 financial year saw it increase significantly its investment in next- generation products (NGP). The company’s NGP portfolio is built around the Blu brand, which will be 10 years old next year but which, during 2018, was expanded with three new launches in the U.K.: Myblu (also launched in Austria, Canada, France, Germany, Italy, Japan [0 percent nicotine only], Russia, Spain and the U.S.); Myblu Intense (also launched in the U.S.); and Blu Ace (also launched in France and Italy).

Imperial Brands said that its Blu brand was one of the best-selling in the world and available in an increasing number of markets. Myblu is described as a pod format device that combines a high-performance vaporizer with a simple liquid pod system. “The device takes just 20 minutes to charge and lasts all day,” said Imperial. “Blu Ace is our latest open system product and the most powerful device in our portfolio. It comes in an all-in-one stainless steel housing with a built-in liquid tank, and [it] delivers more puffs per charge than competitor products.”

And in September, Japan Tobacco International (JTI) launched Logic Compact in the U.K., which joined Logic Pro, said to be the U.K.’s No. 1 capsule vapor device. “JTI engineered every aspect of Logic Compact with a modern, design-conscious vaper in mind,” the company said in launching the device. “Magnetic pods, metallic colors (slate gray, steel blue and rose gold) and a large 350 mAh battery are all within a sleek, compact, pocket-sized device. Taste, performance and style come together in a device that’s simple, convenient and easy to use.”

“The U.K. is a growing e-cigarette market, with consumers increasingly looking for the ultimate vaping product,” Daniel Sciamma, managing director of JTI in the U.K., was quoted as saying. “Logic Compact offers a user-friendly and modern design, which is an exciting addition to our Logic portfolio. The new premium capsule vape is also an excellent product for adult smokers who are looking to vape—it delivers the perfect combination of flavor, power, simplicity and style.”

Finally, PML launched the iQOS Mesh, which, despite the first part of its name, is an electronic cigarette rather than a heated-tobacco product. The new product has a Mesh heater—rather than a wick and coil system—that is in constant contact with the e-liquid to provide a consistent vaping experience. According to a note posted on its website, digital controls detect when e-liquid levels are low, thus avoiding overheating and the possibility of a burnt taste, while the device’s battery is certified according to ISO standards featuring three protection levels to prevent overheating, short circuiting and pressure buildup.

The Mesh’s Veev flavor capsules, which are available in seven flavors, each in three nicotine strengths, are said to enable flavor swapping on the go with no flavor aftertaste from one capsule to another.

I have heard people knowledgeable about the vapor device market say that, in the U.K., there is a device for every smoker. And I have heard people knowledgeable about the cigarette market challenge whether this is true, particularly in respect of price. I don’t know where the truth lies, but to regain the previous momentum that had smokers switching in large numbers to vaping, it seems essential that some of the recommendations and proposals outlined above are put into practice so that at least smokers can be confident that less-risky, satisfying products are available at a reasonable price, that they are useable without needing a degree in engineering, and that they can be bought at a store near them and used widely in public places.