Category: News This Week

Foreign Firms Dominate Iranian Cigarette Market

Photo: Emanuele Mazzoni
Despite recent gains by Iranian Tobacco Co. (ITC), multinationals continue to dominate the Iranian cigarette market, according to a report by PressTV, citing ITC CEO Siavash Afzali.
Speaking at a press briefing on May 17, Afzali said that Japan Tobacco International (JTI) and British American Tobacco (BAT) control more than 61 percent of sales and some 70 percent of the value of the cigarette market in Iran. Afzali estimated that JTI and BAT supplied 46 billion cigarettes to Iranian consumers in the calendar year to late March.
Afzali said ITC’s share of the market was around 9 billion over the same period against an estimated supply of 20 billion cigarettes that entered the market by traffickers.
In the year to March, ITC increased its cigarettes sales in Iran by 50 percent. Its output and market share increased by 23 percent and 70 percent, respectively, over the same period.
However, the company is responsible for only 5 percent of the value of the cigarettes sold in Iran, a market that is believed to be worth around IRR400 trillion ($1.74 billion).
Afzali said that ITC could triple its output to 25 billion cigarettes per year, although he insisted that existing laws favor local manufacturing by foreign brands.
“Foreign companies easily import raw material and control the market,” he said. But ITC generates more local employment than the multinationals, Afzali insisted. Including farmers, ITC employs 12,000 people—far more than JTI and BAT, according to the CEO.
May 18, 2021
Forestry Officials Sound Alarm in Zimbabwe

Photo: Taco Tuinstra
Zimbabwean forestry officials have raised alarms about the rate at which trees are being cut for tobacco curing, charcoal production and other purposes, reports The Herald. The country loses more than 262,000 hectares per year due to farming activities and fires, among other reasons.
“Within the next 10 years, we are likely to see a huge decrease in tobacco farming if alternatives are not found,” said Forestry Commission Director-General Abednigo Marufu. “We want to encourage chiefs to encourage sustainable tobacco farming.”
Because Zimbabwe’s native trees take many years to replenish, Marufu called on tobacco farmers to plant gum trees, which grow quickly and require little water.
“Farmers should embrace the species of gum trees that we have introduced in other parts of the country, except for Manicaland,” he said. “These have been under test since 1966, and they don’t require a lot of water.”
Marufu also urged growers to consider alternative energy sources, such as biogas.
The Forestry Commission encourages the use of trees that enrich the soil while lamenting the involvement of political figures in the illegal charcoal trade.
Every year, the Ministry of Finance and Economic Development releases funds to the Forestry Commission for tree planting. The money is deducted from each farmer’s total sale of tobacco for the Afforestation Fund, which is taken through the Tobacco Industry and Marketing Board.
Nurseries of trees have been set up in provinces and have produced over 6.8 million trees that are availed to tobacco farmers for free.

Zimbabwe’s Sustainable Afforestation Association aims to create sustainable wood sources, conserve indigenous forests and research alternative fuels. (Also see “Back in Business,” TR June 2018.)
May 18, 2021
ITC: IQOS Infringes on Vuse Patents

Photo: JHVEPhoto
Philip Morris International’s IQOS device infringes two patents owned by British American Tobacco subsidiary Reynolds American Inc., reports Bloomberg, citing a note posted by Judge Clark Cheney on the U.S. International Trade Commission’s website.
The next step is a likely review by the full commission, which has the power to halt products at the U.S. border and is scheduled to complete the investigation by Sept. 15.
IQOS is the only heat-not-burn product authorized for sale in the U.S., where it’s sold by Altria. Last year, the U.S. Food and Drug Administration allowed the company to market IQOS as reducing consumers’ exposure to harmful chemicals found in cigarettes.
Reynolds claims PMI and Altria copied patented technology that it had developed for its Vuse Vibe and Vuse Solo vaping products, for which it’s filed for FDA approval. The company complained to the ITC in April 2020.
Altria responded with its own patent infringement claims and a separate suit against Reynolds in May. Altria also lodged petitions with the U.S. Patent and Trademark Office challenging the validity of a half-dozen Reynolds’ patents.

The judge has to make a determination on whether even temporarily removing such products is appropriate for public health and what alternatives there are for consumers.
Andre Calantzopoulos, executive chairman, PMI
Reynolds said it expects the judge will recommend an import ban, adding that the unauthorized use of its inventions “undermines our ability to invest and innovate and thereby reduce the health impact of our business.”
Philip Morris called the judge’s findings “one step in a long process that does not have an immediate effect” and it will present its position to the commission.
“BAT’s litigation in the U.S. is part of a worldwide attempt—which has been entirely unsuccessful to date—that is meant to undermine the heated-tobacco segment, where they lag far behind,” the company said.
PMI has also argued that, even if a patent violation is found, it’s not in the public’s interest to keep IQOS out of the U.S.
“The judge has to make a determination on whether even temporarily removing such products is appropriate for public health and what alternatives there are for consumers,” said PMI Executive Chairman Andre Calantzopoulos. “If we remove a product that exists, and the only alternative that people have are cigarettes, it’s a consideration of public health interest, and that has to be taken into account.”
May 18, 2021
Imperial Brands Delivers ‘Solid’ First-Half Results

Photo: Imperial Brands
Imperial Brands reported net revenue of £15.57 billion ($22.1 billion) in the six months ended March 31, 2021, up 6.1 percent over the net revenue it reported in the first half of 2020. Operating profit increased 77 percent to £1.64 billion. On an organic adjusted basis, Imperial Brands reported net revenue of £3.57 billion, up 2.4 percent from 2020. Adjusted operating profit was £1.59 billion compared with £1.46 billion in the first six months of 2020.
“We have made a good start in implementing our new strategy to transform Imperial and remain on track to meet full-year expectations,” said Imperial Brands CEO Stefan Bomhard in a statement.
“In tobacco, we have put in place a clear market prioritization to increase focus on our best opportunities for sustainable profit delivery. We have begun to stabilize the aggregate market share performance across our top five priority markets, reflecting the changes we have made to tighten performance management and the good underlying momentum established over the past year. This is an encouraging start and one that I look forward to building on over time as we begin to step up investment in new strategic initiatives.

We have made a good start in implementing our new strategy to transform Imperial and remain on track to meet full year expectations.
Stefan Bombard, CEO, Imperial Brands
“Our NGP [next-generation products] performance has improved, albeit against a weak comparator period. We have focused investment more tightly behind our NGP market strongholds and are on track to activate market trials in vapor and heated-tobacco later this year. Our aim is to create a successful NGP business that meets consumer needs and, over time, can make a meaningful contribution to harm reduction.
“We have started to change our culture and ways of working, including developing a new market cluster structure to simplify the organization and allocating resources more effectively. I have now assembled my new Executive Team with key external hires who have the necessary skills and expertise to complement Imperial’s existing tobacco experience. This has significantly strengthened the capabilities we need to support the successful delivery of the new strategy.
“All of this has been achieved against the background of the ongoing global pandemic, and I would like to thank employees throughout the business for their hard work and willingness to embrace change.”
May 18, 2021
Academic Journal Criticized for ‘Juul Issue’

Photo: Tada Images
Academics and anti-smoking charities have criticized The American Journal of Health Behavior for publishing its “Special Issue on Juul,” reports BMJ.
The papers in the special issue focus on the implications of switching to Juul products from combustible cigarettes as well as dual use of combustible cigarettes and Juul products.
The special issue was sponsored by Juul Labs. Altria, the parent company of Philip Morris USA, has a minority stake in Juul. The issue was coordinated and edited by Saul Shiffman, a Pinney Associates consultant. Pinney Associates has provided consulting services to British American Tobacco and Reynolds American.
May 18, 2021
Tobacco Auctions Suspended Due to Covid

Photo: Taco Tuinstra
The Tobacco Board of India has suspended auction sales for a week due to the rapid spread of Covid-19 cases, reports The Times of India.
“With the situation going from bad to worse, we have decided to put off the auctions in view of the welfare of all those involved in the process, including growers, traders and officials,” said Tobacco Board Executive Director Addanki Sridhar Babu.
Sixty-eight employees of the Tobacco Board have reportedly tested positive for Covid-19, and one died due to the coronavirus during the auction season.
To date, Indian farmers have sold about 27 million kg against the expected total production of 110 million kg during the current season. Although the board authorized growers to produce about 115 million kg, production fell short due to weather conditions. Nonetheless, board officials noted that farmers produced “fine” quality leaf.
Growers fetched an average price of INR161.80 ($2.21) per kg compared with INR142 per kg last season.
The board will decide on May 24 whether to resume auction sales.
May 18, 2021
BAT Recognized as a Climate Leader

Photo: BAT
BAT has been named as a 2021 Climate Leader by the Financial Times in an inaugural European ranking.
FT Europe Climate Leaders 2021 recognizes the top 300 of more than 4,000 companies across Europe that achieved the highest reduction in core greenhouse gas emissions in relation to revenues for the period between 2014 and 2019.
BAT’s climate targets include being carbon neutral in its own operations by 2030. In 2020, BAT achieved a 30.9 percent reduction in emissions from its operations, contributing to a 37.4 percent reduction against a 2017 baseline. In March this year, BAT announced a further ambition to be carbon neutral across its value chain by 2050, representing around 90 percent of its total carbon footprint.

This recognition by the Financial Times is a positive signal that we’re heading in the right direction.
Kingsley Wheaton, CMO, BAT
“We are very pleased to be named by the Financial Times as one of the companies leading the charge against climate impact,” said Kingsley Wheaton, BAT’s chief marketing officer, in a statement. “BAT is deeply committed to being a responsible business and reducing our impact on the environment.
“Last year, we said we’d achieve carbon neutrality for our own emissions by 2030, and we’re making good progress toward this target. In addition, considering the urgent global challenge of climate change, earlier this year, we committed to carbon neutrality across our value chain by 2050. This recognition by the Financial Times is a positive signal that we’re heading in the right direction.”
May 18, 2021
KT&G Aims to Become Carbon Neutral by 2050

KT&G CEO Bok-In Baek
KT&G has declared its goal of becoming carbon neutral by 2050 by reducing its greenhouse gas emissions.
First, KT&G is planning to reduce the greenhouse gas emissions by 20 percent by 2030 compared to the levels in 2020. To achieve carbon neutrality, KT&G plans to expand its scope of environmental responsibility not only to the workplace, but also to the entire chain, from raw materials to production and sales.
It will promote the expansion of renewable energy, improvement of energy efficiency and support energy efficiency improvement of leaf tobacco farms. In the mid-term to long-term, KT&G plans to engage in external greenhouse gas reduction projects in connection with domestic and overseas value chains and put forth effort to secure Certificated Emissions Reduction.
KT&G has also decided to reduce water consumption by 20 percent by 2030 compared to the levels in 2020 and to achieve 90 percent in waste recycling rate by 2030, accelerating the transition of the circular economy.
Meanwhile, KT&G is speeding up its environment, society and governance (ESG) ambitions by implementing environmental management that values a sustainable future. Last month, KT&G announced a plan to reduce greenhouse gases by more than 20,000 tons by converting business vehicles into eco-friendly vehicles, such as electric vehicles, by 2030.
“We have established a mid-[term] to long-term environmental management strategies, including carbon neutral, to recognize the magnitude of the climate change problem and to participate in global efforts to respond to the crisis,” said a KT&G spokesperson in a statement. “We will continue to actively participate in solving social and environmental issues and make additional efforts to establish an ESG management system that meets the global standards.”
May 17, 2021
PMI Recognized for ESG Strategy

Photo: patpitchaya
S&P Global Ratings’ ESG Evaluation report has assessed Philip Morris International’s (PMI) approach to environmental, social and governance (ESG) topics and confirmed that PMI has positively differentiated itself within the tobacco sector.
The S&P Global Ratings ESG evaluation assesses a company’s ESG strategy and ability to prepare for potential future risks and opportunities and provides a forward-looking, long-term opinion of a company’s readiness for disruptive ESG risks and opportunities.
It provides an overall score that allows comparison with other entities globally, including sector peers, and consists of a combined sector/region score, an entity-specific score and a preparedness score.
Based on entity-specific scores—designed to indicate how a company is actively and effectively managing its exposure to ESG risks and opportunities compared with its industry peers—PMI is placed third in the E-entity specific score, eighth in the S-entity specific score and 15th in the G-entity specific score among all 25 current publicly available ESG evaluations.
“I am proud that our dedication to sustainability, which is fundamental to the transformation of our company, has been recognized externally by S&P Global Ratings,” said Emmanuel Babeau, chief financial officer at PMI, in a statement.
“It is our firm belief that sustainability and business performance do not follow separate paths—they are fully interrelated and mutually reinforcing and should be organized and presented to all stakeholders, including shareholders, in an integrated way.”

Sustainability and business performance do not follow separate paths—they are fully interrelated and mutually reinforcing.
Emmanuel Babeau, CFO, PMI
In February 2021, PMI announced an increased ambition for the contribution of its smoke-free products to total net revenues to more than 50 percent in 2025, meaning that in five years, cigarettes would account for less than half of PMI’s total net revenues.
The company also stated its aspiration to commercialize its smoke-free products in a total of 100 markets by the end of 2025, up from 64 at the end of 2020. Additionally, PMI announced an aspirational target of at least $1 billion in annual net revenues from “beyond nicotine” products by 2025.
This new aspiration reflects additional growth potential and further acceleration of the company’s transformation, leveraging PMI’s significant capabilities within life sciences, device technology, consumer expertise and more.
“The company has made significant R&D investments, by sector standards, and is upskilling its management team to prepare for this transition. In our view, the company is well placed to meet its ambitions,” S&P Global Ratings said.
“We believe PMI is adequately prepared for future disruptions, reflecting its significant investments in [reduced-risk products (RRPs)], which smokers seem to accept as an alternative to cigarettes, and its solid track record of strategic execution despite headwinds.”
S&P also recognized PMI’s “approach to customer engagement—unique among its peers—which educates consumers directly about the health consequences of sustained tobacco use and supports low-income customers in making the transition from cigarettes to reduced-risk products.”
Later this month, PMI will release its 2020 Integrated Report, which details how the organization’s strategy, governance, performance and prospects create value over the short, medium and long term.
May 17, 2021
FDA Invites Comments on IQOS 3 Application

Photo: Кузнецова Евгения
The U.S. Food and Drug Administration (FDA) today opened a public comment period on Philip Morris International’s application seeking authorization to market the IQOS 3 electrically heated-tobacco system as a modified-risk tobacco product (MRTP).
PMI’s application requests the same reduced exposure modification orders granted on July 7, 2020, for the IQOS 2.4 system—the first, and only, electronic nicotine product to be granted marketing orders through the FDA’s MRTP process. To authorize MRTP consumer communications, the FDA’s Center for Tobacco Products is required by law to conclude that a product is appropriate to promote the public health.
The IQOS 3 device contains a number of technological advancements compared to the IQOS 2.4 device, including longer battery life and quicker recharge between uses. It was authorized for sale in the U.S. via the FDA’s premarket review process on Dec. 7, 2020, having met the standard that permitting its sale is appropriate to protect public health.

This application underscores PMI’s ongoing commitment to make new innovations available to American adult smokers through the FDA process.
Jacek Olczak, CEO, PMI
“PMI is fully committed to a smoke-free future, one where we completely replace cigarettes with scientifically substantiated smoke-free alternatives that are a better choice for adults who would otherwise continue smoking,” said PMI CEO Jacek Olczak.
“Our commitment to a science-based future is unmatched, having invested more than $8 billion since 2008 on smoke-free products. This application underscores PMI’s ongoing commitment to make new innovations available to American adult smokers through the FDA process; the confidence we have in our science; and our belief that public scrutiny and open engagement with governments is vital to achieving a smoke-free future.”
May 14, 2021