Category: Business

  • Wang: Global Trade Tariffs in Vaping

    Wang: Global Trade Tariffs in Vaping

    The vaping industry has always faced its share of challenges—from shifting regulatory landscapes to evolving consumer preferences. However, a few factors significantly threaten the industry’s future, such as the impact of global trade tariffs. With the United States set to increase tariffs on Chinese imports, companies that fail to adapt could face skyrocketing costs, disrupted supply chains, and a diminished ability to compete in one of the world’s largest markets.

    Trade tensions between the U.S. and China have been escalating for several years. The vaping industry, which relies heavily on hardware manufactured in China, is particularly vulnerable to these developments. Currently, vaping products imported from China face a 25% tariff, but there is a high likelihood that this could double or even increase to 100% under future U.S. administrations.

    For vaping companies, such tariff hikes mean the cost of importing devices could skyrocket. A 100% tariff would effectively double the cost of hardware produced in China, driving up retail prices for all such products in the U.S. market. This scenario threatens the financial viability of vaping companies and the availability of affordable, high-quality products for consumers.

    The Strategic Decision to Move Manufacturing to Malaysia

    Recognizing the potential for increasing tariffs and broader geopolitical challenges, some vaping manufacturers began shifting their operations from China to other countries. Such decisions were never made lightly. China has long been a global leader in manufacturing efficiency with a robust infrastructure and supply-chain network,, and moving away from such an established infrastructure posed significant logistical and operational challenges.

    Malaysia offered several key advantages to manufacturers. Firstly, Malaysia enjoys favorable trade agreements with the United States, the United Kingdom, and the European Union. For instance, starting in December 2024, a new free trade agreement between Malaysia and the U.K. took effect, eliminating tariffs on products moving between the two countries. Similar agreements are in place or in development with other major markets.

    Secondly, Malaysia’s robust manufacturing ecosystem and skilled workforce make it an ideal location for high-quality production. By establishing operations in Malaysia, companies can continue to deliver reliable, innovative hardware without the added burden of excessive tariffs.

    The Broader Impact on the Global Supply Chain

    The shift to Malaysia reflects a broader trend in global manufacturing. As trade barriers between the U.S. and China grow, a widespread redistribution of manufacturing operations is underway. Companies across industries—not just vaping—are reevaluating their supply chains to reduce dependence on any single country.

    This global redistribution of resources presents both challenges and opportunities. For manufacturers, the challenge lies in building new infrastructure, securing reliable suppliers, and maintaining quality control in unfamiliar territories. However, companies that successfully navigate these changes benefit from more resilient supply chains, reduced geopolitical risk, and greater flexibility in responding to market shifts.

    Maintaining Compliance and Quality Standards

    Shifting manufacturing bases also brings new compliance considerations. Regulatory bodies like the U.S. Food and Drug Administration (FDA) require Premarket Tobacco Product Applications (PMTAs) for vaping devices. These applications are tied to specific manufacturing facilities, meaning that changing production locations requires amendments to existing PMTAs or new submissions.

    Manufacturers must ensure that new facilities meet the highest quality and compliance standards. Proactively managing these regulatory requirements ensures that products remain market-ready even as production locations change.

    The Future of the Vaping Industry Amid Trade Challenges

    Looking ahead, it’s clear that trade tariffs and global manufacturing shifts are not short-term challenges. Regardless of who occupies the White House, protectionist trade policies are likely to persist or even intensify. The vaping industry must be prepared for this new reality.

    Companies that fail to diversify their manufacturing operations face mounting costs and increasing vulnerability to trade disruptions. On the other hand, those who invest in flexible, resilient supply chains will be well-positioned to thrive.

    The vaping industry is at a crossroads. Global trade tariffs pose a significant threat, but they also offer an opportunity for companies to rethink their supply chains and build more resilient operations. For manufacturers, shifting production from China to countries like Malaysia is not just a reactive measure—it’s a strategic move to secure long-term growth and competitiveness.

    As the industry moves forward, companies that adapt to these challenges will be the ones that lead the way. The ability to anticipate trade disruptions, embrace innovation and maintain rigorous quality standards will determine who succeeds in this ever-evolving market.

    As co-CEO of Ispire Technology Inc., Michael Wang is a leader in the development and commercialization of vaping technology and precision dosing. Previously, he served in executive roles at The Pharm/Sunday Goods, Onestop Commerce, Zazzle, and Honeywell.

  • Tobacco Stocks Rally

    Tobacco Stocks Rally

    Image: Paul Tama

    Tobacco stocks rose in the wake of Donald Trump’s victory in the U.S. presidential election, reports The Wall Street Journal.  

    BAT stocks were up 4 percent this morning; its Reynolds American subsidiary was a large donor to the Make America Great Again action committee, which supported the former president’s bid for reelection. Reynolds has been pushing back against the Biden administration’s proposed menthol ban, which was delayed earlier this year. Under another Trump administration, it is likely that a menthol ban would be completely dismantled.

    BAT, Altria and Imperial Brands all have sizable U.S. menthol businesses as the products make up more than a third of the U.S. cigarette market by volume.

    Another Trump administration may also lead to a crackdown on illicit imports of disposable vapes, which primarily come from China. During his first term as president, Trump enthusiastically erected barriers to Chinese imports Such measures could boost some tobacco companies’ e-cigarette brands.

    Expectations that a Trump presidency will strengthen the dollar, however, could be troublesome for Philip Morris International as the multinational makes around 90 percent of sales in other, primarily emerging market, currencies. A possible increase in inflation could also harm tobacco stocks since they are heavily exposed to price-sensitive, low-income consumers.

  • Elfbar and Lost Mary Create Advisory Board

    Elfbar and Lost Mary Create Advisory Board

    Image: Mariakray

    Elfbar and Lost Mary have created a board in the U.K. to provide strategic advice for the brands.

    Board members are from across relevant disciplines in the U.K. with senior-level experience, including in the national and local government, the medical profession and law enforcement.

    The newly formed advisory board also serves Heaven Gifts, the company that manages Elfbar and Lost Mary.

    “The creation of this advisory board marks a milestone in the global operations of Elfbar and Lost Mary. This aligns with our long-term commitment as the responsible market leader for the vaping sector worldwide, and our exploration of the smoking cessation role vaping products play,” said Heaven Gifts Global Vice-President Victor Xiao in a statement.

    “This board further signals our intent to address concerns around, for example, youth vaping, the environmental impact, and illicit trade. Starting in the U.K., we are looking to bring this mechanism to more global markets, particularly those in Europe.”

    Members of the advisory board include Steve Bennett, former director of investigations at the National Crime Agency; George Eustice, former member of parliament and secretary of state for the department of environment, food and rural affairs; Susie Kemp, former CEO of Swindon Borough council and deputy chief executive of Surrey county council; Lord Porter, former council leader and chair of the Local Government Association; Sairah Salim-Sartoni, a health psychologist with extensive experience in smoking cessation and tobacco harm reduction; and Lord Walney, a former member of parliament and special advisor to Prime Minister Gordon Brown and Business Secretary Lord Hutton.

  • Flashlight Offers to Buy KT&G’s Ginseng Business

    Flashlight Offers to Buy KT&G’s Ginseng Business

    Photo: Fan Chen

    Flashlight Capital Partners (FCP) wants to purchase KT&G Corp.’s Ginseng business. The activist investor, which is also a shareholder in KT&G, has submitted a letter of intent to acquire all shares of KT&G subsidiary Korea Ginseng Corp. (KGC).

    FCP is offering KRW1.9 trillion ($1.4 billion), which is 50 percent higher than the enterprise value analyst estimates mentioned at KT&G’s 2023 investor day.

    FCP believes that figure significantly undervalues the business. “It’s like watching parents who downplay their own child,” said FCP Managing Partner Sanghyun Lee in a statement. “We see immense potential in the poor kid. We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai.”

    Despite the growing demand for health food, KGC’s operating profit halved from KRW202.1 billion in 2019 to KRW103.1 billion in 2023, and KT&G’s guidance indicates further decline in 2024.

    FCP has argued that the tobacco-ginseng pairing was a “wrong marriage,” and that KGC’s value is not reflected in KT&G’s stock price at all. Since 2022, FCP has advocated for a horizontal spinoff of KGC, but KT&G’s board rejected the proposal in 2023.

    Lee compared KT&G’s stance on KGC as “Not good enough for me, but too good for others.” He emphasized the need for either a spinoff or sale of KGC and warned that “If KT&G’s board opposes our proposal without a proper rationale, it will only prove that they are serving the interests of management rather than those of the shareholders.”

    Headquartered in Singapore, FCP has repeatedly pushed for changes at KT&G. In recent years, it has pushed for a greater emphasis on smoking alternatives, more transparent procedures in filling the company’s leadership, and a new CEO pay structure.

  • KT&G Steps up Investment in Indonesia

    KT&G Steps up Investment in Indonesia

    Photo: KT&G

    KT&G will invest KRW600 billion ($454 million) and hire about 1,000 people in Indonesia. The company’s local operations will serve not only Indonesia but also the Middle East and other markets in the Asia-Pacific region.

    “KT&G chose Indonesia as the company’s center of production for the Asia-Pacific market,” KT&G Indonesia’s president director, Jeong Yun-sig, told JoongAng Daily. Indonesia is KT&G’s biggest market outside Korea, accounting for 22.6 percent of the tobacco company’s total exports as of 2023.

    KT&G entered Indonesia in 2011, when it bought a local tobacco company. As of 2023, the company had sold 9.55 billion cigarettes in the country, propelling it to the No. 4 spot among tobacco manufacturers in Indonesia, ahead of multinationals such as British American Tobacco and Japan Tobacco International.

     In April, KT&G broke ground for two additional Indonesian factories. Upon completion, company will have a production capacity in Indonesia of 35 billion cigarettes annually.

     “We have consistently invested in the Indonesian market, building a local R&D center and hiring experts for localization efforts,” Jeong Yun-sig said. “The localized version of Esse and new brands for the Indonesian market worked well for the company.”

  • Ispire and ANDS Sign Distributor Deal

    Ispire and ANDS Sign Distributor Deal

    Photo: Mongkolchon

    Ispire Technology and Dubai-based ANDS have signed a five-year agreement under which the partners will commercialize Ispire’s Hidden Hills Club nicotine portfolio to the Middle East, North Africa (MENA) region and global duty-free markets.

    “This collaboration is a pivotal moment for Ispire as we continue to expand our global footprint at a time when consumers are looking for harm-reduced products to transition away from combustible cigarettes,” said Ispire Technology Co-CEO Michael Wang in a statement.  

    “By partnering with ANDS, we gain access to one of the fastest-growing regions in the world, where smoking rates remain high, but there is a significant demand for harm-reduced products. With ANDS’ robust regulatory, legal, compliance, brand building, sales and distribution expertise as well as local market insights, we are well-positioned to bring the Hidden Hills Club nicotine portfolio to new markets, offering consumers innovative, harm-reduction alternatives to combustible cigarettes.”

    “We are thrilled to collaborate with Ispire to bring the Hidden Hills Club nicotine products and their marketing power to the MENA region and global duty-free markets,” said ANDS co-founder and CEO Fadi Maayta.

    “With Ispire’s cutting-edge products and our extensive reach and expertise, we are confident that this partnership will provide consumers with innovative nicotine delivery solutions that will bring potentially reduced risk products to adult smokers. Together, we aim to meet the evolving needs of consumers in the region while ensuring compliance with local laws and regulations.”

  • Global Synergy

    Global Synergy

    Photos: KTI

    Stuart Buchanan discusses KT International’s partnership with KT&G.

    By Marissa Dean

    As the tobacco industry changes and evolves, companies are adapting in different ways. Recently, KT International (KTI) and KT&G entered into a manufacturing license agreement, allowing KTI to manufacture and distribute KT&G’s products in Europe.

    KT&G is a leading tobacco manufacturer in South Korea and the fifth largest in the world by sales volume, with an annual sales revenue of approximately KRW6 trillion ($4.5 billion). KTI, established in 2008, has built its reputation as one of Europe’s fastest-growing independent tobacco companies. The company has also earned recognition for its strong and credible footprint across Europe along with world-class production facilities within the European Union.

    The agreement between the two companies was signed on Oct. 20, 2023. Under the terms of the deal, KTI received exclusive rights to manufacture and distribute KT&G’s products within the EU region for three years. The two companies have agreed to a market entry plan aimed at expanding into strategic markets within the Western European region, with a specific focus on KT&G’s Esse products. Esse, a flagship brand of KT&G, is renowned for its premium quality and holds the distinction of being the world’s bestselling super-slim cigarette brand. While the two companies will initially focus on Esse products, the product range expansion will be discussed and announced in due course.

    Tobacco Reporter recently discussed the arrangement with Stuart Buchanan, chief commercial officer of KTI.

    KTI is one of only a few companies that uses a single facility for all its production needs.

    Tobacco Reporter: Your company, KTI, entered into a partnership agreement with KT&G, one of the world’s largest cigarette producers. Why was KTI chosen as a partner of KT&G?

    Stuart Buchanan

    Stuart Buchanan: After three years of collaborative efforts leading to the signing of this agreement, we have developed a strong cultural fit between our two companies in terms of people and commercial objectives. We expect the synergy between our complementary brand portfolios to strengthen the market position of both companies. A significant amount of time has been taken to structure a competitive business model and to develop an innovative and consumer-relevant product portfolio that is consistent to the global objectives and standards of KT&G.

    What necessitated this synergy?

    The KT&G partnership is certainly our most significant and strategic partnership; however, we have other partnerships with large global players, and in most cases, these synergistic partnerships have developed through taking time upfront to understand each other’s strengths and weaknesses. This in itself is a process as it takes time to develop trust and a collaborative working environment that is open and transparent, particularly in cases where we are competitors in other parts of the world.

    Why do you think more global players are forming partnerships with KTI?

    When we started our international expansion, we were an unknown company, and we found it very difficult to find importers and distributors in strategic markets. From the outset in our first three proper international markets, Spain, France and the Czech Republic, we committed to working with credible world-class importers and giving them the level of service they would expect from a major multinational. By maintaining our business standards and building our corporate reputation, we now work with some of the world’s best partners, like KT&G, and new business is self-generating as we are the first point of call for credible, reliable partners.

    Our corporate reputation extends beyond just how we operate externally in our markets but also how we operate internally through things like properly vetting our supplier base, health and safety for our employees and most recently our environmental and sustainability strategy where we have installed a 5 MW photovoltaic solar park to be sustainably self-sufficient for over 40 percent of our energy needs.

    This is probably also our biggest learning; in building our corporate reputation by doing things properly from how we manage our business partners, our brand and product development, our people development, through to our investment strategy, sometimes takes longer, but the payback is significantly higher.

    What is most important in your business? What is the strategic potential of your company and the key to your success?

    First and foremost, our people. In both our production and commercial business units, we have prided ourselves on building a world-class organization with locally developed talent.

    Operating across 70 countries, our commercial teams have developed not only the commercial acumen to compete with the world’s best, but we have embedded a culture where we understand and respect cultural differences. This applies not only to the professionalism with which our teams engage with many different countries and cultures but also in how we deploy our brand portfolio by being flexible to the consumer needs of different markets and consumer segments.

    Secondly, our production capabilities. We have one of the world’s most modern factories and service these 70 countries from one factory. We are one of the few global companies across any category that services their total demand from one production facility. Whilst creating a highly complex production environment, it provides for global brand consistency and quality standards and a single point of business contact, which is seen as a significant benefit to our partners.

    This is particularly relevant to European partnerships as we have a core production strength in being able to operate across this highly complex environment with multiple EU-driven product registration processes. This applies not only to physical production but also to logistics, product development, commercial contracts and market implementation.

    What is your outlook for the future of the tobacco industry?

    As a company, we fully respect and support sensible regulation for what is an adult category of choice. We do, however, recognize the role and growth of next-generation products (NGPs) and reduced-risk products and believe these will continue to become an integral part of a broadening category. We also support the recent moves across Europe to regulate these products along similar lines to traditional tobacco with regards to excise, legal age and product registration as it will provide higher levels of consumer protection against cheap, low-quality imports, particularly in the disposable vaping category.

    Now that, in general, across Europe there is a much clearer regulatory outlook, we have recently launched our own NGP range under our brand in Spain and Bulgaria and aim to follow across major European markets, including Germany, the U.K., France, Czech and Italy, where we have a strong presence in our traditional cigarette brands.

    Looking at the longer term horizon on the future of the category, I personally believe a natural consumer-driven balance will develop between cigars, pipe tobacco, rolling products, traditional cigarettes and NGPs, where each will have a place in the consumer repertoire.

    How is KTI adapting to changing markets and consumer needs?

    Tobacco and nicotine alternatives are a highly regulated category, and as such, it is difficult to provide the same level of consumer interaction as other categories, and to a large extent, price and brand value provide the key consumer drivers. That being said, in our traditional business, we have always believed in providing different and innovative formats that go beyond the traditional brand, price, value equation in driving purchase. It is one of the key reasons for our growth.

    Does KTI have any plans to expand into reduced-risk products or other types of tobacco products aside from cigarettes and traditional leaf tobacco?

    2023 saw the launch of our LIV brand, which is our noncombustible brand. We have launched a range of travel-friendly nicotine pouches as our first step into the noncombustible category.  

    Marissa Dean joined Tobacco Reporter in the summer of 2018 as a copy editor.Since that time, she has taken on additional responsibilities, including feature writing.Her skills span the publishing industry from layout and design to copy editing to content creation.
  • Philip Morris to Invest in Serbia

    Philip Morris to Invest in Serbia

    Image: epic

    Philip Morris International plans to invest €100 million ($111.4 million) in Serbia, reports SeeNews, citing the country’s president Aleksandar Vucic.

    “Such foreign investments are decisive for the development of the economy and business and further strengthen the position of our country as a major partner in innovation and modern technologies,” Vucic said Sept. 23 following a meeting with PMI CEO Jacek Olczak in New York.

    PMI operates in Serbia through two subsidiaries, Philip Morris Operations and Philip Morris Services.

    In 2003, PMI acquired Serbia’s largest tobacco factory, DIN Fabrika Duvana in Nis. To date the multinational has since invested more than $800 million in its Serbian operations.

  • PMI to Further Expand U.S. Zyn Production

    PMI to Further Expand U.S. Zyn Production

    Photo: PMI

    Philip Morris International’s Swedish Match affiliate will invest $232 million to expand the production capacity of its Owensboro, Kentucky, USA, manufacturing facility, which produces the popular Zyn nicotine pouches.

    The expansion is expected to create an additional 450 direct jobs with an ongoing annual economic impact of $277 million and 410 indirect jobs for the Commonwealth of Kentucky.

    “Philip Morris International’s Swedish Match affiliate has been an important partner and job creator in this region for many years, and I’m excited to see this incredible new investment and the 450 great job opportunities it is creating for families in Owensboro and the surrounding region,” said Kentucky Governor Andy Beshear in a statement.

    Construction of the expanded facility is already underway, including adding more production space. Progressive production increases are expected during the project, which is targeted for completion by the second quarter of 2025. The construction phase alone is expected to create nearly 2,800 jobs and have an economic impact of about $414 million.

    In addition to facility expansion and ongoing optimization of processes to increase capacity progressively over the coming quarters, the Kentucky facility will move from a 24-hour, five-days-per-week schedule to a 24-hour, seven-days-per-week schedule to boost production, starting in the fourth quarter of this year.

    The Swedish Match Owensboro facility currently has about 1,100 employees. The ongoing expansion of the facility in Kentucky is expected to provide around 900 million cans of capacity by 2025.

    In July, PMI announced an investment of $600 million over the next two years through its U.S. affiliate to open a nicotine pouch manufacturing facility in Aurora, Colorado. The Aurora facility and Owensboro expansion are designed to provide the capacity needed in the near term and midterm to meet the ferocious U.S. demand for Zyn.