Category: Print Edition

  • Beyond Ordinary

    Beyond Ordinary

    Photo: Vaporesso
    Photo: Vaporesso

    Since 2015, Vaporesso has been the category leader of open-system vape products.

    By Timothy S. Donahue

    Vaporesso has been a force in the open-system vaping segment for nearly a decade. The China-based powerhouse is one of the world’s largest open-system vaping hardware manufacturers and produces a wide range of mods, pods, tanks, coils and accessories. The company has been so successful that it has received recognition from several media outlets such as Ecigclick, Vapouround, Vaping360 and VersedVaper, winning more than a dozen “best international brand” awards in 2023 alone.

    The company has also won several professional international design awards, including the MUSE Design Award, the German Design Award, the London Design Award and the French Design Award. It has also garnered the Golden Leaf Award from the GTNF, one of the most prestigious awards in the nicotine industry.

    Since 2015, Vaporesso’s commitment to helping combustible smokers switch to less harmful nicotine products has been deeply embedded in its core philosophy, which emphasizes innovation, reliability and style. Maggie Chen, a Vaporesso spokesperson, said during an interview at the GTNF in Athens in September that understanding the diverse needs and aspirations of Vaporesso vapers is a priority.

    “By leveraging local insights, such as preferences for design and culture from subsidiaries in key markets like the USA and France, we have established dedicated touchpoints in each market to gather insights from consumers, retailers and various sales channels,” explained Chen. “This approach enables us to understand the specific requirements of different vaper segments while ensuring that the information we collect is objective and reliable, reinforcing our commitment to meeting the diverse needs of users across regions.

    “This commitment allows us to continuously develop product lines that cater to beginners and experienced vapers, ensuring a wide variety of styles and consistent quality. Our advanced automated manufacturing processes ensure each device is crafted with precision and quality, reflecting our dedication to reliability and excellence. Furthermore, we focus strongly on understanding users’ feedback and monitoring market trends while staying committed to ongoing R&D investment. This dedication enables us to consistently offer innovative open-system products that meet the needs of both consumers and the industry.”

    Vaporesso has held a leading position in the global open-system vaping product category for many years. It is recognized as the top brand worldwide in terms of market share. The company also achieved the highest growth rate among open-system brands, with its mouth-to-lung (MTL) products, such as the XROS series, becoming global bestsellers. The success of the XROS series is due to its compatibility with all XROS pods, reliable quality and superior flavor delivery, according to Chen, who added that the accomplishment highlights Vaporesso’s strong presence in key markets, such as the USA and Europe.

    Eve Wang, executive director of Vaporesso’s parent company, Smoore International Holdings, remarked, “The journey of Vaporesso from 2015 truly reflects the value instilled by the parent company, Smoore Group, which has consistently prioritized the importance of R&D. At the beginning of the story, Smoore dedicated two full years to support the development of our very first product: the patented CCELL vape coil, which is recognized as the world’s first ceramic coil.

    “This innovation reflects Smoore’s substantial commitment to R&D; since going public, the company has consistently invested a total of RMB3.94 billion ($551,923) in R&D by the end of 2023, with an additional RMB760 million allocated in the first half of 2024.”.

    Building on this strong R&D foundation, Vaporesso developed three core technologies: the AXON Chip for intelligent power management and optimized performance, SSS leak-resistant technology, which sets new standards for reliability by preventing e-liquid leakage, and COREX heating technology for faster heating and enhanced flavor.

    These innovations drive continuous improvements across Vaporesso’s product lines, ensuring premium quality and performance, according to Chen. The 2024 iteration of the XROS 4 series, featuring pod compatibility, exceptional flavor and a unique design, has become the world’s bestselling MTL product.

    Currently, disposable vapes dominate significant markets. However, despite the challenges posed by the explosive growth of disposable products since 2020, Vaporesso has excelled in the open-system segment, achieving an average annual growth rate of over 20 percent in the past four years, according to company financial disclosures. This trend reflects open-system users’ strong trust in the Vaporesso brand as it consistently meets consumer demand for continuous innovation, reliable quality and diverse styles. The company has also excelled at combating vaping waste, which is much less when using an open system compared to a disposable.

    “In addition to this growth, as a public company, Smoore Group strongly emphasizes developing various ESG indicators,” Wang stated. “Our commitment to ESG [environmental, social and governance], particularly to environmental sustainability, is reflected in several key areas. We aim to achieve carbon neutrality by 2050 by progressively increasing renewable energy use across our operations. Additionally, we have set a target of sourcing 50 percent of our energy consumption from renewable sources by 2030, further demonstrating our dedication to reducing our carbon footprint and fostering a sustainable future.”

    Chen explained that this commitment is mirrored at the brand level with Vaporesso’s ongoing initiatives, adding that the company embodies this commitment through its dedication to sustainable development.

    “We achieve this by innovating eco-friendly products, such as the ECO series, which features four products made from environmentally friendly materials, including recyclable ocean waste, coffee grounds, sugarcane bagasse and limestone-based inorganic composite material,” said Chen. “Additionally, our brand initiative, Vaporesso Care, promotes global carbon neutrality by collaborating with users, environmental organizations and industry partners, further reinforcing our commitment to sustainability.”

    The vaping industry is still relatively young, with just over a decade of history, and no one can predict the final shape of vape devices, including in the open-system category. Chen explained that Vaporesso is committed to its user-centric R&D approach, focusing on deepening consumer insights.

    “This enables us to anticipate market needs ahead of both competitors and even the consumers themselves,” said Chen. “Moreover, as each market evolves at its own pace with distinct characteristics, we continuously expand our frontline teams to better understand and respond to the specific needs of users in every region. This ensures our products are not only highly preferred but also perfectly tailored to each market.”

    Vaporesso may not have been the earliest entrant into the vaping industry; however, Chen said the company has always dedicated itself to becoming a leading vape brand. As the market has evolved, Vaporesso has stayed true to this vision by continually refining its products, organizational structure and promotional strategies.

    “At Vaporesso, innovation is inspired by our users. We harness advanced insights and global consumer research to deeply understand their preferences. With branches and design centers in North America and Europe, we blend local market expertise with continuous R&D investment to maintain our industry-leading position,” said Chen. “Reliability lies at the heart of everything we do. We prioritize quality manufacturing with the industry’s first medical-grade factory, supported by the most advanced automatic production lines and 14 industrial parks.

    “Our after-sales service, backed by local teams across four continents, ensures top-notch customer support. Our style goes beyond aesthetics. Local design centers provide insights into trends, preferences and lifestyles, enabling us to create stylish products for diverse needs and usage scenarios. Looking to the future, Vaporesso remains dedicated to realizing a smoke-free world, working closely with the industry to turn this vision into reality.”

    Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.
  • Increasing Stakeholder Engagement

    Increasing Stakeholder Engagement

    Image: ngstock

    Accelerating actions to clear the smoke: finding common ground in a polarized world

    By Scott D. Ballin

    During September and October 2024, there were a number of tobacco-related and nicotine-related conferences, including the Global Tobacco and Nicotine Forum in Athens; the Nicotine and Tobacco Science Conference in Charleston, South Carolina, USA; the Tobacco Science Research Conference in Atlanta; CORESTA in Edinburg; and the Food and Drug Law Institute annual tobacco and nicotine conference in Washington, D.C. The E-Cigarette Summit will convene in London in December.

    All of these conferences have a number of things in common, including looking at how to move forward in advancing public health and harm reduction and advocating for more stakeholder engagement. While these objectives are to be applauded and enjoy support, the tobacco and nicotine space remains more divided, polarized and tribal than ever.

    This division and the animosity that often goes with it mirrors what we see happening in societies around the world. This is tragic in terms of public health when more time is being spent fighting perceived enemies than looking for common-ground solutions to save lives.

    The divide is not merely between Big Tobacco and mainstream public health organizations but now also seems to include anyone associated with tobacco and nicotine. It is troubling to me that significant divisions continue to occur within the public health community to the extent that some take the position that anyone engaging with the tobacco and nicotine sector needs to be “called out,” blacklisted and even banned from attending some meetings or conferences.

    For some years now, I have taken the position that “safe-haven” dialogues between stakeholders are essential to advancing our public health objectives of reducing disease and death from the use of tobacco and especially the combustible cigarette, which is by far the riskiest tool for nicotine consumption. Today’s rapidly changing tobacco and nicotine environment is very different from the days of the “tobacco wars” of the late 20th century.

    We should be constantly reminding ourselves that globally, there are approximately 1 billion smokers who are subject to dying prematurely from cigarette smoking. In the U.S. alone, the number of smokers remains close to 30 million, making cigarette smoking the single most preventable cause of death.

    Many battles must be fought, but new approaches, ideas and opportunities need to be discussed and considered as well.

    A Role for CTP

    The U.S. Food and Drug Administration’s Center for Tobacco Products (CTP) has an important role to play in providing stakeholders a safe haven where civil dialogue can take place. For me, obtaining FDA regulatory oversight of the tobacco industry and its products was a major priority and a gamechanger in reigning in the bad behavior of the tobacco industry. All three CTP directors—Lawrence Deyton, Mitchell Zeller and Brian King—recognized and acknowledged the critical need for stakeholder engagement. Stakeholder input and engagement has and will continue to assist the agency in its efforts to not only prevent future generations from using tobacco and nicotine products but also to provide significantly lower risk, science-based regulated products to the millions of addicted adult smokers worldwide. It can ensure that bad actors distributing, marketing and selling illegal, unauthorized products are punished and expeditiously removed from the marketplace.

    Many will recall that in July of 2017, the FDA announced a visionary, comprehensive tobacco and nicotine plan. In its press release, then FDA Commissioner Scott Gottlieb and the Center for Tobacco Products Director Zeller wrote: “Envisioning a world where cigarettes would no longer create or sustain addiction and where adults who need or want nicotine could get it from less harmful alternative sources need to be the cornerstone of our efforts, and we believe it is vital that we pursue common ground …. To succeed, participants from all sectors [emphasis added] need to take a step back and work together to reach greater common ground.”

    This visionary plan was generally well received by a broad spectrum of stakeholders as a way to discuss and address important issues in a rapidly changing environment. Unfortunately, and for many reasons, the CTP has put much of the plan on the back burner.

    The time has come for the FDA/CTP to move the comprehensive plan back to the “front burner” and to begin a series of important discussions on how many of these ideas, challenges and opportunities can be addressed and implemented.

    The Morven Dialogue

    In July, the University of Virgnia’s Institute for Engagement and Negotiation (IEN) released its latest report, titled Accelerating Action to Clear the Smoke: Finding Common Ground in a Polarized World. Referred to as the Morven VII dialogue, the report builds on past dialogues and reports and lays out a set of 10 interrelated and overlapping core principles designed to “provide stakeholders guidance and encouragement to commit to engage and work together in a more transparent and cooperative way.”

    The report addresses topics such as updating definitions and terminologies; recognizing the differences between the risks and relative risks of a spectrum of products along the continuum of risk; the need to “modernize” and develop a more flexible and consumer-friendly regulatory framework; ensuring that scientific research is of the highest integrity; encouraging innovation and technology; ensuring comprehensive regulatory oversight while providing flexibility for “fast-tracking” of approved lower risk products for use by adults; ensuring that adolescents do not have access to any tobacco and nicotine products; providing consumers, the general public, medical professionals and other stakeholders with truthful, accurate and consistent information about the risks and relative risks of all tobacco and nicotine products; and encouraging all stakeholders in both the public and private sectors to engage civilly and honestly.

    The Morven VII dialogue report serves as a means for having a more in-depth civil discussion on issues confronting the tobacco and nicotine space. As the IEN director has stated: “It is owned by no one but can be used by everyone.” There are no copywrite restrictions on the report, and all entities are encouraged not only to use it but also to make it available to others, including policymakers, medical professionals, nongovernmental organizations and the media.

    The Morven VII report can be accessed at http://www.tobaccoreform.org.

    Scott D. Ballin worked in the public health policy arena for more than four decades, with much of his time spent on issues pertaining to tobacco and nicotine. He is a former vice president and legislative counsel for the American Heart Association and two-time chairman of the Coalition on Smoking OR Health, which later became the Campaign for Tobacco-Free Kids. In recent years, he has focused on the importance of bringing stakeholders together in both the public and private sectors. He also served as an advisor to the Institute for Engagement and Negotiation at the University of Virginia and as an advisor to the Food and Drug Law Institute.
  • Pride in Tobacco

    Pride in Tobacco

    Photos courtesy of ITGA

    Participants in ITGA’s annual meeting debated the challenges and opportunities facing their sector and obtained an in-depth understanding of U.S. tobacco farming.

    By Ivan Genov

    Jose Javier Aranda

    The International Tobacco Growers Association (ITGA) held its 2024 annual general meeting (AGM) Oct.15–18 in Raleigh, North Carolina (N.C.), USA. The birthplace of flue-cured “bright leaf” was the perfect location to wrap up a year full of activities, which included regional meetings in the Americas and Africa, global campaigns and numerous visits focusing on grower challenges.

    Hosted by the Tobacco Growers Association of North Carolina (TGANC), the meeting included a four-day dynamic program concentrating on the practical side of farming in the U.S. Notably, the association’s members reelected the ITGA’s president, Jose Javier Aranda, for another term. His efforts to defend the legitimate interests of farmers around the world have expanded to most of the leading tobacco-growing markets. As a result, the AGM was attended by a record number of delegates, including representatives from Argentina, Brazil, the European Union, India, Malawi, the Philippines, Tanzania, the USA, Zambia and Zimbabwe.

    The meeting started with a guided tour of the Universal Leaf Factory in Nashville, North Carolina. The facility is the company’s biggest and most advanced plant in the world. Today, it has the capacity to process the entire yearly U.S. crop. Delegates from other regions were able to compare the process to their own markets, but the sheer size of the facility is surely to leave them with a lasting memory. This was followed by a visit to a live auction, a unique experience that is rarely seen in any other place. For example, tobacco growers from Kentucky were sad to note the absence of auctions in their state.

    Mercedes Vazquez

    The open day conference started with an overview of the ITGA’s strategic objectives. Currently, the ITGA focuses on four pillars—information, tobacco sector advocacy, strategic partnerships and reinforcement of the membership base. ITGA CEO Mercedes Vazquez went through the association’s substantial data reserves and capabilities, campaigns to help bring attention to the enormous socioeconomic impact of tobacco growing, such as the May 31 World Understanding Tobacco Farming Day and the Oct. 28 World Tobacco Growers Day, along with the association’s recent participation in the InterTabac/InterSupply trade fair, which presented four ITGA member associations an opportunity to obtain greater visibility. This is particularly important to entities such as Fedetabaco in Colombia, which went through an extraordinary transformation after leading companies left the market with little notice and no alternatives.

    Shane MacGuill, Euromonitor International’s global lead for nicotine and cannabis, provided an in-depth global overview of consumption trends. MacGuill noted that the U.S. market is characterized by an ongoing realignment of consumption behavior in the context of overall flat nicotine volume evolution. Among the most significant global tobacco drivers for the future will be regulatory innovation, including sustainability, cost-of-living crises and risk of impaired sensitivities, along with a broadening of the nicotine universe, according to MacGuill. Currently, the Middle East and Africa are the only cigarette markets experiencing growth, compared with significant declines in Europe and North America.

    The top volume growth cigarette markets in the next five years, according to Euromonitor, will be Ethiopia, the United Arab Emirates, Cambodia, Egypt and Lebanon while the biggest volume declines are expected in New Zealand, Australia, Denmark, the United Kingdom and Ireland. In the reduced-risk products space, heated tobacco is establishing itself as the key format as significant e-vapor value migrates to illicit markets. Euromonitor’s estimates of the total nicotine market (excluding China), which includes legal and illicit sales and all categories, traditional and novel, indicate striking overall nicotine resilience. In stick-equivalent terms, global volumes are expected to remain unchanged from 2018 to 2028. In addition, the reduced-risk categories are gaining share of the total nicotine universe, but by 2028, it is likely that cigarette sales will still account for three in every four nicotine units. Regarding one of the newest tobacco categories, nicotine pouches, growth is predominantly centered in the U.S., with no evidence of serious traction elsewhere. In the “beyond nicotine” category, manufacturers’ activity remains patchy as the cannabis revolution slows down.

    Ivan Genov, ITGA manager of tobacco industry analysis, provided information about tobacco leaf production trends. In 2024, the biggest tobacco variety, flue-cured Virginia (FCV) was characterized by short crops. Unfavorable weather affected some of the leading FCV markets. In Brazil, more humid and warmer climate resulted in lower productivity (see “The Great Scramble,” Tobacco Reporter, May 2024). FCV final volume output was 461 million kg against 551 million kg in 2023. Zimbabwe, which declared a state of disaster during the growing season, registered one of the lowest rainfalls on record. Consequently, production went from 296 million kg in 2023 to 231 million kg in 2024. At the same time, burley production is rising, with Malawi being one of the year’s star performers. The marketing season brought growth in both volume and value terms and expectations for an even better 2025. Another market to pay attention to, Tanzania, was unable to reach the government target of 200 million kg. Nevertheless, local growers produced 116 million kg, twice as much as in 2022. The local ministry of agriculture remains optimistic that Tanzania could become the biggest tobacco exporter in Africa. In summary, demand for tobacco leaf continues to exceed supply on the global markets. Major leaf dealers report low levels of uncommitted stocks, and tobacco is sold very quickly. Current forecasts suggest a larger crop in 2025, but problems that have built up for many years, including thin profit margins for growers, lack of continuity and other social and environmental issues, are now reaching a tipping point.

    The topic was further unpacked in a panel that was moderated by TGANC Executive Vice President Graham Boyd and featured leaf sales executives from Alliance One and Universal Leaf North America. While some expected the FCV market to balance in 2025 and burley in 2026, others, particularly in the audience, saw this happening in a longer time frame. Burley Stabilization Corp. CEO Daniel Green noted that three quarters of the U.S. burley production is now realized on the local U.S. market.

    A panel moderated by William Snell from the University of Kentucky and featuring farmers with many generations’ worth of experience also sparked a lot of debate. Growers were united in the opinion that the issues faced by growers are the same in every market. TGANC President Matt Grissom expressed another sentiment shared by many growers—that they grow tobacco because they love to do it. However, underlying market changes are putting strong pressure on the community. The U.S. tobacco buyout program was also discussed in detail. At its start, stakeholders expected farms to consolidate, individual farm operations to get bigger, production to shift westward and yields to improve. The first three happened as predicted, but the last one failed to materialize, with yields remaining flat. This was also the key focus of ITGA research in 2024. The association interviewed leading agronomy experts to uncover the reasons behind flat or declining yields—a trend that goes against that seen in crops like corn, soybean and cotton. The research identified common factors impacting all growers as well as ones relevant to small scale against commercial growers. After identifying the issue, the ITGA will continue to analyze the underlying factors and come up with ways to address them.

    The session also included a U.S. regulatory update by Universal Leaf Vice President of External Affairs Benjamin Dessart and a global regulatory overview by Michiel Reerink, international corporate affairs director and managing director at Alliance One International. Certain regulatory actions in the pipeline are likely to impact not only consumption but also the whole supply chain, including farmers. These include, for example, the discussions around nicotine reduction in the U.S. and the Due Diligence Directive in the European Union. Tracking regulations that impact growers directly remains a key focus area for the ITGA.

    As part of the AGM, delegates also visited a research farm in Oxford, North Carolina, where Loren Fisher, director of N.C. State Research Stations and Field Labs, explained how the U.S. conducts tobacco production research—how it allocates financing, for example, or how it handles technical aspects related to resilient varieties. ITGA delegates agreed that this is an incredible asset for local growers—one that needs to be kept at all costs. The group also visited a field where experts was noted that crop failures are welcome in the research environment as they help in the pursuit for productivity improvements for the future.

    Finally, ITGA delegates visited the N.C. State Fair, where tobacco featured prominently. The group witnessed a tobacco-stringing contest, visited the TGANC pavilion and came to appreciate the continuing importance of the golden leaf to their host state. This enduring significance was perhaps best captured by a sign stating that “North Carolina still has pride in tobacco”—a sentiment that was not only wholeheartedly shared by the AGM participants but even managed to grow stronger during their short visit to America’s Tobacco Belt.

    Ivan Genov is ITGA’s manager of tobacco industry analysis.
  • Small Packs, Big Problems

    Small Packs, Big Problems

    Tobacco companies may not sell packs containing fewer than 20 cigarettes in Pakistan. | Photo: Taco Tuinstra
    Tobacco companies may not sell packs containing fewer than 20 cigarettes in Pakistan. | Photo: Taco Tuinstra

    Pakistan’s dispute over cigarette exports to Sudan

    By Stefanie Rossel

    No matter the outcome, the situation is unlikely to yield any winners. In April, local news outlets reported that BAT subsidiary Pakistan Tobacco Co. (PTC) had asked Pakistan’s government for permission to fulfill a $20.5 million order from Sudan for cigarettes packed in boxes of 10 sticks each.

    The sale would require a change of law. Under its Prohibition of Sale of Cigarettes to Minors rule, Pakistan bans the manufacture of packs containing fewer than 20 cigarettes. Health activists believe that small packs encourage smoking among lower-income groups, including minors, because such packs are less expensive than packs containing more cigarettes.

    Pakistan Prime Minister Shehbaz Sharif approved PTC’s request on May 28 after a committee comprising members from various ministries argued that the 10-pack prohibition applied only to products intended for sale on the domestic market. The sale could proceed, the committee said, on the conditions that the manufacturer ensured product traceability, printed the text “For export purposes only” on each pack and agreed to submit quarterly export invoices to the health ministry.

    The latter, however, has dragged its feet on giving the required green light. According to local press reports, the ministry has referred the matter to the Ministry of Foreign Affairs. Meanwhile, PTC continues lobbying for a change of law.

    The plans face strong opposition from health groups. Soon after learning about PTC’s plans, the Campaign for Tobacco-Free Kids expressed concern, arguing that the move would not only jeopardize progress made in tobacco control but also directly target those most vulnerable to the harmful effects of tobacco consumption. The group’s country head for Pakistan argued that “kiddie packs” produced for export would inevitably find their way onto the local market, thus directly undermining efforts to discourage smoking among young people.

    In July, representatives of 25 member countries of the African Tobacco Control Alliance wrote a letter urging Pakistan’s prime minister to prevent PTC from exporting small cigarette packs to Sudan. “If a product is too dangerous for one country’s children, it is too dangerous for children anywhere,” the signatories wrote. “Putting other people’s children at risk of tobacco addiction, disease and death is unacceptable—don’t put our African kids at risk by changing your strong tobacco control regulations in Pakistan.”

    Due to the delay in obtaining permission, Sudan started contacting other countries to fulfill its order.

    Both Pakistan and Sudan are parties to the World Health Organization Framework Convention on Tobacco Control (FCTC), which obliges them to prohibit the sale of cigarettes individually or in small packs. However, the treaty does not define what constitutes “small.” Of the more than 180 FCTC signatories, at least 82 member states require cigarettes to be sold in packs containing at least 20 sticks.

    Weak Enforcement

    Daud Malik

    The parties in the dispute now find themselves in a catch-22 situation. For Pakistan, it’s the decision between monetary gain and its tobacco control commitment. Battered by a severe economic crisis characterized by high levels of inflation, dwindling foreign reserves and a depreciating currency, the nation could certainly use the income.

    PTC’s Sudan order, which the company says could be repeated, would bring valuable hard currency into the country. In March, the company was honored as one of Pakistan’s leading taxpayers. In 2023 alone, PTC paid more than PKR229 billion ($821 million) to the national exchequer in taxes and duties. According to Brecorder, the company has been exporting cigarettes to numerous foreign markets since 2019, earning the country $156 million. For the next fiscal year, PTC is targeting $60 million in exports. However, a third of that amount depends on the Sudan order.

    “In the context of Pakistan’s economy, this export order is insignificant,” says Daud Malik from the Alternative Research Initiative, which conducts research in a variety of fields, including tobacco control, health, education, governance and culture, in Pakistan. “However, its consequences are adverse and extremely damaging to the tobacco control efforts in Pakistan. It would send all the wrong messages to everyone working to end smoking in Pakistan. It would raise questions about Pakistan’s commitment to FCTC and the commitment to a smoke-free country.”

    Over the past decade, Pakistan considerably stepped up its tobacco control efforts, for which it was recognized by the WHO in 2021. In recent years, the country introduced a series of significant tax hikes on cigarettes. In February 2023, the government increased the federal excise duty on cigarettes by around 150 percent, resulting in a corresponding increase in cigarette prices.

    However, the tax hike also boosted Pakistan’s already flourishing illegal cigarette market. An Ipsos study in May 2024 revealed a surge in smuggled cigarette brands. With consumers shifting from expensive duty-paid products to duty-avoiding products made at home or smuggled in from abroad, illicit share tobacco sales were expected to exceed half of Pakistan’s total market this year. Most locally manufactured tax-evaded brands, the study found, are available in packs of 25 and 30 cigarettes, encouraging single-stick sales among retailers.

    For PTC, the loss of the Sudan order has other implications. If Pakistan does not allow exporting cigarettes in small packs, the company’s parent company may assign the order to affiliates in Bangladesh or Indonesia, a PTC official said. It would not be the first time that PTC lost export business because of Pakistan’s domestic regulations. In 2019, PTC lost an order for small packs from a customer in the Gulf region after the Ministry of Commerce gave permission but the health ministry did not.

    While struggling to fulfill export orders, the manufacturer has also been coping with increasingly challenging business conditions at home. In May, BAT reportedly threatened to pull out of Pakistan if the government further increased cigarette taxes. According to the company, existing taxation had already caused its sales in Pakistan to plunge by 38 percent. “The past couple of years’ developments on fiscal policies have raised questions about the sustainability of the company’s operations in Pakistan,” Michael Dijanosic, regional director for Asia-Pacific, the Middle East and Africa at BAT, was quoted saying in a meeting with the prime minister.

    Growing Tobacco Market

    Apart from the moral quandary implied by tobacco health activists about prevention of underage smoking in various continents, there is another ethical dilemma: Should a company export a product known for its adverse health effects to a country in the midst of a civil war?

    “Demand for nicotine and tobacco products is bound to go up in war-torn regions and volatile markets as people try to deal with heightened stress, uncertainty and the destruction around them,” says Samrat Chowdhery, journalist and director of the Council for Harm Reduced Alternatives, an Indian registered nonprofit that works on tobacco harm reduction measures. “This was also evident during Covid as smoking rates went up in response to stress despite WHO warnings linking smoking to severe outcomes.”

    With an anticipated cigarette market value of $1.9 billion in 2024 and a projected compound annual growth rate of 16.81 percent by 2029, according to Statista, Sudan is among the few countries still holding potential for tobacco companies. The local cigarette market is dominated by Haggar Cigarette and Tobacco Factory, a subsidiary of Japan Tobacco International, with a share of over 80 percent and BAT subsidiary Blue Nile Cigarette Co. The latter factory is based in Madani, which has been the scene of heavy fighting. The shift of production to Pakistan was meant to ensure the continuity of supply.

    Tobacco taxes are a major source of income for the Sudanese government, with hefty taxes levied on both domestic and imported brands. Recently, nonduty-paid cigarette sales have been a significant issue, which could be acerbated by a shortage in legal supply.

    “Denying people access to nicotine products in war regions in fact contributes more to their hardship than alleviates it, as smuggling takes over, hurting not just their meager resources as prices shoot up, like it is happening currently in Gaza,” says Chowdhery (see “In the Shadow of War,” Tobacco Reporter, October 2024). “But it also affects aid work as cigarette smuggling, due to higher profits to be made, gets prioritized over transporting aid supplies, which also in turn makes these shipments targets of attacks, hurting people in need of aid. In such an environment, ensuring safe, legal supply of nicotine or tobacco products is more humane and the lesser evil.”

    Chowdhery recalls a recent foreign policy podcast describing how loyalties can be bought with cigarettes in Gaza. “So if BAT can ensure a legal, duty-paid supply of cigarettes to Sudan that does not violate the country’s local regulations while Pakistan, which is also struggling financially, can earn some revenue, I don’t see why it is being framed as a negative, especially when the alternative is smuggled cigarettes, which do not earn both countries any revenue, while increasing criminality and increasing stress, withdrawals and the economic hardships of smokers as well as people in need of humanitarian aid,” he says.

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

    Spread the Word

    BAT’s Danielle Tower shares her views on the tremendous opportunity presented by tobacco harm reduction.

    By George Gay

    Ahead of the 2024 CORESTA Congress that was held in Scotland Oct.13-17 under the theme “Advancing Tobacco Harm Reduction through Scientific Collaboration,” Tobacco Reporter took the opportunity to interview Danielle Tower, group head of scientific and regulatory affairs at BAT, the host of the Congress.

    Tobacco Reporter: In March, BAT went public with the opening of its new U.K. Innovation Centre in Southampton, U.K. (see “Driving Transformation,” Tobacco Reporter, May 2024). More recently, with your Omni initiative, you have presented a summary of BAT’s progress toward making “A Better Tomorrow by Building a Smokeless World.” And last month, you hosted the CORESTA conference under the banner “Advancing Tobacco Harm Reduction Through Scientific Collaboration.” This is all very praiseworthy, but do you have evidence that your tobacco harm reduction (THR) messages are getting through to those people making regulatory decisions about tobacco and nicotine?

    Tower: Governments, the public health community as well as manufacturers like BAT and their business partners have a key role to play in maximizing the potential of smokeless products to contribute to tobacco harm reduction.

    In July 2023, the FDA [U.S. Food and Drug Administration] has authorized the marketing and sale of our vapor product Vuse Alto with Golden Tobacco and Rich Tobacco flavors in the United States. This is good news for adult smokers, who would otherwise continue to smoke, and for public health.

    Evidence-based regulation requires a comprehensive scientific assessment, from data that assesses the health impact of new products, to the impact on the population, including users of new products and nonusers of nicotine products.

    At BAT, we are focused on driving awareness and understanding of our science across multiple scientific and other nonconsumer audiences. We believe that by being open and transparent with our data, we can meaningfully contribute to the discussion on tobacco harm reduction.

    Even in the U.K., where regulations have tended toward the pro-THR, the signs are that things are going to get more difficult for those offering smokeless alternatives to combustible tobacco products. How can you navigate this potentially more hostile regulatory landscape in such a way as to take THR forward?

    We believe that tobacco harm reduction—the switching of smokers, who would otherwise continue to smoke, to alternatives with a reduced-risk profile—is the best way to reduce the harm associated with smoking cigarettes.

    We have a vast body of scientific evidence to substantiate the reduced-risk profile of our smokeless products. And, when required, we conduct new science to support our regulatory submissions.

    BAT is in favor of progressive regulation—based on the best available scientific evidence—allowing adult smokers to have access to smokeless alternative products while providing consumers with high product standards and preventing underage access. 

    The U.K. is a tobacco harm reduction success story. The number of smokers is at an all-time low—6 million—and nearly 3 million people have switched to vaping in the last five years. We are calling for smart regulation that allows smokers to have access to smokeless alternatives while providing consumers with high product standards and guarding against underage access. One of our proposals is a retail licensing system—similar to alcohol. Most importantly, good regulation must be accompanied by robust enforcement—otherwise, it is unlikely to be effective.

    And how do you navigate your way in jurisdictions where regulations are not as supportive of THR as they have been to date in the U.K.?

    Harm reduction approaches have produced diverse opinions from numerous stakeholders. We encourage anyone interested in learning more about tobacco harm reduction to read more and consider the broadest range of available viewpoints.

    Regulation should be based on the best available scientific evidence. And lessons can be learned from countries like Sweden, the U.K., New Zealand and Canada that have embraced tobacco harm reduction and have experienced an associated acceleration in the decline of smoking rates.

    One of the problems with nicotine product regulations seems to be that they are not always fully enforced, something that can unfairly put legitimate companies in a bad light in the general media. Again in the U.K., rogue manufacturers seem able to market noncompliant products because imports, compliance and retail sales, including to those underage, are not properly policed. Is there anything that you can do to turn this around?

    Yes, I think there are three main challenges: Firstly, the lack of awareness or acceptance of tobacco harm reduction. Many prestigious public health organizations are in favor of THR as the way to reduce the harm associated with smoking cigarettes for those consumers who would otherwise continue to smoke.

    Secondly, the lack of enforcement. Regulation must be well enforced with strong sanctions for those who don’t comply. Otherwise, situations as seen in the United States arise where the majority of the vapor market consists of illegal, illicit disposable vapes.

    And thirdly, the lack of flexibility to keep pace with innovation. Regulatory frameworks often struggle to keep pace with a fast-evolving, consumer-led market. It’s important to cater for innovation so that adult smokers have access to the best available smokeless alternatives, which has the potential to accelerate tobacco harm reduction.

    Your new Innovation Centre involved a considerable investment, but, in fact, it is only a part of the total investment needed to bring forward efficacious alternative smokeless products. How do you ensure that these investments are used to the best advantage in producing good products while keeping investors happy? Do you mainly seek to improve the categories of alternative smokeless products already established, or are you involved in blue-sky projects that might come up with revolutionary products?

    Consumer choice is driving the transformation of the tobacco industry. Adult smokers are more likely to switch to a product that delivers comparable satisfaction. That is why we are obsessed with innovation and invest £300 million [$392.27 million] a year in the development of our smokeless products. The Innovation Centre in Southampton will collaborate with BAT’s Innovation Centres in Shenzhen and Trieste [see “Shaping Tomorrow,” Tobacco Reporter, April 2023] to anticipate and meet the needs of consumers through science, technology and innovation.

    I can’t disclose our innovation pipeline, but we are constantly innovating and utilizing new technology to improve our portfolio of smokeless products.

    You compete in most if not all the smokeless product categories and, at the opening of your new Innovation Centre, presentations were given concerning the seemingly impressive levels by which the health risks associated with the consumption of these products is potentially lower than that of smoking combustible cigarettes. But this sort of information does not seem to see the light of day too often. Can this situation be turned around?

    Already today, several public health organizations and regulators are supporting the use of smokeless products. However, to ensure that the full potential of the tobacco harm reduction opportunity is realized, much more focus is required by regulators to ensure that adult smokers in all markets across the world have access to smokeless products and accurate information about their relative risk—so they can make informed decisions about switching.

    We publish the findings of science in peer-reviewed publications and present the results at conferences. This helps to informs other scientists working in the field and those undertaking evidence reviews.

    Governments have an important role to play as a trusted source of information. The U.K. is a good example. The government has undertaken reviews of the scientific evidence on vaping—publishing its key findings (OHID evidence review). And the National Health Service has a page dedicated to vaping as a means of promoting THR—covering the myths and facts (Vaping myths and the facts—Better Health—NHS [www.nhs.uk]).

    Questions have been asked in the recent and not-so-recent past about the relevance of CORESTA in the current tobacco/nicotine environment. Do I take it that, in hosting this year’s congress, you are giving a stamp of approval to this organization and the idea of scientific co-operation even within a highly competitive industry?

    It is a great honor for BAT to host the 2024 CORESTA Congress concentrating on the theme of “Advancing Tobacco Harm Reduction Through Scientific Collaboration.” We are proud to welcome around 500 attendees to the congress, bringing together member and nonmember organizations from over 30 countries, including companies, research institutes, laboratories, associations and regulatory bodies. Our focus is to promote discussion and the sharing of knowledge and understanding in the science related to tobacco harm reduction across a variety of disciplines, from agricultural raw material production to product characterization, nonclinical and clinical assessment and product use behavior. With increasing regulatory requirements, the scientific work and outputs of CORESTA have become a worldwide reference point for tobacco policymaking and support the development of testing standards—such as ISO standards.

    How do you see the future for THR?

    We have an opportunity to usher in a new smokeless world, grounded in scientific research and a firm commitment to public health. The solutions are available today. All that is required is for the relevant stakeholders to actively work together to prioritize tobacco harm reduction and the well-being of millions of people worldwide.

    Countries that have recognized the opportunity tobacco harm reduction presents, and which have adopted supportive policies, have seen striking success in reducing their smoking rates. The U.S., U.K. and Japan are all currently witnessing their lowest smoking rates on record while Sweden is on track to declare itself smoke-free this year—defined as having [less] than 5 percent of daily smokers in the population—16 years ahead of the 2040 EU target.

    Sweden’s experience with snus is a useful case study for tobacco harm reduction. Snus is a traditional smokeless tobacco product that is placed between the lip and gums and held in the mouth for around 30 minutes, during which time it slowly releases nicotine without inhalation. It has been available in Sweden for 200 years, and, while the composition has changed, manufacturing methods have improved dramatically over that time.

    Although Sweden has the highest consumption of smokeless tobacco per capita in the world, Swedish men have the lowest death rate attributable to tobacco and the lowest incidence of lung cancer and other tobacco-related diseases of nearly every country in the world.

    More recently, other smokeless products—vapor, heated products and tobacco-free oral nicotine pouches—have been introduced in Sweden, helping to further reduce the prevalence of smoking.

    This remarkable transformation in Sweden, and other countries, has been driven by acceptance of tobacco harm reduction from policymakers, regulators and health officials in these markets, encouraging smokers, who would otherwise continue to smoke, to migrate to smokeless alternatives.

    And the $60,000 question: Is it, or will it ever be, acceptable for nonsmokers to take to using smokeless nicotine products?

    We market our smokeless products to existing adult tobacco and nicotine consumers. For those who don’t smoke, my message is simple: Don’t start. For those who do smoke, my recommendation is to quit entirely. However, if they will not quit, then I encourage them to completely switch to smokeless nicotine products backed by scientific evidence that shows their reduced-risk potential compared to smoking cigarettes.

    Is there anything you would like to add?

    Tobacco harm reduction represents a significant public health opportunity that cannot be ignored. It is my hope that the Omni will spur dialogue with stakeholders—scientists, public health authorities, policymakers, and investors—and across the wider scientific and regulatory ecosystem related to tobacco and nicotine products. I appreciate that some people will be skeptical of our motivations and actions. The Omni is not intended to be a panacea. It is, however, designed to underscore our commitment to science and facilitate an important conversation about tobacco harm reduction. Omni can be accessed at www.asmokelessworld.com.

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

    Thoughtful Progress

    Image: PuiZera

    At the recent GTNF in Athens, stakeholders debated how to responsibly advance innovation.

    By Taco Tuinstra

    For a decade and a half now, the Global Tobacco and Nicotine Forum (GTNF) has nurtured engagement worldwide, fostering lively and constructive discussions among its participants. The GTNF’s most recent gathering, Sept. 24–26 in Athens, was no exception. For three days, the Divani Apollon Hotel served as a modern-day Greek agora, the ancient public space where people exchanged ideas and engaged in philosophical discussions with both friends and adversaries. Paying tribute to the host nation’s famous philosophers, the GTNF delegates asked probing questions, contemplated opposing viewpoints and displayed the courage to doubt themselves.

    But even as Athens upheld the tradition of spirited discourse, one of the conference’s most powerful moments was strikingly quiet. On day three of the forum, Carolyn Beaumont, a general practitioner and tobacco harm reduction educator from Australia, concluded her presentation with silence. She then chimed a bell every time a person would have succumbed to tobacco-related disease during that time span. Mindful of the conference’s full agenda, Beaumont played the recording for only a brief period. Had she let it run for the duration of the one-hour panel discussion she took part in, the bell would have tolled 900 times. That’s the equivalent of one death every four seconds, or 8 million deaths—nearly the population of Switzerland—every year.

    The staggering numbers underlined the urgency for the industry to help reduce the harm inflicted by smoking, and how to best achieve that goal was a major focus of this year’s GTNF. The task, of course, is formidable. Smoking is a notoriously difficult habit to kick, witness the fact that 60 years after the U.S. Surgeon General’s landmark report on smoking and health, and following decades of anti-smoking campaigns around the globe, more than 1 billion people continue to light up.

    Much of that is due to the properties of nicotine. The chemical’s uncanny ability to simultaneously stimulate and relax keeps many users coming back despite the widely known health risks of smoking. Illustrating the tenacity of nicotine addiction, another GTNF speaker, the cardio-endocrine physician Rohan Savio Sequeira, shared an anecdote of a patient who woke up from bypass surgery and immediately asked for a cigarette. “That’s the challenge we’re up against,” Sequeira said.

    Photo: Timothy S. Donahue

    But while addictive, nicotine is not the compound that causes the most serious smoking-related diseases. Nicotine may elevate blood pressure and heart rate, but the more significant risks presented by cigarettes, including cancer and chronic obstructive pulmonary disease, stem from combustion. Several GTNF speakers compared the rewards and risks presented by nicotine to those of caffeine. But unlike the most popular method for taking caffeine—drinking coffee—the most common nicotine consumption method—setting fire to dried tobacco leaves and inhaling the smoke—exposes its user to thousands of harmful chemicals.

    While the obvious solution would seem to be for smokers to consume only the nicotine, through patches, for example, the low success rate of nicotine-replacement therapies in cessation suggests there are additional factors that keep people reaching for cigarettes. As multiple speakers pointed out during the GTNF, smoking is about more than self-administering nicotine. Many aspects of the ritual are difficult to replicate. “Pouch and blow me a smoke ring,” Rae Maile, managing director of research at the U.K. investment bank Panmure Liberum, challenged his intellectual sparring partner, Erik Bloomquist, during a GTNF “fireside chat” about the financial side of the nicotine business.

    But innovation is changing the equation. Over the past decade or so, breakthroughs in battery and atomization technologies have allowed manufacturers to construct devices that not only deliver nicotine without the harmful products of combustion but also closely mimic aspects of smoking that many consumers find so appealing—the “throat hit,” the hand-to-mouth motion and, yes, even the ability to blow rings. BAT Group Head of Global Policy Flora Okereke likened the nicotine business’ rapid technological leap to the progress that had played out over a much longer timespan in the automobile business: from Ford’s Model-T to today’s self-driving cars. While not risk-free, these tools, which include e-cigarettes and devices that heat rather than burn tobacco, offer an opportunity to satisfy people’s cravings at a fraction of the risk presented by traditional cigarettes. In 2015, Public Health England memorably announced that vaping was 95 percent less risky than smoking.

    Yet despite their considerable potential, such next-generation nicotine products have not been universally welcomed, with many regulators and health groups, including the influential World Health Organization, more attuned to the risk of attracting new nicotine users than the promise of transitioning adult smokers from deadly cigarettes to less risky consumption tools. Electronic nicotine-delivery systems have also come under fire for generating e-waste and creating fire hazards.

    Much of the Athens GTNF revolved around this conundrum: How can society reap the benefits of cigarette alternatives without attracting consumers who shouldn’t be using those products and without creating other unintended side effects, such as environmental pollution? As suggested by the 2024 conference theme, at least part of the answer lies in “Advancing Responsible Innovation.”

    Acknowledging the fact that tackling the challenges will require the involvement of stakeholders from all parts of society, the conference hosted a whopping 79 speakers, including 30 women, from various professional walks of life. In addition to industry officials, regulators and analysts, the lineup featured health activists, politicians and consumer advocates. There were returning headliners such as the director of the U.S. Food and Drug Administration’s Center for Tobacco Products, Brian King, and numerous first-time contributors, such as Greek Health Minister Adonis Georgiadis, who in a video message encouraged delegates to educate governments so that they could provide their citizens with accurate information about the relative risks of nicotine products.

    Other participating politicians included Morgana Daniele, a member of Lithuania’s Parliament and chair of that nation’s Commission for Addiction Prevention, and Pietro Fiocchi, a member of the European Parliament and vice-chair of the Committee on the Environment, Public Health and Food Safety. The retail sector was represented by Henry Armour, president and CEO of NACS in the U.S., and Panos Panayiotopoulos, general manager and director of the Greek retail association, among other speakers.

    Perhaps the GTNF’s biggest “coup” this year was the participation of Kathy Crosby, president and CEO of The Truth Initiative, a U.S. anti-tobacco group established after the 1998 landmark Master Settlement Agreement between leading tobacco companies and American states seeking to recover the cost of treating sick smokers. The Truth Initiative has been highly skeptical of e-cigarettes, especially because of their uptake by underage consumers. But Crosby courageously elected to engage rather than demonize the industry—a decision that will surely have raised eyebrows among the more uncompromising members of the public health establishment.

    Yet Crosby did not dilute her message. Even as she acknowledged the need for less harmful solutions for smokers who are not ready to leave nicotine behind, she was adamant such products should leave behind their youth appeal. With unauthorized sales accounting for the overwhelming majority of U.S. e-cigarette sales, she urged retailers to remove illegal products from their store shelves immediately. Doing so, she said, would create goodwill and pave the way for constructive dialogue with the public health community. Industry representatives at the GTNF eagerly accepted the olive branch. “The ball is now in our court,” said Jose Luis Murillo, chief regulatory advisor to Juul Labs’ CEO.

    Encouragingly, each link of the supply chain represented at GTNF appeared eager to address underage access. While preventing sales to minors is a legal requirement in many markets, NACS’ chief, Armour, stressed that his organization’s members are motivated not by fear of penalties but because they feel a responsibility toward the communities they serve.

    Of course, that doesn’t mean it’s easy. Sketching the size of challenge, Armour noted that half of the U.S. population—some 165 people—comes to a convenience store every day, with 40 percent of their inventory comprising age-restricted products such as tobacco, alcohol and lottery tickets. Fortunately, technology, such as digital age verification platforms, are increasingly alleviating the burden.

    While the desire to prevent youth access is widely shared among stakeholders, opinions differ on the best way to achieve that objective. Around the world, lawmakers are increasingly resorting to prohibition, banning vape flavors or single-use products, for example—or outlawing new nicotine products altogether.

    That is not the approach favored by most GTNF speakers. Counterfactual Director Clive Bates reminded his audience that people have been using nicotine for at least 12,000 years. “Demand will persist because nicotine provides psychoactive rewards,” he predicted. Banning it, Bates noted, will simply shift demand from legitimate suppliers to law-evading ones, as happened in the U.S., where an onerous product authorization system combined with halfhearted enforcement has handed nearly the entire vaping business to the black market. Dave Dobbins, former chief operating officer of the American Legacy Foundation and now a consultant to Altria Group, cited the example of Bhutan, which in 2004 declared a nationwide ban on sales of tobacco products but was later forced to abandon its experiment under pressure from the illicit market (see “Bhutan’s Tryst with Health Imperialism,” Tobacco Reporter, June 2024).

    Instead of betting on unworkable bans, many GTNF attendees were hopeful that the same innovation that had brought the world less harmful nicotine products would help tackle challenges such as underage consumption. Elaine Round, group head of life sciences at BAT, took the opportunity introduce the GTNF audience to her company’s recently launched Omni platform, an evidence-based, accessible and dynamic resource that shows how science and innovation can combine to achieve a smokeless world. The potential of such innovations was clearly demonstrated in three “big pitch” presentations, a new GTNF event during which companies outlined their solutions to some of the business’ most vexing problems, and answered questions from an expert panel.

    Rhodri James, chief sales officer at Yoti, a digital identity company, described a technology that verifies buyers’ ages by scanning customers’ faces and measuring their skin tone. As people age, James explained, the pigment of their skin changes. Wrinkles, for example, have a different tone than smoother parts of the skin. By determining the differences, Yoti’s technology is able to determine a potential buyer’s age with an almost uncanny accuracy. In tests, the platform performed much better than human store clerks. In addition to speeding up checkouts—and thus reducing “friction” in store transactions—the platform helps defuse what James described as “challenges to the challenge.” Confronted with a customer incensed about being denied a sale, the salesclerk can simply blame the computer. Asked about privacy, James noted that facial age estimation is not facial recognition. The platform, he said, cannot tell who you are—only how old you are.

    Greenbutts presented a filter that it claims is biodegradable without compromising performance and taste (see “A Future Without Plastics,” Tobacco Reporter, March 2023). The product addresses a colossal challenge indeed. With 11 billion cigarettes discarded daily, filters are the single most littered item on the planet. As indoor smoking bans have forced consumers outdoors, the problem has only become worse; butts that were previously deposited in ashtrays are now ending up in the environment. Made with cellulose acetate, current filters degrade into nanoplastics, which not only pollute but also end up in the food chain.

    Founded in 2010, Greenbutts has developed a plastic-free, plant based product that is 100 percent dissolvable in water. Importantly, the filter delivers the same sensorial experience as cellulose acetate products at a comparable cost, according to the company. In blind tests performed at trade exhibitions, many smokers chose Greenbutt’s filter, said Chief Strategy Officer Luis Sanches, who added that production could be scaled up easily.

    Greentank shared a solution that offers vapers a more consistent user experience while lowering the risk of creating undesirable compounds during the heating process. In many currently available vapes, the flavor tends to wane as the pod empties. In tests, the Quantum Vape technology delivered 1,000 puffs with virtually unchanged flavor intensity. According to President and Chief Operating Officer Corey Koffler, Greentank was able to achieve this through “cleanroom chip manufacturing technology combined with physics at nanoscale.” Instead of relying on wicks and coils or ceramics, Quantum Vape comprises thousands of microscopic heating tubes on a chip. The system allows Greentank to precisely control both the location and the duration of the heating, thus eliminating hot spots and avoiding the risk of negative chemical reactions.

    The 2024 GTNF highlighted many more examples of such remarkable innovations, which perhaps isn’t surprising considering the amount of money invested. In a discussion among prominent suppliers of vaping hardware, e-liquids and nicotine pouches, company representatives revealed how much their employers spend on research and development. For example, Smoore International Holdings, a leading e-cigarette manufacturer headquartered in China, directs a whopping 10 percent of its revenue to R&D, according to Executive Director Eve Wang.

    While celebrating innovation, GTNF speakers lamented the hurdles preventing society from reaping the full benefits of new technologies. Misguided regulation featured prominently among the delegates’ gripes. According to Health Diplomats President Delon Human, 34 countries ban tobacco harm reduction products outright, leaving the market to combustible cigarettes. In the rest of the world, manufacturers must contend with everything from no regulations to very strict frameworks. Many words were devoted to the burdensome product authorization process in the U.S., which has left law-abiding American consumers with only a handful of outdated products and a thriving black market. The European Union’s continuing ban of snus, too, elicited repeated groans, as did the rapid spread of bans on nicotine pouches.

    Speakers also despaired at increasing restrictions on vape flavors. Konstantinos Farsalinos, senior  researcher at the School of Public Health at the Universities of Patras and West Attica, said that in the name of protecting youth, regulators aimed to make tobacco harm reduction products unpleasant and difficult to access. “But harm reduction will not work if you substitute cigarettes with a product that the smoker does not enjoy,” he warned.

    Misinformation was also mentioned as a challenge by many GTNF delegates. The World Economic Forum lists it as the biggest threat to humanity after climate change, noted Tikki Pang, former director of research policy and cooperation at the WHO. In the nicotine business, misinformation is widespread not only among consumers, many of whom now mistakenly believe that vapes are more harmful than cigarettes, but also among people who should know better: doctors. What medical schools teach their students about nicotine is abysmal, noted Jasjit Ahluwalia, a professor of behavioral and social sciences and professor of medicine at the Brown University School of Public Health and Alpert School of Medicine. In a recent survey, 80 percent of U.S. physicians erroneously indicated that nicotine causes cancer. Speakers agreed that education would be key to help correct misperceptions, although they acknowledged that any such effort by nicotine-related companies would likely backfire due to the industry’s enduring reputational challenge.

    The Athens GTNF also devoted much attention to a key but often overlooked stakeholder in the debate: the consumer. Nancy Loucas, executive coordinator of the Coalition of Asia Pacific Tobacco Harm Reduction Advocates, emphasized the need to humanize the consumers, who she said are too often treated as mere data points. “We are more than statistics,” said Loucas, after sharing her personal story of transitioning away from smoking with the help of e-cigarettes.

    Acknowledging the people that make up the market, tobacco companies appear to be increasingly receptive to that message, as became clear during a keynote by Imperial Brands’ Paola Pocci, whose very title—chief consumer officer—underscores the central role of nicotine users in the manufacturers’ operations. While consumers are similar in their desire for better health, Imperial Brands’ research also revealed that one size does not fit all; they need a variety of product categories to choose from, depending on local regulations and personal preferences, which may vary even depending on the time of day.

    To facilitate the transition to lower-risk products, devices must also be easy to use. As multiple panelists observed, innovation is useless if consumers don’t want the product. Bells and whistles that excite product designers also complicate operations, which in turn could deter users. The success of disposables is a case in point. Single-use vapes have become popular largely due to their ease of use; there are no buttons to push, batteries to charge or apps to pair. All the user has to do is puff—just like with a conventional cigarette.

    Despite the tremendous technological developments of recent years, GTNF panelists agreed that much work remains. Because no player has yet managed to develop a perfect cigarette substitute, the industry must continue to listen to consumers and address their pain points, said Pocci. The fact that cigarettes are still the most popular nicotine product suggests that the industry has not done enough to reduce the harms of smoking, echoed Marina Murphy, senior director of scientific affairs at the Haypp Group—although she also noted that it had done much better than the pharmaceutical sector, which failed to appreciate that people smoke not only to satisfy their nicotine cravings but also for the sensory aspects.

    Even as regulatory frameworks tighten and misinformation persists, the 2024 GTNF once again underlined the industry’s strong commitment to tobacco harm reduction and continued innovation. While the combination of regulatory and societal challenges will keep nicotine companies on their toes, it will also ensure another trove of compelling discussion topics when the GTNF reconvenes at a yet-to-be-announced location in 2025.

    Taco Tuinstra is Tobacco Reporter’s editorial director.Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors.On his watch, Tobacco Reporter has won several awards for editorial excellence.Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.
  • The Long Road to Zero

    The Long Road to Zero

    Photo: monticellllo

    Efficiency will be the key to decarbonizing the EU transportation sector by 2050.

    By Stefanie Rossel

    To achieve its Green Deal goal and make the European Union climate-neutral by 2050, the European Commission aims to decarbonize transportation in the common market by that same date. It’s a mammoth task because the transportation sector is the EU’s biggest source of greenhouse gas (GHG), currently accounting for more than 1 billion tons of carbon dioxide (CO2) emissions annually, which is equivalent to the total emissions of Germany and the Netherlands combined.

    Not only is transportation responsible for more than a quarter of the EU’s total GHG emissions, but it is also the only major economic sector in Europe where GHGs have increased since the 1990s. Demand for transportation continues to grow steadily in the EU. According to the Alliance for Logistics Innovation through Collaboration in Europe (ALICE), demand for transportation in Europe increased by more than 20 percent between 2000 and 2019, with freight transportation growing 22 percent. Although the Covid-19 pandemic disrupted this trend, leading to a drop in GHG emissions from transportation of 13.5 percent between 2019 and 2020, according to the European Environment Agency, emissions quickly resumed their upward trend, growing by 2.7 percent in 2022. International transportation emissions, such as those from ships and airplanes, are also projected to continue increasing.

    Complicating matters, a recent analysis by Transportation and Environment (T&E), a European advocacy group for clean transportation and energy, shows that transportation has been decarbonizing more than three times slower than the rest of the EU economy since peaking in 2007. Under current climate policies, the group says, its share could reach 44 percent of all GHG emissions in the common market by 2030, up from 29 percent today.

    According to the evaluation, the EU’s current climate regulations will reduce transportation emissions by just 25 percent compared to 1990 levels in 2040 and by 62 percent in 2050 as the new CO2 standards fall short on several measures, according to the organization. For starters, T&E argues, the rules lack a 100 percent zero-emission target. Furthermore, they leave 13 percent of heavy-duty vehicle sales unregulated and define trucks running partially on diesel as “zero-emission.” Cars, vans and trucks with combustion engines bought between now and the mid-2030s, the group argues, will still be driving on European roads while shipping operators have little incentive to increase their operational efficiency. Meanwhile, demand for air travel, spurred by increasing airport capacity, will offset any gains from green fuel this decade.

    More Measures Needed

    T&E therefore calls for additional efforts complementing Green Deal policies to fully decarbonize transportation. Next to halting new airport and motorways capacity expansion and introducing binding electric vehicle sales targets for companies owning large fleets, the organization stresses the importance of direct electrification of road transportation, which, the group says, is two times more efficient than hydrogen power and four times more efficient than using e-fuels. Trucks are responsible for 25 percent of climate emissions from road transportation in Europe while accounting for less than 2 percent of the vehicles on the road, the group says.

    A study T&E commissioned in 2022 concluded that it was possible to transition all new freight trucks to zero emission cost-effectively and in time to meet Europe’s climate targets. Long-haul trucks, the study suggested, would initially have a slower increase in uptake potential but grow quickly to 80 percent by 2026 and to 99.5 percent by 2030. Held against the reality of zero-emission truck sales in the EU, this might be wishful thinking: Of the 11,000 new zero-emission heavy-duty vehicles sold in the EU-27 in 2023, only 0.9 percent were heavy trucks and 5 percent light and medium trucks, according to the International Council on Clean Transportation. In the fourth quarter of 2023, the sales share of zero-emission vehicles (ZEVs) in the heavy truck segment exceeded 1 percent for the first time.

    Reducing CO2 emissions by 50 percent will require a minimum of 465,000 ZEVs, the European Automobile Manufacturers’ Association estimates. These vehicles will need to be supported by 53,000 and 65,000 charging points as well as around 2,900 H2 fueling stations.

    Increasing Logistics Efficiency

    Logistics account for 11 percent to 12 percent of Europe’s total CO2 emissions, according to ALICE vice chair Sergio Barbarino. “The problem is that while most industry sectors since the 1980s or 1990s have managed to decrease their carbon footprint, transportation has been completely unbound,” he says. “Transportation has a huge struggle to decarbonize.”

    While thorough electrification of vehicles or use of sustainable aviation fuels are important factors in the journey toward zero emission, ALICE prefers a more holistic approach, leveraging opportunities for increased logistics efficiency.

    ALICE was set up to develop an industry-led strategy for research, innovation and market deployment of logistics and supply chain management, and to provide an overarching view on logistics and supply chain planning and control.

    The not-for-profit association has more than 180 members and represents all logistics key stakeholders as well as retail companies, information and communication technology providers and research and technology centers. ALICE supports, assists and advises the European Commission in the implementation of the EU Programs for research, Horizon 2020 and Horizon Europe.

    The alliance’s defining rationale is the Physical Internet (PI), an open-method approach that maximizes the use of existing data in infrastructure. The PI involves sharing resources with business partners, for instance, transportation means or storing space, which reduces costs, increases efficiency and contributes directly to reducing traffic and therefore emissions. The PI aims to seamlessly connect organizations by means of an overarching network system to external sources and capabilities so that they can collaborate and share transportation routes as well as logistics nodes, such as distribution centers, inland terminals or airports and ports.

    For the future, ALICE has identified several pillars. The first deals with how freight demand growth is managed, focusing on the question of how much stuff really needs to be moved and whether it would be more efficient to manufacture closer to the point of consumption.

    The second pillar stresses that all modes of transportation should be used as efficiently as possible. “Our problem today is that traditionally shaped supply chains are highly individual and diverse,” Barbarino said. “This lack of standardization makes the supply chain inefficient.” Choosing the most efficient energy mix between diesel-powered trucks with 100 g GHG per ton-kilometer, ZEVs (which still emit around 80 g GHG per ton-kilometer), trains (25 g GHG per ton-kilometer) or ships (10 g GHG per ton-kilometer) can make a huge difference.

    Pillar No. 3 calls for managing fleets and assets as efficiently as possible. In Europe, a truck is on average used with 50 percent of capacity. “As long as you only ship single-type products, you can never fill a truck efficiently. To achieve this, you will need combined products of different companies.”

    If enhanced efficiency is achieved in pillars one through three, Barbarino emphasized, this would lead to a 50 percent to 60 percent reduction in emissions. In addition, ALICE expects a $100 million to $300 million cost relief for the European industry.

    Removing Regulatory Barriers

    Several EU directives currently in preparation are expected to significantly facilitate the realization of more sustainable transportation solutions, according to Barbarino. The revised Weights and Dimension Directive will remove barriers for the uptake of ZEVs and energy-saving technologies and harmonize the rules on maximum weight and dimension of heavy-duty vehicles in cross-border operations. Among other things, it will allow for the extra weight of the batteries for ZEVs, enable a European modular system between member states with trucks heavier than 40 tons and will streamline procedures and requirements for indivisible loads.

    The new Combined Transportation Directive will support the shift from road freight to lower emission transportation modes such as inland waterways, maritime transportation and rail. It will entail the obligation on terminals to publish information about available services and facilities.

    Apart from policies, automation could be a revolution for freight transportation, Barbarino pointed out, and also for sustainability. He reported about an experiment in which companies had tried out “silent delivery,” i.e., delivery before six a.m. and thus outside the usual morning rush hour. This way, the companies could save 30 percent of fuel.

    “To decarbonize transportation, it is important to push the boundaries of technology and regulation,” Barbarino concluded. “Often, the most complex part of a project is not the technology or the innovation but the permitting.”

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

    Testing the Waters

    Photo: Adobe Stock

    Tobacco companies are slowly gaining their footing in the cannabis business.

    By Stefanie Rossel

    Eight years after the first tobacco company invested in a cannabis firm, hardly a month passes without news on the progress of cigarette makers’ ventures into this field. On Sept. 5, Organigram Holdings, BAT’s first major investment in the cannabis sector, announced that it had closed the second of three tranches of a CAD124.56 million ($92.2 million) follow-on equity investment by BAT’s BT DE Investments subsidiary.

    As part of the transaction, Organigram in 2023 created a strategic investment pool, Jupiter, to be funded with CAD83.1 million. According to a press release, Jupiter is targeting investments in emerging cannabis opportunities that enable Organigram to apply industry-leading capabilities to new markets, thus expanding its global footprint.

    Organigram’s first Jupiter investment, in March, was in Open Book Extracts, a Roxboro, North Carolina, USA-based manufacturer of legal cannabinoid ingredient production, formulation and finished goods. The $2 million investment was Organigram’s second into the U.S. market. In June, the company invested €17 million ($18.8 million) in Sanity Group, a leading German cannabis company.

    Meanwhile, on Aug. 1, Aurora Cannabis announced a commercial collaboration with Cogent International manufacturing, a subsidiary of inhalation and oral delivery systems provider Vectura Fertin Pharma, which is associated with Philip Morris International. Through the arrangement, Cogent will launch its Luo CBD lozenge on Aurora’s Canadian medical cannabis patient platform, giving it access to patient feedback that will be used for building data for future analysis.

    There is, however, also less upbeat news from the sector. Altria’s Cronos Group, which has been struggling to find its footing in the Canadian recreational market, ended last year with a $168.7 million loss; in mid-2023, Cronos was even reviewing sales options.

    In June this year, Imperial Brands’ Oxford Cannabinoid Technologies (OCT) delisted from the London Stock Exchange, where it had been one of the first cannabis companies to start trading in 2021. Since its listing, the company’s share price had fallen by 97 percent, with its market capitalization plunging to £1.5 million ($1.96 million). OCT stressed that it had no immediate cash flow concerns but said that, as an unlisted company, it expected to have access to a larger pool of capital.

    Room for Experimenting

    Deepak Anand

    Deepak Anand, principal of Vancouver-based ASDA Consultancy Services, describes the challenges tobacco companies are encountering in the cannabis sector as part of the natural progression for businesses entering a new industry. “For most tobacco companies, these early-stage investments are not particularly significant from a financial standpoint; this is certainly true for Altria,” he says. “Their involvement in cannabis is more about gathering intelligence. By holding stakes in cannabis companies, tobacco firms gain insights into the market, including product trends and production methods, in case they decide to scale up their operations in the future.”

    According to Anand, Organigram is a prime example of this approach. “What’s notable about Organigram is their product development collaboration—a center of excellence focused on next-generation cannabis products,” he says. “As a result, we see many personnel from BAT actively involved at Organigram’s Moncton, New Brunswick facility. They are conducting extensive R&D on cannabinoid products, immersing themselves in different sectors of the cannabis industry, leveraging the federally legal market to experiment and innovate.”

    In August 2024, Organigram announced preliminary results from its clinical pharmacokinetic study on nano-emulsion technology. Branded as FAST (fast-acting soluble technology), this patent-pending innovation aims to offer faster onset, improved bioavailability and a more predictable duration of cannabis effects. Organigram expects to launch FAST in the fall, starting with gummies.

    Anand explains why many tobacco companies are zeroing in on CBD, pharmaceutical or medical cannabis segments. “Tobacco firms have realized they must prioritize consumer safety and navigate complex legal frameworks. For instance, the U.K.’s Proceeds of Crime Act presents a unique challenge. Since nonmedical cannabis remains illegal in the U.K., investing in cannabis companies—even in jurisdictions where it is legal—can be legally complicated.”

    Potential New Market

    Cannabis continues to be legalized for medical and recreational use in more jurisdictions, albeit at a slower pace than in recent years. On April 1, Germany became the third country in the European Union after Malta and Luxemburg to authorize recreational cannabis, although under EU pressure it stopped short of the originally envisioned full legalization. The first phase allows consumers to cultivate cannabis for personal consumption in social clubs; in a second step, Germany will test legalization in selected regions.

    Six months into partial legalization, recreational cannabis is hardly flourishing: The social clubs are just getting going while Bavaria continues to fight cannabis consumption with new local laws. Nevertheless, Anand sees opportunity in Germany. The country’s 2017 legalization of medical cannabis coincided with the introduction of telemedicine. Telemedicine providers specialized in prescriptions for cannabis have mushroomed since. “Cannabis is now regarded as any other medical product,” says Anand. “That shift alone has created very strong market forces. Most people who want cannabis can get a prescription and obtain it.”

    He expects the cannabis landscape to experience another shift once the pilot projects under the second pillar of Germany’s cannabis law become operational. “Once consumers are able to access cannabis products in pharmacies or licensed stores, we’ll see a new phase in the market,” says Anand. In April, lawmakers released draft legislation to implement the second pillar of Germany’s cannabis law.

    Japan is another market worth watching. In 2023, the country passed a bill to amend its Cannabis Control Law for the first time in 75 years. The proposed revisions, expected to take effect as soon as this year, will bring much-needed clarity to CBD regulations and may accelerate legal use in areas like medicine, health, beauty, beverages and edibles. Citing Euromonitor International, The Japan Times noted that sales of CBD products in Japan have grown sixfold over the past four years, reaching ¥24 billion ($154 million) in 2023.

    “I believe this amendment will open up the CBD category, although the restrictions on THC content are strict compared to other markets,” says Anand. “That poses a challenge, but it’s significant that the Japanese government is moving away from its previous stance, where CBD was only allowed if derived from the seed and stalk of the cannabis plant, rather than the flowers, where the most active cannabinoids are found.”

    As for Japan Tobacco, the only major international tobacco company without a stake in the cannabis sector, Anand expects them to enter the space “sooner rather than later.” “The amendment of Japan’s Cannabis Control Law, along with increased activity from JT’s global peers, will likely prompt the company to explore opportunities in this field more aggressively,” he says. However, since JT is partially owned by government, any major business decision would require the approval of Japan’s minister of finance.

    Shifting Sector

    Statista expects the global cannabis market to generate $64.73 billion in 2024 and then grow at a compound annual growth rate of 3.01 percent until it reaches a value of $75.09 billion by 2029. With an anticipated revenue of $42.98 billion in 2024, the United States will continue to be the world’s largest market for cannabis, although the substance remains illegal on the federal level.

    Currently, medical cannabis is legal in 38 states and various U.S. territories while recreational use is permitted in 24 states and Washington, D.C. In April, the Drug Enforcement Administration (DEA) announced that it would reclassify the drug from the strictest Schedule I, which refers to drugs with no accepted medical use and a high potential for abuse, to the less stringent Schedule III.

    By rescheduling cannabis, the drug would be studied and researched to identify concrete medical benefits, opening the door for pharmaceutical companies to get involved with the sale and distribution of medical cannabis in states where it is legal. Reclassifying cannabis would also represent a first step toward narrowing the policy chasm between state and federal cannabis laws.

    On Aug. 27, however, the DEA postponed its cannabis reclassification hearing to Dec. 2, after the U.S. presidential election. The announcement sent cannabis stocks plunging. Asked to take a position on a ballot measure seeking to legalize recreational cannabis in Florida, Republican presidential contender Donald Trump on Sept. 9 said that if he wins in November, his administration would “focus on research to unlock the medical uses of marijuana.”

    The Democratic presidential candidate, Kamala Harris, too appears receptive. “Both sides supporting the cause is certainly good news for the cannabis industry,” says Anand. “But at this point, it is still uncertain what U.S. legalization might look like. What we have seen so far is the DEA comment on rescheduling, which will still involve cannabis to be considered like a pharmaceutical product. But then what happens on a state-by-state basis—will there be a Department of Justice memo forcing the government to leave the states alone because of the states’ rights?”

    The cannabis sector is undergoing a significant transition, according to Anand. “In North America, there was a surge of early interest and substantial investment in the sector, but much of that capital was misallocated or even wasted. Some early-stage founders mismanaged their companies, leading to inefficiencies. The challenge with cannabis legislation is that it often moves more slowly than anticipated, which leads to disappointment when milestones aren’t met, such as the DEA delaying hearings or Germany adopting a phased approach to legalization.”

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

    Smokeless Coup

    Marlboro remains the world’s most valuable tobacco brand, but cigarette alternatives are gaining ground.

    Contributed

    The total value of the world’s top 10 most valuable tobacco brands has decreased by 6 percent, with eight out of 10 brands experiencing a decline in brand value this year, according to the latest ranking by Brand Finance, a leading brand valuation consultancy. The ranking reveals a significant shift in the industry toward smokeless alternatives, driven by changing consumer preferences and increasing regulatory pressures. Despite these changes, traditional combustible tobacco brands remain the most valuable, supported by loyal customer bases and effective pricing strategies.

    IQOS (brand value up 8 percent to $3.5 billion) is the fastest-growing tobacco brand, driven by rising revenue from smoke-free products. Philip Morris International reported smoke-free products reached nearly 40 percent of total net revenues in the fourth quarter of 2023. This was driven by the continued growth of IQOS, which has now surpassed Marlboro in net revenues, solidifying its position as the leading premium nicotine brand less than 10 years after its launch.

    Despite a 6 percent drop in brand value to $32.6 billion, Marlboro retains its position as the world’s most valuable tobacco brand for the 10th consecutive year. It leads the sector by a significant margin, with a brand value more than five times that of L&M, which holds the second spot.

    Altria Group, which owns Marlboro in the United States, and PMI, which owns the brand elsewhere, have both faced declining revenue from combustible products. Altria has struggled with lower shipment volumes and increased promotional investments, including a recent $0.17 per pack price increase on Marlboro and other brands in the U.S. Similarly, PMI has reported a drop in revenue from combustible tobacco. Nevertheless, Marlboro retains its top position due to its loyal customer base and strong promotional strategies.

    L&M (brand value $6.2 billion) has climbed to second in the ranking, despite recording a 2 percent decline in brand value. It has overtaken Pall Mall, which now sits in third following a 9 percent loss in brand value to $5.9 billion. L&M’s brand value has taken a hit as shipment volumes have declined. L&M is the sector’s strongest brand with a Brand Strength Index score of 77 out of 100.

    “While Marlboro continues to lead as the most valuable tobacco brand for the 10th consecutive year, the industry is undergoing significant transformation,” said Richard Haigh, global managing director at Brand Finance.

    “The rise of smokeless alternatives like IQOS highlights shifting consumer preferences and changing market dynamics. Earlier this year, BAT’s announcement of a $31.5 billion impairment on the value of some of its U.S. cigarette brands marked the first significant write-down in a major market.

    “Acknowledging the reality that the market for traditional cigarettes is shrinking and taking action should be seen both as a bold and an important step in addressing an existential problem for the company. With eight out of the top 10 brands experiencing declines in value, tobacco giants must be brave in admitting market shifts and strategically planning their next moves to sustain global dominance and relevance.”

    Chesterfield (brand value $3.1 billion) has maintained its brand value year-on-year and advanced one position to seventh place. The brand has seen a rise in shipment volume, with an 8 percent increase in the fourth quarter of 2022 and a 14 percent increase for the full year, which has contributed to its stable brand value this year.

    The latest rankings highlight the dominance of U.S. tobacco brands, which make up a remarkable 92 percent of the total brand value in the ranking, totaling $61 billion. Only two brands in the ranking are from outside the U.S., the U.K.’s Rothmans (brand value down 8 percent to $2.9 billion) and Indonesia’s Sampoerna (brand value down 12 percent to $2.7 billion).

  • 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.