Category: Print Edition

  • All in the Mind

    All in the Mind

    Photo: andriano_cz

    A human-centric health ecosystem could unleash tobacco harm reduction’s full potential.

    By Stefanie Rossel

    In their efforts to end the era of combustible cigarettes, governments, public health authorities and other stakeholders today have a much larger toolkit at their disposal than they did at the turn of the millennium—at least in theory because only a fraction of available strategies are currently being employed.

    Due to increasing connectivity, the Fourth Industrial Revolution has brought rapid changes to technology, industries and society. It is also transforming the healthcare system—insurance companies seeking to promote a healthy lifestyle by asking their customers to use wearable devices that record physical activity and calorie intake are just one example.

    In order to better deal with today’s complex challenges, healthcare has in recent years become more human-centric, striving to understand human needs and how design—both the process of designing and the outcome of that process—can respond to these needs. “Design” in this context refers not only to products, services and procedures but also to strategies and policies.

    A human-centric health ecosystem (HCHE) involves understanding people and their needs, engaging stakeholders throughout the design process and systematically addressing interactions between the micro-level, meso-level and macro-level of sociotechnical care systems as well as the transition of individual interests to collective interests.

    This new approach to healthcare requires a holistic systemic approach, major organizational change and well-designed, dedicated interventions, such as products, services or procedures to be used by patients, caregivers and medical professionals to facilitate and implement the system.

    The role of the patient in this system changes accordingly: Instead of being a passive recipient of medical directions, he or she becomes a well-informed, responsible patient, intrinsically motivated to actively contribute to the success of his or her treatment. In contrast to the traditional approach, he or she doesn’t simply passively comply with instructions and wait for professionals to solve their problems but makes use of a technology-enabled ecosystem with an embedded choice architecture that encourages the desirable behavior and seeks support from a variety of sources.

    This healthcare model is shifting the focus from treatment toward prevention. Centralized, capital-intensive diagnostics facilities will be aided and perhaps even replaced by individual, on-demand or continuous inexpensive and readily available technologies, such as the mentioned wearables. Sensors in these devices generate data that enable disease prevention with the help of machine learning. Diagnostic and treatment data could be collected in a global database that practitioners can access but that is owned by the patients. Finally, instead of applying homogeneous therapies across groups of patients with similar health issues, treatments are likely to become more personalized.

    Behavioral Triggers

    The novel concept also holds promise for the prevention of noncommunicable diseases (NCDs), for which tobacco use is one of the greatest risk factors. The U.K.’s progressive tobacco harm reduction (THR) strategy, for example, incorporates many HCHE components. It has established a comprehensive infrastructure that includes institutions and healthcare professionals to help smokers to switch to less hazardous products or quit nicotine altogether. In 2017, the U.K. launched a Tobacco Control Plan that stresses the importance of innovation and less harmful alternatives. According to studies, the U.K.’s approach has been able to reduce smoking prevalence from around 20 percent in 2011 to between 13.8 percent and 16 percent in 2021.

    But the HCHE model offers further opportunities. Focusing on the individual and his or her perceptions, intentions and behaviors influencing personal health results, it is a demand-driven structure. Personal health outcomes, in turn, will ultimately influence population health. A fully developed HCHE environment uses a vast range of behavioral triggers that can encourage healthy decisions and eventually impact the incidence and prevalence of NCDs.

    At the 2017 World Economic Forum (WEF) in Davos, Willis Towers Watson published a white paper assessing the progress in preventing NCDs with the help of behavioral economics as part of the Human-Centric Health project. According to the white paper, mortality rates due to NCDs are projected to increase from 38 million to 62 million by 2040. While NCDs presently impact mostly high-income countries, they are growing fastest in low-income and middle-income countries.

    Participants in the Human-Centric Health project were tasked to develop and disseminate knowledge and tools for behavioral changes that would lead to long-term healthier lifestyles. The experts were also asked to identify public-private cooperation opportunities across nontraditional health and healthcare stakeholders, for which the WEF could provide a platform. The project touched upon smoking cessation but did not make use of the THR concept.

    Making Healthy Choices

    Human decision-making depends heavily on heuristics, mental shortcuts that can facilitate problem-solving in situations of limited knowledge and time. Heuristic processes are based on experience, thus enabling people to quickly make the thousands of decisions they must make every day. Not all precepts of behavioral economics, though, lead to choices that support good health. The WEF white paper reviews some of the more powerful principles in behavioral economics that may contribute to healthier behavior within the HCHE if being applied appropriately.

    “Present bias,” for example, is a strong motivator: Humans tend to assign greater value to payoffs that are closer to the present time than those that occur further in the future—if people want something, they want it immediately. A strategy for health improvement should thus present choices that combine a current pleasure with a behavior that will lead to better health in the future and emphasize the near-term advantages of healthy behavior rather than the benefits that might be achieved later. A case study described by the white paper suggested glycemic control in diabetes patients reliant on food banks could be improved by providing clients with diabetes-appropriate food, blood sugar monitoring, primary care referral and self-management support.

    Another behavioral trigger is loss aversion: People sense the pain of loss more deeply than the pleasure of gain. Recently, this insight has been used in initiatives to encourage smoking cessation: Smokers received a payment at the outset of the program, which they would be forced to pay back if they failed to keep their commitment to quit smoking.

    Health choices can also be influenced by framing—by expressing the consequences of disease in survival rates rather than mortality rates, for example—even if the results are equal. The HCHE system may emphasize benefits that can be achieved through a specific action or the ease of healthy behavior compared with other activities people voluntarily decide on.

    The HCHE system also takes advantage of the knowledge that humans respond better to narratives than logic or statistics. By telling compelling stories that people can relate to, health practitioners can drive healthier behaviors. Of course, facts must be given accurately, but data alone don’t necessarily drive change.

    Humans are also subject to social norms—a person married to or friendly with smokers is more likely to smoke than a person without such relationships, according to the white paper. Findings like this, however, can also be used to achieve a positive effect—for example, by incorporating social media and influencers into information campaigns or asking people to make public commitments to future change.

    Choice architecture and defaults can nudge people toward healthier decisions. In a realm of choices, humans tend to stay with a default as it takes less energy than making an active decision and allows them to focus on more important concerns. A prominent display of healthy food in shops, for example, can thus help people make healthier choices.

    Humans’ tendency toward “irrational optimism” and “depletion” are additional behavioral triggers that can be taken advantage of to stimulate desirable behaviors. Including a lottery element in health incentives will generate attention at low cost. As people only have a limited span of attention, health improvement efforts should focus on measures with the most potential benefit while requiring the least cognitive effort of the targeted population.

    Stakeholders

    A successful HCHE, the white paper argues, resembles a consumer purchase model in which informed buyers express demands that support their well-being and stakeholders succeed by recognizing and meeting those demands. The paper identifies three actors that can greatly impact NCDs—insurers, retailers and technology.

    Insurers can contribute to the HCHE by providing health assistance, for instance, through health coaching, paying healthcare claims and providing incentives, such as rewards to encourage smoking cessation. They can also provide information about achieving and maintaining health, including health risk assessments, biometric screening and education.

    Next to increasing their inventories of healthy items, retailers, who act as a principal source of consumer products and therefore exercise particularly powerful influence over dietary quality, can provide access to selected health services, such as vaccinations on-site, and work with policymakers to develop pricing policies that encourage consumption of healthier foods and beverages. In the case of tobacco, the white paper recommends a reduced inventory, citing the example of CVS Caremark, a U.S. retailer that in 2014 stopped selling cigarettes.

    While CVS Caremark’s sales declined during the following year, its decision reduced total cigarette sales by 1 percent across 13 U.S. states while nicotine patch purchases increased by 4 percent immediately after tobacco sales ended.

    Health-related technology, the third component mentioned in the report, refers to the application of organized knowledge and skills in the form of devices, medicines, vaccines, procedures and systems developed to solve or prevent a health problem and improve the quality of lives.

    For patients suffering from chronic obstructive pulmonary disease or asthma, for instance, tracking usage of inhalers that provide vital medication can be challenging. An estimated 70 percent to 90 percent of patients use their inhalers improperly, thus delivering insufficient levels of medication to their lungs. In late 2018, the U.S. Food and Drug Administration approved the first digital inhaler with built-in sensors that detect when the inhaler is used and measure breathing. The sensors connect to a smartphone app, recording data that can be shared with doctors who can evaluate a patient’s inhaler usage. There are many ways that these technologies could be adapted for e-cigarettes, heat-not-burn devices and related products.

    The technology sector is also where reduced-risk tobacco products (RRPs) come into play as the gap between recreational and therapeutic inhalers is narrowing. Among recently published patents for nicotine vapor devices and heated-tobacco products, most cover therapeutic innovations, including vaping products that employ sensors (see “In the Pipeline,” page 20).

    The combination of new technologies and behavioral economics allow for healthy choices to be the easier choices. Laws that regulate products proportionate to their risk compliment and support this.

    Properly integrated into the HCHE, RRPs could drive tremendous progress in public health. The private sector has already realized the potential of RRPs as a smoking cessation tool. It is time for regulators to follow their example.

     

    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.
  • From Coercion to Empowerment

    From Coercion to Empowerment

    David Sweanor

    Tobacco harm reduction advocate David Sweanor describes the shift required to reduce the health toll of smoking.

    By Derek Yach

    David Sweanor has played a global role in steering the World Health Organization, governments and nongovernmental organizations to use the most powerful interventions they have to end smoking. His focus on policy measures to reduce the carnage from cigarette smoking, including a leading role on excise taxes, marketing restrictions and smoke-free policies, has long included tobacco harm reduction (THR). And in the process, Sweanor has highlighted the need to move from blunt approaches to all tobacco products to a system that regulates products proportionate to their risk. In a recent conversation, Sweanor discussed the origins of innovation in THR.

    “Hobbyists” and consumers seeking safer products have long tried to develop products that deliver nicotine without other toxic ingredients common in combustible cigarettes (see “Major Milestones”). Our conversation focused on transformation underway in leading tobacco companies.

    Sweanor believes that leading tobacco companies have a clear vision of the endgame for their transformation—addressing health, wellness and consumer needs profitably. This was largely forced upon them by advancements in technology, upstart competitors and consumer demand. In contrast, leaders in tobacco control, he believes, are trapped in a vision set in the 1970s that relies on coercion rather than empathy and empowerment and ignores the role of disruptive technologies.

    Sweanor laid out progress reported in the latest round of quarterly earnings by leading tobacco companies. Analysts highlighted the role of reduced-risk products as increasingly driving corporate profitability. Philip Morris International now gets 30 percent of total revenue from reduced-risk products and BAT gets 12 percent, with Altria and Imperial advancing through single digits. And Sweanor stressed the fundamental role that competition and investments in innovative research have played in driving this progress.

    The funding, volume, quality and diversity of industry research have accelerated over the past decade, and the nicotine business has attracted new and innovative players. Industry research is more interdisciplinary than most public-funded research and includes cutting-edge insights from toxicology, systems biology, epidemiology and pharmacology enhanced by clinical insights from respiratory medicine, oncology and cardiovascular disease.

    Sweanor is concerned that at a time when we need more engagement between industry and public health researchers, more barriers are being created that discourage debate, counterproductively protect the cigarette trade and prolong the epidemic of diseases and deaths caused by cigarette smoking. The Society for Research on Nicotine and Tobacco’s ban on tobacco industry participation in its conferences is only the latest example of industry exclusion.

    To demonstrate that they have truly embraced transformation, says Sweanor, tobacco companies and other players in the consumer nicotine market should:

    • push ahead with investments and the launch of healthier, safer products designed to end combustible use;
    • be more proactive in challenging misinformation and the laws that protect the cigarette business from competition;
    • share patents addressing core aspects of health and safety with smaller companies and state monopolies in low-income and middle-income countries—this could be done in many ways within World Trade Organization rules; and
    • place key data of public health policy relevance in the public domain. This includes, for example, conversion rates from combustibles to reduced-risk products and consumer research on the viability of reduced-risk alternatives to cigarettes. Sweanor stressed that all companies need to do this. Much could be learned from a related effort undertaken by food companies in the United States led by the Healthy Weight Foundation.

    Above all, he believes that this is the time for companies to work with governments to more aggressively end the sale of combustibles. “They should not await permission from unyielding anti-tobacco groups before fully engaging in efforts to protect the health of their consumers,” said Sweanor.

    Sweanor discussed the emergence of industry initiatives that build on their investments to end combustibles (see “In the Pipeline”). From Covid-19 vaccines derived from tobacco plants (see “The Virtuous Weed”) to deeper insights into medication aerosolization and what this might mean for new classes of pharmaceuticals delivered through 21st century delivery systems, Sweanor stated that it is clear that companies are not stopping their transformation journey. “There are no examples from across other sectors that when such profoundly disruptive change happens, it ever returns to the status quo,” he said. “The arrow of innovation points toward healthier and more environmentally sustainable products and services.”

    In time, the recent analyst views that some tobacco companies will become life sciences companies tackling major health issues may well come true!

    Derek Yach has been a global health expert and anti-smoking advocate for more than 30 years. Throughout his career, he has supported and led smoking cessation research and policy development and has been a strong proponent of harm reduction policies,

    Previously, Yach was the director of the Foundation for a Smoke-Free World, and a World Health Organization cabinet director and executive director for noncommunicable diseases and mental health. He was deeply involved with the development of the Framework Convention on Tobacco Control.
  • The Promise of Innovation

    The Promise of Innovation

    Photo: Lezinav

    Nicotine companies are helping tobacco users move from deadly combustible cigarettes to substantially reduced-risk products.

    By Derek Yach 

    Over the past few decades, we have seen unprecedented progress across a wide range of technologies—digital and info tech, biotech, AgroSciences, material sciences and more. These are transforming many sectors considered “legacy,” “dirty” and simply out of fashion. The tobacco sector epitomizes many of the changes underway. The April 2022 edition of Tobacco Reporter highlights the diversity and speed of the change. From finding new uses for the tobacco plant, to ending exposure to toxic substances linked to combustion in cigarettes, to finding ways to design the emerging products to be biodegradable or recyclable, to limiting youth access—innovation pervades this classic, dirty legacy sector.

    Evolution of THR Technologies

    In an insightful article, Mike Huml outlines the role of hobbyists and smokers in seeking solutions to cutting toxic exposures (see “Major Milestones”). Driven by their passion, an entire new set of products with myriad components, a new language and, later, vape stores have arisen. Their role has been crucial in showing what is possible, what is desired and what can be achieved when advances in electronics, aerosolization, batteries and coils are combined into new consumer products.

    Thousands of miles away from where the first large groups of users of these new products live in Shenzhen, China, new companies have taken up the opportunity and drawn on the Silicon Valley-like spirit that pervades the city to develop core components and completed products now at the heart of the e-cigarette and heated-tobacco revolutions. Until recently, companies like Shenzhen Smoore Technology, ALD and other vapor hardware suppliers were unknown in Europe and the United States; today, they are household names in the nicotine business. Their investments in research will increasingly become visible as future products emerge.

    As with any successful innovation, the larger established tobacco companies have invested billions of dollars to create tobacco harm reduction (THR) products that appeal to smokers and pass the muster of regulators, such as the  U.S. Food and Drug Administration. Their continued investment in research, patent filings and product launches mean that we now have over 100 million users of reduced-risk products—but that is less than 10 percent of the real target! More progress requires that state monopolies, who together account for one in two cigarettes sold globally, join the innovators.

    Next Frontiers for Farmers and the Environment?

    Farmers. Advances in our understanding of plant genomics initially helped to produce more environmentally resilient and productive tobacco plants and the ability to adjust nicotine levels. This has now given way to using the tobacco plant to develop a Covid-19 vaccine, a range of pharmaceuticals, wound-healing products and a range of domestic products for clothing, skin care and more! In his article “The Virtuous Weed,” Taco Tuinstra gives a hint of what is to come. These advances, however, will provide only a few tobacco farmers with alternative livelihoods. The speed of switching away from combustibles and high levels of quitting combined with the growth of demand for synthetic nicotine come together to make it more urgent to support the most vulnerable tobacco farmers’ transition to alternative livelihoods.

    THR and the Environment. The growing concern about the impact of plastic pollution on the environment has led to the start of negotiations of a new United Nations resolution on greening plastics. The initiative will take two years to three years, will be legally binding and will push the pace of change in addressing alternatives to plastics like never before. Electronic cigarettes and heated-tobacco products will not escape scrutiny. They contain a wide range of nonbiodegradable components, including plastics, batteries and heavy metals. The rapid increase in disposable vapes and pods has not been accompanied by serious efforts to tackle this problem—until now!

    ALD Group, a Shenzhen-based company, has been actively reviewing various studies and found from the Truth Initiative that 51 percent of e-cigarette users throw their empty pods or disposable devices in the regular trash, 43 percent do the same with their empty batteries, about 17 percent put both in the regular recycling bin, and about the same percentage throw them away or send them for recycling.

    ALD Group’s response is to use biodegradable materials whenever possible and to develop recycling solutions within an integrated environmental management approach based on international standards, such as ISO 14001. The company appears to be adapting best practices from Nespresso on pod design, recycling and disposal as well as from leading beverage companies that have shifted almost exclusively to biodegradable products in the sale of their beverages.

    ALD’s investments in research and development in biodegradability are beginning to pay off. This comes at a time when consumer and regulatory concerns about the environmental impact of risk-reducing product waste have increased.

    Continued Progress on the Transformation Road Demands More Private-Public Partnerships

     In a recent editorial, Nature highlighted the value of industry- academic collaboration in the context of Covid-19 vaccines. This edition shows how massive investments by nicotine companies—large and small—in research, technology development and consumer  insights are delivering alternatives to deadly combustibles and displacing them faster than ever before.

    THR advocate David Sweanor mentions several areas that require additional attention if private-public collaboration is to be achieved: mechanisms for researchers to access industry data and how to apportion intellectual property (see “From Coercion to Empowerment”) None of these are impossible. All require individual companies to find ways to work together on issues of public health and environmental benefit.

    The Nature editorial calls for barriers to collaboration to be dismantled as much as possible. That lesson has yet to penetrate the walls of leading groups like the World Health Organization, academic and research bodies and scientific journals in relation to THR. Bans, prohibitions and ad hominem attacks of tobacco industry and related scientists chills dialogue, slows innovation and seriously hampers progress toward ending smoking and the death and disease it causes.

    This edition shows that despite these barriers, substantial, unstoppable progress is underway—that progress could accelerate if engagement replaced these barriers. The beneficiaries would be millions of smokers seeking better solutions and longer, healthier lives.

    Derek Yach has been a global health expert and anti-smoking advocate for more than 30 years. Throughout his career, he has supported and led smoking cessation research and policy development and has been a strong proponent of harm reduction policies,

    Previously, Yach was the director of the Foundation for a Smoke-Free World, and a World Health Organization cabinet director and executive director for noncommunicable diseases and mental health. He was deeply involved with the development of the Framework Convention on Tobacco Control.
  • Watch Your Mouth

    Watch Your Mouth

    Image: martialred

    What the industry can’t (and could) say about harm reduction

    By Cheryl K. Olson

    Surveys show that the public perceives nicotine as the devil behind most of the cancer and heart disease caused by smoking. E-cigarettes and nicotine-replacement therapies alike are misperceived as relatively risky by many smokers. Even physicians are likely to believe nicotine is dangerous. The now entrenched view of nicotine as public health villain is the predictable result of years of emotion-based anti-vaping campaigns from government and advocacy groups and a steady drip of media reports on the latest perceived danger or deception from the nicotine industry. This includes coverage of the e-cigarette or vaping use-associated lung injury crisis that wrongly linked deaths from THC vaping to nicotine vapes.

    The hundreds of thousands of deaths from smoking take place out of sight; they’re old news, not worth mentioning. When I was a public health graduate student in the 1990s, there was much conversation about how to make those deaths newsworthy. Advocacy groups looked for vivid imagery and metaphors to make their case: Hey, deaths from smoking are like a jumbo jet crashing in flames every day! Those deaths are still happening; the campaigns are not.

    The Real Cost media campaign, run by the U.S. Food and Drug Administration since 2014, now targets vaping instead of smoking. Creativity in advertising is now focused on fanciful brain worms and similarly unsupported high-fear imagery.

    Over drinks at the 2021 London GTNF meeting, I heard conversations bemoaning the passing of those government antismoking efforts and wondering how the FDA or Centers for Disease Control (CDC) could be persuaded to target nicotine misperceptions. In the “before times” (pre-FDA regulation and pre-Tobacco Control Act of 2009), as an academic who consulted to the industry, I headed a multi-year stop-smoking campaign funded by Philip Morris USA. QuitAssist was created to expand upon and encourage the use of existing smoking cessation materials from government and nonprofit organizations. This naturally made me wonder whether, even in this changed regulatory environment, the industry could find a way to pick up the dropped baton and lead a new communications effort.

    What stops nicotine product companies from pushing back against this tide of misinformation and misperceptions? You’d think there would be a strong incentive for companies to educate the public. After all, if everyone believes that the health danger in cigarettes comes from the nicotine instead of the byproducts of combustion, why would smokers who can’t or won’t quit even consider switching to vastly less dangerous alternative nicotine products?

    Since the GTNF meeting, I’ve talked with people from legacy and upstart nicotine product companies working with these issues from various corporate communications, regulatory and legal angles to try to understand the “carrots and sticks” that shape how the industry responds.

    Companies reflexively blame the FDA regulations for their inaction. This has merit. To prevent new outbreaks of old Big Tobacco deceptive practices, the wording of the law can block companies from speaking obvious truths. But there are also surprising hidden disincentives to educate the public about nicotine. Will it upset shareholders? Will it upset regulators? Is it worth the money? Will it create litigation risk?

    What makes nicotine product makers watch their mouths when it comes to public education? It’s complicated. If we envision the forces blocking industry communication as an iceberg, let’s start with the visible tip: what the law says that you can’t say.

    The Rules

    The most commonly cited roadblock to correcting misperceptions about nicotine harm reduction is Section 911 of the Family Smoking Prevention and Tobacco Control Act of 2009.

    Without a specific modified-risk claim pre-authorized by the FDA, a product’s label or advertising can’t state or imply it carries lower risk of disease or harm than another commercially marketed tobacco product. That’s pretty straightforward. But what’s next is not: you can’t even say the product “or its smoke contains a reduced level of a substance or presents a reduced exposure of a substance” or that the product “does not contain or is free of a substance” even when those statements are empirically true.

    Based on this language, a company could not repeat facts from published research. It could not share the grudging admission from the CDC’s website that “E-cigarette aerosol generally contains fewer toxic chemicals than the deadly mix of 7,000 chemicals in smoke from regular cigarettes.”

    This seemingly outrageous restriction on factual speech should be understood in historical context. The Act initially only covered cigarettes, cigarette tobacco, roll-your-own tobacco and traditional smokeless tobacco. With the language about advertising and communications, its authors were thinking about “light” cigarettes and similarly implied health claims that were misleading or taken out of context—not novel nicotine products that might be truly and even massively less risky. The FDA was empowered to issue regulations deeming other tobacco products to be covered by the Act, adding e-cigarettes in 2016.

    The Risk/Benefit Calculation

    Now, let’s look at the larger underwater part of that iceberg: the less visible factors that block companies from taking action.

    Shareholders. Legacy tobacco companies like to focus publicly on their novel nicotine products and the transition away from combustibles. But there’s no denying that traditional tobacco products, especially cigarettes, are where the money is. Shareholders expect companies to act conservatively when it comes to their primary source of income. And some of the profits from combustibles support the massive R&D costs of transitioning to less dangerous products. However desirable the transition to the future world of reduced consumer harm and reduced litigation risk … as one person told me, it’s a good ESG (environmental, social and governance) story, but the incentives aren’t there.

    Litigation risk. Despite the 1998 Master Settlement Agreement and FDA regulation, multinational tobacco companies remain in near-constant litigation on the cigarette front. Today’s tobacco industry is stuck with the legacy of decades of bad behavior; every action is scrutinized for intent to addict and harm fresh generations of users. So, an attempt to partner with a physician for public education conjures up images of 1930s Lucky Strike ads with smiling white-coated pitchmen. And as one insider explained, it becomes a cost to the business if it gets interpreted in court as evidence of further bad acting.

    Cost. Section 911 of the Tobacco Control Act does allow the option of seeking authorization through the modified-risk tobacco product (MRTP) pathway to make a modified-risk claim. In 2019, Swedish Match was first to earn this status, allowing claims of lower risk of mouth cancer and five other ills if used instead of cigarettes to appear on eight General Snus products.

    Unlike Europe, which takes a category approach to regulation, the U.S. regulates products one by one, even for very similar products with low youth use, such as vaping liquids. One person estimated that the cost of research to support an MRTP claim would be equivalent to what their company spent to support that product’s PMTA for marketing authorization: millions of dollars for claims that may not even be relevant or understandable to the average smoker.

    Regulator pushback. Especially in the current regulatory environment of low trust, confusing guidance, pending legal cases and thousands of products in regulatory limbo, few companies want to risk further antagonizing the FDA. When I raised hypotheticals of education efforts that could be undertaken by nicotine product makers, I heard stories of wonderful might-have-been campaigns nixed by lawyers. A collaboration between the industry and respected researchers and their university, based on extensive focus group testing with smokers? Add a catchy slogan and creative messaging plus incentives and prizes to encourage smokers to try reduced-risk products and to stay off cigarettes? The FDA is lukewarm on the plan. Big Tobacco dollars that could have supported a huge smoking cessation effort go unspent.

    The Right Audience and the Best Messenger

    A final concern among industry insiders is a frank understanding of their own lack of credibility. Does it make sense to spend money on messages that won’t be believed? They point to research showing that government agencies and health professionals are the most trusted sources of information.

    It’s noteworthy that recent research suggests that government agencies are less trusted by groups that disproportionately suffer from smoking, such as racial/ethnic minorities and lower income persons. And the FDA’s actions speak loudly: When smokers see their favorite vaping products removed from websites or store shelves while very low-nicotine cigarettes are authorized, what message does that send to consumers?

    The industry’s best hope for correcting nicotine misperceptions likely comes from indirect public education, through health professionals and consumer advocacy organizations. But industry folks might also consider how to educate regulators, who may not know many or even any smokers, about the realities of their lives and needs.

    Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Associates. She spent 15 years on the faculty of Harvard Medical School.
  • Kicking up Dust

    Kicking up Dust

    Photo: Roman

    Where should smokers turn for sound advice on quitting? That question is surprisingly difficult to answer.

    By George Gay

    Often, some of the most interesting aspects of conferences are thrown up by questions posed from the floor. And this was the case at the September 2021 GTNF in London where, from memory, a participant asked how a smoker could know who to approach for sound advice on using vaping devices to help her quit tobacco smoking. At first hearing, the answer seemed fairly obvious, but the more I thought about it, the more I realized how difficult it was to respond usefully to this important and insightful question. But to come to this realization, it was necessary for me to walk a little way in somebody else’s shoes: to examine the question not from the point of view of a person steeped in the information garnered from many vaping conferences but from the point of view of the smoker in the street struggling through a blizzard of contradictory messages.  

    So how can our smoker know who to approach for sound advice on using vaping devices to help her quit tobacco smoking?

    It would be good to be able to answer this question by pointing to official government agencies in whatever country the smoker lives, but this is problematic. If I look around the world, it seems to me that the number of people who live in countries whose governments I would call reasonably trustworthy is small, and I suspect that many smokers would agree with me. And this is the vitally important point here. Remember, most smokers will have no inside information about the benefits or otherwise of smoking and vaping, so they will be able to base their judgements about these habits only on whether, in general, they trust the source of the information being provided.

    Since I live in the U.K. and know a little about the workings of this country, let me expand on what I mean. Some might say with justification that the U.K. government has consistently put out messages that, in effect, encourage smokers wanting but previously unable to quit smoking to try switching to vaping devices. But our smoker can be expected to accept this advice only if, as a general thing, she trusts the government.

    Is this likely? I would suggest not. There are many stories doing the rounds at the moment that point to the untrustworthiness of the U.K. government in both its national and international dealings, but let me mention just one that I feel is relevant. The high court recently ruled that the government’s operation of a VIP lane for suppliers of personal protective equipment (PPE) during the Covid-19 pandemic was illegal. No prizes for guessing who were some of the big beneficiaries of this scheme, which didn’t always provide satisfactory items of PPE. Given this, it would not be unreasonable, I believe, for our smoker to question whether vaping devices were not being recommended by the government for reasons other than those to do with her welfare and that of other smokers.

    The question under consideration concerns “sound” advice, and so I should declare an interest. What is written above about lack of trust stands, to my way of thinking, whatever is your definition of “sound” advice about smoking and vaping. Some of what appears below, however, is about what I would call “sound” advice: advice that encourages smokers to try switching to vaping if they want to quit smoking and if they are unable to quit using other methods.

    There are, of course, some people who, according to this definition, could provide a smoker with sound advice and who would do so without fear or favor. There were a number of such people who sat on various GTNF21 panels or who participated in the conference in other ways, people of integrity who are experts in their fields. This is all very well, of course, but the genius of the question posed was that it got behind all of this to ask how the smoker in the street can get to know of these people and how our smoker can know for certain that these people are giving out sound messages. After all, everybody who is reading this magazine will be aware of the huge number of counter messages out there, sometimes published in respected journals under the names of people with qualifications that stretch around the block. Some of the people who I would regard as being experts acting with integrity have been maligned and had their work misrepresented in “good” journals. And messages from governments are often counter; those from the U.S. Food and Drug Administration are confusing while those from the World Health Organization appear to be both confusing and counter, which is quite an achievement.

    Learning from the Private Sector

    None of this is reassuring. But, as somebody once said, when you ask questions, you kick up dust, and it’s no good then complaining that you cannot see. So, let our smoker press on to discover what she might learn from the private sector.

    Well, let’s see. At one end of the scale are those companies that really don’t give a damn about the smoker or vaper and that are in the vaping business for a fast buck. Then there are companies intent on making a profit out of tobacco or nicotine, but that would be happier doing good than doing harm while making that profit. Of course, they are always going to be trying to sell the brands they offer, which they probably believe are the best, but about which others may have different opinions, and they are often going to be seen trying to put a spoke into the wheel of their competitors, no matter how potentially beneficial their competitors’ brands might be.

    And then there are companies that probably start out from the position that they want to do good but realize that to do so they have to stay in business, which means turning at least a modest profit. I think it is probably fairly obvious that if you’re looking for sound advice, it would be best to stay away from the first group, assuming that, as in the case of the other groups, you can identify its members. Members of the second group might offer a lot of sound scientific and technical information but, in listening to them, you would need to know how to split that information off from the commercial messages. Those of the third group, meanwhile, especially those among it that comprise vape stores, might give you the best objective advice, though it has to be kept in mind that objective isn’t always right or sound.

    Tobacco Control

    What about turning to tobacco control? As is suggested above, there are those in the tobacco control community who want to do good and who are embracing harm reduction; there are those who want to do good but cannot bring themselves to recommend products whose efficacy relies on their mimicking combustible cigarettes; and there are those who want to do good but haven’t got much of a clue, who believe that nicotine ingested during vaping causes cancer. And, unfortunately, there are those in tobacco control who seem to be interested only in keeping their jobs open until they retire, which means attempting to put a spanner into the works of tobacco harm reduction. To those of us imbued with the definition of “sound” advice given above, it doesn’t take too long to work out who it would be best for the smoker to listen to, but, again, you come back to the question: How can the smoker know?

    Other Considerations

    Everything that is written above looks at this debate from the point of view of the smoker who is thinking of quitting tobacco smoking so as to become healthier. But there might be other reasons. The smoker in question might also want to save money and/or the environment. At this point, things get easier and more difficult. For instance, the smoker wanting to save money doesn’t have to rely on outside advice; she can do the math for herself. The cost of cigarettes and vaping devices and consumables is information available in the public domain, so costing the two habits roughly is fairly easy on the basis of puffs, as advertised in the case of vaping devices. There is a difficulty in the form of a big unknown, however. What will be the future tax strategy of our smoker’s government as it is applied to vaping devices? And probably nobody could provide sound advice in this case, especially as the hue of the government might change if our smoker is lucky enough to live in a functioning democracy.

    Looking at environmental issues is even more difficult up to a point. How you compare the discarding of toxin-containing acetate filters with that of batteries and plastics would test most people, but it seems reasonable to assume that, since vaping devices are relatively new and upcoming while combustible cigarettes are old and on their way out, more development is going to be applied to the former than to the latter. Well, at least that is the case in those jurisdictions that encourage rather than disallow development.

    It is necessary, I think, also to say something about choice, which is seen as the great emancipator of consumers, at least by those who believe in the notion that the free market is the answer to everything. Smokers, such people may argue, are fortunate because they are able to choose between the wide-ranging information available across all media. But of course, this is not choice, it is simply confusion for most nonspecialists.

    So all is lost? Perhaps, though, then again, maybe there is something that can guide the smoker through: questions. Peter Abelard said that the only means we have of judging between apparently conflicting authorities is reason. “Through doubting, we come to questioning, and through questions, we perceive the truth,” he said.

    In other words, the answer to the question lies in asking—lots of—questions. Yeah, I’d go along with that.

    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.
  • Unintended Consequences

    Unintended Consequences

    Photo: Manatee County Sheriff’s Office

    The number of crimes committed at specialty retail outlets has grown dramatically over the past few years.

    By Timothy S. Donahue

    Every year, hundreds if not thousands of cannabis dispensaries, vape shops and tobacco outlets are robbed or burglarized in the U.S. On July 10, in Lincoln, Nebraska, between 2 a.m. and 5 a.m., the police department responded to alarms at two vape shops where officers found shattered storefront glass at both locations. The thieves targeted CBD (cannabidiol) and Delta-8 THC (tetrahydrocannabinol) products. The pair of break-ins happened two days after another similar burglary, totaling three in as many days. The businesses lost tens of thousands of dollars in merchandise.

    Timothy Goodman, a manager at the Lincoln Vapor location, said that break-in was just the latest in a string of six incidents in approximately the last two years, according to news reports. Goodman, who has worked at Lincoln Vapor for nearly four years, said it’s his understanding that every break-in can be linked back to the same group.

    The burglars stole $2,000–$3,000 worth of merchandise in May 2021 and have lifted around $16,000 in products from the business through the last year and a half, according to Goodman. Most products were hardware and cannabis products, such as CBD and Delta-8 THC. “It’s frustrating beyond belief,” he said. “I wake up most nights in the middle of the night and check the cameras to make sure nobody got in.”

    The rise in vape shop crimes may be an unintended consequence of recent regulatory actions, such as tax increases, flavor bans and raising the age to purchase vaping and tobacco products to 21, according to many industry experts. Richard Marianos, a senior law enforcement consultant who has served more than 27 years at the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and who is now a consultant and adjunct lecturer at Georgetown University, says crime is often an unintended and overlooked consequence of regulatory constraints on the marketplace that encourage the growth of black markets.

    Marianos said that taxes and flavor bans bring prohibition, and prohibition brings crime. “These regulatory actions mean a dramatic increase in street sales to kids, and that is what we have seen all over the United States,” said Marianos. “If you have any form of tobacco harm reduction in your state, just throw that completely out the window [if you are going to implement flavor bans and raise taxes exorbitantly] because it forces young adults and people who can’t afford these products into a growing black market. In terms of law enforcement, the issue is that there has been 150 percent increase in smash-and-grabs because of the difficulty of purchasing these products.”

    Sam Salaymeh, president and CEO of AMV Holdings, parent to a chain of 113 Kure CBD & Vape shops across the U.S., said that his stores have seen a major increase in crime over the past two years. During Covid-19 lockdowns in 2020 through early 2021, AMV stores had over 20 burglaries combined. “There is a myriad of stories that come with these break-ins, but the main theme is criminals are trying to get to high-value items that are small in size—and that would be the CBD/cannabis products … etc.,” explains Salaymeh. “This is happening more and more across the country.”

    During a one-hour period on Dec. 20, five separate retail locations—three vape shops and two tobacco/vape outlets—suffered a string of robberies by three men wearing masks that crossed the Southeast region of Los Angeles County. A shop owner said the criminals pretended to be customers when one pulled a gun and demanded money while two others snatched merchandise from the store’s shelves, according to news reports.

    “We now have organized crews that go out and hit multiple stores like convenience stores, gas stations, vape shops in a single night or a weekend … they don’t go for cash registers; they want the tobacco products because they can sell it on the street cheaper than what it’s being sold for with these high taxes and these prohibitions,” says Marianos. “They’re making a fortune in the black market the same way the dope dealers are selling cocaine and heroin because the taxes on vaping and tobacco products are going through the roof.”

    Phoito: Lexington Police Department

    Crimes of Convenience

    In 2020, there were 102,677 robbery incidents and 102,677 offenses reported in the U.S. by 9,991 law enforcement agencies that submitted National Incident-Based Reporting System (NIBRS) data. Nearly 25 percent of those incidents were committed at convenience stores (13,721), gas stations (7,006) and specialty stores, where vape shops are lumped into (5,372) combined. If criminals are looking for quick cash, then robbing convenience stores or small specialty retail shops is one of the best ways to do it, according to the FBI.

    John Cavanaugh, owner of California-based Vaping Industries, says that thieves have broken into his stores numerous times. Typically, thieves try to take what’s immediately available. “They broke in after hours … broke the glass, popped open the register, grabbed the cash, broke into my office, got the petty cash and then rolled out,” he said. “I think we are starting to see more robberies than burglaries lately, and I think that it’s an easier target to hit a vape shop or a smoke shop with guns because the layout is small, there’s only typically one or two employees and—especially with cannabis dispensaries—there’s a lot of cash on hand.”

    The terms “burglary” and “robbery” are not interchangeable. They have meaningful differences. Burglary involves a person illegally entering a building to commit a crime while inside. Robbery is typically when someone takes something of value directly from another person using force or fear. There is a far greater chance that someone committing a robbery will do so armed compared to burglaries, which typically occur after hours. Convenience stores accounted for nearly 13 percent of all violent crimes suffered in 2020, and gas stations accounted for about 12 percent.

    Across North America, crimes involving vapor, tobacco or cannabis shops are getting more violent. On Dec. 3, in Calgary, Canada, officials said a “number of people” entered Jerry’s Smoke and Vape just after 6:30 p.m. According to a police report, one of the suspects pointed a gun at the clerk, and the bandits made off with cash and merchandise.

    On Sept. 12, in British Columbia, a suspect entered a vape shop alone armed with a shotgun. After threatening an employee, the suspect took an undisclosed amount of cash and product before escaping on foot. Over the weekend of May 29 to June 1, 2020, thieves burglarized several cannabis dispensaries, distribution centers and cultivation in Los Angeles, Oakland, San Francisco and other cities, stealing legal commercial cannabis products and cash. On Sept. 11, 2021, in Calgary, Canada, three masked men entered a dispensary armed, held off staff and got away with a quantity of cannabis products.

    Cavanaugh said robberies are more common at cannabis dispensaries than vape shops because cannabis dispensaries have a lot of cash on hand, especially in the U.S. where very few banks will work with marijuana businesses. There are also numerous illegal cannabis dispensaries, which perpetrators know are less likely to notify law enforcement.

    “Before all of this started happening over the last few years, I didn’t really believe in upping my security. Now, I have to make sure that there are panic buttons, that my staff are properly trained for when somebody comes in with guns blazing,” he says. “They need to know to just give it all up. Give them the cash and whatever they want. It’s OK. It isn’t worth your life. I’m also now spending extra money for high-end security cameras and security systems. It’s frustrating.”

    Photo: UK Vapers

    Crime Prevention

    According to Marianos, there are several reasons why thieves target convenience stores and gas stations and now vape shops and dispensaries: operating hours and low numbers of staff on site, and these types of stores have smaller layouts, so it’s easier to find the expensive/high demand products and there is the potential for large amounts of cash on-site.

    “You don’t want it to make product accessible where somebody can just take a trash can, throw it through the window and get into your shop and take all your stuff,” says Marianos. “More cameras, limiting the amount of people that are coming in like they do at jewelry stores—these businesses need a similar model that retailers with high-end products have. In some higher crime areas, you may even have to hire a security guard.”

    Vandalism, from smash-and-grab types of crimes, has occurred so often at AMV stores in recent years that Salaymeh says he has a toolkit in his garage ready to go at a moment’s notice with everything needed to board up a store. He says he involuntarily became an expert at it. Salaymeh says that while it is rare for AMV stores to alter operating hours, it is a tactic they have used in the past. He says that having at least two staff members at all times in some locations, installing security cameras and other security measures are the primary tools store owners have in their arsenal to help deter crime.

    “Security cameras help us at least get the story behind what happened and potentially pictures of the thieves. We also try to limit the access potential thieves have to valuable product … and we’ve tried to keep the lights on after hours so that people can actually see that these products aren’t lying around or in display cases,” he says. “We leave the register drawer open so that people, when they walk up, they see there’s no cash.”

    Another unintended consequence of overzealous taxation and regulation is the impact it has on local law enforcement, according to Marianos. He says enacting some of these rules are, in effect, giving police more work to do in terms of harassment violations that have no teeth instead of fighting real crime. “Instead of being able to work on what they should be working on—to serve and protect—are we going to be calling the police because someone is vaping a flavor?” he asks. “What is law enforcement going to do with all this nonsense? What are they going to charge the guy with? What is the crime? Do you know what I mean? It becomes an hour and a half just sitting around trying to figure out what we’re going to do here.”

    During his interview with Vapor Voice, Salaymeh’s phone rang. It was the security firm ADT. One of the AMV stores had an alarm going off. He said it happens multiple times a week. There is insurance available for specialty shops, but both Cavanaugh and Salaymeh say it is expensive. The deductible is often higher than the amount of damage suffered during a crime. Both say they rarely, if ever, claim any damages with their insurance companies.

    Another overlooked result of rising crimes in these specialty sectors is the impact on the economy and the lives of employees. Cavanaugh said that crime has forced him to shutter two stores, and he now struggles to keep the doors open in his remaining location. Increases in crime, overregulation and misinformation concerning the health and safety of vaping, and the causes (illegal THC vaping products) of e-cigarette or vaping use-associated lung injury have been too much to bear. “We are doing our best to deal with the reality of today’s vaping industry,” Cavanaugh said. “I want to keep my doors open, and people depend on us; that’s important.”

    Salaymeh says he had to close some stores during the Covid-19 pandemic, some of which were temporary. The closures weren’t all crime-related, he explains, but most of them were. There was a period when stores were not allowed to be open, so burglaries were happening, and stores couldn’t sell anything to try to recover losses. “We’re trying to keep people employed. The height of the pandemic was a very, very, very difficult time for our company and many companies like us. The primary victims of these senseless crimes are the people who don’t have a job to go back to because I shut down 18 stores during that time,” he says. “Think about that.” 

    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.
  • Damage Done

    Damage Done

    Soldiers of the South African National Defense Force guard confiscated cigarettes. (Photo: SANF)

    Eighteen months after lifting its cigarette ban, South Africa still struggles with inflated illicit sales.

    By Stefanie Rossel

    Sometimes the best intentions yield the worst possible outcome. In an effort to protect its citizens from the impact of Covid-19, the South African government banned the sale of alcohol, cigarettes and vape products from March to August in 2020.

    For the legal cigarette market, the move backfired: Illicit trade, which according to market leader BAT South Africa (BATSA) already accounted for approximately 33 percent of all cigarettes sold in South Africa before the ban, soared to unprecedented new levels. “With very weak enforcement by government during the ban, the legal industry adhered 100 percent to the ban, but it gave the illegal players a golden opportunity to take over 100 percent of the market during that time,” explains Francois van der Merwe, advisor to the South Africa Tobacco Transformation Alliance.

    One and a half years after the ban was lifted, illicit tobacco still claims an estimated 60 percent of the total market, one of the highest shares in the world and only comparable to Malaysia. Out of a total market of more than 32 billion sticks, only 12 billion to 13 billion cigarettes were tax-paid in 2021, according to van der Merwe.

    Francois van der Merwe

    An online survey by the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP) showed that 90 percent of smokers continued to purchase cigarettes during the lockdown. Unable to buy their pre-lockdown brand, 46 percent of smokers switched from a multinational company brand to a brand produced by a local producer. Most of these licensed companies are members of the Free-Trade Independent Tobacco Association. Critics contend they conducted illegal business by selling vast quantities of their products at a fraction of the minimum collectible tax of ZAR21.60 ($1.41) per pack of 20—sometimes for as little as ZAR6 per pack.

    According to BATSA, these companies manufacture and earn profit on vast volumes of cigarettes while paying the South African Revenue Services (SARS) only a small portion of the tax owed. BATSA estimates that this under-declaration costs the country’s treasury at least ZAR8 billion annually. For the 2021–2022 government fiscal year, this figure is expected to rise to ZAR21 billion. BATSA reckons that more than 90 percent of all illegal cigarettes in South Africa are manufactured locally.

    During the lockdown, illicit whites were freely available, although at hugely inflated prices. The temporary sales prohibition dramatically changed the purchasing environment, the REEP survey found. Before the lockdown, 56 percent of smokers had bought their cigarettes from formal retailers, but only 3 percent did so after the ban had been lifted. The percentage of smokers who purchased from small informal spaza shops in townships increased significantly. Street vendors, friends and family or “essential workers” became new sources of cigarette supply. The profitability of dealing with illicit cigarettes attracted a range of new players, including crime syndicates, but also civilians seeking to make a living amid a worsening economic crisis.

    The financial damage of the ban was immense: It cost the government ZAR5.8 billion in tobacco tax revenue from BAT alone. In addition, the government lost a court case filed by the tobacco industry regarding the constitutionality of the ban. BATSA said it lost more than ZAR2 billion due to the sales ban.

    Johnny Moloto

    Smuggling Prevails

    While alcohol sales largely recovered after restrictions were relaxed, legal cigarette sales continued to languish. “Consumers have become used to buying illicit products, and this will make it increasingly difficult to eradicate the illicit trade,” says Johnny Moloto, general manager at BATSA. “The fiscus is projected to lose ZAR19 billion in cigarette excise tax in the 2021–2022 fiscal year alone as a result, which the country cannot afford.”

    In November last year, Ipsos found that illegal cigarettes were available in almost half of stores (43 percent) nationwide. Cigarettes are selling for the equivalent of ZAR8 per pack, close to a third of the ZAR21.60 in tax that should have been paid. “It is clear that taxes on these products could not have been paid by the manufacturer,” says Moloto.

    While reliably measuring illicit trade is inherently difficult everywhere, it is even more complex in South Africa, where cigarette packs don’t carry security features, such as stamps, indicated tax payments and illicit manufacturers comply with health warning requirements. The Ipsos study therefore used the “mystery shopper” model, under which researchers bought the cheapest cigarettes in almost 5,000 stores nationwide. Its findings echo those of the REEP survey. The ban, it said, would feed an illicit market that “will be increasingly difficult to eradicate when the lockdown and Covid-19 crisis is over.”

    Ahmad Ismail, general manager for southern Africa at Japan Tobacco International, believes South Africa has now reached that point. “The legal industry declined by over 40 percent alone during the Covid-19 tobacco ban,” he says. “Illicit tobacco flourished with very little enforcement during the lockdown. We have also witnessed an increase in cross-border smuggling in and out of South Africa, which was a problem that we had not experienced in several years. It will take more than three years for the legal industry to recover—not fully—if government acts immediately.”

    “The failure of government to enforce its own regulations during the sales ban was a golden opportunity for illicit operators to establish their brands firmly in the market in the absence of the legal brands,” says van der Merwe. “By dropping their prices post the lifting of the ban, they simply retained their market share, and the legal tax-paying brands are struggling to regain lost market share. With the lower volumes of legal brands, this resulted in many thousands of job losses across the value chain, including the most vulnerable jobs on farms in rural areas, but also in factories processing leaf and manufacturing products.”

    At an annual tax conference in 2021, the SARS commissioner noted that the lockdown brought about a proliferation of illicit cigarettes that has now embedded itself as an alternative to the regular brands. He said the SARS was fighting a losing battle in this regard.

    Ahmad Ismael

    Concerted Efforts Needed

    Although the major legal cigarette manufacturers in South Africa have called on the SARS and law enforcement agencies to increase their efforts to prevent criminal networks from selling illicit cigarettes, little has been done so far. In May 2020, the SARS canceled a tender for a track-and-trace system. “One of the main challenges was the lack of consultation with the industry, as local manufacturers and wholesalers would have been required to implement the system and bear the cost of implementation,” says Ismail. “Another challenge was that South Africa did not ratify the Framework Convention on Tobacco Control (FCTC) Protocol on Illicit Trade (ITP) and that the tender was not in line with the FCTC approach. This would have enabled them to align the system with global guidelines and systems being implemented and allocate a budget dedicated to fully comply with the protocol guidelines following a recommended and tested process implemented in Europe.”

    In 2020, the SARS instructed all cigarette manufacturers to install production counters that report directly to the authorities how many cigarettes are coming off the production line in real time. Moloto, whose company believes not enough is being done to combat illicit trade at this point, argues that this measure had not been enforced. Ismail claims that while being a step in the right direction, the system still relies on the transparency of manufacturers to report on their production levels.

    Moloto says the South African government must act to stop the flow of illicit cigarettes before the problem becomes even more entrenched. Both BATSA and JTI have asked the government to ratify the ITP immediately. “South Africa has been a founding member of the FCTC where the former minister of health, Honorable Dr. Aaron Motsoaledi, signed the ITP in Geneva in January 2013,” says Ismail. “Putting in place a track-and-trace system would allow tobacco products to be traced from the manufacturer to the wholesaler and to retail and contribute to the reduction of massive illegal cigarette trade.”

    JTI believes that a full digital volume verification system, in combination with a track-and-trace system, would be the most effective and affordable migration. This would give the government real-time insight into what is manufactured and thus help it curb under-declaration and tax evasion.

    “Track-and-trace aimed at tracking cigarettes from manufacturing plants to point of sale on its own will not prevent illicit trade,” Ismail admits. “However, it will support law enforcement agencies and legitimate businesses working in collaboration to reduce the problem. Consistent audits by the SARS need to continue, seizures of illegal tobacco products must intensify, and law enforcement agencies need to work in a coordinated manner to increase prosecution or closures of operators that decide to conduct illegal practices.”

    In addition to the other measures, BATSA has called for a minimum legal retail price of ZAR28 per pack. “This is a simple way to allow the police to seize illegal cigarettes more effectively without having to prove that the manufacturer has not paid the taxes due,” says Moloto. “It could be implemented quickly through the declaration by the government of a minimum price for cigarettes. It would also help consumers to differentiate between legal and illegal products.”

    South Africa’s experience proves that prohibition does not work, according to Ismail. “Illegal trade cheats everyone: governments, society, consumers and legitimate businesses,” he says. “It robs governments of tax revenues, harms hardworking retailers and invites organized crime into communities.”

    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.
  • Fired Up

    Fired Up

    Nina Ritter-Reischl, in front of Glatz LIP paper machine
    (Photo: Julius Glatz)

    Having prevailed in an intellectual property dispute, Julius Glatz prepares to reenter the market for lower ignition propensity cigarette papers.

    By George Gay

    Julius Glatz is to reenter the market for lower ignition propensity (LIP) cigarette papers.

    This follows a four-year hiatus during which it was forced out of that market as a result of a patents dispute it eventually won in September last year, after a legal battle that, in total, lasted six years.

    Nina Ritter-Reischl, a managing partner at Glatz, told Tobacco Reporter during an exchange in January that, having overcome the difficulties of those four years, the company, which produces a large range of papers, mainly for the tobacco industry but also for other industries, was keen to return to the LIP market and, indeed, had already started work on doing so.

    And this won’t be a case of starting from scratch, of course. “As we were able to retain at least some of our core personnel, we can build upon their know-how and knowledge to produce LIP papers with the high standard our customers know us for,” said Ritter-Reischl. “Our customers will still find their former contacts in our technical, R&D and sales teams.”

    Meanwhile, the machine that Glatz used in the past to produce its LIP papers has been geared up at the production site where those papers were manufactured previously, in Neustadt, Germany, about 10 km from the company’s base in Neidenfels. “Our LIP machine has been maintained during the down period, some parts have been renewed, and our control technology has been upgraded within the last months,” said Ritter-Reischl. “Those investments were made to ensure production of all kinds of LIP papers.

    “As our application system is very flexible,” she added, “our production range and products are as well. We can therefore produce LIP papers to the specifications our customers were used to, or we can develop papers with new specifications according to our customers’ needs.”

    Of course, during the period when it wasn’t possible for Glatz to manufacture LIP papers, the company didn’t just sit on its hands; it used the time to concentrate on another type of demanding tobacco industry paper. “We were able during those four years to focus on another part of our core competences—our tipping base paper production,” Ritter-Reischl said. “Those papers also are very complex and demanding papers in the industry, and our quality and service for those is a benchmark.”

    That’s not to say, however, that the renewed opportunities that LIP paper production now offer isn’t massively important. In corresponding with Ritter-Reischl, I got the impression that Glatz was not only taking a huge amount of pleasure in being able to restart its LIP papers operation but also relishing the fact that this meant it could once again offer a complete range of tobacco industry papers. “Entering back into the LIP market, we at Glatz can offer our customers not only additional papers, [but] we can again provide them with the full-service range of all papers for the industry, from plug-wrap papers and tipping base papers to cigarette papers, including LIP papers,” she said. “We are able to offer all these papers manufactured to the highest qualities and within the most demanding specifications. And we can offer a flexible service delivered through short lines of communication by a dedicated team of traditional paper makers.”

    Currently, Glatz’s LIP papers production unit is making trial runs to produce papers of various specifications for a number of interested customers, but it expects to have to ramp up its production level to full manufacturing mode during the next few months.

    Ritter-Reischl, who is a lawyer, seemed frustrated that discussions and legal disputes over one LIP patent had taken so long but pleased that that period was now behind the company. “As the patent was held to be invalid, this pulled the rug from under all the accusations made against Glatz,” she said. “But, needless to say, this dispute and the interim consequences were a burden for us over the past four years, and only a company like ours with a very resilient financial, social and competitive structure would have been able to endure such a phase.”

    Julius Glatz is a family-owned medium-sized company with more than 135 years of experience in producing paper in Neidenfels, Germany. “We are a traditional and sustainable asset in the region, being ourselves aware of the responsibility we have toward our employees, our environment, our suppliers and, most important[ly], our customers,” said Ritter-Reischl.

    The company was started in 1885 by Wilhelm Adolph Glatz, Franz Julius Glatz and Hans Haehnle when, between them, they founded the Glatz papermill at Neidenfels in the Palatinate Forest. Almost 100 years later, in 1990, Glatz became the first fine paper manufacturer to offer thin printing papers and cigarette papers of TCF (totally chlorine-free) quality. And, in 1994, Glatz became part of the first Sino-German joint venture in the field of tobacco industry papers with the founding in Yunnan province of Yunnan Hongta Blue Eagle, which quickly went on to produce premium cigarette paper of international quality standards.

    Now, as it navigates 2022, Glatz can look forward to the boost that being able once again to participate in the LIP papers market will bring. But the question arises as to what the future holds for Glatz beyond LIP papers, and Ritter-Reischl started answering this question by admitting that, overall, the outlook for the traditional tobacco industry was not exactly rosy. Everyone knew, she said, that the tobacco market in general was difficult, as regulations and tobacco product taxes were increasing while the number of smokers was decreasing. Nevertheless, she indicated, Glatz was optimistic about the future, and part of that optimism seems to be coming from what is perhaps an unexpected source. “Due to the coronavirus pandemic, customers have come to realize how important local sourcing, flexible service and short communication tracks are,” said Ritter-Reischl. “And those are all services and assets that we can offer firsthand.”

    Another reason for optimism at Glatz was that the idea of sustainability was becoming more and more important and into focus, said Ritter-Reischl. “As a family-owned business with a history of 135 years in paper making, [we] are sustainable by our very nature,” she said. “We value our employees and suppliers, we take care of our environment, and our customers are always in focus as we conduct every aspect of our business.”

    Of course, individual businesses can expand even when the markets they serve are not expanding by, in one way or another, increasing their market shares or by diversifying. And in this regard, Glatz sees opportunities arising in the future as paper products come to replace other materials, such as plastic. “Our thin papers with their special haptic properties can be used in other industries to substitute for foil or other wrappers,” she said. “Therefore, alongside our tobacco papers specialization, we have the opportunity of diversifying into other aspects of fine papers. And this will be one of the options we will focus on in the future and that will help keep us optimistic in the face of the challenges to come.”

    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.
  • A Balancing Act

    A Balancing Act

    Photos: Taco Tuinstra

    Embracing tobacco harm reduction might help Indonesia ease the tension between dependence on tobacco revenues and rising healthcare costs.

    By Stefanie Rossel

    Tobacco or health—for Indonesia, the choice embodied in that slogan presents a real dilemma. On the one hand, the world’s second-largest cigarette market and fifth-largest producer of leaf tobacco is highly dependent on the revenue from the sector. Statista expects revenue from the cigarette segment to reach $24.86 billion in 2022, up 5.8 percent from 2021. On the other hand, the country is facing increasing healthcare costs for the treatment of tobacco-related illness. An October 2021 study by the Indonesian Development Foundation found that tobacco-induced morbidity, disability and premature deaths were responsible for economic losses of IDR375 trillion ($26.04 billion) in 2019—a fifth of the total state budget.

    Indonesia is unlikely to find a way out of this quandary soon. Smoking and tobacco cultivation have been deeply rooted in the nation’s culture since the 19th century. The market is unique in that it is largely dominated by kreteks or clove cigarettes, which represent around 95 percent of all cigarette sales. While tobacco consumption has been declining, Indonesians still smoked a whopping 300.2 billion cigarettes in 2019. With roughly 75 percent, the vast majority of cigarettes consumed are machine-made kreteks. Hand-rolled kreteks account for around 20 percent of the market.

    Indonesia has one of the highest smoking rates in the world. According to a national survey from 2018, the country is home to almost 100 million smokers. More than one-third (33.6 percent) of adults use tobacco. Smoking is a male habit; 62.9 percent of men are smokers compared to only 4.8 percent of women. Worryingly, smoking is also common—and increasing—among minors. Ministry of Health data show that 33.8 percent of youths under the age of 15 smoked in 2018, up from 32.8 percent in 2016. Other data suggest that an estimated 20 percent of children under the age of 10 have tried a cigarette.

    The Covid-19 pandemic, in combination with cigarette excise tax increases, has depressed incomes and pushed smokers toward lower priced products, a trend the industry has met with smaller packages. This, in turn, has driven up demand for higher tar kreteks.

    In 2020, five major corporations controlled almost 90 percent of the Indonesian cigarette market, according to the Southeast Asia Tobacco Control Alliance. Sampoerna led the market with a share of 32.5 percent followed by Gudang Garam (27.5 percent), Djarum (18.7 percent), Bentoel (8 percent) and Nojorono Tobacco Indonesia (3 percent). The remaining 10.3 percent are made up by an estimated 500 small-sized to medium-sized manufacturers.

    Tobacco is a major employer, providing work to 5.98 million people, of which 4.28 million work in the cigarette manufacturing and distribution sectors and 1.7 million in tobacco cultivation, according to the Indonesian Development Foundation. In 2019, this corresponded to 0.34 percent of total employment in the manufacturing sector. As in many tobacco-cultivating countries, leaf is grown mainly by small-scale farmers who rely solely on tobacco. The tobacco farming sector also struggles with child labor. In 2002, Indonesia committed to eliminating it in all forms by 2022. In 2019, the U.S. Department of Labor noted that Indonesia had made “moderate advancement” toward this goal (see “Homework Due,” Tobacco Reporter, February 2021).

    The tobacco industry remains a major employer in Indonesia.

    Incoherent Policies

    With tobacco playing such a large role in the country’s economy, Indonesia’s tobacco control efforts have been halfhearted. It is one of only nine countries that have yet to ratify the World Health Organization Framework Convention on Tobacco Control. Decentralized decision-making has led to fragmented policies. Responsibility for tobacco policy is spread among the president’s office, six national ministries and an independent agency.

    Nonetheless, some progress has been made. Since 2014, cigarette makers must print pictorial health warnings covering 40 percent of each pack. Smoking bans have been implemented for public transport, healthcare facilities, educational facilities, places of worship and playgrounds. Tobacco advertising on TV and radio remains permitted with certain restrictions. There is no minimum age limit to buy cigarettes, and selling cigarettes by the stick is common practice.

    Despite regular excise tax hikes, cigarette prices in Indonesia remain among the lowest in the Asia-Pacific region. The tobacco excise tax remains far below the 75 percent of retail price recommended by the WHO. Indonesia’s tobacco taxation system is also dauntingly complex. Until recently, cigarette tax rates were divided into 10 tiers based on product type, volume and price. The tiers are meant to protect smaller manufacturers and local jobs from competition. Under the government’s 2017 “tobacco roadmap,” the number of tax tiers were supposed to be cut to five by 2021 to reduce the incentive for smokers to switch to cheaper products. The plan, however, was withdrawn in 2019. In November 2018, the coordinating ministry of economic affairs launched a new tobacco roadmap emphasizing the importance of the industry and arguing for its protection until 2025.

    Effective Jan. 1, 2022, Indonesia increased its tobacco excise across cigarette types by an average of 12 percent. In addition, the number of tax tiers was reduced from 10 to eight. According to the ministry of finance, the tax reform aims to counter the rising healthcare costs caused by increasing smoking prevalence and to reduce the smoking rate among adolescents aged 10 years to 18 years.

    Harris Siagian

    Promoting Tobacco Harm Reduction

    To help the country escape move forward, the Indonesian Development Foundation has proposed a tobacco transformation program that seeks to address certain policy gaps. It has created a roadmap that, among other things, proposes to complement existing policies with harm reduction initiatives. By emphasizing reduced-risk products (RRPs), the foundation believes Indonesia can reach smokers who have been overlooked by the current policies.

    “The draft roadmap targets to diminish substantial economic costs and productivity losses associated with cigarette smoking by introducing a cost-benefit analysis approach to estimate the strengths and weaknesses of alternative, reduced-risk products,” explains Harris Siagian, one of the authors of the report. “It will measure and compare the costs of cigarette smoking-attributable diseases and the economic costs of reduced-risk product use.”

    The guideline also recommends increasing the affordability and accessibility of RRPs. According to its authors, the excise tax on RRPs should be lower than that for combustible products.

    Indonesia classifies noncigarette tobacco products as “other tobacco processing products,” or Hasil Pengolahan Tembakau Lainnya (HPTL). These include molasses-based tobacco products, snuff, chewing tobacco and RRPs, such as e-cigarettes and heated-tobacco products (HTP). All HPTL products are subject to the maximum excise tax rate of 57 percent.

    Among RRPs, e-cigarettes, which hit the market in 2010, are significantly more popular than HTPs, which were introduced to Indonesia in 2019, and the vape market is growing. According to the Indonesian Development Foundation Report, there were 2.2 million vapers in the country in 2020. Apart from provisions on import and excise tariffs, there is no specific and comprehensive regulation of HPTL products yet, and policies appear uncoordinated between regulators. While the Food and Drug Monitoring Agency would like to ban vape products altogether, claiming they could be a gateway to youth smoking, the health ministry wants to regulate e-cigarettes as conventional tobacco products. This, in turn, is opposed by the ministry of agriculture, which fears that such regulation would burden tobacco farmers.

    Indonesia aims to simplify its complex tax ystem.

    Complex Task

    To address such conflicts, the Indonesian Development Foundation committee team advocates incorporating RRPs in the national smoking cessation programs. “The products will be available to users, on an incentive basis, through registered outlets and clinics,” says Siagian. To help fund the initiative, the committee suggests using money from the revenue-sharing fund of tobacco products excise, which collects 2 percent of the total tobacco excise funds at the national level and distributes it to regional governments.

    The roadmap also takes farmers into consideration. Locally grown tobacco will be directed toward RRPs, and farmers will be encouraged to diversify into other crops. To help eliminate child labor, the program calls for strengthening local government initiatives to provide basic education access and other supportive measures for children involved in tobacco farming.

    Affordability is a well-known challenge to the success of RRPs in low-income and middle-income countries. Nonetheless, Siagian is confident that RRPs will succeed in Indonesia: “Over the past 20 years, there has been a significant shift of the vulnerable lower middle-class population that has climbed out of poverty and into the aspiring educated middle class, and these demographic groups are shifting toward more health-conscious and hygiene products, including in their use of tobacco products,” he says.

    “The educated middle class, which currently accounts for 52 million people out of a total population of 273 million Indonesians, are favoring e-cigarettes as part of their lifestyle, and these population groups are more open to healthy-yet-stylish products, which means a great opportunity for RRPs. The Indonesian middle class has been a major driver of economic growth as the group’s consumption has grown at 12 percent annually since 2002 and now represents close to half of all household consumption in Indonesia, which means that price is not a major concern for these groups when purchasing RRPs. A suitable brand ambassador, product choices, accessibility and affordability will play an important role in RRPs for the middle-class groups.”

    Transforming Indonesia’s tobacco control policies will be a tough nut to crack. The Indonesian Development Foundation’s proposed roadmap, therefore, is a multi-step plan, with the first stage of implementation expected to be concluded within a two-year period—provided that the country’s development priority plan, which includes the elimination of child labor, remains under the control of the current government, says Siagian. “The overall program is expected to be accomplished in five years, with an additional three years of implementation under the next government as the continuation of the first-stage program,” 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.
  • Pure Play

    Pure Play

    Photo: Essentra

    Filter manufacturers consider their strategies in an increasingly challenging environment.

    By Stefanie Rossel

    In October last year, Essentra fueled speculation about the future of its filter business: The Singapore-based company, which manufactures plastic caps, work-holding clamps, fasteners and knobs, said it was studying strategic options for two of its three divisions, cigarette filters and packaging, in an attempt to become a “pure play” components business over time. The review is expected to conclude by the end of June 2022 at the earliest. Since the announcement, the company has appointed several new people to key positions, including Robert Pye as Essentra Filters’ managing director.

    SK Low

    “A strategic review normally covers the full range of strategic options for a business, i.e., the best structure for that business to reach its full potential and deliver value for shareholders,” explains Seng Keong Low (SK), global marketing manager at Essentra Filters. “These reviews can include a number of potential outcomes including sale, demerger and other outcomes. We don’t yet know what the outcome of the filters review will be, and no decisions have been made regarding any of the divisions. The filters business will still be in operation, just that it may or may not be under the banner of Essentra pending the outcome of the strategic review. The most recent appointments to the global filters leadership team are longtime filters leaders, which were decided before the announcement of the strategic review.”

    According to the company’s 2021 pre-close trading update, the filter division performed well in the fourth quarter of 2021, with revenue up 22.3 percent during that period. “The division continues to benefit from higher volumes from outsourcing contracts and a strong performance in Europe,” the update said. “Further progress has been made in the delivery of its ‘game changers’ with the China joint venture continuing to gain momentum after successful commencement in June. Our range of proprietary eco and heated-tobacco products continue to attract increased interest. The number of projects underway continues to grow.”

    At the end of 2019, Essentra announced the establishment of a joint venture in China, China Tobacco Essentra (Xiamen) Filters, which launched in June 2021. Shareholders in the joint venture are Essentra with 49 percent, China Tobacco Fujian Industrial Co. with 21 percent, and three Chinese investment management companies holding ten percent each. The JV manufactures specialist and next-generation filters locally at a new facility in Xiamen in Fujian province.

    Tackling Logistics

    While awaiting the outcome of Essentra’s strategy review, filter manufacturers must navigate the ongoing global logistics crisis, which has led to a shortage of shipping containers, significant in freight rate hikes and delays in the supply chain. “We have been working closely with all partners covering long-term plans that required more accuracy than before,” says Hyunyoung Park, sales and business development manager at Taeyoung Industry Corp. in South Korea. “Nevertheless, other activities, such as keeping a high level of stock or production capacity build-up, can help to mitigate the delivery issue. However, it is affecting factory operation severely.”

    Essentra says it is experiencing extended lead times on deliveries from many suppliers. “To ensure supply continuity, we are working several BCP (business continuity planning) plans, e.g., holding more safety stocks, working on finding more local solutions, etc.,” says SK. “To minimize supply disruption and delay to our customers, we are doing additional pre-build where possible, making advance bookings for deliveries and driving more end-to-end synchronization of our materials planning with finished goods delivery.”

    In addition to supply chain challenges, the price of raw materials, including wood, has risen significantly due to the Covid-19 pandemic. Wood, of course, is the basis of cellulose acetate tow used in cigarette filter production. “We have seen increases across our raw materials as well as other commodities, from packaging materials to spare parts,” says SK. “The increase in wood prices has affected our plug wrap suppliers, acetate tow suppliers, packaging and pallet suppliers. We are also seeing significant increases in power prices.” Because of these developments, Essentra Filters had to raise prices in 2021. “We have to find the right balance in accepting and passing on any price increases and constantly evaluate our positions with both suppliers and customers given any potential changes in the pandemic situation around the world,” says SK.

    Park has also observed an impact on prices due to the logistic and raw material situation. “Raw material price is affecting not only our factory operation but [those of] other manufacturers as well. However, the cost of logistics is underlying geographical influences, which made it difficult for the export business and increased chances to find alternative suppliers for cost saving or minimizing cost impact, and these activities will concern all manufacturers involved in the cigarette business except major players.”

    Growing Importance

    Another theme affecting the filter sector is sustainability. In July 2021, more parts of the European Union’s Single-Use Plastics Directive entered into force. While cigarette butts have been exempted from the rules for the time being, a provisional agreement in the legislative process seeks to further encourage innovation in the development of sustainable alternatives to plastic-containing tobacco filters through the introduction of extended producer responsibility (EPR).

    EU member states have until Dec. 5, 2023, to set up EPR schemes for tobacco filters, but to date, there is no implementation guidance for member states. Since July 3, 2021, all packs of filtered tobacco products in the EU have been required to display a pictogram against littering.

    Legislators in other jurisdictions are considering similar measures. In February 2022, Californian lawmakers introduced a bill that would ban the sale of single-use cigarette filters and vapor products. Under the bill, sellers would risk fines of $500 per violation, defined as the sale of one to 20 items. Ninety percent of the approximately 12 billion cigarettes sold in California each year are filtered. The state spends millions of dollars annually on cleaning up cigarette litter, according to proponents of the ban.

    “Sustainability has always been important to us at Essentra Filters, and we have long had nonplastic filters in our product portfolio,” says SK. At the end of last year, the company added two new varieties to its sustainable filter range: the ECO Active Filter, a plastic-free alternative to active carbon acetate filters that is 100 percent biodegradable, and the ECO Flute Filter, a nonplastic alternative to the company’s Combined Performance Superior Filters. The design of the Flute Filter is customizable for length, circumference, pressure drop and flute length and can be combined with other filter segments. “Our new ECO range is currently the largest step change in our sustainability efforts, and with an increasing number of customers asking us about sustainable, nonplastic filters, we are confident that investing our innovative efforts in sustainability is the correct strategy,” says SK.

    Park, who in a previous interview mentioned that Taeyoung’s research and development department was working on filter development with nonacetate tow and carrying out studies on the replacement of conventional filter materials, said that the company had made progress with that initiative. “However,” he added, “market feedback is more important for actualization. I believe this kind of development is continuing under rapidly changed business circumstances including environment, social, governance criteria.”

    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.