Category: Print Edition

  • A Paradigm Shift

    A Paradigm Shift

    Photo: BAT

    Contributed

    For years, smokers weren’t interested in supposedly safer cigarettes. There were some attempts by R.J. Reynolds in the 1990s with a “heated not burned” cigarette in the U.S. (under the brand name Eclipse), Germany (HI.Q), Sweden (Inside) and Japan (Airs). But the time seemingly wasn’t ripe for novel products.

    Instead, the tobacco industry entered an era of consolidation, the majors embarking on a large acquisition spree to expand their sales and distribution reach and to build on the popularity of global brands. The alcohol companies followed a similar strategy. The one exception was Swedish Match, which sold off of its cigarette interests to prioritize less harmful snus. That was before the EU decided to impose a ban on the product.

    The emergence of vaping technology, alongside the continuing focus on the health impact of smoking and an increase in regulatory restrictions saw the arrival of startup companies like Blu, Ploom (now Juul), NJOY, E-Lites and Ruyan. These businesses were at the forefront of starting what Swedish Match originally envisaged—a widespread transition for smokers from tobacco to alternative nicotine-delivery products.

    The tobacco majors stood briefly on the sidelines but quickly began acquiring many of these businesses and renewing their investments in the previously trialed heated-tobacco technologies. Philip Morris International led the way, soon publicly proclaiming its intentions for a “smoke-free future” and committing to transition smokers to less harmful products. Indeed, PMI’s latest acquisitions in the pharmaceutical sector, including those of OtiTopic, Vectura and Fertin Pharma, are intended to transition their business even beyond the nicotine segment.

    But prevailing public perceptions of the tobacco industry are slow to change, and with increasing attention on environmental, social and governance (ESG) issues, many investors have taken a restrictive approach toward tobacco stocks. Whether or not compounded by the disruptive threat of new challenger technologies, tobacco stocks have shed circa $300 billion over the past five years. This is despite the industry’s history of paying generous dividends, which in theory should attract investors. Similarities with “stranded assets” in the oil, gas and coal-mining industries immediately come to mind.

    There is already a noticeable difference in valuations between faster and slower transitioning tobacco companies, skewered in favor of the more active ones. The meteoric rise of Juul (albeit one that has now somewhat deflated) and the explosive valuations afforded to the likes of Smoore and RELX are also indicative of where investors see the future value in nicotine businesses. 

    Increasing public health concerns and huge consumer demand for harm reduction products, set against a complex regulatory landscape, fuel the reduced-risk product (RRP) categories.

    PMI, Altria and BAT are prominent in outlining their significant investment in and commitment to a portfolio of RRPs and their plans to transition smokers away from combustible products. While Japan Tobacco may have appeared to prioritize combustibles, recent developments suggest an intention to increase its presence in the RRP category too. Imperial Brands, while still undergoing a change in the senior management team, is following a similar strategy.

    Tobacco companies are increasingly becoming lifestyle companies with broad product offerings but streamlined brand portfolios.

    Although not widely commented on, this development and the plans that the tobacco majors seemingly have for the RRP category will have significant consequences for a number of industry participants, not least tobacco leaf growers. Prominent tobacco-producing nations, such as Malawi and Zimbabwe, will therefore face significant challenges and will likely need to restructure their entire economies.

    As a result of these developments, tobacco companies are increasingly becoming lifestyle companies with broad product offerings but streamlined brand portfolios. PMI is the most ambitious, trying to converge lifestyle and pharmaceutical categories focusing on inhalation technologies, benefiting from PMI’s expertise in this area. However, the acquisition of U.K.-based Vectura met with protests. On the other hand, PMI’s acquisition of OtiTopic, a U.S. respiratory drug delivery development company did not trigger such a strong public outcry. While Japan Tobacco has long had a pharmaceutical division, no areas of overlap or corresponding synergies with the tobacco business have been made apparent.

    The entrepreneurial small-size and mid-size enterprises, who kickstarted the vaping industry from the grassroots, initiated the transition we’ve seen in the last 10 years. At the outset, public health and tobacco control activists in many countries considered grassroots vaping companies to be a welcome alternative to the large tobacco multinationals. The majority of those early vaping companies were preoccupied with product launch, sales and distribution and overlooked the importance of the public policy and regulatory arena. Many, such as Blu, Ploom, E-Lites, Logic and Juul, then accepted tobacco industry investment, but this led to a negative view toward the category for many in public health and tobacco control.

    Seemingly the stigma associated with the tobacco industry—the “Big Tobacco” factor—quickly attached itself to the vaping industry.

    It seems only a matter of time before history repeats itself in the cannabis industry. Altria, BAT, PMI and Imperial Brands have all made investments in cannabis. Whether a preemptive step or not, it’s certainly a cost-effective manner to understand the sector and thereby be positioned to participate as and when restrictions come to be lifted.

    Only a few years ago, the tobacco industry was considered to be a dinosaur set for extinction. Some industry participants, whether encouraged by early successes of vaping businesses or otherwise, took on the challenge and are reinventing themselves as lifestyle companies, and PMI is daringly entering the pharmaceutical sector. Those that are prepared to transition away from combustible tobacco products have been given a new and exciting line of life.

    The tobacco industry is only at the beginning of its paradigm shift. Special efforts to engage with regulators—which are not only the industry’s biggest partner but will ultimately decide on the success of the “new nicotine” sector—will be required. It seems likely that those industry players who make those efforts and who experiment with new technologies, new products and new business models will be those best placed to thrive in the future.

    This article was contributed by GMTL, a leading risk advisory, due diligence and corporate intelligence firm headquartered in London.

  • A Versatile Tool

    A Versatile Tool

    Photo: IOTO

    Reconstituted tobacco can help cigarette manufacturers reduce waste and control cost. It is also a useful tool for product design. Most recently, recon has played an instrumental role in the development of tobacco-heating products. Perhaps less well known are the further environmental gains that have been brought about by refining reconstituted tobacco processes. Tobacco Reporter spoke with representatives of IOTO and SWM to discuss the latest developments in the field.

    Bruno de Veyrac

    A Diminished Carbon Footprint: SWM Reduces Its Dependence on Fossil Fuels

    In August, the Physical Science working group of the International Panel on Climate Change (IPCC) published its contribution to the Sixth Assessment Report of the IPCC, and it made scary reading. At the same time, however, it helped reinvigorate the environmental debate and encouraged us all to run informal audits on our own carbon footprints and those of the organizations, companies and industries with which we are associated.

    An environmental audit of the tobacco industry would prove to be incredibly complex, but one thing is obvious: the industry’s positive developments are often brought about by a desire to save costs. And one of the prime examples of this has been seen in the development of reconstituted tobacco, which is formed largely from tobacco that would otherwise go to waste.

    This is well known. But what is probably less well known is that, during the 40 or so years the industry has been using reconstituted tobacco, further environmental gains have been brought about by refining reconstitution processes. In answer to a question posed during an email exchange in August, SWM said that it had decreased its CO2 emissions by 140,000 tons during the past six years following the installation during 2014 of a biomass boiler at its LTR production site in France. That is apparently the same environmental advantage as would be achieved by cancelling 140,000 round-trip flights from Paris to New York.

    According to plant manager Antoine Uzu, the biomass boiler, which has reduced the plant’s dependence on fossil fuels, operates on locally sourced wood harvested from sustainable, well-managed forests and supplies the steam needed to operate the plant’s machines 24 hours a day. Additionally, the hot water generated during the production process is used for heating some of the company’s buildings, and SWM’s LTR production site strategy is to continue to reduce its fossil-fuel consumption until, within two years, it will have all of its buildings heated using renewable energy—what would otherwise be thermal losses from its renewable energy-driven process. And, as part of its global Operational Excellence program, it is studying whether it would be possible to use by-products of its own manufacturing as fuel for the biomass boiler, an exciting prospect that would reduce its waste production while increasing the share of renewables in its energy consumption.

    In summary, what you have here is a process largely driven by renewables in which tobacco that would otherwise have to be disposed of is being reconstituted and returned to the tobacco manufacturing process, and the prospect that the waste from the reconstitution process will be used to help drive that process. Little wonder then that Bruno de Veyrac, director of NGP [new-generation products] & Recon at SWM, described the reconstitution process as working on the principles of the circular economy by adding value to tobacco that would otherwise be difficult to use by providing for a better control and specification of traditional tobacco products, and by enhancing the tobacco so that it can be used as the raw material for reduced-risk, heated-tobacco products (HTPs).

    SWM has decreased its CO2 emissions by 140,000 tons following the 2014 installation of a biomass boiler at its LTR production site in France. (Photo: SWM)

    Another way in which reconstituted tobacco might be thought of as contributing to the positive environmental credentials of the industry is that it can be used in traditional-cigarette manufacturing facilities without the need for modifications, and it allows companies to start manufacturing HTPs using as much as possible of their existing assets. In part, this is because it is delivered in the same sizes of lamina and strips as is raw tobacco and in the same C48 cases. But it is also because of the advantages that have accrued from SWM having upgraded the quality standards of its LTR factory and having invested significantly in its analytical laboratory.

    Meanwhile, special reconstituted tobacco products have been developed to help smaller manufacturers move more easily into the production of HTPs by making it unnecessary for them to undergo major research and product development programs. Bruno Stefani, product manager of heated-tobacco products at SWM, said his company had developed a portfolio of ready-to-use augmented tobaccos, each of which had been developed using the company’s expertise in aerosol generation—expertise that had been built up during a seven-year research and development program and that was based on the selection of the right tobacco grades and their processing into high-quality materials.

    SWM’s reconstituted-tobacco filler substitute Nexfill allows manufacturers to replace part of their filler tobacco and offers security of supply at a time when deliveries of raw material might be interrupted.

    The major use of reconstituted tobacco remains, of course, as a component of traditional cigarette blends where it is used to help with blend design and in contributing positively to smoke delivery controls. De Veyrac pointed out that reconstituted tobacco was a convenient tool to help manufacturers better comply with existing regulations and to help the industry prepare for more demanding regulations in the future.

    And as de Veyrac pointed out, such future regulation could include a requirement by the U.S. Food and Drug Administration that nicotine deliveries are tightly controlled. Given such a situation, he said, reconstituted tobacco could be used to help reduce nicotine deliveries. The key advantage of SWM’s reconstitution process, which is based on the paper-making process, was that it worked on the basis of separating the fibers and the extract, and then adding back the extract, at which point various compounds, such as nicotine, could be removed or their level controlled. Otherwise, other reconstituted botanicals with no nicotine could be added to blends, alone or in combination with reconstituted tobacco.

    Specifically, SWM offers two reconstituted-tobacco filler substitutes that were launched two years ago under the name Nexfill, one lemon-style and one orange-style flue-cured Virginia product. De Veyrac said these products had been popular from the start because they allowed manufacturers to replace part of their filler tobacco but that they had come into their own recently because they offered security of supply at a time when deliveries of raw material might be interrupted, such as during the current pandemic. Two other Nexfill products are on their way. Nexfill Oriental, which has been developed recently, and Nexfill Burley, which is still under development.

    Not surprisingly, given the above, de Veyrac seems confident about the future. The flexibility of the reconstitution process meant that it was capable of helping the tobacco industry meet the challenges it was facing with regard to the need for waste management and recyclability, he said. SWM today offered a wide range of products for the manufacture of cigarettes, cigars, cigarillos and NGPs. It had also developed its product and service portfolio, which included prototyping and scientific support in developing HTPs. From the new NexFill family of grades to special grades for HTPs, and reconstituted botanicals, innovation is to the fore more than it ever has been. —G.G.

    Hemp cut rag (Photo: IOTO)

    Herbal materials present new opportunities for reconstituted products.

    It would be wrong to give the impression that homogenized herbal materials make up anything but a small fraction of the market for the various reconstituted plant-based products that, mostly and traditionally, have been used in tobacco production. Nevertheless, it is difficult not to become caught up in the buzz that surrounds these materials.

    In the past, reconstituted tobacco has been the utilitarian product par excellence. It has played all manner of important—sometimes vital—roles in the development of tobacco products, most recently in respect of heat-not-burn (HnB) products, but it has done so largely out of sight; it has tended, for various reasons, to hide its light under a bushel.

    Reconstituted herbal materials, however, partly because of their range and, sometimes, their rather exotic constituents, but mostly perhaps because they offer a wealth of new opportunities, seem to be destined for the spotlight. During an email exchange earlier this year, Helder Tullio, director of operations at IOTO International, the U.S.-based and Brazil-based manufacturer of homogenized wrapper, cut filler and binder for the smoking industry, told Tobacco Reporter that his company had already manufactured herbal sheets from many different materials, including yerba mate, chamomile, sage, cocoa, lemongrass, coffee, hibiscus, clove, stevia and black, green and white tea. “We can produce herbal blends according to our customers’ demands,” said Tullio. “IOTO is committed to partner with our customers for the development of reconstituted herbal products according to their needs. Some herbal materials we have manufactured were suggested by our customers.”

    This, of course, raises a question about what determines whether a particular herb can be made into a homogenized product. Naturally, it has to be readily available in big enough quantities, but are there other factors, such as fiber structure? “The cell wall composition and fiber structure are the main factors that determine the conversion of the herbal materials into reconstituted sheets,” said Tullio. “However, due to our process flexibility and expertise to adapt our formulas, we have succeeded even when using soft materials, such as hibiscus flowers.”

    One of the things that I found most exciting about the availability of such a range of reconstituted herbal materials and the potential for expanding that range was the fact that, in a press note earlier this year, IOTO talked of being able to accommodate smaller initial production runs. This clearly has the potential to attract entrepreneurs who could take such materials into new markets and new areas. In fact, Tullio said that IOTO could work with production runs of as low as 50 kg, which would help small and new companies get a foot on the ladder leading to increasing volumes.

    The press note issued by IOTO earlier this year announced that the company had expanded its herbal offerings to include U.S.-produced premium reconstituted hemp sheet. Demand for reconstituted hemp wrappers has been increasing significantly in the U.S. and it is fortunate that, due to its high fiber content, hemp is easily converted into homogenized sheet. Additionally, there is a plentiful supply of hemp in the market, and IOTO’s process can accommodate different parts of the hemp plant, such as its flowers, leaves and stems.

    “All the hemp materials used by IOTO are tested for THC content, heavy metals, residual pesticides and presence of microbes to guarantee the best quality products to our customers,” said Tullio. “A full cannabinoids spectrum analysis is also performed to guarantee the highest quality of hemp.”

    Testing the hemp for THC content is important to ensure that the level is below the legal definition of marijuana because IOTO is based in North Carolina where marijuana is not legal. However, given the similarities between hemp and marijuana, the company says it will be able to process marijuana when and if it is made legal there.

    IOTO can provide reconstituted hemp on bobbins for use in the production of wrappers and cones, and the company can provide it in square sheets, threshed sheets and cut rag for use as filler materials. In addition, since IOTO’s process is patented, it is able to sell its equipment and license customers to produce their own homogenized sheets.

    So what is the outlook for reconstituted hemp? Well, according to Tullio, demand will certainly grow in every country in which hemp and or cannabis is legalized. Before hemp was an alternative, tobacco and paper were the rolling products of choice for most RYO smokers, he said. But, once legalized, hemp naturally became an alternative because hemp wraps provided a flavorful, slower burn for hemp and cannabis users. Hemp wraps offered the advantage of retaining the terpenes and CBD naturally present in the plant, and they were being offered in the market in a variety of flavors, such as grape, pineapple, lemon and lime.

    The reconstituted herbal sheet market is seen by IOTO as a growing one, not only in respect of hemp cigarettes but also for other nontobacco products, such as cocoa and tea. But Tullio said it was already a very competitive market, and to thrive in it, companies were adding a variety of flavors to their herbal products as a means of differentiating them.

    Meanwhile, originally used as a tool to reduce waste and costs during cigarette production, reconstituted tobacco is now a key component of blends, in no small part because it can help manufacturers regulate nicotine levels and the chemical composition of smoke in line with the restrictions placed on tobacco product delivery levels. It can be used also as cigar binders and wrappers.

    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.
  • Staying Ahead

    Staying Ahead

    Photo: Belt Technologies

    In today’s hypercompetitive environment, tobacco companies expect suppliers to enable them to develop attractive products while controlling cost and meeting government regulations. Tobacco Reporter spoke with three suppliers of tobacco-related machinery and asked them what they are doing to help their customers stay ahead of the competition.

    Cleaning up nicely: Belt Technologies on the Advantages of Stainless Steel Belts.

    The Covid-19 pandemic has left us all more aware than we once were about the necessity of paying attention to, among other things, the cleanliness of surfaces; so, as part of its machinery feature, Tobacco Reporter took the opportunity of engaging in an email exchange with Brian Harbison, managing director of Belt Technologies Europe, about his company’s metal belts and tapes, which have been promoted in part on the basis that metal provides a more hygienic surface than that of other materials. 

    Tobacco Reporter: Do you think that, in the wake of Covid-19, demand from the tobacco and nicotine industry for Belt Technologies’ metal belts and tapes will increase?

    Brian Harbison: We have been helping the tobacco industry in the manufacturing process for more than 20 years. Our PureSteel metal belts do not require lubrication and do not outgas, eliminating the risk of contamination. Also, unlike other belt materials, stainless steel does not fray or generate particulates that could get into the tobacco and contaminate it. There has always been a push to maintain cleanliness in tobacco production and packaging to preserve purity, but I think now more than ever it’s at the top of consumers’ minds due to the pandemic.

    I take it that increased demand for such conveyor systems will arise in respect of some of the other industries the company serves, such as the food industry. 

    Absolutely. The food industry has had to pivot during the pandemic to ensure its processes are as safe and sanitary as possible. Our PureSteel conveyor belts are excellent for cooking, freezing and handling edible products, offering a variety of benefits over belts made from materials, such as plastic or rubber. Metal belts do not require lubrication, so there is no risk of chemicals tainting the food. Additionally, stainless steel is resistant to bacteria, making it easy to clean and in compliance with even the strictest USDA [U.S. Department of Agriculture] requirements.

    Has it generally been the case that, when looking at factory conveyor systems, the tobacco and nicotine industry has prioritized cleanliness in the past? 

    Yes, in the time we have been working with the tobacco industry, hygiene has been a top priority. Since people place tobacco products in their mouths, eliminating the presence of potentially harmful bacteria at all points of contact, from handling raw tobacco to the rolling and packaging process, is paramount.

    From the point of view of cleanliness, in what parts of the processes involved in the production of tobacco and nicotine products is it most important to employ metal conveyor systems? 

    Our belts can really be used to make any part of the process more sanitary. In the primary stage of tobacco processing, which is the bulk handling of raw, unprocessed tobacco, our metal belts ensure the product does not become contaminated with bacteria or other foreign matter. And when it comes to the secondary processing of tobacco, our stainless steel suction bands, used in the production of cigars and cigarettes, are available in a range of sizes and surfaces. The benefit of using a metal belt in this stage is the ability to keep the material that will touch the mouth free of contaminants and bacteria while still processing at top speed.

    Cleanliness is not the only characteristic on which Belt Technologies promotes its metal belts. Another, I notice, is durability. Again, this durability, along with metal’s usually good recycling credentials, seems to be currently more important than ever, given the environmental problems we are suffering. 

    Stainless steel has a low thermal coefficient of expansion, enabling greater resistance to extreme temperatures, and it’s also corrosion resistant and vacuum compatible. Inferior materials, such as plastic, rubber or cloth will warp, burn or fall apart when subjected to the same high temperatures metal belts can withstand, and similarly, will shrink or become brittle in extreme cold while metal belts thrive. Stainless steel has a tensile strength ranging from 180 KPSI to 300 KPSI (thousand pound force per square inch), depending on the alloy and temper of the metal. That means relatively thin and lightweight belts can be designed to handle the stresses of almost any application. The high strength and low weight enable the conveyor’s input horsepower to be directed toward moving the product and not the belt, which boosts efficiency and reduces operating expenses. Simply put, metal belts are stronger and more efficient than the alternatives.

    The tobacco industry seems to be evolving. Does Belt Technologies see fewer or more opportunities ahead as the production of tobacco products gives way gradually to lower-risk products, particularly oral products? 

    We have such a wide variety of products that can be used in various ways; we foresee being able to work in the tobacco industry no matter what pivots they make. Our custom solutions can be fabricated to the customer’s exact specifications, so even if one of our existing belts didn’t fit their needs, we could create one that would.

    Would you like to tell me anything else? 

    Metal belts, timing belts and drive tapes are superior, high-quality options for automated production and robotic facilities. Belt Technologies has been producing custom metal belt conveyor solutions for new and existing conveyor systems for more than five decades. Sophisticated engineering, advanced manufacturing processes and an unlimited variety of configurations and coatings are available to custom design belts to suit any application. –G.G.

    Montrade—Reimagining Product Assembly

    Photo: Montrade

    Some of the most interesting and innovative developments being applied to the machinery that will manufacture the tobacco products of the future, along with their derivatives, are unknown to those of us who are not intimately involved in those developments. This is understandable. The competitive nature of the tobacco and nicotine product business means that, often, manufacturers work confidentially with machinery suppliers to come up with new or redesigned equipment that will allow them to manufacture products capable of standing out in the marketplace.

    This has not always been the case. Before filters were added to cigarettes, the differentiation of products was mostly down to their taste, and so the secrecy surrounding manufacture was almost entirely down to tobacco blends. But once filters were added, for a number of reasons, the focus moved from the blend to other things.

    I got to thinking about these things during an email exchange with Emanuele Massari, senior sales manager at machinery supplier Montrade, who described how his company had previously reimagined the process of making nonwrapped acetate (NWA) filters, allowing a product design innovation. The invention of the new process, which is covered by a number of Montrade patents, led to the design and development of an innovative machine, the MONO NWA, to manufacture the filter in line with the new process. Montrade’s MONO NWA, Massari said, was still a reference point for the filter market and continued to be the only filter maker capable of producing, at high speed, tubes (hollow acetate tubes) with extra-thin walls of 0.5 mm.

    Currently, Montrade, which supplies machines for manufacturing heat-not-burn sticks, from the base rod makers, including the tobacco portion, to the combiners that assemble the final products, says it is partnering with several clients in investigating other new-generation products. “We are working on some very interesting and innovative projects, which are still at a confidential stage,” said Massari.

    Meanwhile, over the years and up to the present day, Montrade has directed some of its innovative thinking at the environment. Fifteen years ago, before such thinking went mainstream, it built the first version of its paper crimper, a move that was to pay off commercially as well as environmentally. “We have been recognized by many customers, both multinationals and independents, as the preferred OEM for paper filter equipment, establishing ourselves as the clear leader in this sector,” said Massari. —G.G.

    Independent Solutions: Achieving Engineering Goals in the Most Cost-Effective Manner

    Photo: TMQS

    If a company operates in a fast-moving consumer goods market sector, change is almost certainly part of its DNA because change is an important strand of the competitive thread that binds it to success. And if a company operates in the tobacco sector, change tends to loom even larger because it is driven not only by competitive issues but also by regulatory ones.

    The problem is that change can be expensive and there is little point in changing to stay ahead of the competition and regulations if it means you lose money. So how do you engineer the changes you need without breaking the bank?

    Tobacco Reporter in August put this question to Norbert Schulz-Nemak, sales manager at TMQS, a German machinery company that takes a flexible approach in helping tobacco manufacturers attain their various goals. Tobacco manufacturers needed to undertake frequent changes in their product portfolios, he wrote in an email exchange, and, in some cases, their existing machinery might not be such that it could be efficiently reconfigured to accommodate these changes, which might require anything from a minor to a major conversion.

    “If a manufacturer is faced with a new requirement and asks an OEM [original equipment manufacturer] about the solution, this usually leads to the buying of new machinery that is equipped or specifically designed for such a task,” said Schulz-Nemak. “This helps, but it is certainly an extremely costly exercise.”

    Given this, TMQS says it is working with customers to achieve their new goals in the most cost-effective manner possible. “Our solutions are stand-alone and independent of machinery PLCs [programmable logic computers, or industrial computers],” he said. “And they are flexible so that they can be used on each and every type of cigarette and filter maker.”

    So what types of changes can be achieved at reasonable cost? Well, one example was where a manufacturer needed to produce cigarettes with high levels of ventilation, said Schulz-Nemak, in which case TMQS could provide a modern, online, high-powered laser capable of achieving the best results, even where there were critical specifications.

    Another example was where market-driven or consumer-driven changes required cigarettes to be produced with biodegradable filters. Instead of buying new machinery, a TMQS crimping unit could be placed in front of an existing filter maker. And if special filters, such as hollow filters, were required, existing machinery could be converted.

    It was unnecessary, also, to buy new machinery when new plug-wraps with, for instance, glossy or slippery paper, were introduced, because TMQS could optimize the rolling process of such papers to ensure the manufacture of the best quality products.

    And while detection equipment for NTRMs (nontobacco-related materials) was available from OEMs only in respect of new-generation machinery, TMQS offered NTRM detection for retrofitting to older cigarette makers.

    Meanwhile, more complex changes involving, for instance, new PLCs or weight-control systems, could be integrated into existing machinery, said Schulz-Nemak. Importantly, if a manufacturer wanted to branch out into new product areas, such as those involving tubes or heat-not-burn devices, TMQS could modify existing machinery, thereby bypassing the need to make major investments in new machinery. —G.G.

    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.
  • Taming the Moral Panic

    Taming the Moral Panic

    Photo: romankosolapov

    A recent landmark article offers a rare balanced look at vaping in the U.S.  

    By Cheryl K. Olson

    In the 1930s, there was considerable handwringing among politicians and academics about how gangster films would turn an entire generation of teenagers into thugs and thieves. After a few years, film scholars recognized that it was a moral panic—a widespread and irrational fear supported by emotions rather than by scientific data. They moved on.

    In the 1950s, sociologists feared that crime and horror comic books would destroy the morals of that era’s youth. There were U.S. Senate hearings on whether they should be published as well as mass comic book burnings around the country. After a few years, sociologists recognized that it was a moral panic. They moved on.

    In the early 21st century, a popular London-based tabloid claimed that video games are as addictive as heroin and that “Britain is in the grip of a gaming addiction, which poses as big a health risk as alcohol and drug abuse.” On the other side of the Atlantic, then-Senator Hillary Clinton claimed that “violent video games increase aggressive behavior as much as lead exposure decreases children’s IQ scores.” It was, psychologists have largely concluded, another moral panic with echoes that remain in today’s public policy.

    We may have just seen the turning point on the moral panic surrounding vaping. Writing in the August issue of the American Journal of Public Health (AJPH), 15 former presidents of the Society for Research on Nicotine and Tobacco (SRNT), the world’s leading scientific organization for the study of smoking, concluded that concerns about youth vaping are overblown and may be undermining attempts to get current combustible tobacco users to quit. The much-touted fears are simply not supported by the data.

    Rebalancing the Conversation on Vaping

    As the title—“Balancing Consideration of the Risks and Benefits of E-Cigarettes”—suggests, the authors were particularly concerned about the public’s misunderstanding of the products’ relative risks.

    “Of respondents to a 2019 national survey, nearly half considered vaping nicotine just as harmful as or more harmful than cigarette smoking,” they wrote. “Only one in eight considered vaping less harmful. (The rest responded, ‘I don’t know.’) By contrast, the U.S. National Academies of Sciences, Engineering and Medicine and the British Royal College of Physicians have concluded that vaping is likely far less hazardous than smoking cigarettes.”

    In the U.S., youth vaping prevention programs have done their work too well. In recent years, the tone of coverage of vaping, in academic journals and news media, has gone from a mix of curious, skeptical and optimistic to a presumption of acute danger. A 2018 content analysis of 2015 news coverage of e-cigarettes, published in Nicotine & Tobacco Research (the SRNT’s journal), noted that “quoted physicians, researchers and government representatives were more likely to refer to e-cigarette risks than benefits” in the run-up to U.S. Food and Drug Administration regulation.

    They presciently cited concerns about harm from this increasingly negative media coverage: “While the news media is an important vehicle for informing the public about the potential risks of these new products, it has also been argued that news stories that focus only on risks without contextualizing their risks relative to cigarettes or discussing their harm reduction benefits may contribute to misperceptions about the risks of these products.”

    “Contextualizing the risks”—in other words, framing the issue affects the terms of the debate. For example, we’ve seen the framing of flavored vapes shift as public opinion on vaping soured. The initial focus on eliminating child-attracting names, imagery and packaging (sugary breakfast cereals, cartoons, baby bottle shapes) morphed into suspicion of fruit flavors in general and then to all nontobacco flavors. This gradual shift masks the absurdity of mandating that nicotine stay linked to the taste of cigarettes, when the goal is to wean people off them.

    While no one who looks at the data would claim that vaping is safe or that nonsmokers should start, the 15 AJPH authors put our concerns into perspective. The melodramatic public service announcements implying that vaping will disfigure your face and send eel-like creatures to invade your brain or that it “can escalate teen mood swings” are as irrelevant as the much-mocked Partnership for a Drug-Free America’s series of “This is your brain on drugs” public service announcements from the 1980s featuring sizzling fried eggs.

    Smokers Are Still Here

    Smoking remains a massive and challenging public health problem. In the United States alone, nearly a half-million people will die this year from smoking-related illness. The headlines and health campaigns about smoking may be gone, but smoking is not.

    In the AJPH authors’ eloquent phrasing, “To the more privileged members of society, today’s smokers may be nearly invisible. Indeed, many affluent, educated U.S. persons may believe the problem of smoking has been largely ‘solved.’ They do not smoke. Their friends and colleagues do not smoke. There is no smoking in their workplaces nor in the restaurants and bars they frequent. Yet one of every seven U.S. adults remains a smoker today.”

    The stalled decline in adult smoking rates gets little attention in academic journals. One 2017 study (Zhu S et al. – “Smoking prevalence in Medicaid has been declining at a negligible rate.”) found that about a third of people on Medicaid (who must have incomes below a certain threshold and often deal with chronic physical or mental illnesses) are smokers; their quit rates were basically flat from 1997 to 2013.

    As part of restoring balance between vaping’s youth risks and adult smoker benefits, the 15 AJPH authors bring up smoking as a social justice concern. For example, “African Americans suffer disproportionately from smoking-related deaths, a disparity that, a new clinical trial shows, vaping could reduce.”

    Further, “Smoking accounts for a significant proportion of the large life expectancy difference between affluent and poorer Americans. For smokers with serious psychological distress, two-thirds of their 15-year loss of life expectancy compared with nonsmokers without serious psychological distress may be attributable to their smoking. Vaping might assist more of these smokers to quit.”

    I shared the AJPH article and related material with someone whose business is specially designed e-cigarettes for incarcerated persons, replacing various types of dangerous contraband combustible tobacco. Watching the short video that accompanies the article, produced by the University of Michigan School of Public Health and featuring study co-author Kenneth Warner, made her staff literally stand up and cheer. 

    The 15 researchers’ conclusions bode well for helping those who are addicted to combustible tobacco and who will not or cannot yet quit. Vaping provides a reduced harm pathway for providing the nicotine that smokers’ brains crave without most of the extremely dangerous combusted byproducts of tobacco. The contents and existence of this landmark article are a reason to celebrate—not for us but for the smokers whose lives may be saved.

    Why is it important that these authors are past presidents of the Society for Research on Nicotine and Tobacco? Because this is not an organization known for friendly relations with the nicotine product industry. But they looked at the data and are moving on.

    The New Merchants of Doubt

    An interesting commentary accompanied that American Journal of Public Health consensus statement by 15 respected experts. In it, Martin Dockrell and John N. Newton worry that the drumbeat of concern about vaping’s risk “leads to cognitive bias” that makes us discount evidence of benefits. For this mindset, they use an interesting and potentially stinging turn of phrase: “Public health risks stealing the [tobacco] industry’s clothes, becoming the new merchants of doubt.” This references the famous 2010 book Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming.*

    Dockrell and Newton are not the first to label e-cigarette critics as merchants of doubt (just as I’m far from the only person to call moral panic on youth vaping). But it’s quite another thing to sling that history-laden insult in the editorial pages of the venerable American Journal of Public Health.

    Merchants of Doubt tells the story of how the tobacco industry pioneered the creation of controversy and uncertainty in the face of general scientific consensus. “How could the industry possibly defend itself when the vast majority of independent experts agreed that tobacco was harmful and their own documents showed that they knew this?” asked authors Naomi Oreskes and Erik M. Conway. “The answer was to continue to market doubt.”

    This approach of creating controversy and marketing doubt was copied by other industries, including to deny global warming. They describe the industry’s “key insight: that you could use normal scientific uncertainty to undermine the status of actual scientific knowledge. As in jujitsu, you could use science against itself.”

    For example, longitudinal studies may well uncover yet-unknown health risks of vaping for certain types of products or use patterns or people with certain genetic makeups. Because vaping is new and the technologies are still evolving, it will take decades to collect the kinds of evidence we have now about smoking. The new merchants of doubt take advantage of that to play up the inevitable uncertainty about risks, blowing smoke to obscure the fact that today, the “vast majority of independent experts” agree that vaping is a far less dangerous alternative.

    For decades, the hero’s narrative was public health against Big Tobacco, charging ahead, the good guys beating back lies from the bad guys promoting disease and death. Now, 15 Society for Research on Nicotine and Tobacco past presidents invite us to look up from the haze of that long battle and consider how positions have altered. Some public health advocates may now be engaged in the wrong fight. Or worse, we may be fighting on the wrong side. —C.K.O.

    *Oreskes N, Conway EM. Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming, Bloomsbury Press, 2010.

    Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors. She spent 15 years on the faculty of Harvard Medical School.
  • Piping Up

    Piping Up

    Ruth Gunning (Photo: European Shisha Community Alliance )

    Ruth Gunning, board director of the European Shisha Community Alliance, discusses the challenges facing the water pipe tobacco sector in Germany.

    By Stefanie Rossel

    While still a niche, shisha has become more popular in Germany in recent years. The country is the largest market for water pipe tobacco in the European Union, with entrepreneurs introducing many new shisha brands. Germany is also home to large communities from Turkey and the Middle East, where smoking shisha has historically been a popular pastime. Many Germans try shisha on holidays in Turkey, Egypt or Dubai and subsequently seek it out when they return home.

    According to estimates by the European Shisha Community Alliance (ESCA), smokers consume about 5,500 tons of shisha annually in Germany. A quarter of it is consumed in the country’s approximately 6,000 shisha lounges. But the market has a severe black market problem—around 45 percent of water pipe tobacco is nonduty paid or counterfeit.

    As part of the country’s recently passed tobacco tax reform, the German ministry of finance will increase taxes on shisha tobacco by an additional €23 ($27.24) per kilo by 2026. Furthermore, pack sizes will be limited to 25 grams from July 1, 2022.

    Tobacco Reporter spoke with Ruth Gunning, head of EU engagement for shisha manufacturer Al Fakher and a board director for the ESCA, about the challenges facing the sector.

    Tobacco Reporter: Water pipe smoking is a social activity, with much of it taking place in shisha lounges. Which impact has the Covid-19 pandemic had on the German shisha market?

    Ruth Gunning: It has been an extremely difficult period, and unfortunately the relief has been slower than originally anticipated so far in 2021. Many of our members have been unable to operate—lounges due to the restrictions that have been put in place and some retailers have had to remain shut due to the nonessential nature of their business. Not just in Germany but across Europe. Much of the use was driven into the home.

    As the hospitality sector was allowed to reopen, initially with outdoor areas being most popular, we started to see more anti-tobacco groups being very vocal about banning outdoor smoking and linking it to the spread of Covid-19 despite having no evidence to support this. Shisha is nothing like cigarettes, yet these groups seem to conveniently forget that people’s livelihoods are fully reliant on the shisha sector operating at full capacity. We estimate that there are about 65,000 people across Europe with jobs that are dependent on the shisha category. ESCA has had to work hard with its members to try to ensure that shisha bars and lounges are afforded the same opportunities for reopening as others in the hospitality sector. All of our members are fully committed to upholding extensive hygiene standards to ensure their customers are protected and feel safe.

    Amid the crisis, Germany, uniquely in the EU, passed a law to reduce the packaging size for shisha tobacco to 25 grams in order to curb illicit trade. What is your take on this measure?

    We support any efforts to help to reduce the problem of illicit trade. The problem with this new proposal is that it requires significant enforcement, which will undoubtedly not happen. It also doesn’t properly address the growing problem of illicit [trade]. Enforcement in Germany, particularly in lounges serving illegal product, is very low, and now with the increase in prices for consumers, the incentive for smugglers will grow and/or people will buy elsewhere, i.e., in countries where they can access larger pack sizes at cheaper prices.

    What impact will this regulation have on manufacturers?

    Complexity and cost. This new size will require a reconfiguration of the production process in factories. New equipment and materials will be required, and Germany will be the only country to have this, which will be costly. Manufacturers who are hardest hit by illicit [trade] may face real challenges in protecting the legal market if the government does not step in and enforce its new laws.

    What does it mean for shisha lounge owners?

    Again, it’s a question of enforcement. Many lounge owners are legally compliant; they are already required to serve only 20 gram packs to consumers. But because there is a lack of consistent enforcement, those who seek to abide by the law lose out. They already compete on an uneven playing field.

    Many shisha lounges in Germany have been unable to operate due to Covid-19 restrictions. (Photo: Parilov)

    Will the new rules help reduce tobacco consumption in Germany?

    The more restrictions are placed on products like shisha, the more the illegal market grows—and with that comes an added risk to consumers. Therefore, I don’t think added restrictions will reduce tobacco consumption; it will merely drive it underground.

    Germany and Europe’s aim to reduce tobacco use is totally understandable. And in fact, globally, many people recognize that a move from combustible to heated products can be beneficial. However, it is important to remember that shisha is very different from cigarettes. Shisha is heated at a much lower temperature compared to cigarettes, which are burnt, and the aerosol produced when shisha is heated comprises 60 percent water vapor compared to 15 percent in cigarette smoke.

    According to the Federal Institute of Risk in Germany, on average, people in Germany use a shisha once or twice a week. If you compare this to cigarette use, where on average users can smoke 20 [cigarettes] to 30 cigarettes a day, the difference in consumption pattern is staggering. The exposure to tar, nicotine and carbon monoxide over a one-week period for average shisha smokers is far less than that for average cigarette smokers. Shisha is much lower on the risk continuum than cigarettes, and as governments aim to reduce cigarette and combustible tobacco use, they should not apply the same regulations to shisha. 

    Whilst shisha is a tobacco product and is not harmless, it is used very occasionally, it is a social activity, and it has cultural and historical roots. Shisha consumption is a lifestyle choice for adults, is a force for good and is part of an inclusive society.

    Your association estimates that illicit product accounts for more than 45 percent of the German shisha market. How does this compare to the situation in other EU markets?

    It’s not the worst in the EU because the taxes are not the highest when compared to other countries. However, with the newly imposed excise hikes, this will likely change from January 2022 onward. The biggest factor driving the illegal business in Europe is the EU’s position on shisha taxation. At the moment, shisha is taxed in the “Other tobacco” category, which includes pipe tobacco, cigars and cigarillos. These are very different products to shisha in terms of use and market size. The range of taxes in the EU goes from €22 per kg to €250 per kg. This, combined with the open borders, causes a great deal of instability in the shisha tobacco market. The French market, for example, has 85 [percent] to 90 percent illegal shisha, and that is solely because the tax is so high. Spain, on the other hand, is almost 100 percent legal because it has reasonable taxes. This provides the Spanish government with full control over the sector. 

    Many countries, such as Russia and now Germany, have introduced a special tax category for shisha alone. But more is needed. In addition to its own tax category, ideally, shisha should be taxed based on the percentage of tobacco contained in the shisha. Shisha only contains about 15 percent tobacco and should be taxed based on this. In Russia, they switched to a tax system that only taxes the actual tobacco content, and they converted the market from almost 100 percent illegal to 100 percent legal in a short period of time.

    What, in your view, would be a better solution to tackle black market for hookah tobacco?

    The most obvious solution is to apply excise according to the weight of the tobacco. This would bring prices down and significantly reduce incentive for organized criminal gangs to smuggle and counterfeit shisha products. Additional sensible solutions are to stock, prepare and serve shisha in sight of the consumers and from its original packaging. This requires enforcement by authorities and also a desire by consumers to be served genuine product. Consumers should demand certain standards. Introducing a licensing system for shisha lounges with license renewal to be subject to compliance performance—for example, with withdrawal of a license after three infringements—would also be a possibility. Furthermore, there should be regular inspections of inventory and significant fines for those involved in selling illegal products.

    Which countries have handled this issue most successfully and could serve as an example?

    Spain is really the best example I can give. In addition to the steps outlined above, another known and proven way to get illicit trade under control and to meet the objective of protecting public health is to ensure that the tax rate takes into account the rates in neighboring countries, tax increases are planned over the long term and are increased in regular and small increments and close cooperation between industry and authorities. Additionally, enforcement and penalties should be strong enough to act as a deterrent. A legal market is easier for the authorities to monitor, and legal manufacturers are obliged to follow all product, packaging and marketing regulations, which strengthens the authorities’ aim of protecting public health. Criminals that are involved in the illegal trade of shisha don’t follow any regulations or laws, and the authorities cannot monitor the product as it is mostly sold out of sight and “under the table.”

    What about the future of shisha in Europe?

    The next big piece of legislation that we need to be prepared for is the revision of the Tobacco Products Directive. The EU has already stated that it aims to ban flavors for all tobacco products. Shisha is inherently flavored; therefore, it would act as a de facto ban of the product. That would be disastrous for thousands of businesses across the EU, deprive EU citizens of the ability to legally consume shisha and exacerbate an already flourishing illegal market.

    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.
  • In the Lurch

    In the Lurch

    Photo: ltummy

    By Paul Hardman

    Electronic nicotine-delivery system (ENDS) companies in the U.S. have found themselves in limbo following the FDA’s recent statement on the regulation of e-cigarette products.

    The long-awaited deadline for the review of manufacturers’ premarket tobacco product applications (PMTAs) was somewhat of an anticlimax, leaving many none the wiser as to whether they could continue to sell their products.

    The result left company executives frustrated—and in a predicament when it comes to their responsibilities to public health versus their legal obligations.

    The lead-up to Sept. 9, 2021, saw companies that had submitted PMTAs given a year’s grace to continue to sell their products until a decision on their future could be taken.

    For many, that decision is yet to materialize, with the FDA announcing it had not managed to get through the sheer volume of applications received by the court-imposed deadline. 

    So, what has the FDA done? Its statement said that as of Sept. 8, the organization had completed acceptance review for all of the applications and completed filing review for about 90 percent of applications submitted by the Sept. 9, 2020, deadline.

    Many of these applications were ultimately knocked back at the first hurdle, receiving a refuse to file (RTF) letter at the filing stage due to missing some of the required information, with 4.5 million products receiving refusal to file from just one company’s application. The FDA said this included the lack of ingredient listings, labels for each product and adequate environmental assessments.

    As of Sept. 8, the FDA said it had issued substantial equivalence (SE) marketing orders covering more than 120 (non-ENDS) products and exemption from substantial equivalence requests marketing orders covering more than 230 products. Some companies had bad news in the form of the first marketing denial orders (MDOs), which were issued on Aug. 26 for about 55,000 flavored products. The FDA’s responsibility is with public health, weighing the potential benefits for adult smokers of using ENDS products to wean themselves off cigarettes against the potential appeal to teenagers or new users who may go straight to ENDS, potentially attracted by flavored varieties.

    These companies will now have to remove their products from shelves or risk enforcement action. With limited resources, the FDA has suggested it will prioritize the enforcement of those that have received MDOs as well as products with no pending application while processing the backlog of applications and any new PMTAs.

    That leaves a quandary for those who submitted their applications by the Sept. 9, 2020, deadline but who haven’t yet received an MDO. They can effectively continue to sell their products as no ruling has been made on them; however, the FDA has made it clear that any company that does continue to sell these products will be doing so unlawfully, although it is clear that they are not likely to face any enforcement action.

    And there lies the difficult part. Many of these companies cleaned up their acts in recent years, putting in place codes of conduct setting out their ultimate aims of improving public health through promoting the replacement of combustible tobacco. If those that have submitted PMTAs have demonstrated and believe that their products are doing good in the world, then to follow the letter of the law by removing their products from shelves could potentially harm users by pointing them back in the direction of cigarettes—going against their codes.

    That brings them to a decision between their obligations to the law and their responsibilities to the overall safety of users. The naysayers may suggest these manufacturers are putting profits first, but, as an extreme example, if all the companies out there decided to take their products off the market, there would ultimately be limited choices for users, which may make a return to tobacco an attractive prospect for them. There is also a risk that some may choose to fly under the radar by turning to the black market to sell their products.

    Companies must decide whether they take a chance and wait for the FDA to take enforcement action against them.

    One positive for ENDS companies from the statement is that the reason given for some of the MDOs was not that they were necessarily worse for health than cigarettes, but that the application lacked sufficient evidence provided within the submission. We know that the FDA is very much open to ENDS products having the potential to protect public health. I am sure that, with adequate evidence resubmitted, many of these products will receive marketing orders in time.

    This is where specialized companies, such as Broughton Nicotine Services, can assist, working with businesses to provide the evidence needed to complete this process. The FDA’s delay in processing applications provides an opportunity, too, to those companies whose PMTAs have not yet reached the substantive review stage. There is still time to bolster an application that has yet to reach this stage if you believe additional evidence would be beneficial—but time is of the essence.

    The PMTA process, as is evident, is complex, perhaps favoring the larger companies with the resources to navigate the system and submit detailed information. Juul Labs, for example, was able to take action by reducing its products to only tobacco and menthol flavors, removing fruit options from the market, yet we are still to hear the outcome of their application.

    The next step will be to discover how frequently the FDA plans to announce the results of PMTAs. My preference would be monthly to ensure ENDS companies and the industry feel a little less in the lurch. 

    FDA Postpones Decisions on High-Profile Marketing Applications

    The much anticipated deadline for the U.S. Food and Drug Administration to decide on millions of premarket tobacco product applications (PMTAs) passed without bringing the clarity about the future of tobacco harm reduction that many health advocates and industry representatives had hoped for.

    On Sept. 9, the agency issued marketing denial orders (MDOs) to more than 130 companies requiring them to pull an estimated 946,000 products from the market. However, despite a court order to complete the PMTA review process by that date, the FDA failed to make decisions on some of the bestselling vapor products on the U.S. market. 

    There were no updates on high-profile submissions, such as those submitted by Juul Labs, Reynolds American Inc. and Japan Tobacco International. The agency also offered no response to any submitted open-system hardware products or tobacco-flavored e-liquids.

    “We continue to work expeditiously on the remaining applications that were submitted by the court’s Sept. 9, 2020, deadline, many of which are in the final stages of review,” acting FDA Commissioner Janet Woodcock and FDA Center for Tobacco Products Director Mitch Zeller wrote in a joint statement.

    Interestingly, the agency saw fit to issue marketing orders for more than 350 combustible tobacco products under the standard equivalency pathway, many of which, hookah tobacco for example, are flavored tobacco products. All of the issued MDOs were for flavored electronic nicotine-delivery systems (ENDS) products.

    “This looks like being a public health own-goal of historic proportions,” Jonathan Foulds, professor of public health sciences and psychiatry at the Penn State University College of Medicine, wrote on Twitter. “Will be interesting to see whether the stock value of cigarette manufacturers goes up.”

    Amanda Wheeler, president of the American Vapor Manufacturers Association, noted that the FDA ruling criminalizes thousands of longstanding businesses across the United States. “Those entrepreneurs have to junk their inventories, fire their employees and stiff their investors,” she said during the recent GTNF conference in London.

    Vuse owner BAT, for its part, was sanguine. “We remain confident in the quality of our applications, which are supported by scientific evidence that our Vuse and Velo products are appropriate for the protection of public health,” the company wrote in a statement.

    Vapor industry representatives have long complained that the PMTA system favors big players. In 2019 court filings, the Vapor Technology Association noted the expenses greatly exceeded the $300,000 to $500,000 per product that the FDA estimated in its regulatory impact analysis. Such a burden, say critics, can be borne only by the best-resourced players—i.e., the established tobacco companies.

    Meanwhile, MDO recipients have started looking for ways to continue serving their customers, with some of them turning to synthetic nicotine. The FDA currently defines a “tobacco product” as anything “made or derived from tobacco that is intended for human consumption, including any component, part or accessory of a tobacco product.”

    Whether the FDA will allow products with synthetic nicotine to remain on the market remains to be seen. Eric Lindblom, a senior scholar at Georgetown’s O’Neill Institute for National and Global Health Law and a former director of the FDA’s Center for Tobacco Products Office of Policy, suggested that as more vapor companies move in this direction, the FDA could either assert jurisdiction over synthetic nicotine as a tobacco product or push for synthetic nicotine to be regulated like any other drug.

    How the ENDS market will evolve from here is anyone’s guess. Since the Sept. 9 deadline, the FDA has continued issuing MDOs, including to products submitted by prominent companies such as Turning Point Brands, Avail Vapor and Bidi Vapor. At press time, the number of MDOs exceeded 1.16 million products from 323 companies.

    A big question is whether the agency will grant marketing orders to the applications submitted by the market leaders. Previously, the FDA had indicated it would prioritize those products because doing so would have the greatest impact on the market. Even in the wake of substantial share losses, Juul alone still accounts for 40 percent of the U.S. vaping market.

    Whatever happens, the FDA is certain to catch flak from industry critics and vapor companies alike. At GTNF, Wheeler announced a public campaign. “We will be at FDA’s doorstep demanding answers or forcing them through freedom-of-information laws and in the courts,” she said. “We are not going to sit still while the FDA endangers our health, crushes our livelihoods and treats the American people like gullible idiots.”

    The Campaign for Tobacco-Free Kids (CTFK), which helped set the Sept. 20, 2021, deadline through litigation, hinted it might resume legal action to have the court enforce its order requiring the FDA to begin to remove unauthorized products.

    “While FDA has said it has ruled on 93 percent of the applications, it hasn’t ruled on the products that have driven the youth e-cigarette epidemic,” said CTFK President Matthew Myers. “Every day those products remain on the market, our kids remain in jeopardy.”

    Paul Hardman is head of scientific affairs at Broughton Nicotine Services.
  • For the Long Haul

    For the Long Haul

    Photo: BAT

    Sustainability, strategy and survival in the tobacco market

    By Clive Bates

    Before delving into what sustainability means for the tobacco market, we must first ask what the word itself means. A good starting point is an observation of the French philosopher Luc Ferry: “I know that this term is obligatory, but I find it also absurd, or rather so vague that it says nothing.”

    Ferry captures the problem well. It is often taken as a green concept, promoting enlightened practices on energy and emissions, waste and recycling and raw materials in the supply chain. A more evolved definition considers social and economic impacts. This has led to a steady output of sustainability reports from major businesses, increasingly with feedback into operations with a view to improving over time and avoiding the wrong half of sustainability league tables. This is all good, but is it good enough?

    I favor a more hard-nosed definition of business sustainability. It would be a variation of the concept defined by one of the pioneers of sustainable development, Gro Harlem Brundtland, in 1987: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

    Brundtland was referring to nations or to the whole world, but that formulation can be repurposed for a business. If the goal of a business is to generate shareholder value (the value of its stock and flow of dividends) then a reasonable equivalent would be to sustain and grow shareholder value over the longer term. Ultimately, sustainability is about designing and executing a corporate strategy that builds resilience and long-termism into a business but not at the expense of today’s shareholders. One reason why a tobacco company cannot just pull out of cigarettes and concentrate on new products is that the shareholders would fire the management, the company would be taken over or the cigarette assets sold as a going concern.

    What does this concept of sustainability mean? We can start with what it does not mean: It does not mean the single-minded pursuit of quarterly earnings at the expense of all wider concerns. “Shareholder value” embodies a range of important but less tangible elements that are reflected in the price of a stock. These include numerous market judgments on the future earnings of the company and its resilience to changes in the marketplace. Nor can it be oblivious to the concerns of stakeholders who are not shareholders, including customers, employees, politicians and public health organizations. They frame the operating context and confer the license to operate.

    Here are six questions I would ask any company about its sustainability in the tobacco market:

    1. How robust is the company’s approach to the mitigation of litigation risks? No one really denies that about 8 million people die annually from smoking-related diseases. But who is responsible and accountable for that? Plaintiffs and their lawyers will continue to stalk companies and hold them to account for their past and present behavior. Litigation in the early 2000s had a powerful suppressing effect on shareholder value and at times looked like an existential threat. Part of litigation risk mitigation is to be scrupulously honest in describing products and their risks, to be responsible in marketing and promotion, and to provide a range of low-risk alternatives with encouragement for smokers to switch. The conduct of companies that make products that are harmful and open to abuse will always be under scrutiny, often in the courts of law but always in the court of public opinion.
    2. How resilient is the company strategy to political and regulatory pressures? Governments permit, regulate and tax the most dangerous nicotine products, cigarettes, in every country in the world (even in Bhutan, which recently rescinded its longstanding prohibition of tobacco). While that mandate persists, there will be companies lawfully selling cigarettes. But as the low-risk alternatives rise in popularity, governments will be increasingly emboldened to take stronger regulatory actions against cigarettes, for example, in setting reduced-nicotine standards. Many advocates of such policies now argue that highly restrictive measures are becoming feasible as smokers have a range of low-risk and acceptable alternatives to switch to. Prohibitions without alternatives just lead to black markets. For tobacco businesses, the low-risk alternatives to smoking simultaneously threaten to hasten the end of cigarettes but also provide the opportunity in an emerging, and potentially larger, market for much safer smoke-free recreational nicotine.
    3. How well positioned is the company for changes in consumer preferences? What happens if the pace of migration from high-risk cigarettes to low-risk vaping, heated or smokeless nicotine products accelerates? What if there are tipping points when a critical mass of users makes the alternatives become rapidly ubiquitous? Which companies are poised to prevail? In a fast-moving consumer goods market, companies must ask what the consumer really wants and does not want. It is undeniable that many enjoy smoking, but if we break down that experience into different elements, what do they really want: a satisfying nicotine experience; a sensory experience and flavor; behavioral rituals; a social medium; elements of personal identity and group affinity? How can that be offered without cancer, cardiovascular disease and lung disease? Without stigma and social barriers?
    4. In a changing market, how well is the company positioned to gain or defend market share from competitors? I recently heard a tobacco executive say, “We have 25 percent of the cigarette market, but with our new products, I’m going after the other 75 percent.” That was a sharp reminder that in a radically disrupted market, no one can count on brand loyalty, and even the mightiest brand equities count for little. The aggressively sustainable company looks at disruption and sees opportunity to build future shareholder value. In contrast, the passive profit-seeker may find its grasp on its once-loyal customers is not as strong as it thought. How promising is the company’s portfolio of products in the more febrile markets for smoke-free alternatives? How strong is the product pipeline in R&D? What approach is the company taking to synergistic acquisitions of promising companies and their intellectual property?
    5. Who wants to work for this company? It is a tiresome management cliche to say that “our company is our people.” But it is also right, and especially over the longer term. A sustainable company needs to develop, retain and attract talent at every level and in every area. That is ultimately where its longer term value will be created. The staff in the companies today bear little resemblance to the famously pictured lineup of CEOs testifying to Congress in 1994 (with apologies to industry veterans), but many are younger, sharper and motivated by change for the better. Many see themselves as quiet revolutionaries from within—and not always quiet. The ability to attract top quality, highly motivated staff at affordable salaries will be increasingly about how the companies are looking to the future and how they will ultimately shed their reputational baggage.
    6. Does the board have a convincing vision? In Alice’s Adventures in Wonderland by Lewis Carroll, the Cheshire Cat argues, “If you don’t know where you’re going, any road will get you there.” When the board meets, how often does it raise its collective gaze to the horizon and beyond? When it does this, what does it see and how does that affect what it does today, this month and this year? It makes a big difference if the board sees new products as line extensions and a neat new consumer segment or if it sees a structural transition from smoked to smoke-free nicotine products underway and gathering pace.

    But what is a sustainable vision for the nicotine market? It goes beyond tobacco harm reduction, which is an important phase in the transition from combustible to noncombustible products. For the long term, I expect we will see a stable business model based on a (grudging) societal acceptance that nicotine is a legal and legitimate recreational stimulant with relatively benign side effects (no intoxication, violence, incapacitation, loss of control, etc.). The challenge for the tobacco market is to make this drug available in a way that is acceptably safe. That does not mean completely safe. It means within the normal societal appetite for recreational risks. In this vision, smoking would have declined to minimal levels primarily through consumer preferences for much safer but satisfying alternatives to cigarettes driven by continuing innovation. Regulators could put a thumb on the scale to tilt the market toward the safer products, but they will have no need to use the iron fist of prohibition. It will also require a rethink in public health groups that resist everything the tobacco companies do by default. They believe there is an irreconcilable conflict between the interests of tobacco companies and public health. In my view, they are wrong.

    There are still some who think sustainability is about corporate social responsibility. In the tobacco market, it is more than that: It’s about strategy and survival.

     

    The theme of GTNF 2021 (Sept. 21–23, 2021, in London) is Continuing Change: Innovation & Sustainability.

    Clive Bates is the director of Counterfactual Consulting and the former director of Action on Smoking and Health (U.K.).
  • The Credibility Gap

    The Credibility Gap

    Photo: ia_64

    What tobacco industry scientists wish they could say to physicians and public health researchers about their work

    Cheryl K. Olson

    “I was an ardent antismoker who believed that the tobacco industry was a bunch of evil scientists just working out how they could addict children,” said Justine Shaw Jackson, who is also known as Justine Williamson. Her grandfather, a smoker, died of COPD; her father’s smoking was likely linked to his heart attack and cancer.

    She simply didn’t believe anything that tobacco industry scientists said. “I thought they wanted to make their products even more harmful,” she added.

    So, how did she end up working for Big Tobacco?

    Scientists employed by most industries face predictable concerns about the independence and credibility of their work and even whether they’re “real” scientists. After all, we have a pretty good idea what the Egg Board will be recommending we eat for breakfast. This problem is particularly acute for scientists who work in the tobacco industry.

    Despite their detailed and sophisticated knowledge about harm reduction for smokers, they’re sometimes excluded from professional interactions with nonindustry researchers in which that expertise would be of benefit. The history of Big Tobacco from decades ago has stripped them of their credibility.

    Current employees of tobacco companies are constrained by a combination of government regulations and corporate nondisclosure rules. I spoke with several scientists who had recently left positions at tobacco companies about what they wished they could say to physicians and public health researchers about the work they’d been doing. Some agreed to speak on the record; others agreed to provide background information.

    Twenty years ago, Jackson was finishing her doctorate in genetic technology at Swansea University. British American Tobacco was funding a project in a professor’s laboratory. She met some of their scientists. “These guys were working incredibly hard on understanding what in smoke was causing problems and on reducing the harm of tobacco products,” she added.

    Across the pond in the U.S., Willie McKinney, a toxicologist, had a similar start to his career at Philip Morris USA. He had finished his doctorate in toxicology at the University of North Carolina, met with industry scientists and was impressed with their honest assessment of tobacco’s health effects.

    “They told me that they were out of alignment with society and that their products cause harm,” he said. “That alignment with society means modifying products to be less harmful or selling products that do not cause harm. They can’t make money if they’re shut down. So for 20 years, that was my focus: testing and evaluating potentially reduced-risk products.”

    They both became experts in harm reduction for smokers. Yet because of their association with Big Tobacco, they were frustrated that public health practitioners, medical professionals and government policymakers left researchers like them out of the conversation when it came to helping smokers stay healthier or quit smoking.

    Both recently left industry positions. Jackson is now an executive coach; McKinney formed his own consulting company. (Full disclosure: I’ve worked and written articles with McKinney.)

    One of the concerns I heard from them and others was being unable to respond to the rampant misinformation on the relative risks of nicotine products, especially when that misinformation comes from well-intended government sources or nonprofit organizations. Like epidemiologists facing anti-vax propaganda, industry scientists watch in frustration as facts lose ground to uninformed beliefs and outright lies—information that could interfere with smokers quitting combustible cigarettes.

    I asked them to imagine a long plane flight. Their seatmate, whom they had never met before, is a public health researcher. Upon discovering that they work in the tobacco industry, the public health person starts peppering them with questions. If they could have spoken freely, how would they have responded?

    Why can’t you just stop selling cigarettes? That would solve the problem!

    Unfortunately, it wouldn’t. In an ideal world, there would be no cigarettes. There would be no nicotine. But the world we inhabit includes 1.14 billion smokers.

    This number may startle the seatmate, who probably doesn’t know many current smokers. Smoking is not evenly distributed among the population nowadays. In North America, it’s relatively rare among the highly educated and well-to-do, for example. It’s banned in most workplaces. Anti-smoking ad campaigns have waned. But the deaths continue—nearly 8 million a year. Yet many smokers cannot or will not quit, even with all the available information on how smoking kills. That’s an incredible challenge that won’t respond to simplistic solutions.

    “We know from past experience with prohibition of alcohol and opioids that simply banning something doesn’t work,” noted Jackson.

    In fact, one of the predictable consequences of prohibiting the sale of combustible cigarettes at the commissaries of state and federal prisons has been the growth of a resilient black market. That’s a reflection of how powerful the addiction to nicotine is.

    But combustible cigarettes, the most dangerous of nicotine products, are not the only option for people who are addicted. There’s growing evidence that e-cigarettes work better than nicotine gums or patches at helping people quit smoking.

    But isn’t vaping just as bad?

    Public service campaigns in the U.S. that are meant to keep youth from vaping have stoked fears. National surveys show that more and more people incorrectly view vaping as equal in harm to smoking. Reports of potential benefits get scant attention.

    It’s another example of a moral panic—a widespread and irrational feeling of fear that’s not supported by scientific data. (A moral panic in the 1920s was that motion pictures about gangsters would turn millions of innocent teenagers into hoodlums. We now refer to those films as “classics.”)

    By contrast, health authorities in Europe, such as Public Health England, the Royal College of Physicians and Cancer Research U.K. are taking a different approach than their North American counterparts. They’re educating adult smokers about the relative risks of smoking versus vaping and encouraging them to switch, ideally as a first step toward quitting nicotine altogether. Their experts say that e-cigarettes are about 95 percent less harmful than combustible cigarettes and doubt that vaping leads youth to take up smoking.

    But what about the flavors?

    Some e-cigarette flavors, unfortunately, are attractive to teens. That’s a legitimate concern. We need to have a combination of effective youth vaping prevention programs, buyer age verification protocols, responsible marketing and nicotine addiction treatment programs for those who get hooked.

    But this concern about flavors seems inappropriately focused on vaping. My local grocery store sells stacks of mango-flavored and watermelon-flavored White Claw fizzy alcohol drinks with no visible protest. Yet these types of “alcopops” are highly attractive to underage drinkers and have been linked to dangerously high blood alcohol concentrations.

    Also, banning flavored vapes may do more harm than good when it comes to public health. Grown-ups prefer flavors too. “Evidence shows that flavors are incredibly important for adult smokers to use e-cigarettes to switch with,” Jackson added. “So how do you responsibly market those flavors with age-appropriate adult names? In the U.K. and in Europe, we worry whether the levels of nicotine in these products are high enough for smokers to be able to switch satisfactorily.”

    In other words, adequate nicotine levels may be a critical variable in getting addicted smokers to switch to reduced-harm vaping.

    Can’t we just get rid of the nicotine?

    Not only does the proverbial “man on the street” wrongly point to nicotine as the health danger in smoking; new studies show that most physicians “strongly agree” (also incorrectly) that nicotine directly contributes to cancer and heart disease.

    “Yes, nicotine does have addictive properties; that’s beyond question,” said Jackson. “But it’s all the other stuff. There are 10,000 components in cigarette smoke, and a chunk of them contain the carcinogens and toxicants that do the damage.”

    That’s where harm reduction comes in. If nicotine is not the health danger, how can you improve the health of addicted smokers who don’t (or don’t yet) want to quit? We now have a variety of delivery systems, such as e-cigarettes, heat-not-burn products, pouches and snus that can give smokers the nicotine their brains crave “without all the nasties in the smoke,” as Jackson put it. Ideally, they’ll use those reduced-harm products as a bridge to quitting tobacco and then nicotine completely.

    How can you work for Big Tobacco?

    “I was hired to focus on harm reduction because the people at the company knew that their product caused harm,” said McKinney.

    Today’s industry scientists work under different assumptions than past generations and toward different goals. We know and can openly say that smoking is addictive, dangerous and deadly. From inside, we can work to save lives without being dependent on the vagaries of grant support.

    The flight is coming to an end. The seatbelt light is on. Your seatmate has one final question.

    What can we agree on?

    The development of Covid-19 vaccines has shown what can happen when industry, academia and government work together on solving a critical public health problem. The ongoing threat and lives lost from smoking is similar to that of the pandemic. Imagine what could be achieved with that same level of cooperation and transparency.

    Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors. She spent 15 years on the faculty of Harvard Medical School.
  • A Hard Sell

    A Hard Sell

    Photo: Sergii Figurnyi

    The EU continues to view harm reduction with suspicion.

    By Stefanie Rossel

    The European Commission’s 2021 application report on the EU Tobacco Products Directive (TPD), which was published on May 20, 2021, had been highly anticipated as its objective was to clarify which parts of the TPD the commission deemed necessary to amend.

    Considering the Commission’s goal to create a “tobacco-free generation” by 2040, where less than 5 percent of EU citizens use tobacco, tobacco harm reduction (THR) advocates had been hoping the report would reconsider its opposition to their cherished concept.  

    TPD Article 28 required the Commission to review the directive in the light of scientific and technical developments five years after the legislation had entered into force. It was obliged to pay special attention to e-cigarettes.

    The application report would also guide the EU position toward safer nicotine products at the upcoming Conference of the Parties (COP9) of the World Health Organization Framework Convention on Tobacco Control (FCTC). As COP9 had to be postponed to November 2021 due to the Covid-19 pandemic, the commission found itself in the unusual situation that its stance might point the way for COP9 rather than the other way around.

    In the event, the Commission preferred to be the well-behaved pupil, mirroring the WHO’s hostile stance toward THR and what has been termed the organization’s war on nicotine. “As scientific consensus has yet to be reached, the precautionary principle prevails and the TPD takes a careful approach in regulating these products,” the application report states. “The WHO further concluded that no firm evidence exists on the safety of e-cigarettes, but there is increasing evidence of harm.”

    That the commission was unwilling to consider the relative risks of alternative nicotine products compared to that of combustible cigarettes already became clear when the EU Scientific Committee on Health, Environmental and Emerging Risks (SCHEER) released its preliminary opinion in 2020. Critics called the report “fundamentally flawed,” having, among other things, effectively ignored scientific literature published after April 2019, most of which supports the argument that vaping actively helps facilitate THR. Mandated to focus only on health impacts of e-cigarettes compared to nonsmoking, the SCHEER’s final opinion leaves the users of vape products without guidance and clear information about the level of risk of these products compared to traditional cigarettes, as scientists wrote in a letter to the EU Commissioner of Health and Food Safety, Stella Kyriakides.

    Disregarding ample feedback from the scientific community and other stakeholders, the final opinion turned out to be a nearly verbatim version of the preliminary opinion. “The SCHEER opinion underlined [the] health consequences [of e-cigarettes] and the important role they play in smoking initiation,” its authors stated. “This opinion supports the careful and precautionary approach taken so far. However, it should be explored whether some provisions could be further developed or clarified, such as tank size or labeling requirements; use of flavors; use of nicotine-free liquids; and advertising provisions. Insofar as e-cigarettes are smoking cessation aids, their regulation should follow the pharmaceutical legislation.”

    Damian Sweeney, a partner in the European Tobacco Harm Reduction Advocates (ETHRA), an advocacy group formed by consumers, says that the EU misuses the precautionary principle to justify imposing harsher regulations. “This could mean flavor bans and restrictions on open systems, which would severely limit the appeal of vaping and would be extremely detrimental to public health,” he says. “The danger is that they will throttle the one game-changing measure that really does seem to be working and could scale up dramatically and quickly with the right regulatory, fiscal and communications environments.”

    Learning from others

    Altogether, the application report is positive about the TPD, claiming it has put in place comprehensive EU tobacco control policy rules, “notably through enlarged combined health warnings, a track-and- trace system, a ban on characterizing flavors, the creation of an ingredients database and the regulation of electronic cigarettes.” Most importantly, the Commission states that the TPD has overachieved its aim to reduce tobacco consumption among those aged 15 and over by 2 percent within five years of its transposition. Smoking prevalence across the EU, the report says, had declined from 26 percent in 2014 to 23 percent in 2020. “Of course, it didn’t attribute any of this to the rise of low-risk alternatives, even though that has had an obvious effect,” says Sweeney. “While any reduction in smoking is to be welcomed, we think that the gains in smoking cessation could have been far greater were it not for the excessive restrictions which the TPD imposes on vaping products, such as nicotine and volume limits or marketing restrictions. A positive effect of the TPD is that it has prevented member states from banning vaping outright.”

    According to Sweeney, declines in smoking prevalence accelerate where safer nicotine products are widely available, accessible and affordable. “The EU data shows that Sweden has almost reached smoke-free status, with a smoking prevalence of just 7 percent,” he says. “This is the lowest smoking prevalence in the EU by a significant margin and it’s largely thanks to the use of snus. The U.K., where tobacco harm reduction is widely supported and promoted by public health, experienced the sharpest decline in smoking prevalence since 2006 (minus 21 percentage points). Ireland has one of the highest rates of adult vaping in the EU, which led to a 6 percent fall in smoking prevalence in three years—a drop which was unheard of before vaping became popular.”

    Despite the U.K.’s departure from the EU, Sweeney says the country will continue to play an important role in tobacco control policy at the international level. “The U.K. is a world leader in tobacco harm reduction, with a smoking prevalence 9 percent lower than the EU average, so they are clearly doing something right that the rest of the EU can learn from. Researchers from the U.K. are still involved in pan-European tobacco control initiatives and the high-quality research and experience they bring will be invaluable in informing future policy.”

    While the EU Parliament lost important voices for tobacco harm reduction with the departure of Britain, Sweeney believes the move creates opportunities as well. “Leaving the EU means that the U.K. is now in a position to diverge from the TPD; to remove the arbitrary restrictions on vaping products, which are a barrier to switching; and to lift the ban on snus. The main consumer organization in the U.K., the New Nicotine Alliance, has put forward proposals that would take advantage of Brexit to help the government meet its ambitious smoke-free 2030 target. If the government adopted these proposals, it would set an example for the EU by showing what could be achieved with a comprehensive approach to tobacco harm reduction.”

    Proof, not anecdotes

    To achieve an EU smoking incidence of less than 5 percent by 2040, the application report urges improvements in TPD enforcement at the national level and better consideration of new market developments, such as novel tobacco products.

    The 5 percent goal is at the heart of the EU’s Beating Cancer Plan (BCP), which the EU presented in February this year (see “Beating Harm Reduction,” Tobacco Reporter, April 2021). The BCP identified tobacco as the top avoidable key risk factor. However, this plan, too, failed to distinguish between combustible and noncombustible products. It did not recognize low-risk alternatives, such as vape products and smokeless tobacco, as substitutes for the more harmful combustible products.

    The European Parliament’s BECA committee drew similar conclusions. Its draft report, presented for discussion on July 15, calls for an increase in minimum excise duties for all tobacco products and a ban on flavorings in all tobacco products. At press time, it remained unclear whether these requirements would apply to safer nicotine products. “Taken literally in EU law, this would apply to heated-tobacco products and smokeless tobacco, including snus,” says Sweeney. “Most countries have cigarette taxes that are above the minimum, so this would tend to close the gap between very dangerous and much safer products and therefore reduce switching and increase smoking compared to not doing it,” he explains.

    “However, several countries have moved to increase taxes on vaping products, most notably Germany. So, we may see this language evolve. The danger is that we will see the fiscal incentive to switch weakened and more smoking as a result. The MEPs need to realize that taxation has direct consequences for behavior and therefore for health,” says Sweeney.

    Ahead of the July meeting, ETHRA had written to all BECA members to outline the important role THR can play in achieving the goal of reducing cancer in Europe. Judging from members’ reactions to the draft report presentation, Sweeney is cautiously optimistic. “THR is facing a difficult future in Europe, there can be no doubt about that, but I don’t think it’s the end—far from it. Ultimately, political opinions don’t change the lived experience or underlying science. There is support for THR within the European Parliament and several MEPs have asked very important parliamentary questions on the role harm reduction can and should play in the Cancer Plan. […] So, some MEPs clearly do understand the concept and importance of harm reduction strategies.”

    According to Sweeney, the fact that the science of THR and the lived experience of consumers of safer nicotine products have been largely ignored should be used as a rallying call to consumers and advocates alike. “We need to contact our elected representatives to share our experiences and let them know that harm reduction will be key to successfully preventing cancer. As consumers who have successfully quit smoking using safer nicotine products, we are not anecdotes, we are proof that THR works. There are millions of us, and we shouldn’t be ignored.”

    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.
  • The Leading Edge

    The Leading Edge

    Photos: Republic Brands

    Building on a formidable heritage, Republic Brands is keen to capitalize on the latest market trends.

    By George Gay

    Here’s a challenge. Try to figure out what “category” was being referred to when, during an interview with Tobacco Reporter in August, a company executive said, “I think it is the most exciting time to be in the category in the U.S.”

    If I didn’t know the answer to this puzzle, I think I would have guessed at something like nicotine pouches. I certainly wouldn’t have gone for a combustible product. But the executive was talking about the roll-your-own category in general, and, in particular, about Republic Brands, which in July changed its name from Republic Tobacco. “It’s rare that you are able to become part of a company like Republic with such great ownership, such iconic global brands and an amazing supply chain in a category that is becoming more and more meaningful in the U.S.,” said Paul Marobella, the former chairman and CEO of Havas Creative in North America who joined Republic as president and chief marketing officer on July 1, having previously acted as a consultant. “And I know that everybody here is really excited about our future. You’re going to see some great new products from us—some innovation. I think people will come to know the Republic Brand name more than they knew Republic Tobacco in the past: We are going to focus more on that. And we’re building a great place to work and a place that really creates iconic brands. That is the spirit here at the moment.”

    Marobella was speaking mainly about the U.S. market, though some of his underlying ideas have wider resonance, which is appropriate given the global reach of Republic. The company, owned by Donald Levin, claims to be the largest RYO company in the world. It has subsidiaries in Canada, continental Europe and the U.K. operating under the name Republic Technologies, seven manufacturing facilities across North America and Europe, and a sales presence in 120 countries.

    But for the moment, the focus is on the U.S. where Marobella has taken on the responsibility for aligning Republic’s brands and brand marketing with specific consumer segments across the U.S. He exudes enthusiasm for this challenge, and it is easy to get swept along by such an experienced brand marketer talking of consumers choosing new pathways through changing cultural environments with products that combine brand heritage with sustainable materials.

    Paul Marobella

    A Growing Market

    But he has a point. If you step back and take a moment to reflect, there is clearly something going on here—in the U.S.—and now. The first thing that should be kept in the background is the size of the U.S. market. This was brought home to me when Marobella mentioned E-Z Wider, one of the most recent brand additions to the Republic portfolio of rolling papers, acquired along with the Joker brand by Levin about three years ago. One of the areas where E-Z Wider has a strong presence comprises the Eastern Seaboard of the U.S., which, the internet tells me, has a population of about 118 million people, slotting it into about 12th position on a list of the most populous nations of the world. The plan is to take E-Z Wider national, as one of the company’s growth and emerging brands.

    Importantly, too, there are signs that within the huge U.S. market—the total population is about 328 million—the RYO sector is growing. Hard data on the sector is more difficult to come by than is that on factory-made cigarettes, for instance, but Marobella said Republic was seeing growth both in the incidence of people rolling their own and making their own with papers, cones and tubes. The cone sector, which Republic entered about three years ago, was particularly vibrant, he said, before adding that bamboo cones and bamboo papers were “flying off the shelves.” At the same time, indirect evidence for such growth is being provided, too, by an increase in new competitors and new brands entering the market and by what Marobella described as the excitement currently evident in the segment at trade shows.

    Another important point to keep in mind is that, whereas the market for factory-made cigarettes, which are locked in with tobacco, has nowhere else to go, the market for RYO and make-your-own accessories, such as rolling papers, cones and tubes, while heavily underpinned by tobacco consumption, is expanding beyond tobacco. Marobella is careful to emphasize that Republic wants its products to be used only with legal materials, naming tobacco, hemp, CBD and herbal products generally. But there is no getting away from the fact that smoking marijuana is becoming legal in parts of the U.S. and is already so north of the border, across Canada. And Marobella conceded that, in respect of marijuana, U.S. federal legalization would be great for “the RYO category in which Republic’s brands play such an important part.”

    What I wrote above about factory-made cigarettes having nowhere else to go might be taken to suggest that the manufacturers of factory-made cigarettes also have nowhere they can go beyond tobacco. But such a suggestion would be misleading. Leading manufacturers in this field are making huge efforts to move away from combustible tobacco toward all manner of new-generation products, and, given their initial success is maintained, it is conceivable their departure will leave behind a considerable vacuum, part of which could be filled by RYO products—initially tobacco based, but later, perhaps, underpinned by other smoking materials.

    And on top of these marketing opportunities for RYO brands, you can add emerging retail possibilities, such as ecommerce. Marobella told me that new highly innovative delivery services were coming on line in the U.S.: services such as GoPuff, which will deliver to your house in 25 minutes or less. Despite its name, GoPuff delivers a huge array of products that happens to include a wide range of tobacco and nicotine goods from charcoal heaters for hookahs to rolling papers to e-liquids. “You have consumption lounges being legalized in certain cities,” added Marobella. “Las Vegas is one where you will be able to consume herbal products on-premise. You have subscription delivery boxes in which papers and cones are sometimes included.”

    Bamboo papers and cones have been flying off the shelves, according to Republic Brands.

    A diverse consumer base

    Marobella added, however, that while more and more routes were being opened to the consumer and while it was important for Republic to keep abreast of these new opportunities, the company’s core business was with, and would remain with, distributors, wholesalers, convenience stores, c-gas stations and smoke shops.

    I guess that, to a certain extent at least, the route to the consumer needs to be allied with the type of consumer you are aiming at. So who are these consumers? Well, the traditional RYO consumer is still a male manual worker who likes to roll tobacco and smoke without having to take out a loan, and that is unlikely to change greatly soon. But, partly because of new opportunities provided by herbal materials, more women are entering the RYO category, and, in fact, some estimates have women accounting for nearly 40 percent of the RYO market attributed to herbal material use. In part, too, the RYO category has opened itself up to new entrants with products such as cones that don’t require people to be skilled in the art of rolling. And then there is the question of cultural changes. “I think that in the U.S., people are seeking to find moments to themselves, they are seeking to relax, seeking to enjoy the little things in life more and more because of what is happening in our world,” said Marobella. “And through our research, we have seen that people use our products to help them relax.”

    The JOB brand is said to be about creativity.

    Of course, to satisfy the needs of a diverse consumer base, you need a wide-ranging portfolio of products, and Republic seems to have just that. The company was started in 1969 by Levin, who at that time owned one of the most famous smoke and head shops in the U.S., Adams Apple in Chicago, and a smoking accessories business operating under the same name. He no longer owns the shop but still owns the brand name, which is used for the company’s ecommerce business selling on Amazon, and which appeared as recently as August in a TMA trademark report relating to RYO-related and MYO-related products. Since those early days, Levin has been acquiring and building a formidable brand portfolio, which includes OCB, said to be one of the largest global brands and one that is the company’s all-natural brand, carrying the tag line “One with Nature.” OCB, like many rolling-paper brands, comes in a dizzying number of versions, but Marobella says it is probably the company’s most expansive. “We have a whole line of different sizes, fibers, some that are made of flax, some that are made of wood pulp,” he said. “OCB has organic hemp, bamboo; we have a virgin unbleached paper and cones as well.”

    While OCB is about being one with nature, the JOB brand, which has been in existence since 1838, is said to be about creativity—you’ve almost certainly seen the fine print posters—and cultural relevance while E-Z Wider, apparently named after the film, Easy Rider, is Republic’s outlaw or rebel brand.

    It is not possible to list all the brands and, especially, all the product styles within each brand, but I should point out that, despite such a large existing portfolio, as is mentioned at the start of this piece, there is more to come. Marobella wasn’t going to be drawn on specifics, but he did say that, across Republic’s portfolio, there would be more products made of organic hemp, which, by the way, is sourced from Champagne, France, from the same soils that produce fine champagnes. “You’ll start to see some unique sizes of products, such as cones; you’ll start to see some brands that are targeted at very specific demographics and consumer segments in the U.S.,” he said. “You might see some different colors of papers, some different patterns of papers that would appeal to a different 21+ demographic in the U.S., maybe a female demographic. There is a lot of innovation that is happening. We want to be on the leading edge of 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.