Category: Print Edition

  • The Time is Now

    The Time is Now

    David O’Reilly (Photo: BAT)

    Making tobacco harm reduction a reality has never been more important.

    Never has tobacco harm reduction been more important than in the wake of the Covid-19 pandemic. Public health bodies are now, more than ever, focusing on broader health issues and how they can optimize outcomes while also making the most of their resources. Minimizing the negative public health impact caused by smoking cigarettes continues to be a major challenge that many are trying to tackle, with some countries, such as the U.K., setting themselves ambitious targets to eliminate cigarettes entirely. The real question is, how can they effectively deliver on this goal? 

    We know from experience, such as the U.S. prohibition of alcohol, that simply banning popular consumer products does not work. Based on the evidence, we believe that the most effective way to tackle this issue is through tobacco harm reduction. Policies that are bold, progressive, forward-looking and, most importantly, backed up by robust scientific evidence must be created and embedded into society.

    The reality is that people continue to smoke despite awareness of the adverse health risks associated with doing so. These are smokers who would benefit from greater access to alternative products that can effectively deliver nicotine and provide an enjoyable and, importantly, reduced-risk alternative to smoking.* It is this group of people for whom effective tobacco harm reduction policy matters most.

    BAT is steadfast in its position that the best thing people can do to protect their health is to not start smoking or to quit smoking. We encourage those who would otherwise continue to smoke to switch completely to a scientifically substantiated, reduced-risk alternative. Products that contain nicotine but do not involve combustion (the burning of tobacco at up to 900 degrees Celsius) emit far fewer and lower levels of toxicants compared to conventional cigarettes and have the potential to be significantly less harmful to health.

    The availability of scientifically substantiated, less risky products such as vapor products, tobacco-heating products and modern oral products are crucial to effective tobacco harm reduction. Product regulations should recognize the role these alternatives can play in harm reduction by ensuring that high quality product standards are enforced, that consumers have access to information to make informed choices and, critically, that underage use is prevented.

    Smokers who wish to continue using nicotine via these less risky alternatives should not be punished by regulations and legislation that deprives them of information and denies them access to these products—a system that does not recognize the rigorous scientific process that goes into developing these reduced-risk products.*

    This view is shared by many within the public health community, including Public Health England. However, there are some organizations and public health bodies that disagree with the concept of tobacco harm reduction. Often, this is because the available reduced-risk alternatives are not entirely risk free, which BAT acknowledges. That doesn’t mean that consumers should be denied the choice to make use of alternative products that reduce the risk of harm versus continuing to smoke.

    At BAT, we support regulation that is founded on scientific evidence that can effectively reduce the projected health impact of smoking around the world. Tobacco harm reduction underpins our clear purpose to build “A Better Tomorrow” by reducing the health impact of our business. We have been clear for many years that our business needs to be built on outstanding products, informed consumer choice and a drive toward a reduced-risk portfolio, which is underpinned by world-class science. We are doing this by providing consumers who would otherwise continue to smoke cigarettes with a range of less risky ways of consuming tobacco and nicotine.*

    We recently conducted a long-term randomized, controlled trial of our tobacco-heating product, Glo, which lends credibility to the harm reduction potential of the entire category of high-quality tobacco-heating products. Surely, even our detractors can see the benefit in this landmark new clinical study showing that the health risks of cigarette smoking may be reduced in smokers who completely switch to using tobacco-heating products.

    We advocate for a collaborative, multi-stakeholder approach to advance tobacco harm reduction. We want to see meaningful change in the development of tobacco and nicotine policy. Industry, government, scientists, regulators and governing bodies must put their differences aside and come together in order to create effective tobacco harm reduction policy and provide better alternatives for those who would otherwise continue to smoke. This is not something that can be tackled by one group alone. Engagement, dialogue and communication among all parties is what is required in the development of effective policy. By adopting a more inclusive stakeholder approach to tackling tobacco harm reduction, we can make progress much more quickly.

    We have a goal of 50 million consumers of our reduced-risk noncombustible products by 2030. Every one of these individuals matters. So, to me, this is 50 million reasons why tobacco harm reduction matters and 50 million reasons to believe in “A Better Tomorrow.”

    * Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk-free and are addictive.

    David O’Reilly is director of scientific research at BAT.
  • Chew on This

    Chew on This

    Photo: Swedish Match

    How sensibly will modern oral nicotine products be regulated in the future?

    By Stefanie Rossel

    Is history repeating itself? The parallels between the development of the vaping sector and that of modern oral nicotine are striking: Quick consumer adoption leads to phenomenal category growth rates. The promising, still-unregulated market lures myriad players and creates an unmanageable number of brands. Leading tobacco manufacturers seek to get their slice of the cake, often by strategic acquisitions. Despite evidence pointing at the reduced harm potential of the product compared to combustible cigarettes, tobacco control activists raise the alarm, urging regulators to crack down. The Wild West, gold-rush atmosphere is then abruptly curbed by the introduction of often-misguided restrictions and even product bans.

    It is at these crossroads where modern oral nicotine currently finds itself. The category, still a niche, has grown impressively in the five years since Swedish Match introduced Zyn, the first product of its kind. Market analysts are outdoing each other in their forecasts. 360Research Reports expects the category to increase to $32.77 billion in 2026 from $2.38 billion in 2020. Five key global players jointly hold a 77 percent share of the world market, according to Precision Reports. With 66 percent, Europe is the largest market, followed by North America and Asia-Pacific with more than 30 percent each, the company states.

    Competition in the market has rapidly heated up. Research and Markets notes the launch of 27 new brands of nicotine pouches in 2020. By now, all major tobacco companies and several smaller players are represented in the category. To cater to the increased demand, many of them had to step up production capacities, among them British American Tobacco, which in September 2020 built a new plant in Hungary that is dedicated to the production of nicotine pouches for export markets.

    The most recent company to enter the segment is Philip Morris International. In an investor presentation in February 2021, then-CEO Andre Calantzopoulos announced the development of a respective product through a “combination of partnerships and internal development.” In May, PMI acquired Danish family business AG Snus, a manufacturer of nicotine pouches. The deal was followed by PMI’s takeover of Danish firm Fertin Pharma on July 1, a company specializing in nicotine-replacement therapy (NRT) type products such as gums, pouches, liquefiable tablets and other solid oral systems for the delivery of active ingredients, including nicotine.

    Less Harmful Than Snus

    Nicotine pouches or “modern oral,” as manufacturers have termed the novel segment, are considered a subcategory of the smokeless tobacco segment. They are an evolution of traditional Swedish snus, a pasteurized oral tobacco that is available as loose products or in pouches and has been consumed in the Nordic country for 200 years. Unlike snus, however, modern oral nicotine contains no tobacco. In some brands, the nicotine used is not even derived from tobacco but produced synthetically. The nicotine pouches are white, pre-portioned little bags comprising nicotine applied to a carrier material, such as food-grade fillers. They come in a variety of flavors and nicotine strengths and even as nicotine-free variants. Like snus, they are discreet and spit-free and can be disposed of in household trash after use.

    For years, Sweden has had the lowest smoking rate in the European Union. According to Statista, the share of daily smokers in the country stood at 7 percent in 2019 (if the rate were to drop below 5 percent, Sweden would be considered “smoke-free” by some definitions). This compares to an average smoking prevalence of 23 percent throughout the EU. Sweden’s low smoking incidence is largely attributed to snus, which is used by 1 million Swedes. Decades of scientific research have confirmed the product’s efficiency as a smoking cessation tool. Snus use is estimated to be about 90 percent to 95 percent safer than smoking combustible cigarettes, which puts the product on par with e-cigarettes on the continuum of risk scale. A 2020 survey conducted by the European Tobacco Harm Reduction Advocates found that 43.3 percent of Swedish ex-smokers had used snus and/or nicotine pouches to quit smoking whereas more than 31 percent of current European smokers would be interested in trying snus if it was legalized.

    However, snus sales have been banned in the EU since 1992 except in Sweden, which negotiated an exemption from the ban when it became part of the trading bloc in 1995. The EU prohibition has survived two lawsuits, and few expect it to be lifted in the foreseeable future. Modern oral products, which offer non-Swedish EU users an alternative to snus, may rank even lower than snus on the risk continuum, according to a recent BAT study published in Drug and Chemical Toxicology. The research found that the company’s nicotine pouches had a toxicant profile comparable to that of NRTs, which are currently considered the least risky of all nicotine products.

    In a Gray Zone

    Given the EU’s attitude toward tobacco harm reduction, such an acknowledgement appears unlikely, however. Because modern oral products don’t contain tobacco, they cannot be regulated under the current EU Tobacco Products Directive (TPD); their status will be reconsidered during in the next TPD revision.

    In Germany, this has recently led to confusion over the legality of nicotine pouches. Several courts at the federal level have ruled that modern oral products are to be classified as foodstuff. As such, they would have to meet the requirements of European food legislation, which does not permit nicotine as food, food ingredient, food additive or flavor. Furthermore, food must not be hazardous to consumers’ health, according to the legislation. However, toxicological studies have shown that the nicotine dose that is taken up even by moderate users of modern oral is linked to health damage, courts argued. The rulings led to local sales bans. Due to this legal uncertainty, BAT in July 2021 suspended sales of its Velo nicotine pouches in Germany. The company called for legislation to set advertising standards for tobacco-free nicotine pouches and to limit nicotine concentration to 20 mg/mL.

    In the absence of EU legislation, several countries have tried to regulate nicotine pouches at the national level. In May, the Czech Republic amended its food and tobacco products act, obliging manufacturers, importers, retailers and distributors of nicotine pouches to ensure that these products meet the requirements for the composition, appearance, quality and characteristics stipulated by the decree of the Ministry of Health under similar conditions as those for e-cigarettes. In addition, they will have to inform the ministry, on a regular basis, on the nicotine pouches that they intend to launch on the EU/European Economic Area market. Manufacturers will also have to collect information on the suspected adverse effects of these products on human health. Tobacco-free nicotine pouches that do not comply with the amendment and that were produced or marketed before May 12, 2021, will have to come off the market in 2022.

    Italy, where nicotine pouches are considered consumer products, will reportedly consider modern oral products when it revises its anti-smoking law by the end of the year. Estonia’s parliament announced in July that it might relax its snus regulations to help reduce smoking.

    The U.K., no longer an EU member and therefore not bound to the common market’s regulation, is expected to follow Sweden’s example. To achieve its goal of a smoke-free society by 2030, the British government is presently shaping a tobacco control plan, which may very well include stronger promotion of cigarette alternatives, such as heated-tobacco products and nicotine pouches.

    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.
  • No Exaggeration

    No Exaggeration

    Photo: asayenka

    The future of tobacco machinery in a rapidly changing market for nicotine products

    By George Gay

    According to the Oxford Dictionary of Humorous Quotations, on June 2, 1890, the New York Journal ran what was to become one of most famous quips by Mark Twain: The report of my death was an exaggeration. The quote is perhaps more often rendered as “Reports of my death have been greatly exaggerated,” and, in this form especially, it could be applied to the tobacco industry. With the word “my” substituted with “the tobacco industry’s,” the quote could have been run in the New York Journal and other U.S. or European newspapers any time during the past 50 years because, while the tobacco industry has suffered a number of well-publicized setbacks, it has always recovered.

    No one can deny, however, that while sales of traditional cigarettes might be increasing slightly in a few markets and holding firm in others, in many, they are falling or even plummeting. Certainly, the long-term, worldwide trend seems to be down, and it is difficult to imagine any future scenarios in which tobacco smoking will be given a boost.

    This, of course, raises questions about where the machinery sector—and here and elsewhere in this piece I’m writing about making and packing machines for traditional cigarettes—is headed. It would seem reasonable to assume that it will decline in line with the market for cigarettes. But things might not be quite as simple as this, partly because there are divisions within this sector.

    Ask around and you will no doubt be told any number of reasons why the tobacco industry has managed to survive in the face of the moral outrage aimed at its existence by the people with the power to put it out of existence, but one of the most important reasons is that it has demonstrated flexibility where necessary, though sometimes reluctantly and, therefore, belatedly.

    There was, about 30 years ago, a sense that machinery suppliers, especially those based in Europe, were working themselves out of a job because, as increases in sales of cigarettes outside China slowed, machinery speeds were being ramped up—at times hugely. And at roughly the same time, technology transfer deals were being made with engineering companies in China.

    In part, though, there was something of a separation between overall cigarette consumption and machine capacities. The very fastest machines became relevant mostly to what were known as long-run brands, the most internationally in-demand products, the sorts that major cigarette manufacturers wanted to focus on and wanted increasing numbers of consumers to focus on while the manufacture of lesser brands was left in the hands of slower—though mostly not slow—machinery.

    On the surface, such a separation was based on the competing claims about machine flexibility. Those supplying slower machinery claimed their equipment was better for manufacturing other than long-run brands because technicians could make the size and other changes needed when switching from the manufacture of one type of cigarette to another more quickly than was the case with faster machinery. And even if changes took the same length of time on the two types of machines, they said, it was more inefficient to have a fast machine sitting idle while lengthy changes were made to it than to have a slower one sitting idle.

    Partly in response to this, perhaps, the suppliers of the fastest machinery made well-publicized efforts to make their equipment more flexible. But this response was more likely to have been caused mostly by competitive issues, supplier to supplier, I think. After all, those that supplied the faster machines offered also slower—though not the slowest—equipment, either directly or, as time went by, through acquired specialized suppliers.

    Of course, there is more to the machinery capacity arguments than cigarette production numbers; it also concerns investment costs. For many years now, we have been used to seeing the major international cigarette manufacturers swallow smaller companies, and, in recent times, seeing those manufacturers consolidate their product portfolios, all of which, I guess, has tipped the scales toward high-capacity machinery.

    New-Generation Products

    But what about the future? I guess it is not beyond the bounds of possibility that, having perhaps taken their eyes off the traditional cigarette ball somewhat, the major cigarette manufacturers have left the door open to startups, at least in those countries where it is possible to start a cigarette manufacturing business from scratch. After all, they have stopped manufacturing some of their shorter run brands and are in the process of converting former cigarette factories to manufacture new-generation products. Clearly, if this door is left ajar, part of the focus might start to switch to smaller manufacturers and, therefore, to lower capacity machinery, including secondhand machinery.

    Such thoughts were brought to the surface again recently when, according to a report in the Guardian newspaper, Philip Morris International’s CEO, Jacek Olczak, called on the U.K. government to ban cigarettes within the next 10 years. Olczak apparently said PMI could “see the world without cigarettes … and actually, the sooner it happens, the better for everyone.” Olczak said, “Give [people] a choice of smoke-free alternatives … with the right regulation and information, it can happen 10 years from now in some countries. You can solve the problem once and forever.”

    I don’t know why Olczak picked on the U.K., but it might have been partly because the country has already seen a fairly dramatic fall in cigarette consumption, because it has taken a generally progressive attitude toward lower risk alternatives to combustible cigarettes and because the country is in a state of transition in respect of tobacco and nicotine as it reviews its tobacco and related products regulations after having left the EU and left behind the necessity to comply with that institution’s Tobacco Products Directive (TPD).

    Looked at like this, the U.K. could become an experiment in tobacco harm reduction (THR), were the government to make such a bold move. And this is not altogether unthinkable even for a semi-detached libertarian regime as is now in power. But the real question is: What would be the conclusion of such an experiment? Would the U.K. become, as those supporting the principles of THR might have it, a tobacco smoke-free heaven in which former smokers were satisfied with the new, less risky nicotine-delivery products, cancer rates plummeted and the economy boomed as improvements in health, productivity and social cohesion provided huge dividends?

    Or would it conclude, as those opposed to THR might have it, with a nation, most of whose youngsters were hooked on nicotine and committing crimes to obtain the money necessary to buy the black market cigarettes onto which they had moved during their summer breaks abroad—a nation with worsening health, productivity and social cohesion?

    Given scenario one, the medium-term to long-term outlook for cigarette machinery suppliers would be bleak because even the best efforts of the World Health Organization and its allies would not be able to hold the tide of countries wanting to take advantage of similar THR dividends. But given scenario two, cigarette machinery suppliers could end up on a roll given that what had appeared to be the only truly viable route out of smoking had been shown to be fatally flawed.

    Of course, it is unlikely, I think, that Olczak believes the U.K. government would ban cigarette smoking within 10 years, but I wouldn’t rule out that he is banking on his plan B being taken seriously: “Give [people] a choice of smoke-free alternatives … with the right regulation and information …”

    This would, of itself, be a valuable experiment, especially if cigarette smokers were also provided with the right, or rather truthful, information and if the information provided to both smokers and vapers included accurate information about the environmental impacts of traditional cigarettes and lower risk products. After all, it is going to be challenging to enjoy a smoke or a vape if your house has been blown away and you are standing up to your neck in water that is being evaporated by the heat dome that has appeared overhead.

    So what is the likely outcome? I think we will see a U.K. scenario that sits somewhere between one and two above. The art of politics is compromise, which, depending on your point of view, means satisfying everybody or nobody. In other words, there will be significant but modest changes in the U.K. that will bring about a welcome boost to the conversion of smokers to less risky products.

    Looking further afield, the U.K. example might have some effect on those countries orbiting at the greatest distance from the WHO, while those in closer orbits will continue to try to rebut the ideas of THR. The result will be that cigarette smoking worldwide will continue to fall for the next 10 years, much as it has in the past, and the requirement for cigarette machinery will fall with it, perhaps with demand tilting toward medium-speed equipment. I think there is simply too much inertia in the market, largely held in place by the opposition to THR inherent in positions taken up by the WHO and its allies, for there to be any sudden, major changes. For one thing, it has to be remembered that while the U.K. might have shaken off the shackles of the TPD, it is still tied to the WHO’s Framework Convention on Tobacco Control and the way that treaty is interpreted by the parties to it.

    One last point: If the U.K. government does decide to ban cigarettes during the next 10 years, it would be consistent and fair for it to also ban alcohol. In fact, it would be hypocrisy not to do so. Alcohol consumption takes a far greater toll on U.K. society than tobacco consumption, and, with the number of smokers falling and the number of drinkers increasing, the damage caused by alcohol is only going to increase relative to that of tobacco.

    Sodim’s Synergies

    Eric Favre

    In communicating earlier this year about a story published in the August issue of Tobacco Reporter, Eric Favre described as synergistic the relationship between the instrument company of which he is managing director, Sodim, and Hauni, the machinery supplier. He made his remark in reply to a question about what advantages had accrued after the acquisition some years ago of Sodim by Hauni.

    Favre made the point, also, that this synergy, this coordination if you like, extended to customers and potential customers. There were, for example, advantages to be had for a customer in acquiring, for instance, a cigarette maker and a quality control (QC) test station as a single package—advantages such as those to do with technology and logistics. And by the same token, Favre added, during an R&D project, a customer could take advantage not only of the machinery expertise and support available from Hauni but also of the quality assurance (QA) and QC oversight of Sodim.

    The idea of such synergies did not make it into the August story but, this, the September issue, provides an opportunity to take the idea further because it is looking at making and packing.

    Tobacco Reporter: Given that Hauni making machinery would, in the normal course of things, be delivered with QA/QC equipment included, what, specifically, can Sodim add to a cigarette manufacturer’s standards armory?

    Eric Favre: Sodim adds the capacity of automatic sampling, a hands-free system that picks a cigarette from the mass flow and delivers it into the hopper of a Sodim test station: a SodiQube or a station from the Sodiline family. The data generated by the test station is then fed back to the maker, which, where necessary, uses it automatically to adjust its settings and thereby keep each cigarette produced very close to the target weight, diameter and dense end position. It is, in fact, a “police camera” that fine tunes the monitoring of the maker.

    What can Sodim offer in the way of additional QA and QC equipment in respect of cigarette packing?

    In the packing area, Sodim can offer a nondestructive pack seal tester that has the advantage of allowing all boxes that are correctly sealed to be returned to the product flow. Currently, this system is manual, and it would be ideal if it were developed so that it sampled automatically. Such automatic sampling would require complex developments, however, and might not be viable economically.

    In respect of making and packing, what can Sodim offer to manufacturers of other tobacco and nicotine products, such as tobacco-heated products (THP) and snus?

    Sodim test stations are suitable for measuring THP weights and diameters, though not dense-end positions. And the nondestructive pack-seal tester is suitable for testing THP and snus packs.

    Are Sodim’s instruments used mainly by major manufacturers, or do smaller manufacturers also use them?

    Sodim equipment is used by any type or size of manufacturer, from small and family-owned businesses to international groups.

    Is it true to say there are certain measurements, such as those that have to do with complying with regulations, that all manufacturers must make, though these will differ from country to country, while others are optional because they provide data for internal use, perhaps for improving efficiencies and reducing waste, etc.?

    This is correct. In the case of traditional cigarettes, Sodim’s very accurate and specialized equipment is needed to meet both the demands of regulations and internal standards of quality control. But for THPs, which do not generate smoke, our equipment is used more for internal QC reasons because there are fewer specific regulations in respect of these products than is the case with traditional cigarettes.

    How does Sodim or a manufacturer running Sodim instruments ensure they are giving the correct readings? Do they need regular servicing and replacement after a given lifetime?

    Sodim instruments will give the correct readings provided that the end users—mainly manufacturers but also laboratories—calibrate these devices regularly. And to allow users to calibrate their instruments, Sodim’s ISO 17025-accredited laboratory regularly delivers calibrated standards to the users. In addition, regular servicing is strongly advised and in most cases is carried out by Sodim at customers’ sites. –G.G.

    A Veteran’s View: Challenging Times Ahead

    Chris Crawley

    In another main story accompanying this sidebar, I question how much longer traditional cigarettes, and therefore the machinery that makes and packs them, will be around. My conclusion is that they will be around for quite some time, even though their demise is perhaps being brought into sharper focus right now.

    That is my stab at predicting the future, but what is happening right now? In an email exchange, I asked Chris Crawley of Axiom Select, who has been observing and working widely in the tobacco industry for many years, whether he believed that demand for traditional cigarette making and packing machinery was currently strong, average or weak. “I believe the market for new secondary (making and packing) machinery—with almost all the multinationals—is soft globally as traditional cigarette markets mature and volumes decline,” Crawley wrote. “If there’s a bright spot, it is probably Asia, but this, too, has its ups and downs.”

    And if Asia is a bright spot, for whom is it a bright spot? Crawley pointed out that the large EU-based machinery producers were finding emerging competition in Asia where labor and materials were often lower. There was an ongoing argument that said the quality of machinery built in Asia was not as good as that built in Europe, but while those putting forward this argument might be correct in some instances, any quality gap was certainly narrowing. And, at the same time, the cost and, therefore, the machinery price gap could be considerable.

    Crawley said he expected these trends to continue as mature cigarette markets slowly contracted, particularly in North America and Europe. But again, there is a bright spot. “Nevertheless, there is a highly competitive market—mostly price driven—for used/refurbished machinery from some of the larger independent cigarette producers,” said Crawley.

    That is all well and good, but isn’t the competitiveness of this market in part down to the fact that supply has been choked off in recent years? “It has been general policy, with the multinational producers, not to resell or trade their surplus machinery,” Crawley acknowledged. “Nevertheless, not all play by the same rules all over the world. Consequently, there is a good amount of used machinery available if one cares to search. This trend, also, is expected to continue.”

    At this point, I couldn’t help asking a question that has often occurred to me in my more fanciful moments. If I decided I wanted to start a modest cigarette manufacturing plant in the EU, what would be my best options in respect of machinery and equipment, assuming that I had a modest budget—whatever that might be—but what I thought was a winning brand name? “A modest startup can still find good used machinery at competitive prices,” said Crawley. “For example, a Molins Mk9 with a Hauni MaxS tipper is a good medium-speed complex with high efficiency/productivity. Spares and expertise are also available. And from this mid-point, you can go up or down in price and type of machinery.

    “For the last 30 years, machinery development has focused on higher speed machinery, and, while there are huge benefits to achieving greater speeds from the same machinery footprint, those speed increases often come with the sacrifice of flexibility. Machinery flexibility lags profoundly and there is little development in this sector. Changing machinery configurations for different lengths, diameters and tipping, etc., remains difficult, time consuming and costly.”

    Finally, Crawley turned his gaze on the future. “Affluent and highly profitable cigarette markets still abound, but they are increasingly finding their volumes shrinking and competition increasing,” he said. “In the longer term, challenging times are ahead for both machinery and cigarette producers.” –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.
  • Uncharted Territory

    Uncharted Territory

    Photo: JHVEPhoto

    The FDA’s review process of PMTA applications won’t be completed by the Sept. 9 deadline.

    By Stefanie Rossel

    Regulation of novel tobacco products can be a tedious and sometimes overwhelming process, as current developments in the United States show. Almost a year after the court-ordered deadline for manufacturers to hand in premarket tobacco product applications (PMTAs) for their products and only a few days before the grace period for unapproved products to stay on the market ends, the U.S. Food and Drug Administration sits on a mountain of more than 2 million applications for “deemed new tobacco products.”

    In 2019, a Maryland district court judge had ordered the FDA’s Center for Tobacco Products (CTP) to set a new and earlier PMTA deadline for electronic nicotine-delivery systems (ENDS), which was finally laid down for Sept. 9, 2020. The court order provided for a one-year period during which time such products might remain on the market pending FDA review. After Sept. 9, 2021, the FDA will be allowed to grant further extensions on a case-by-case basis for “good cause,” but no general extra time.

    If a negative action is taken by the FDA on the application prior to Sept. 9, 2021, the product must be removed from the market or will risk FDA enforcement. If the FDA issues a positive order on a product, it will be listed on the positive marketing orders page and can continue to be marketed, according to the terms specified in the order letter. At the time of writing, however, most applications, each consisting of hundreds or even thousands of pages of scientific data, still needed to be reviewed. In May 2021, the agency published a long-awaited list of vapor companies that had submitted PMTAs by the Sept. 9, 2020, deadline. The publication of the list is believed to signal the start of enforcement.

    Considering the large volumes of PMTAs submitted, though, it is improbable that the FDA will be able to process all submissions before manufacturers are required to withdraw their products from the market. In June, the U.S. Small Businesses Administration (SBA), a federal agency that represents small businesses to the various branches of government, urged the FDA to ask the Maryland district court judge to allow the agency to extend the deadline until September 2022. Most small ENDS manufacturers, the SBA argued, did not have the resources to absorb the losses from having their products pulled from the marketplace for several months or more. It said that once the FDA ordered small ENDS manufacturers’ products removed from the market, those small businesses would close permanently. The SBA also pressed the FDA to end its current practice of processing PMTAs in order of manufacturer market share.

    On August 4, Swisher International filed a motion for an emergency preliminary injunction against the CTP for threatening enforcement against products without PMTAs or substantial equivalence approval authorized. The cigar manufacturer, whose cigars are also in the FDA’s premarket-review process with authorization pending, called the FDA’s process “half baked” and accused the agency of creating chaos.

    Individual instead of standardized

    Jonathan Fell

    Consumer staples specialist Jon Fell, partner at Ash Park Capital, thinks it’s unlikely that the FDA will grant a blanket extra year extension. “The FDA has regularly stressed that it has discretion to defer enforcement action on a case-by-case basis, although it’s very hard to know what that will actually mean for the—presumably quite large number—of products which the FDA still hasn’t had time to review by September. I suspect that they will have to defer enforcement against products whose PMTAs have been accepted for review and aren’t obviously deficient, otherwise they’ll face more legal challenges.”

    The agency has repeatedly issued warning letters to manufacturers and retailers to remove unauthorized products from the market, most recently in late July. “The FDA will continue to prioritize enforcement against companies that market ENDS without the required authorization and that haven’t submitted a premarket application to the agency—especially those products with a likelihood of youth use or initiation,” the agency said on its website.

    In contrast to the EU, which with the Tobacco Products Directive (TPD) created a regulatory framework that sets the legislative standards for nicotine strengths, ingredients, labeling, health warnings and other issues for ENDS, the U.S. opted for an individual approach at product regulation. In its recent application report of the TPD, the European Commission stated that the directive’s restrictions on additives in e-liquids, such as vitamins, likely was the reason why the EU was spared the EVALI (e-cigarette or vaping associated lung injury) that raged through the U.S. in 2019.

    “There are very few pros to the way FDA is regulating e-cigarettes in the U.S.,” says Fell. “About the only one I can think of is that having a product explicitly authorized to be marketed in the U.S. might help build consumer confidence in these products after various health scare stories, including the EVALI crisis. But that is at the cost of an enormously complicated and expensive regulatory process that really adds very little value and is a substantial barrier to innovation. I think it would have been far more effective to define a set of standards that e-cigarettes have to meet and then take enforcement action against any products on the market which don’t meet those standards.”

    IQOS on hold

    But it’s not always the FDA’s long-winded processes that prevent manufacturers from marketing their novel tobacco products. Altria subsidiary Philip Morris USA suspended sales of its IQOS heated-tobacco product (HTP) after the U.S. International Trade Commission (ITC) in late July 2021 had found that PM USA had infringed on two patents owned by British American Tobacco subsidiary Reynolds American Inc. (RAI). RAI, which sued PMI USA last year before the ITC and in federal court in Virginia, claims that IQOS violates its patents over the device’s heating blade and alleges PMI was using a former version of the current technology of its own HTP Glo.

    RAI was seeking to have an import ban into the U.S. imposed on IQOS devices and consumables unless PMI licensed the technology from it. The ITC judge’s findings are subject to review by the full commission, with the investigation scheduled to be completed by Sept. 15. In the Virginia case, Altria responded with its own patent-infringement claims and a separate suit in May. The company also filed petitions with the U.S. Patent and Trademark Office, challenging the legality of several RAI patents, inclusive of three investigated in the ITC court case.

    IQOS had been introduced in U.S. test markets, including Atlanta, Georgia, Richmond, Virginia, and metropolitan areas in North Carolina after the FDA had granted the product PMTA authorization in April 2019. IQOS was the first next-generation inhalable product to be authorized as a modified-risk product in July 2020. Its U.S. expansion is now on hold.

    “I hope that the two-way patent battles between PMI and BAT will be settled in a grown-up way before long,” says Fell. “It’s not a good look for an industry trying to make the case for harm reduction to be squabbling in this way, particularly if it results in consumer choice being restricted, by products being taken off the market or not rolled out as fast as they otherwise might. Robust competition ought to be a potent mechanism for encouraging more innovation and shifts in consumer behavior.”

    Another development with uncertain impact on the cause of tobacco harm reduction is Juul Lab’s recent funding of a scientific publication. According to The New York Times, the vaping company spent almost $60,000 to fund the entire May/June issue of The American Journal of Health Behavior to help establish Juul as a smoking cessation tool. Juul Labs has submitted a PMTA to the FDA for its Juul products.

    In the past, scientific articles on reduced-risk products sponsored by tobacco or ENDS manufacturers repeatedly had difficulties being accepted by renowned scientific journals. “Perhaps optimistically, I think if the tobacco harm reduction concept continues to take a broader hold, then over the medium to longer term, excluding research sponsored by tobacco or nicotine companies from academic journals will not be tenable,” says Fell.

    “It will come to be seen as what it is: an anti-scientific and unjustifiable attempt at censorship, rooted in a view of the industry which is at least a couple of decades out of date. Perhaps this is the other silver lining of FDA regulation: the FDA has to engage with industry science and recognize its integrity, and over time the influence of that might spread. Ultimately, the FDA’s decision on Juul’s PMTA will have to come down to rigorous science and hard data, whatever attempts are made to sway the agency’s hand via the emotive arguments of campaigning organizations.”

    FDA Refuses to File Substantial Share of PMTA Applications

    On Aug. 9, the U.S. Food and Drug Administration issued a “refuse to file” (RTF) letter to JD Nova Group. The letter notified the company that the premarket tobacco product applications (PMTAs) it submitted for approximately 4.5 million of its products do not meet the filing requirements for a new tobacco product seeking a marketing order.

    As a result of this RTF action, JD Nova Group must remove approximately 4.5 million products from the market or risk enforcement action by FDA. The company may resubmit a complete application for these products at any time. However, the products may not be marketed unless they receive a marketing granted order.

    The FDA’s action affects a significant share of PMTAs under review. The agency has received applications for more 6.5 million products from over 500 companies.

    According to the FDA, JD Nova was issued the RTF letter because the company’s applications for these products lacked an adequate environmental assessment. Under FDA’s regulations implementing the National Environmental Policy Act, an environmental assessment must be prepared for each proposed authorization.

    This RTF does not apply to all product applications submitted by JD Nova. The remaining product applications the company submitted by the Sept. 9, 2020, deadline are still moving through the review process, according to the FDA.

    The list of affected products is available at https://bit.ly/3fP6cZj.

  • Innovation as a Driver

    Innovation as a Driver

    Photo: Celanese

    Even in challenging times, filter and tow suppliers find new business opportunities in innovative nicotine products.

    By Stefanie Rossel

    Over the past years, manufacturers of acetate filter tow and cigarette filters have come to learn how to best cope with challenges. The continuous decline in global cigarette consumption since 2013, which also resulted in lower demand for tow and filters, has been one such issue.

    Hyunyoung Park

    In 2020, tobacco companies sold 5.06 trillion cigarettes worldwide, representing a decline of 3.7 percent compared to 2019, according to Euromonitor. Increasing restrictions on tobacco products as well as the rise of reduced-risk alternatives contributed to this development. “Philip Morris International’s conventional cigarette-free world mission is a big challenge to filter makers,” notes Hyunyoung Park, sales and business development manager at Taeyoung Industry Corp. of South Korea, a supplier of mono, dual and triple filters to multinational cigarette manufacturers.

    The year 2020 added more trials for the tobacco industry, most notably the Covid-19 pandemic. At the ITGA’s Issues Day in November 2020, Shane MacGuill, Euromonitor’s senior head of tobacco research, said he expected combustible cigarette volume to decline further in the next five years, aided by a pandemic that left many governments scrambling to refill their coffers.

    Harald Bruggeman

    For the time being, the most tangible effect of the pandemic for suppliers of acetate tow is logistic in nature, says Harald Bruggeman, vice president of commercial acetate tow at Celanese in the U.S. “A challenge for the entire industry is that the global liner market remains tight with lower performance and higher freight rates that continue to climb,” he says. “To ensure supply chain security, Celanese has a global warehouse network and healthy inventory levels.”

    Bruggeman notes that pandemic-related travel restrictions continue to impact business. To provide best possible service, he explains, Celanese provides remote sales and technical customer support by offering video conferences, online training, webinars, web-based software for item selection, filter and cigarette design calculations and RealWear devices, such as hands-free, voice activated, head-mounted tablets, for remote assistance.

    The pandemic follows a period during which tow manufacturers were busy preparing for tighter regulation. In February 2018, the European Commission published the classification of titanium dioxide (TiO2), a delustering agent that had been used in paints and varnish, plastics, paper, printing inks and many other applications for about 100 years, as a suspicious carcinogen for inhalation. Although many scientific studies show that TiO2 does not cause cancer in humans, the classification will take effect Oct. 1, 2021. “The filter tow manufacturers are transitioning to acetate tow without added TiO2, which increases complexity in manufacturing, portfolio and supply chain,” Bruggeman says. “Celanese has completed all necessary preparations for the commercial production of acetate tow without added TiO2 at both manufacturing sites, i.e., Narrows, Virginia, USA, and Lanaken, Belgium.”

    Jens Ebinghaus

    Jens Ebinghaus, CEO of Swiss-based acetate tow manufacturer Cerdia, formerly Rhodia Acetow, stresses the positive side of this challenge. In November 2018, the company launched DE-Tow, a tow made of cellulose acetate that is free from TiO2. “Most of our customers have already switched to TiO2-free filter tow while others still use tow with TiO2,” he says. “Supplying both customer groups adds complexity to the manufacturing process and creates opportunities to the most flexible suppliers.” In 2019, Cerdia’s Freiburg, Germany, plant committed to invest close to $100 to strengthen its competitiveness, to foster the growing market share of specialty filters produced in Freiburg and to focus on product innovation as well as diversification.

    Taeyoung Industry Corp. is developing filters with non-acetate tow and studying alternatives to conventional filter material.

    Toward Increased Sustainability

    While the pandemic is far from over, this summer brought about new challenges for the sector: On July 3, 2021, more parts of the European Union’s Single-Use Plastics Directive (SUPD) entered into force, banning the sale of items such as plates, cutlery, straws and cotton bud sticks made of plastic as well as food containers and expanded polystyrene cups. The directive was drafted to fight marine pollution. Although cigarette filters are among the 10 single-use plastic products most often found on Europe’s beaches and seas, representing as much as 60 percent of all waste items, they are not among the prohibited products. Worldwide, around 98 percent of cigarette filters are made of cellulose acetate, a bio-based polymer that biodegrades over several months to several years, depending on the conditions of the environment where it has been discarded.

    Instead of the originally discussed consumption reduction targets for filter cigarettes, the European Parliament reached a provisional agreement stating that “the huge environmental impact caused by post-consumption waste of tobacco products with filters, discarded directly into the environment, needs to be reduced. Innovation and product development are expected to provide viable alternatives to filters containing plastic, and this development needs to be accelerated.” Through the introduction of extended producer responsibility (EPR), a reinforced application of “the polluter pays” principle, the provisional agreement seeks to further encourage innovation leading to the development of sustainable alternatives to tobacco product filters containing plastic.

    More specifically, the directive will require producers to cover the costs of consumer awareness-raising measures and EPR schemes tackling the clean up of litter and its subsequent transport and treatment, the costs of data gathering and reporting, and the costs of collection of waste of tobacco filters discarded in public collection systems. EU member states have until Dec. 5, 2023, to set up ERP schemes for tobacco filters that contain plastic, but to date, there is no available guidance for member states as to how such EPR schemes should be implemented. As of July 3, all packaging of tobacco products with filters are required to be marked with a pictogram warning against littering.

    “The most burning concern at the moment is the impact of the SUPD—how to deal with the directive and product solutions that are compatible with the criteria it sets out,” says Ebinghaus. “The role that biodegradability of filters and tow will play in the future depends heavily on littering regulations. Cellulose acetate is based on wood pulp, a renewable raw material. With Cerdia DE-Tow, we have already created a product that is characterized by certified rapid biodegradability. We are convinced that this topic will continue to accompany us in the future and are glad that we can already offer a future-proof solution to our customers.”

    “The criteria for biodegradability under the SUP directive are not expected to be established by the EU until 2027,” notes Bruggeman. “The EC is concerned about potential misleading claims around biodegradability of filters as it could likely have an inverse effect on littering behavior. Certifications of biodegradability alone do not resolve the fundamental problem of reducing the impact of ‘littering’—thus, the measures called for in the EU SUP directive remain as important and necessary to be adopted, i.e., contribute to awareness-raising EPR, including cleanup, collection and waste treatment, and labeling requirements for cigarette packs.”

    SK Low

    Seeking the Gold Standard

    Filter manufacturers are also busy trying to meet changing requirements for an expanding environmentally friendly products market. Taeyoung’s R&D department is working on filter development with non-acetate tow and is carrying out studies on the replacement of conventional filter material. Seng Keong Low (SK), global marketing manager at specialty filter manufacturer Essentra, explains that the greatest challenge now is to find the perfect substitute for cellulose acetate filters—“a gold standard, so to speak. While we have commercially launched paper-based filters from our ECO range, we also acknowledge that there are certain tradeoffs when using these alternative materials. That is why Essentra Filters continues to learn, innovate and improve upon these products to achieve that gold standard.” He relates that his company has several intermediary products within its portfolio of products, such as BiTech, which mixes cellulose acetate and paper, thus increasing the biodegradability of the product.

    Sustainability issues aside, filter designers continue to seek innovative solutions beyond the usual range. Filter and tow makers observe an ongoing shift toward slim and superslim formats while capsule filters remain popular. “Outside of the EU, flavors continue to play a role in driving consumer demand, especially in countries like China, Japan and Korea,” says SK.

    While cigarette consumption will likely continue to decrease, heated-tobacco products (HTPs) are creating new opportunities for filter and tow manufacturers. Like conventional cigarettes, HTP consumables require a—highly complex—filter. Cellulose acetate tow is found in vape products too; it can be used in e-cigarettes to prevent leakage of e-liquids. “We see great opportunities and great potential in developing and producing a broader spectrum of specialty items for more specific new-generation products and in the advancement, refinement and expansion of the [HTP] segment,” says Ebinghaus.

    “We observe continuous innovation and product launches in the strong growing HTP market, e.g., PMI’s IQOS Iluma, BAT’s Glo Hyper plus, JT’s Ploom X or KT&G’s Lil Solid 2.0,” echoes Bruggeman. “Celanese partners with the major players in the HTP segment for the development of new filters for heated-tobacco sticks.”

    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.
  • Thank You!

    Thank You!

    The 2021 GTNF would have been impossible without the support of these generous sponsors.

    TR Staff Report

    Founded in 2009 and headquartered in Shenzhen, China, ALD Group Limited is an innovation-driven enterprise specializing in a full range of next-generation products, including electronic nicotine-delivery systems, CBD vaporizers and heated-tobacco devices. As one of the leading vape manufacturers, ALD is capitalizing on years of R&D know-how and manufacturing experience to provide global one-stop service. With a powerful intellectual property system, high-quality assurance, fast delivery service and a strong commitment to social responsibility, ALD serves worldwide clients with the most cutting-edge products.

    Alliance One International is a tobacco leaf supplier that offers customers high-quality leaf they can trust. With more than 145 years of agricultural experience and customers in approximately 90 countries, Alliance One International purchases tobacco from a network of more than 300,000 farmers worldwide to produce products that are sustainable and traceable.

    Altria’s tobacco companies have a long history of leading the industry. Today, adult tobacco consumers are increasingly seeking new options, including those that reduce risk, and their preferences are evolving rapidly. Altria’s vision by 2030 is to responsibly lead the transition of adult smokers to a smoke-free future. To that end, it will work within the framework that government, public health and regulatory bodies have established to communicate about reduced-harm choices. And for any tobacco consumer who wants to quit, Altria offers access to a breadth of information from experts on how to do so successfully. The actions the company is taking will create a different Altria—and a different landscape that the company believes will benefit today’s adult tobacco consumers.

    Barrettine Environmental Health has worked with the tobacco industry to develop a combined insect monitoring trap that functions as an early warning detection system for both tobacco beetles and tobacco moths. The MoBe Combo trap is an all-in-one hygiene control system for use during tobacco storage, shipment, processing and manufacture.

    When using the MoBe Combo Mk. 2, there is only one trap to check, which can significantly reduce both product and labor cost. Since the launch of the MoBe Combo trap, the company has introduced several enhancements.

    The tobacco beetle is often seen as the most significant tobacco pest; however, tobacco moth infestations can also contribute to significant damage to stored tobacco as well as processed and finished stock. With climate control used in many areas of tobacco processing sites, both species have the potential to thrive in all regions of the world. The MoBe Combo trap is effective in monitoring both species or either of the species in isolation.

    BAT is a leading consumer-centric, multi-category consumer goods company that provides tobacco and nicotine products to millions of adult consumers around the world. Its purpose is to build “a better tomorrow.” It will achieve this by reducing the health impact of its business through a multi-category portfolio of noncombustible products tailored to meet the preferences of adult consumers.

    BAT is investing in building a portfolio of reduced-risk tobacco and nicotine products*† alongside its traditional tobacco business—including vapor products, tobacco-heating products and modern oral products, which are collectively termed New Categories, as well as traditional oral products.

    BAT’s ambition is to increasingly transition revenues from combustible products to its New Category products over time. The company employs more than 55,000 people, operates in more than 180 markets and has 79 owned manufacturing facilities in countries around the world. In 2020, the BAT Group generated revenue of £25.8 billion and profit from operations of £10 billion.

    BMJ is the world’s No. 1 partner for specialty paper and packaging materials in the cigarette industry. BMJ produces cigarette paper, plugwrap paper, base tipping paper and printed tipping paper with standard weights of 18 grams to 40 grams per square meter. As a printing packaging company, BMJ represents high-quality packaging utilizing both rotogravure and offset.

    Boegli-Gravures designs, develops and manufactures state-of-the-art embossing tools and solutions for an exacting worldwide clientele. The company’s combination of artistic vision and engineering excellence has brought it recognition as a world leader in high-precision embossing and as an original equipment manufacturer supplier. The secret of Boegli-Gravures’ success lies in the company’s vision and passion for innovation.

    Broughton is a privately owned global contract research organization (CRO) offering fully integrated end-to-end services to deliver U.S. premarket tobacco product applications, EU medicinal product applications and EU Tobacco Products Directive notifications for next-generation nicotine products. Our business culture is to continue to invest in new science and innovations aligned with global regulatory requirements. By partnering with Broughton, clients will know they have access to some of the most experienced consultants in the world with deep industry knowledge combined with regulatory compliant CRO laboratory facilities. Broughton is committed to supporting clients in their development of safer nicotine products.

    CNT is the world’s largest supplier of highly purified nicotine to the pharmaceutical and next-generation products (NGP) industries. With pure nicotine and nicotine polacrilex resin manufacturing capabilities in Switzerland and Northern Ireland, CNT offers 100 percent contingency in supply of these key products. In addition, CNT has now developed an array of new nicotine-containing formulations for use in a broad spectrum of NGP applications, including modern oral (pouch) products. CNT is actively developing new product categories in its “beyond nicotine” strategy, utilizing its knowledge learned in nicotine to explore additional active substances of interest to our customers. CNT is one of the world’s leading suppliers of sustainably produced tobacco leaf.

    Headquartered in Austria, Delfort is a global leader in tailor-made specialty papers. In addition to thin print paper, release base paper, food packaging paper and electrical applications paper, the company manufactures a complete portfolio of top-quality cigarette paper, plugwrap paper, tipping base paper and printed papers. By utilizing pure and certified raw materials with the most advanced equipment, Delfort ensures that its products meet the most stringent quality requirements.

    FEELM is a high-end atomization technology brand belonging to SMOORE, a world leader in atomization. Focused on cutting-edge atomization technology research, FEELM specializes in the development and manufacturing of high-quality atomization devices driven by the FEELM ceramic coil.

    As the research engine of the global electronic atomization industry, FEELM delivers premium experience. Ever since the successful development of the FEELM black ceramic coil in 2016, FEELM has a significant impact on the research and manufacturing of closed vaping products, changing the whole competitive landscape.

    FEELM won a Golden Leaf Award at GTNF 2018, the China Patent Excellence Award and the iF Design Award 2020. Vaping devices loaded with FEELM atomizer have been exported to Europe, America, East Asia, Africa, Oceania and many other countries and regions. Its accumulated sales volume has surpassed 3 billion pieces, becoming more and more popular among worldwide consumers.

    The Foundation for a Smoke-Free World is an independent, U.S. nonprofit private organization that was formed in 2017 to reduce the 8 million annual deaths caused by tobacco use and address the consequences of reduced demand for tobacco farmers. The Foundation’s mission to end smoking in this generation is supported through three core pillars: Health, Science, and Technology; Agriculture and Livelihoods; and Industry Transformation. To achieve its mission on a truly global scale, the Foundation strives to identify and address the unique needs of the developing world as they relate to tobacco cessation and harm reduction. The Foundation is led by Derek Yach, a global health expert and anti-smoking advocate for more than 30 years.

    Funded by annual gifts from PMI Global Services, the Foundation is independent from PMI and operates in a manner that ensures its independence from the influence of any commercial entity. Under the Foundation’s pledge agreement with PMI and bylaws, PMI and the tobacco industry are precluded from having any control or influence over how the Foundation spends its funds or focuses its activities.

    Founded in the mid-1980s, Hall Analytical is a globally respected analytical laboratory based in Manchester, U.K., which specializes in complex trace analytical chemistry.

    The company’s mission is to deliver innovative and high-quality analytical expertise to strengthen its clients’ ability to improve product safety and reduce harm to patients and consumers. To that end, Hall Analytical partners with clients in the pharmaceutical, biopharmaceutical, medical device and consumer sectors to ensure their products are safe and compliant with appropriate regulatory frameworks.

    To support the nicotine reduced-risk product industry, Hall Analytical offers clients a wealth of experience in the analysis of vapor products and heated-tobacco products, supporting their core strategic objective to deliver less harmful, smoke-free alternatives for nicotine consumers.

    Imperial Brands is a global consumer organization and the world’s fourth-largest international tobacco company. Its products include JPS, West and Davidoff cigarettes, Rizla rolling papers and the vapor brand Blu. Imperial Brands operates in 120 markets, including the U.S. where its ITG Brands subsidiary offers a broad portfolio of cigarette and mass market cigar brands, including Winston and Backwoods.

    Driven by insights and data, Imperial seeks to meet the expectations of adult smokers by putting the consumer at the center of everything it does. It is also refining its ways of working and its culture to foster a strong challenger mindset among its 27,000 employees worldwide.

    Imperial is focused on leveraging its tobacco assets in its five priority markets and on building a successful and sustainable next-generation product (NGP) business. This year, it has refocused its NGP strategy behind heated-tobacco and oral nicotine opportunities in Europe and in selective market opportunities in vapor.

    Japan Tobacco International is a leading international tobacco and vaping company, with headquarters in Geneva, Switzerland. JTI began 22 years ago when Japan Tobacco acquired the non-U.S. operations of R.J. Reynolds. Since then, its international workforce of over 40,000 employees has driven two decades of growth. JTI owns some of the world’s best-known brands, including Winston, the No. 2 global cigarette brand, and Camel. Other major international brands are Mevius and LD. The company’s portfolio brings together the rich heritage of traditional tobacco as well as the latest technical and scientific innovation in reduced-risk products.

    Juul Labs’ mission is to transition the world’s billion adult smokers away from combustible cigarettes, eliminate their use and combat underage usage of its products. The company believes that vapor products can offer adult smokers an alternative to combustible cigarettes and, in so doing, reduce the harm associated with tobacco. Nicotine is addictive and can potentially be harmful. It would be best if no one used any nicotine product. Anyone who smokes should quit. Adult smokers who have not successfully quit should completely switch to potentially less harmful alternative nicotine products. Juul Labs does not want any non-nicotine users, especially those underage, to try its products, as they exist only to transition adult smokers away from combustible cigarettes. Juul products are not intended to be used for smoking cessation or other therapeutic purposes.

    Kure operates more than 130 retail locations across the United States and several more in Europe. The company is a recognized leader in the vape industry. Kure’s e-liquid line and bar offers custom, bespoke liquids made with the highest quality ingredients to cater to the tastes of every guest. Its tailored in-store service is designed to provide the best support possible to transition from smoking to vaping. Kure offers the latest and greatest hardware to ensure its guests receive only the best.

    Kure has submitted its thorough premarket tobacco product applications to the U.S. Food and Drug Administration. These applications detail the high standards the company adheres to in all aspects of its business. Moreover, Kure takes its responsibility to its guests and the community it serves seriously and has thus designed and implemented measures to ensure its products never end up in the hands of minors. Kure uses tools such as electronic point-of-service age verification software, secret shopper programs and extensive employee training programs to keep this commitment.

    Philip Morris International is leading a transformation in the tobacco industry to create a smoke-free future and ultimately replace cigarettes with smoke-free products to the benefit of adults who would otherwise continue to smoke. PMI is a leading international tobacco company engaged in the manufacture and sale of cigarettes as well as smoke-free products, associated electronic devices and accessories and other nicotine-containing products in markets outside the U.S.

    In addition, PMI ships versions of its IQOS Platform 1 device and consumables to Altria Group for sale under license in the U.S., where these products have received marketing authorizations from the Food and Drug Administration under the

    premarket tobacco product application pathway; the FDA has also authorized the marketing of a version of IQOS and its consumables as a modified-risk tobacco product, finding that an exposure modification order for these products is appropriate to promote the public health.

    PMI is building a future on a new category of smoke-free products that, while not risk-free, are a much better choice than continuing to smoke. Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, PMI aims to ensure that its smoke-free products meet adult consumer preferences and rigorous regulatory requirements.

    PMI’s smoke-free product portfolio includes heat-not-burn and nicotine-containing vapor products. As of June 30, 2021, PMI’s smoke-free products are available for sale in 67 markets in key cities or nationwide. PMI estimates that approximately 14.7 million adults around the world have already switched to IQOS and stopped smoking. For more information, please visit www.pmi.com and www.pmiscience.com.

    Quartz Business Media is the owner and organizer of the largest network of tobacco-related exhibitions and conferences in the world. These include the market-leading series of World Tobacco events, WT Middle East, TABEXPO and World Shisha Dubai.

    Founded in January 2018, Relx is Asia’s leading e-cigarette brand. Relx’s mission is to empower adult smokers through technology, product and science ethically. Relx independently develops its e-cigarette products at its CNAS-standard R&D center and continues to make significant investments in R&D, e-liquid testing and new product development to deliver the best possible experience to its adult users. To protect minors from accessing e-cigarette products, Relx developed the guardian program, a companywide initiative that stretches from product development to sales and marketing, leveraging cutting-edge facial recognition technologies, GPS data and cloud technologies. The company has attracted global talent from Uber, Proctor and Gamble, Huawei, Beats and L’Oreal.

    Reynolds American Inc. (RAI) is an indirect, wholly owned subsidiary of BAT and is the parent company of R.J. Reynolds Tobacco Co., American Snuff Co., Santa Fe Natural Tobacco Co., R.J. Reynolds Vapor Co. and Modoral Brands. RAI’s vision is to build “A Better Tomorrow” by reducing the health impact of its business through offering a greater choice of innovative products for adult tobacco consumers.

    SMOORE is a global leader in offering vaping technology solutions, including manufacturing vaping devices and vaping components for heat-not-burn products on an ODM basis, with advanced R&D technology, a strong manufacturing capacity, wide-spectrum product portfolio and a diverse customer base. According to Frost & Sullivan, SMOORE is the world’s largest vaping device manufacturer in terms of revenue, accounting for 18.9 percent of the total global market in 2020.

    Through its innovative and pioneering vaping technology solutions, SMOORE operates two principal business segments: research, design and manufacturing of closed system vaping devices and vaping components for leading global tobacco companies and independent vaping companies; and research, design, manufacturing and sale of self-branded open system vaping devices, or APV, for retail clients.

    SMOORE owns a series of tech brands, including FEELM, CCELL and METEX, and the product brand Vaporesso.

    SWM is a leading global provider of highly engineered papers, films, nets and nonwovens for a variety of applications and industries. As an expert in manufacturing materials made from fibers, resin and polymers, the company provides critical components that enhance the performance of their end products.

    The company’s engineered papers group has been serving the tobacco industry for decades with highly technical papers and reconstituted tobacco leaf. SWM continues to innovate, with a special focus on heat-not-burn products, using its advanced paper and reconstitution technologies to meet the demands of this emerging product category. SWM’s versatility and portfolio are designed to deliver satisfaction while meeting stringent specifications.

    In recent years, SWM has diversified to include films, nets and nonwovens offered through its advanced materials and structures (AMS) segment. The AMS platform serves a variety of industries with the same focus on technical expertise, operational excellence and customer collaboration that have long been SWM’s hallmark traits.

    SWM and its subsidiaries manufacture on four continents, conduct business in over 90 countries and employ approximately 5,000 people worldwide.

    Founded in 1975, Tobacco Technology Inc. (TTI) exclusively develops and manufactures customized flavors, including casings, for the global tobacco industry: cigarettes, cigars, water pipe, snuff, snus, chew, kretek, roll-your-own, pipe, hemp and dissolvables. TTI also offers consulting services to facilitate flavor, process and product development.

    E-LiquiTech (ELT), a TTI subsidiary established in 2016, is dedicated to the development and manufacture of the highest quality e-liquids in addition to offering both bottle and cartomizer filling services. ELT is also the exclusive global distributor to the tobacco industry for Zanoprima, a research-driven, innovation-led life sciences company, offering SyNic high-purity synthetic (S)-nicotine in pure, bitartrate and polacrilex resin form.

    TTI Flavors, TTI’s subsidiary in Assisi, Italy, will start production of flavors, casings and e-liquids in the fall of 2021 to offer faster delivery to the company’s customers in Europe, the Middle East, Africa and Russia.

    Turning Point Brands continues to grow and evolve to meet changing consumer preferences. Along with a tobacco portfolio that features iconic, historic brands, such as Zig-Zag and Stoker’s, the company has expanded into the vapor and tobacco alternative segments with innovative brands such as VaporBeast, VaporFi and Marley. A highly effective sales force and distribution network ensure that consumers, retailers, partners and shareholders benefit from these products.

    For over 100 years, Universal Corp. has been finding innovative solutions to serve its customers and meet their agri-products needs. The company built a global presence, solidified long-term relationships with customers and suppliers, adapted to changing agricultural practices, embraced state-of-the-art technology—and emerged as the recognized industry leader.

    Today, Universal Corp. is a global business-to-business agri-products supplier to consumer product manufacturers, operating in over 30 countries on five continents, that sources and processes leaf tobacco and plant-based ingredients. Tobacco has been the company’s principal focus since its founding in 1918, and Universal Corp. is the leading global leaf tobacco supplier. Through its plant-based ingredients platform, Universal provides a variety of value-added manufacturing processes to produce high-quality specialty vegetable-based and fruit-based ingredients for the food and beverage end markets.

    Universal Corp. has a long history of operating with integrity, honesty and a focus on quality. It is a vital link in the leaf tobacco supply chain, providing expertise in working with large numbers of farmers, efficiently selling various qualities of leaf to a broad global customer base, adapting to meet evolving customer needs and delivering products that meet stringent quality and regulatory specifications.

    Going forward, Universal will build on its history by seeking opportunities in both tobacco and plant-based ingredients to leverage both its assets and expertise. The company will continue its commitment to leadership in setting industry standards, operating with transparency, providing products that are responsibly sourced and investing in and strengthening the communities where it operates.

    Zinwi Biotech was founded with the desire to offer the “nature flavor” e-liquid product to its clients. The company is sensitive to new trends. When nicsalt appeared as a game changer, Zinwi became one of the first suppliers with its own formula to meet the market needs.

    The merging of cutting-edge technology and boundless creativity, in turn, generates innovative flavoring solutions that serve 400-plus customers worldwide, resulting in a significant share on nicsalt juice used for electronic nicotine-delivery systems.

    With heavy investment in R&D, Zinwi in the future won’t limit itself as an e-liquid or nicsalt manufacturer but will also provide flavoring technologies that enrich food, healthcare and medicine products and other products that will help take humans’ lives to the next health level. Visit the company’s website

    * Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk-free and are addictive.† BAT products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak and Camel Snus, are subject to FDA regulation, and no reduced-risk claims will be made as to these products without agency clearance.

  • That Fleeting Scent

    That Fleeting Scent

    Photo: kasetch

    The FDA’s proposed ban on menthol cigarettes and cigars remains highly controversial.

    By Stefanie Rossel

    Almost exactly a year after the European Union imposed a ban on the manufacture and sale of menthol cigarettes, the U.S. Food and Drug Administration said it would ban menthol as a characterizing flavor in cigarettes and cigars at the federal level. With the move, the agency hopes to significantly reduce youth initiation to smoking, increase the chances of smoking cessation among current smokers and address health disparities experienced by communities of color, low-income populations and LGBTQ+ individuals, all of whom are more likely to use these tobacco products, according to acting FDA Commissioner Janet Woodcock.

    The proposed ban, announced on April 29, has been under discussion for more than a decade. While the 2009 Family Smoking Prevention and Tobacco Control Act (TCA), which gave the FDA regulatory authority over tobacco products, banned all characterizing flavors in cigarettes, it allowed the continued use of menthol cigarettes but instructed the agency to consider what to do about the additive. The FDA’s recent decision was forced by a federal lawsuit brought by public health groups in 2020 after the agency failed to respond to their 2013 petition, which called on the FDA to ban menthol products.

    Menthol can be extracted from mint plants or made synthetically. In tobacco, it is used to mask the harshness and irritation caused by cigarette smoke. The minty flavor creates a cooling, slightly anesthetic sensation, which, according to a 2013 FDA report, makes cigarettes more appealing to new smokers, thus getting them more easily addicted. The substance is also believed to increase the degree of addiction; menthol smokers are reportedly less likely than nonmenthol smokers to successfully quit smoking despite having a higher urge to end their tobacco dependence. Around the globe, mentholated smokes account for about 10 percent of cigarette consumption, according to the World Health Organization.

    In the U.S., menthol cigarettes represented 36 percent of all cigarette sales in 2018, according to the Centers for Disease Control and Prevention. Although U.S. smoking prevalence has dropped below 40 million, the share of mentholated cigarettes has risen significantly after the TCA prohibited all other characterizing flavors.

    What makes the FDA’s proposed ban controversial is the fact that menthol cigarettes are also considered a racial justice issue in the U.S. According to the 2019 National Survey on Drug Use and Health, 85 percent of African American smokers smoke menthol cigarettes compared to 30 percent of white smokers and compared to less than 10 percent of African American smokers in the 1950s—a situation that critics attribute to racially targeted marketing strategies by the tobacco industry. African Americans typically smoke fewer cigarettes and start smoking at an older age than white smokers, but they die from tobacco-related illnesses at much higher rates, CDC data indicates.

    Menthol cigarettes also appeal to Hispanic (48 percent) and Asian (41 percent) smokers, according to the survey, whereas about half of smokers aged 12–17 smoke menthols compared with about 40 percent for smokers aged 18 and older. With a market share of 49 percent, menthol cigarettes also featured prominently in in the LGBTQ+ community.

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    Great Expectations

    The FDA expects its proposed ban to have a significant impact. A Canadian study quoted by the agency suggests that the measure would prompt an additional 923,000 U.S. smokers to quit, including 230,000 African Americans, in the first 13 months to 17 months after taking effect. According to an earlier study, such a measure would avert 633,000 premature deaths, including 237,000 African American deaths.

    While many public health and civil rights groups welcomed the FDA’s decision, lauding it as a win for both public health and racial justice, critics cast doubt on the health effects and warned that it could create more problems for minorities.  

    “In this country, we have found out that prohibition doesn’t work,” says Jeff Stier, senior fellow at Taxpayers Protection Alliance. “The ban is supposed to protect African American smokers, but they are likely to switch to a different, nonmenthol combustible cigarette brand or buy their mentholated cigarettes on the black market. We already have a pretty active illicit market; a ban would make it even worse.”

    In the view of some civil rights organizations, a ban on menthol would create new, unwelcome opportunities for negative interactions between law enforcement and Black Americans.

    The FDA plans to implement its ban by 2022, but experts expect a flood of lawsuits from the tobacco industry. Apart from a long fight regulators may face in court, along with resistance in Congress, most notably from tobacco-state lawmakers, the process of shaping respective legislation is likely to take time as it will comprise two detailed proposals that are open to public comments and will then be reviewed by the White House. When the FDA last proposed to ban menthol cigarettes in 2013, it received 174,000 public comments. The agency is obliged by law to read every single one and consider them carefully.

    Questionable Effect

    While several countries, including Brazil and Turkey, have banned menthol cigarettes over the past decade, data on the impact of the measure remains scarce. Studies from Canada show that smokers of menthol cigarettes were considerably more likely to quit their habit altogether after that country banned menthol cigarettes nationwide in 2017. A more recent study by the National Bureau of Economic Research in Cambridge, Massachusetts, USA, however, concludes that there was “almost no direct evidence on [the] effects” of a menthol cigarette ban “using real-world policy variation.” The study also found that many youths switched to nonmenthol cigarettes and that many adults started buying their menthol cigarettes from Native Canadian reserves, which are exempted from the ban. With a pre-ban market share of 5 percent, the Canadian menthol cigarette market is also more like that of the EU, where menthol cigarettes account for 7 percent of all cigarette sales, than that of the U.S.

    The EU prohibited the manufacture and sale of menthol cigarettes in May 2020. The ban extends to the sale of rolling tobacco with mentholated filters or papers. Exempted from the ban are menthol-flavored e-liquids for vape products, separately available mentholated smoking accessories, menthol-flavored oral nicotine pouches and cigarillos. Outside of Germany, mentholated consumables for heated-tobacco products (HTPs) also remain legal.

    Cigarette manufacturers responded with innovative solutions to the ban. Apart from broadening their portfolios of menthol-flavored and mint-flavored reduced-risk products (RRPs), they introduced mentholated flavor cards, which smokers could buy separately to mentholate conventional cigarettes. Tobacco companies also started offering cigarillos with mentholated filter capsules. Cigarillos are exempt from the EU ban as they are wrapped in tobacco leaf.

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    Choosing Alternatives

    To determine whether the EU ban met its objective of discouraging people from smoking or encouraging them to quit, Euromonitor International, on behalf of the Foundation for a Smoke-Free World, surveyed more than 6,000 adult menthol cigarette smokers in eight EU countries before and after the menthol cigarette ban. While the pre-ban surveys queried awareness and intention to quit or switch, the post-ban surveys queried behavior.

    Main takeaways of the surveys included a lower rate of quitting smoking completely (8 percent) than indicated in the pre-ban survey (12 percent) and higher use of products that allow consumers to manually add a flavor to regular tobacco products. Thirteen percent of respondents said they had started buying products such as menthol flavor cards or menthol filter tips after the ban as opposed to 8 percent who had the pre-ban intention to do so.

    Thirty percent of respondents said they had reduced consumption of menthol cigarettes after the ban. Twenty-eight percent indicated they had stopped smoking menthol cigarettes but continued to consume regular cigarettes (pre-ban intention: 35 percent). Twelve percent said they had stopped consuming menthol cigarettes after the ban but increased their consumption of nonmenthol cigarettes (pre-ban intention: 13 percent). Eighteen percent stated post-ban they had switched to other menthol products not affected by the ban, such as menthol cigars, cigarillos, e-cigarettes and HTPs (pre-ban intention: 19 percent).

    Thirteen percent had started buying menthol cigarettes from other sources (pre-ban intention: 12 percent), more precisely from friends or family who had travelled to countries where menthol cigarettes were still legal or from online retailers shipping from other countries.

    Interestingly, when unprompted, only 43 percent of respondents considered menthol cigarettes to be illegal in the post-ban surveys. While 10 percent were unsure of the legal status of menthol products, 27 percent still believed them to be legal or to be banned in the future (20 percent).

    Harm Reduction Instead of Prohibition

    Interestingly, the EU menthol ban appears to have nudged smokers a bit toward less hazardous forms of nicotine consumption. Of the 18 percent of respondents who said they had switched to other menthol products not affected by the ban, the majority chose RRPs. On average, 57 percent of respondents said they had switched to e-cigarettes, with the highest percentages being observed in Poland (67 percent) and the U.K. (57 percent), two markets with high vaping prevalence. Overall, 12 percent of switchers indicated they had switched to nicotine-replacement therapy products.

    It’s a development Stier would like to see in the United States, which has yet to fully embrace the concept of tobacco harm reduction by promoting products such as e-cigarettes and snus as safer alternatives to combustible cigarettes. “Instead of going back to prohibition that will bring about unintended consequences, we should encourage smokers, as they do in the U.K., to quit smoking and switch to lower risk vape products. The FDA is sitting on applications to authorize these e-cigarettes now. Instead of banning products the African American community smokes, it should undo the misperceptions surrounding RRPs, offer better alternatives and be truthful about the risks,” he says.

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  • Scientific Partnerships for Sustainable Change

    Scientific Partnerships for Sustainable Change

    Photo: BAT

    Options for the tobacco industry to demonstrate its responsible approach

    By Stephane Colard

    The objective to limit or even to ban tobacco is on the health and regulatory agenda. The so-called endgame strategy is an official goal in countries such as New Zealand1 and Ireland.2 More globally, the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) was adopted by the World Health Assembly in 2003 and has been ratified by more than 180 countries to date. This convention is composed of a set of articles to reduce tobacco demand and supply and is seen as an accelerator for sustainable development.3

    Even if a total ban seems unrealistic at the moment because politicians know that prohibition leads to criminality, tobacco product manufacturers cannot ignore this objective and its possible consequences on the performance of their tobacco business, which is legal. It appears clearly that such a regulatory agenda will have massive impacts along the whole value chain from the production of the raw material up to sale, and sustainable value creation may well require serious business transformations in the near future.

    Article 5.34 of the FCTC recommends to “denormalize and, to the extent possible, regulate activities described as ‘socially responsible’ by the tobacco industry, including but not limited to activities described as ‘corporate social responsibility.’” These elements tend to show that corporate and social responsibility (CSR) initiatives having the sole objective of improving the image of tobacco companies will be combatted and will fail and that the needed tobacco business transformation for ensuring sustainable value creation will not be an easy journey; it will succeed only if CSR initiatives support a genuine ambition and if corresponding impacts are assessed with internationally acknowledged methods.

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    There are several options for the tobacco industry to demonstrate its responsible approach: compliance with regulations (mandatory); ISO certification or other acknowledged standard(s) (voluntary); disclosure of relevant information to the public and/or the authorities (mandatory or voluntary); and scientific research and publication in peer-reviewed journals (voluntary). The possibility to link company strategies with the United Nations’ Sustainable Development Goals5 is also an opportunity to consider.

    The U.N. recognizes that a successful sustainable development agenda requires partnerships between governments, the private sector and civil society. The players of the tobacco and alternative product sectors fully understand that no goal can be achieved alone and that partnerships with multiple stakeholders are necessary to meet sustainable development ambitions. For example, some manufacturers prepare their program for child labor prevention in collaboration with the Eliminating Child Labor in Tobacco-growing Foundation (ECLT) and the International Labor Organization (ILO), and others contribute to WASH6 programs led by UNICEF.

    Dialogue and co-development of solutions to the issues faced by business partners, such as suppliers and retailers, are also collaborative approaches for building a sustainable future together. The misinterpretation of article 5.37 of the FCTC tends to forbid any contact with the tobacco industry, and the strategy of denormalization and isolation aims to prohibit partnerships. However, how could one improve the population health without encouraging or collaborating with the industry to develop and sell reduced-risk alternative products? How could one help millions of tobacco farmers worldwide to combat poverty and hunger without working with them on diversification? How could one combat criminal organizations making profits by the illicit trade of tobacco products without collaborating with the legal businesses? More pragmatically, how could one align government and industry testing laboratories without collaborative studies?

    Science should step away from politics, and there is no good reason for justifying absence of partnerships or reluctance to build them in total transparency. This would simply delay the implementation of positive changes. The U.N. underlines that partnerships shall be built upon principles and values, and this is why it is crucial for the tobacco industry to make the meaning of the word “sustainability” very clear in the context of partnership.

    It does not mean building partnerships for a sustainable development of tobacco businesses; it means building long-term partnerships to support transformation enabling the creation of sustainable shared value. It is essential to make a distinction between partnership types, as there are at least four different levels of engagement and shared responsibility: a partnership to elaborate a program that the manufacturers will own and manage autonomously and independently; a partnership to prepare a consensual program that the partners will own and manage together; a partnership to prepare a consensual program that a third party will manage; and a full delegation to a partner for elaborating and managing a program.

    There is always a reason to choose one type of partnership rather than another, depending on the level of interaction, shared responsibility or independence expected. Each type of partnership can be justified and understood for some given situations, but the reporting of partnerships in a public integrated report should be associated with a transparent communication of the governance rules. The analysis of the degree of interaction and interdependence between stakeholders and the related risks is an essential step because a key stakeholder involuntarily ignored and isolated (for example, the community) could impair the success of the joint project; ISO Standards 26000 and 440018 provide useful guidance in this area.

    Transparency is a way to avoid misinterpretations or even the worst suspicions that can totally undermine the good intentions of the partners. Governance is a way to avoid unintended consequences of partnerships, for example, a conflict of interest. The need for science-based methods for assessing impacts of actions for transformation should open a field for transparent and productive scientific partnerships, contributing to accelerate the U.N. agenda and to achieve a shared vision of a better world. There are principles and values in science that are universal (common to public and private sectors), such as transparency on assumptions and results, honesty and clarity in interpretations or capacity to replicate experiments.

    The process of peer-reviewed publication is also a good protection against junk science; the fact remains that several journals have decided not to publish any work from scientists working for, or from independent scientists working with, the tobacco industry9, peer-reviewed or not. However, it is unfortunate to observe that too many battles of numbers still highlight a lack of consensual methods among specialists, which extends the time spent on discussions and finally postpones the implementation of actions. An example illustrates this point: In 2018, the WHO published a global environmental footprint10 relative to cigarette smoking. The document reported a 2.6-ton carbon dioxide equivalent per million cigarette sticks while British American Tobacco and Philip Morris International reported 0.79 ton and 0.6 ton carbon dioxide equivalent per million sticks, respectively. The WHO was unable to understand why the figures were different but assumed a difference in scope and varying assessment methodologies. This point highlights a need for more transparency in scope and consensus in methodologies even if general publicly available protocols already exist.11

    An association like Coresta,12 promoting cooperation, can be the platform that the stakeholders need. It is in a privileged position to initiate new scientific and transparent partnerships and forge a consensus on methodologies for measuring the transformations of tobacco companies, far from political positioning, strategic fragmentation and the isolation of legitimate players.

    References:

    1 www.health.govt.nz/our-work/preventative-health-wellness/tobacco-control/smokefreeaotearoa- 2025

    2 https://health.gov.ie/wp-content/uploads/2014/03/TobaccoFreeIreland.pdf

    3 www.who.int/fctc/implementation/publications/who-fctc-undp-wntd-2017.pdf?ua=1

    4 www.who.int/fctc/guidelines/article_5_3.pdf

    5 www.un.org/sustainabledevelopment/sustainable-development-goals

    6 Water, Sanitation and Hygiene

    7 www.who.int/fctc/guidelines/article_5_3.pdf

    8 ISO 44001 Collaborative business relationship management systems—Requirements and framework

    9 See www.tobaccoreporter.com/2016/06/bat-criticizes-science-censorship

    10 www.who.int/fctc/publications/WHO-FCTC-Enviroment-Cigarette-smoking.pdf

    11 See, for example, the Carbon Disclosure Project www.cdp.net/en and the GHG protocol https://ghgprotocol.org

    12 www.coresta.org

    Stephane Colard is secretary general of Coresta.
  • Messy Market

    Messy Market

    Photo: Taco Tuinstra

    Ukraine’s anti-monopoly committee tries to break up a cartel it helped create.

    By Stefanie Rossel

    June 1, 2021, marked another step toward the end of a multimillion-dollar anti-competition lawsuit brought against four tobacco manufacturers and a distributor in Ukraine. On that day, the country’s Supreme Court ruled that a UAH460 million ($16.87 million) fine imposed by the Antimonopoly Committee of Ukraine (AMCU) against Imperial Tobacco Ukraine (ITU) and Imperial Tobacco Productions Ukraine for alleged violation of antitrust legislation was groundless.

    The Supreme Court found that Imperial’s Ukrainian subsidiaries had not been involved in the events that had unlawfully left the country with only one cigarette distributor. In a press release, Imperial Tobacco Ukraine’s CEO, Ratislav Cernak, welcomed the decision, saying it was an encouraging sign for all foreign investors in Ukraine. The ruling followed the overturning of similar fines for British American Tobacco and Tedis in February and for Philip Morris International in April 2021. At the time of writing, Japan Tobacco’s case was still pending before the Supreme Court.

    In October 2019, the AMCU imposed a record fine of UAH6.5 billion—one of the biggest in the country’s history—on the local affiliates of PMI, BAT and Imperial Brands, along with Tedis Ukraine, the country’s largest tobacco distributor, for conspiring to eliminate competition in cigarette distribution. The committee claimed that the tobacco companies and Tedis had conspired to keep new businesses from entering the market. The companies appealed but lost their cases in the first instance court. Both manufacturers and the American Chamber of Commerce (ACC) in Ukraine expressed concern about the anti-competition trial, arguing the defendants had not been given full access to the evidence on which the AMCU based its allegations and that insufficient attention was paid to the companies’ arguments during the trial.

    The AMCU then asked the court to collect fines from all accused companies and freeze funds on their bank accounts, which could potentially have led to a manufacturing halt. In the face of such pressure, some of the companies paid up. However, some defendants also made clear their intention to defend their rights as foreign investors in arbitration.

    On Dec. 21, 2020, PMI filed a lawsuit for bilateral investment arbitration at the International Center for Settlement of Investment Disputes in Washington, D.C., claiming their fine violated bilateral agreements on mutual protection of investments with the United States and Switzerland. Previously, the ACC had cautioned that such high-profile disputes, which involve consideration by international bodies and make Ukraine, not the AMCU, a party to the dispute, usually gain international publicity and could have a negative impact on Ukraine’s image among foreign investors. The organization had called for a quick, transparent and fair solution.

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    Self-Made Problem

    The story behind the AMCU’s antimonopoly accusation is long and contradictory. Tedis and its predecessor company, Metropolis Ukraine, have repeatedly been the subject of legal challenges for antitrust behavior. Metropolis was founded in 2010 as a subsidiary of Megapolis, a Russian firm. At that time, it held 50 percent of the Ukrainian tobacco market, in which more than 50 cigarette distributors were operating. After a scandal that allegedly involved supplying weapons to the separatists in the war in Donbas in 2016, the company changed its name to Tedis Ukraine.

    Gradually, the company took over most of its competitors, with the AMCU approving the acquisitions. As of 2020, Tedis ranked eighth in the Forbes’ “Top 100 largest private Ukrainian companies” rating, generating an annual turnover of UAH49.7 billion. In 2019, Tedis aimed to generate a turnover of UAH60 billion, the company’s CEO Taras Korniachenko said in an interview with liga.net. According to Wikipedia, the company is one of the country’s largest taxpayers, employing 2,500 people spread over 35 regional branches in 2020. 

    According to openforbusiness.com.ua, which quoted AMCU spokesperson Olha Pischanska, Tedis’ share of the Ukrainian market rose to 99 percent between 2013 and 2015 but decreased to less than 75 percent by 2019. She pointed out that in addition to Tedis, other companies were buying cigarettes from manufacturers.

    Soon after Tedis had been cleared of the October 2019 charge, it was fined UAH274 million by the AMCU, which in March 2021 said that the company had not complied with an earlier ruling. In December 2016, the antitrust committee claimed that Tedis had abused its monopoly position between 2013 and 2015 and imposed a UAH431 million fine on the firm. The AMCU had also ordered the company to restore competition in the tobacco market. Tedis said it planned to appeal the most recent ruling, calling the decision “completely unfounded.” In an official statement on its website, it announced that it had fully paid the original fine in 2020 and fully fulfilled other obligations imposed by the AMCU.

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    Declining Legal Market

    About one-third of Ukraine’s 45.4 million people smoke, according to worldpopulationreview.com. With a joint share of more than 90 percent, PMI, BAT, JTI and Imperial Brands dominate Ukraine’s tobacco market. They also rank among the country’s 10 largest taxpayers. In 2020, the country exported €227 million ($268 million) worth of cigars and cigarettes to the European Union.

    Despite high domestic demand, cigarette sales in Ukraine have declined over the past few years. In 2019, the country produced 51 billion cigarettes, 15 percent less than in the previous year, a greater decrease than in the years 2011 to 2017 together, Imperial Brand’s country general manager said in an interview. His counterpart at PMI Ukraine expected a similarly steep drop for 2020.

    Tax revenues from tobacco account for about eight percent of Ukraine’s total state budget. In the past years, the country has repeatedly raised the excise duty for cigarettes, most recently by 20 percent in January. Presently, the specific rate of excise duty is UAH1,088.64 per 1,000 cigarettes, and the minimum rate is UAH1,456.33 per 1,000 cigarettes. Taxation accounts for around 70 percent of the pack price in Ukraine.  

    The former Soviet republic is one of the poorest countries in Europe, with an average nominal salary of €300 ($354) in 2019. Amid rising prices of legal smokes, the illegal cigarette market in Ukraine has flourished: According to PMI Ukraine’s CEO, the share of illegal cigarettes—including smuggling, counterfeiting and cigarettes with counterfeit excise stamps—has grown from 1 percent in 2016 to 9 percent in 2020.

    Ukraine is also the No. 1 country of origin for illicit cigarettes trafficked into the EU. In 2018 alone, inflows from Ukraine accounted for more than 4 billion cigarettes, according to the European Commission. Until recently, smuggling tobacco to other countries was not illegal in Ukraine. In April 2021, after years of pressure from the EU, Ukrainian President Volodymyr Zelensky introduced a bill that would make trafficking a crime punishable by up to 12 years in prison and a significant fine.

    Important Matter

    Solving the tobacco cartel dispute is essential for Ukraine as this is part of the Association Agreement between with EU that entered into force in September 2017. The contract establishes a comprehensive free-trade area between the parties and commits Ukraine to economic, judicial and financial reforms to converge its policies and legislation to those of the EU. Among other things, it requires the parties to “recognize the importance of free and undistorted competition in their trade relations.” The EU is Ukraine’s largest trading partner, accounting for more than 40 percent of its trade in 2019. Ukraine is preparing to formally apply for EU membership in 2024.

    To break up the monopoly, the country’s cabinet published a resolution in September 2020, which foresees the establishment of a national operator in the tobacco market by the end of 2021. Starting out as a pilot project, the operator’s task will be to combat tax evasion, smuggling and counterfeiting by introducing a track-and-trace system. The move is supposed to attract investment and is expected to add more than $535 million to the state budget.

    Critics, however, fear it would cement Tedis’ leading role and boost the illicit tobacco market. Legal challenges to the plan have been filed already. Ukraine’s road to EU membership is likely to be a long one.

    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.
  • Rebirth of an Icon

    Rebirth of an Icon

    Photo: Rizla

    The legendary Rizla brand gets a makeover.

    By George Gay

    Having been told that the Rizla brand of rolling papers was being given “a very significant refresh to ensure it remains relevant, particularly for younger adult smokers,” I couldn’t help wondering how it was possible to know when a brand needed such a refresh. The answer, it turns out, is fairly simple, at least in theory. Andrew (Drew) Marfleet, the head of marketing for Rizla, told me during a Teams meeting toward the end of June that, in large part, it was a matter of asking the brand’s consumers.

    Rizla, he said, had been talking to consumers for more than a year, and the feedback had included the message that, while during the past few years, changes had overtaken societies, the way consumers viewed brands and the way many brand owners presented their products, Rizla’s image had remained largely unchanged.

    The message was clear and the solution seemingly simple, but this was not quite the case. In refreshing the brand, a number of other factors had to be taken into consideration, not least of which concerned the fact that while consumers wanted change, they were at the same time greatly attached to Rizla’s “iconic and legendary” status. Now words such as iconic and legendary are often bandied about where they really have no place, but this is not the case with Rizla. The Rizla brand, which was acquired by Imperial Tobacco, now Imperial Brands, in 1997, dates to 1796 and the granting of a license by Napoleon Bonaparte to the Lacroix family for the supply of its premium rolling papers to his troops, while the Lacroix family’s involvement with paper can be traced back to at least 1532 and Pierre Lacroix.

    So there was something of a conundrum to confront because here was a rock-solid brand but one that had been around for the sort of timespan over which even rocks wear down. In other words, there was a tightrope for the marketing people to walk in trying to stay true to a venerable brand dating back more than 200 years, while bringing its image up to date. As Marfleet told the people around him, “no pressure then.”

    In fact, negotiating the tightrope required an even trickier balancing act than is implied here. In recent times, Rizla has seen an uptick in demand from those in the 21–30 age group, and it was focus groups largely made up of such people who expressed a desire for a refresh. But the brand’s core consumers are men aged 35 and above, so any refresh needed to be mindful not to alienate them. Unsurprisingly then, Marfleet made the point that this group of older consumers also had been kept close to the research, though, ultimately, he added, it had been about listening to all of the brand’s consumers and keeping them at the center of everything that had been done.

    I guess this approach goes to the heart of marketing, which is defined briefly as being about identifying consumer needs and determining how best to meet them. But care has to be exercised here; otherwise, like me, you can make an altogether wrong assumption. This refresh is about marketing, so these “needs” have to do with the brand messaging, not the product itself.

    Visual Positioning

    So, if the product remains the same, what is involved in a brand refresh? Well, according to Marfleet, it is ultimately about the brand’s strapline. “It is the visual positioning of the brand and the way that the brand communicates itself,” he said. “So, for as long as we can remember, Rizla has had the strapline of Never Settle [as, for instance, in: Keep Discovering—Never Settle; and Keep Creating—Never Settle]. What we have moved to, again after listening to our consumers, is celebrating our heritage and our legacy in a modern way. And that has led to our new brand positioning, which is, Roll with the Legend—Since 1796.”

    Beyond the strapline, Marfleet said, the refresh was more generally about brand communication, which, of course, raises another question. Isn’t the communication of tobacco and tobacco-related products and brands banned in many jurisdictions, which certainly include most of the markets where rolling-tobacco products and accessories are popular?

    Rizla was definitely limited in how it could communicate its message, Marfleet admitted, but it would be making changes in those channels open to it. So, instore materials would be changing, as would the brand’s online digital presence. A more specific example of the changes being made concerns a shift away from the sponsorship of motor sports and toward music and culture in general. Rizla has supported culture in the past, but now it is shifting all of its brand partnership efforts toward music and culture, which resonates more with the brand’s current consumers. Such a shift can be seen also in Rizla’s launch of a digital partnership with the global media platform Dazed, which positions it in the area of supporting emerging artists.

    Return on Investment

    This is a global refresh that, at the time I spoke with Marfleet, had been rolled out in two key Rizla markets, Italy and Spain, and that was due to be introduced elsewhere in the coming months. It was designed by the Rizla marketing team in close cooperation with a creative agency during a year and a half of weekly workshops that decided, following the sifting of something like 10 iterations, on the new brand positioning.

    The Covid-19 pandemic raised some challenges in respect of these workshops, but the overriding challenge, Marfleet said, had been ensuring that those working on the project got it right. In other words, the crux of the matter is: has it worked as a marketing project, and will it be successful as an investment? Well, apparently there has been excellent feedback after rigorous testing, and consumers in both the 21-plus and 35-plus age groups are said to love the refresh.

    But rolling papers comprise a niche product, and tobacco smoking is under attack, so will the market hold up to such an extent that the investment will turn out to have been worth it? Marfleet clearly believes so. The RYO market, which was the subject of healthy competition, was quite stable at the moment as a result of downtrading, Marfleet said, and Rizla had definitely seen an uptick in those aged 21-plus picking up on RYO. “Given the stable market and our predictions, we definitely feel that the investment into the brand refresh is completely justified and will pay off,” he said.

    Custom Manufacturing

    Of course, while Rizla says its products are aimed at the world’s adult tobacco smokers, it is likely that it will benefit from changes in some jurisdictions where marijuana smoking is being legalized. But on the other side of the coin, market challenges could be thrown up by revisions to the EU’s Tobacco Products Directives (TPD) and regulatory changes made by the U.S. Food and Drink Administration. However, Marfleet said these issues were on Rizla’s horizon. “What I can say is that we are proactively planning for multiple scenarios, especially with the TPD, so that we will be ready to take action whatever the outcome of that may be,” he added.

    Meanwhile, there was another, unofficial focus group that was regularly kept appraised of what was happening with the refresh: the approximately 200 people who work at the Rizla rolling papers factory in Belgium, which supplies the world with such papers. And, according to Factory Manager Kris Smedts, all of the people working at the factory, who make up a wide range of ages, loved the refresh.

    The factory, which was built in 1958 and which, over the years, has been expanded and automated to provide for an annual manufacturing capacity of up to 100 billion paper leaves, spread over a staggering number of SKUs (stock-keeping units), is located on the south side of Antwerp, at Wilrijk. It uses lean manufacturing techniques and is managed by an MRP (manufacturing resources planning) system because, though paper booklets might appear to comprise a simple product, their interleaved presentation is difficult to achieve, especially at high speeds, and the addition of innovations such as cut corners (to ease rolling) and pack-closing mechanisms have, over the years, added to the complexity of manufacture and logistical handling.

    Another layer of difficulty is added because, since rolling papers are a niche product, it is not possible to buy off the shelf the machinery for manufacturing and packing it, so it has to be developed by the factory’s own engineers working with specialized partners. And because rolling papers comprise an evolving product, the factory has a special product development team that works on the design of the new or modified machinery required to manufacture the innovative products needed to stay ahead of consumer demands.

    Finally, despite the refresh, some things will not change, or not much. During my chat with Marfleet, I mentioned a fairly raunchy Rizla marketing campaign used a good while ago, and he agreed that the brand’s marketing archives included campaigns that had been “on the edge of cheeky,” though, over the years, the cheek had been toned down in line with new advertising regulations. Nevertheless, he said, we’ll never forget that Rizla should always be a fun and quirky brand.

    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.