Category: Print Edition

  • What’s in a Bottle?

    What’s in a Bottle?

    Photo: Сергей Лабутин

    A look at e-liquid bottling and packaging regulations

    By Marissa Dean

    Like anything in the nicotine industry, bottling and packaging are changing as the U.S. Food and Drug Administration introduces more regulations—PMTAs, testing requirements, labeling restrictions, etc. Being curious what regulations are in place for bottling and e-liquid packaging specifically, I turned to the U.S. Consumer Product Safety Commission (CPSC) website and found this: “The U.S. Consumer Product Safety Commission is the independent federal agency responsible for enforcing a key provision of the Child Nicotine Poisoning Prevention Act of 2015 (CNPPA). … That law requires any nicotine provided in a liquid nicotine container sold, offered for sale, manufactured for sale, distributed in commerce or imported into the United States to be in ‘special packaging’ as defined by the Poison Prevention Packaging Act (PPPA). This packaging, in layman’s terms, must be designed to prevent children from accidentally accessing and ingesting liquid nicotine and must restrict the flow of liquid nicotine under specific conditions.”

    Child-proofing e-liquid bottles makes sense. But are there other regulations? I hit a wall in my research here. Could bottles be made out of anything? Did labels and packaging have to have warnings on them? I went down the rabbit hole of bottling websites, anything from manufacturers to wholesalers. The most common theme between them was the conversation of glass bottles versus plastic bottles.

    Glass is the obvious environmentally friendly option, but it has more potential for breakage and injury due to breakage. Plus there’s the added question of how to make them flow-restrictive to meet CPSC regulations. Plastic bottles are made out of different polyethylenes—polyethylene terephthalate, low-density polyethylene and high-density polyethylene. Plastic is not friendly to the environment, taking decades to break down, and even then, only breaking down into microplastics.

    Recycling helps curb the problem, but many vapor companies lack fruitful recycling programs, if they have them at all. Bidi Vapor offers one for its Bidi Sticks, called Bidi Cares, but as far as bottles are concerned, it doesn’t seem like there are any specific programs outside of traditional city/county recycling programs.

    Going further down the rabbit hole of packaging regulations, I found myself jumping from source to source throughout the vapor community, getting similar responses: “I’m not the right person to answer your questions, but try this person.” Eventually, I reached Azim Chowdhury of Keller and Heckman.

    Chowdhury is a partner at Keller and Heckman, a law firm that specializes in regulatory law, including FDA, CPSC and packaging regulations in particular, and represents companies in the electronic nicotine-delivery system (ENDS) space. As such, he’s well versed in e-liquid packaging regulations. He told me that there are two federal agencies to look to: the CPSC and the FDA. Already having seen the CPSC regulations, I was curious what the FDA had to say.

    Simply put, the FDA regulations for e-liquid packaging lie within the Family Smoking Prevention and Tobacco Control Act (TCA), the FDA Deeming Rule and premarket tobacco product application (PMTA) requirements.

    The TCA “defines ‘tobacco product’ very broadly, in pertinent part, to include anything made or derived from tobacco intended for human consumption, including the components, parts and accessories of the product,” Chowdhury wrote in an email. The Deeming Rule extended the FDA’s tobacco authorities to cover e-cigarettes, e-liquids, pipe tobacco, hookah tobacco, cigars, novel and future tobacco products, among others. “Now, components and parts of newly deemed products are subject to FDA’s tobacco product authorities. With respect to e-liquid packaging, FDA has indicated that the ‘container closure system’ for e-liquids—the materials expected to come into contact with the e-liquid, such as the bottle, cap and dropper—would likely be considered a ‘component and part’ of the e-liquid, and, therefore, subject to regulation as a tobacco product because such materials are intended or reasonably expected to affect or alter the performance, composition, constituents or characteristics of the product.”  

    Accordingly, e-liquid manufacturers must provide detailed information with their PMTAs on the bottle/container closure system to demonstrate that the e-liquid, as packaged, is appropriate for the protection of public health, according to Chowdhury. “For example, in PMTA deficiency letters sent to e-liquid companies, FDA is requesting detailed information on the components of the container closure system (e.g., e-liquid bottle, cap, dropper). FDA has indicated that it is not sufficient to merely identify the components of the container closure system but wants applicants to completely characterize and specify the materials used in such components. In other words, FDA is requesting compositional details that will likely need to be obtained from the bottle supplier (and can be provided to FDA via confidential Tobacco Product Master Files).”

    In 2019, the CPSC added the “flow restriction” requirement to its rule, stating that the 2015 law (child-resistant packaging) always intended to capture flow restriction. The CPSC “issued notices of violations to numerous e-liquid companies alleging that e-liquid bottles (specifically glass bottles) without flow restrictors rendered the e-liquid a ‘misbranded hazardous substance’ pursuant to section 2(p) of the Federal Hazardous Substances Act (FHSA),” according to the Keller and Heckman blog, The Continuum of Risk. “CPSC ordered these companies to initiate a number of ‘corrective actions,’ including to immediately stop sale and distribution, notify all known retailers and consumers and destroy and dispose of returned units and any remaining inventory.”

    Because of the CPSC change, the agency issued hundreds of violation letters. Keller and Heckman sent a letter to the CPSC on behalf of a number of state and national vapor trade associations, pointing out that making the necessary bottling changes to meet CPSC requirements would run afoul of FDA’s prohibition on modifying currently marketed products without FDA authorization. The FDA, in the end, decided not to enforce PMTA change regulations for flow restriction modifications, encompassed in the “Compliance Policy for Limited Modifications to Certain Marketed Tobacco Products.” The guidance states that “this compliance policy provides that FDA does not intend to enforce violations of the premarket review requirements against such modified products [liquid nicotine products modified to comply with the Child Nicotine Poisoning Prevention Act of 2015 flow restrictor requirements and battery-operated tobacco products modified to comply with UL 8139] on the basis of the modifications described in this guidance.”

    Fluid Certify has developed patent-pending technology to help address the glass bottle flow restriction issue.

    The industry tried to comply as best as possible; many premium e-liquid products that had previously been in glass bottles were switched to plastic bottles because there were no flow restriction capabilities in glass bottles. Glass bottles typically use droppers, whereas plastic bottles allow for squeezing. However, one innovative company in this space, Fluid Certify, has developed patent-pending technology to help address the glass bottle flow restriction issue.

    Fluid Certify was founded by Cole McDonald, who also founded McDonald Vapor Co., an e-liquid manufacturer. In 2020, Cole passed away in a tragic climbing accident, and his mother, Lola McDonald, has kept the business going. Before Cole’s passing, he created flow restriction technology for glass bottles. Cole’s e-liquid products were packaged in unique glass bottles, and when the CPSC came out with its guidance, he conceived of his patent-pending technology to allow himself and others to maintain a level of excellence and offer alternatives to more generic plastic bottles.

    The material used in Fluid Certify’s glass bottle flow restrictors is FDA food grade and offers flexibility and strength. It uses vacuum pressure and gravity to allow for repeated, uninterrupted use of a pipette. While the company is not currently mass producing the technology, it is not out of the question, according to Lola.

    “Cole had a passion for the industry … he had no excuses for failure or blame—he found solutions,” Lola said of her son. His creativity and inclination for inventing opened the door to potentially “change things for the better” as he hoped to do. The company’s website, www.fluid-dynamic.com, offers more information on how to access the technology.

    So what about the labels? While e-liquid labels are required to have basic information (name and place of business, amount of liquid contained, a nicotine addiction warning, etc.), the most critical FDA requirement is that they not appeal to youth. This is a broad requirement, and many companies received warning letters for products that mimicked kids’ foods, such as candy and juice. “My advice to clients is to keep their labels as simple as possible, keep it as mature as possible, and don’t use too many colors or graphics kids would enjoy,” said Chowdhury. The industry is “very subjective and competitive,” he added.

    E-liquid packaging requirements are many, though it takes some digging to find them and guidance to navigate the nuance. With the growth and change in this industry, it will be interesting to see what comes next for e-liquid bottles and packaging.

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

    Smart Moves

    Photos: Godioli & Bellanti, CPM Wolverine Proctor and Koehl Maschinenbau

    Machinery makers are investing to future-proof leaf processing factories.

    By Stefanie Rossel

    Ed Wozniak

    While global cigarette consumption has continued to decline for years and next-generation products (NGPs) take an ever-greater share of the nicotine market, there has been some motion in the market for primary equipment recently. British American Tobacco, Montenegro-based Novi Duvanski Kombinat Podgorisca and Alliance One Tobacco Argentina are about to build new processing plants or are relocating their leaf-processing sites.

    “Without a doubt, the trend and investment are still toward heated-tobacco products [HTPs] and NGPs,” observes Ed Wozniak, regional sales manager at CPM Wolverine Proctor, a specialist in tobacco thermal processing operating from the U.S. and the U.K. “The consolidation, and in some cases diversification, of some plants is still ongoing.

    “I say ongoing, as the relocation of plants has been there for some time. It is only logical to move or consolidate production to areas that provide a more economical production and/or are also located close to the remaining major markets for traditional tobacco products.

    “This manifests itself in site and engineering service requests, along with the opportunity to upgrade and future-proof equipment as far as possible. This not only means replacement of spare parts and components but the addition of multiple sensors and up-to-date programmable logic controllers [plc].

    “These key elements combined offer a wide range of opportunities to processors and benefits ranging from almost full auto adjustment ‘on the fly,’ which inevitably leads to optimized production costs, to real-time traceability of materials.”

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    According to Wozniak, HTP sticks have to some degree eliminated the need for burley toasters, with most of the chemical process taking place in the stick. “Diversification and consolidation of the drying process into one flexible unit will possibly make the individual leaf, strip, toaster, stem and oriental dryer generally less attractive, presenting a new opportunity.”

    Lorenzo Curina, sales director at Godioli & Bellanti, an Italian supplier of leaf-processing equipment, has also witnessed an increase of investments in the primary sector. “The primary, having a higher level of technology than a normal green-leaf threshing line, is the first link in the chain, which, in order to remain at a good level of quality and efficiency, needs to be modernized. We are not a big company, but we know how to offer adaptability, flexibility, leanness and of course state-of-the-art technology. And we have been called and invited to collaborate in the relocation and/or modernization of parts of the department of leading cigarette manufacturers.”

    Stefan Hahn, managing director of Koehl Maschinenbau, a Luxemburg-based supplier of tobacco processing and logistics equipment, would like to see the investment pace accelerate. “The market situation slowly improves again, but not as fast as we would like to see as a supplier of processing machinery. Last year’s developments showed us the importance of interconnected solutions inside production. Ever since the beginning, we have been supporting our customers in the improvement of their plants, on the mechanical and automation side. Additionally, new processes lead us to the development of new solutions to react to the new market trends.”

    If HTPs grow exponentially in the next years as is expected by leading cigarette manufacturers, Hahn expects upgrades and extensions of leaf-processing equipment to become more important as well. “Considering this, we see the opportunity to increase our delivery of such processing equipment. Koehl is already deeply involved in the manufacturing of HTPs with several different processes and machines.”

    Kohl’s hemp line uses Twister technology to moisten the product before cutting

    Coping with Covid

    While in 2019 investments in the primary sector declined as cigarette manufacturers focused on next-generation products and integrating the track-and-trace technologies required by the European Union’s Tobacco Product Directive, the Covid-19 pandemic presented its own challenges.

    “To save their production, all manufacturers at the beginning of Covid-19 just kept their ‘business-critical’ projects alive. Our development of a Covid-19 strategy to fulfill highest hygiene requirements and the benefit that Koehl has [with its] different affiliate locations made it possible that new projects were and still are feasible to realize. Therefore, of course the insurance of the project realization despite Covid-19 has become a major requirement for all customers.”

    The execution of projects, he says, became more difficult because of travel restrictions. “To support our customers and avoid delays, we improved remote service activities, also with the help of our affiliates in different countries. Furthermore, we have extended our software of standardized machines with intelligent data-logging to guarantee improved online support.”  

    Curina says that the pandemic affected investment in the leaf-processing and primary machinery segments. “But mostly in the first period of the invasion of this cursed pandemic. Those investors who continue to see a source of income in tobacco know that the pandemic will not last forever. So we have noticed an almost unexpected revival of the market.”

    Wozniak points out that with two or even three lockdowns in some countries, it will take time for these effects to be felt by the industry. “While the marketing information indicates that the global decline for cigarettes has been halted during lockdown—in the U.K. [smoking] is reported to be 7 percent up during lockdown—it does not mean that decline will not continue again when restrictions are relaxed. We can only follow our customers’ demands, and at this stage, we do not see any major changes filtering down to our level. I think that the level of cautiousness at this stage is understandable. We need to understand the real trajectory of the market as we emerge from Covid-19 restrictions and then we and the tobacco companies will have a clearer picture.”

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    Eliminating human error

    Manufacturers agree that customer requirements for primary equipment are changing. “What is constantly required from us is the supply of machines with a low environmental impact, with minimal energy consumption,” says Curina.

    “Without a doubt, the ‘smart factory’ or even Industry 4.0 ‘dark factories’—i.e., fully automated, unmanned factories—are being considered,” says Wozniak. “Integration of our equipment via our local plc system to a central control SCADA or similar [system] is now commonplace. The reduction of human error and having absolute control of as many process variables as possible is now paramount. It reduces overall operating costs and increases efficiency in many areas, as well [as] introducing real-time traceability of the product, in any part of the process. The need for this automation is the reason that CPM has within its divisions Beta Raven, which specializes in such integrations, and locally programmers and qualified electrical staff.”

    Hahn confirms that customer focus has shifted toward a higher level of automation. “Therefore, we are proud to participate in several ‘smart factory’-related projects in which we are, together with our customers, developing tailor-made solutions to be prepared for these future trends. Here we see that specifically manufacturing execution systems—the intelligent link between the business and manufacturing levels—are extremely valuable overall systems for a smart digital transformation to increase efficiency, improve product quality and reduce costs. Our systems provide the correspondingly important layer for the direct execution of production orders as well as dynamic reaction to changes in orders, machine states, quality checks and similar situations for the self-organized factory.”

    Stefan Hahn

    As the tobacco sector slowly transitions away from combustible cigarettes, equipment manufacturers have begun to eye other business opportunities as well. Valued at $24.6 billion in 2020, the global legal cannabis market holds considerable promise. Grand View Research expects it to expand at a compound annual growth rate (CAGR) of 14.3 percent from 2021 to 2028.

    “We are following with interest the developments in the world of hemp for pharmaceutical and therapeutic uses and purposes,” says Curina, whose company also includes a processing business for herbs and plants, food and biomass but who insists its main focus will always be tobacco. “The openings are slow, but there are some,” he notes. “Openings depend on the political and social choices in the various countries. However, we pride ourselves in having created the first industrial processing line for hemp for about 1,000 kg per hour. And we were very happy when we learned that the processed product is appreciated by European pharmaceutical companies.”

    Two years ago, Koehl launched an entire cutting line for cannabis. “This booming market is still interesting for us,” Hahn explains. “We were able to further expand and develop the cutting line over the last year. The hemp line is using Twister technology for hemp-moistening before cutting. We can now announce that Koehl has further projects in this sector.”

    As part of the CPM Group, which is based in a U.S. state where marijuana remains illegal, CPM Wolverine Proctor is not allowed to offer dryers for cannabis containing more than 0.3 percent of THC, the psychoactive substance in cannabis. But the use of marijuana for medicinal use is now legal in 36 states and growing, Wozniak points out. “This may change things for us in the future. However, we can still offer dryers for hemp, which traditionally is used for sisal twine and rope and now also for high-end wearable fabrics similar to bamboo fiber. Traditionally, we have always been diverse, with dryers for fruits, vegetables, herbs, chemicals, cellulose fiber and ovens for breakfast cereals, ready meals and many more products. Many unique features in our tobacco dryers have actually come from some of these industries.”

    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.
  • Incubating Innovation

    Incubating Innovation

    Photos: ITM

    ITM continues to explore new ways to develop flexible next-generation products manufacturing equipment.

    By Stefanie Rossel

    On a global scale, next-generation products (NGPs) are expected to grow significantly over the next five years. During its February Consumer Analyst Group of New York conference, British American Tobacco forecast that the category revenue would increase from £16 billion ($22.12 billion) today to £29 billion by 2025, with vaping products accounting for a little more than half of revenues and heated-tobacco products (HTPs) and modern oral/traditional tobacco each representing roughly a quarter of revenues. Future consumption, Philip Morris International predicted during its recent investor day, will be characterized by “poly-use.”

    With the variety of NGPs rising to cater to different consumer needs, the manufacture of products brings about new challenges. To support its customers in their development of next-generation products, Dutch original equipment manufacturer ITM has created innovation centers at its sites in Kampen, Netherlands, and Radom, Poland, which aim at stimulating cross-over innovation.

    “We are actively looking at technologies in other industries to create groundbreaking innovations in the tobacco industry,” says Michiel van der Sluis, ITM’s sales director. “We have indeed been very successful from the very beginning of the next-generation products, both in heated-tobacco products and in vaping. The majority of the heat sticks [the consumables for HTPs] on the market are being produced on our combining platforms.”

    The new solutions usually are developed in close cooperation with ITM’s customers, sometimes at the initiative of the equipment manufacturer and sometimes at the initiative of the client. “Usually the technology and machinery concepts come from us, and the customer focuses on the product itself,” says van der Sluis. “But it greatly reduces the time to market if both product and machine development can go in parallel.”

    In addition to the innovation centers, ITM has set up an innovation hub called Perron038, which is based in Zwolle, Netherlands, and the ITM Lab. They have a different function than the company’s in-house development centers, according to van der Sluis. “Here we focus on specific technology developments that all technology partners in the region have an interest in. Our partners in Perron038 are universities, research institutes—but most importantly also other machine-developing companies in the region. Some examples are robotics, 3D metal printing and vision. To be leading in these fields, it is good to cooperate with other companies and universities and at the same time give talented students a high-tech environment to work with the latest technologies.”

    Less harm, more sustainability

    Solaris, ITM’s combiner for HTP consumables, and Genesis, the company’s high-volume platform for e-liquid cartridges, are results of ITM’s unique approach to product manufacture innovation. The most recent solutions incubated by the innovation centers include machines that are able to replace all acetate filters with a biodegradable alternative.

    ITM’s mission, says van der Sluis, is to create manufacturing solutions for better and sustainable alternatives. “For the tobacco industry, this means focus on next-generation products that have a lower health risk for consumers, and getting rid of single-use plastics in the tobacco industry, with a big focus on cigarette and heat stick filters. We see a very good reception in both these areas, so we look to the future with confidence.”

    To stay ahead in the fast-growing market for HTPs, ITM continues to develop its Solaris combiner. “Apart from combining, we also do a lot of work in the logistics of the HTP factories and are now delivering the first reclaimers specifically designed to reclaim the tobacco from heat sticks,” he says. “Next to these existing products, we expect a big push to not only make the HTP products better for your health but also better for the planet.”

    Many heat stick segments can be replaced by biodegradable alternatives, according to van der Sluis. For example, a cardboard tube can be used instead of hollow acetate; a paper filter with a capsule or flavor can replace the current acetate filter. The company was taking advantage of Covid-19 restrictions on business travel to develop a range of solutions for making filters biodegradable without degrading customer satisfaction.

    Cigarette butts are among the 10 most found single-use items on Europe’s beaches. Starting on July 3, 2021, the European Union will ban several single-use plastics products, but not cigarette butts, which were a bone of contention in the shaping of the legislation. For the time being, they remain subject to a vague provisional agreement, which states 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.”

    Michiel van der Sluis

    Covering all NGP segments

    Meanwhile, ITM is also developing solutions for the third category of NGPs, new oral nicotine, which is a small but growing niche. “Snus pouch-making has been around for decades, so we are not focusing on a me-too solution,” says van der Sluis. “To make a mark in this sector, we wanted to bring something extra to the table. The machine that we are working on will be able to make pouches in different shapes and without the flaps you see on current pouches on the market. We have gotten a good reception from the marketing departments of our customers of the samples we have provided, so we will go full steam ahead to also break into this segment.”

    With its Genesis platform, ITM in 2014 was the first company to launch a solution for quickly and efficiently filling, capping and testing e-cigarettes. The platform can assemble and fill up to 350 cartridges per minute. Although fully automated manufacturing of vape products is technically feasible, most e-cigarettes are still assembled manually in China.

    Despite an overall growing vape market, van der Sluis has noticed a big reluctance to invest in this category. He cites two key reasons: “Customers are waiting to see what the fallout is of all the negative press around vaping in the U.S. in the last two years. The second part [that is] blocking investment is the fact that the products are still constantly changing. We have had a few projects over the years where the product was completely changed before the machine was ready. Even though our machines are always modular and flexible, the products are not stable enough to invest in now. With hand-assembled products, it is much easier to change. We do expect some winners on the market to automate assembly once the markets and products have stabilized.”

    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.
  • Smart Farming

    Smart Farming

    CropIn has developed a robust farm and agronomy management system that can monitor field agents and track labor practices. (Photos: CropIn)

    Using sophisticated data technology, CropIn is helping leaf tobacco producers streamline their operations.

    By Stefanie Rossel

    Digital technologies are increasingly used in agriculture. “Smart farming” can enhance operational efficiencies, reduce environmental damage and improve livestock husbandry conditions.

    In the tobacco sector, data-driven farming is a relatively new development. Based in Bangalore and Amsterdam, the startup CropIn deployed information technology to help a leading Indian tobacco company significantly improve its tobacco-growing operations.

    With an estimated annual production of around 800 million kg, India is the world’s second-largest tobacco producer behind China. The tobacco industry in India is one of the major revenue generators of the agriculture sector. “With tobacco being one of the biggest cash crops in the world, production is highly regulated by the government in order to ensure maximum output and best quality,” explains Kunal Prasad, co-founder and chief operating officer of CropIn.

    “This means that every aspect of production is being monitored, including plot size, yield, package of practices and more. Hence, farmers cannot sell directly to companies and have to be organized into farmer producer organizations or become part of an agribusiness supply chain. In addition to this, farmers have to deposit the produce in specially designated buying stations. All in all, there are some unique operational needs that are specific to the tobacco industry.”  

    For its tobacco client, he continues, the main objective of the project was to streamline the hitherto unorganized operations into a smoothly functioning unit. This would help cut down on discrepancies in terms of predicted yield, traceable harvest and other quality issues. Achieving this required the adoption of a robust farm and agronomy management system that could monitor field agents and track whether fair labor practices were being followed. The system would also need to provide accurate fields and yield data.

    Before CropIn’s solution was installed, the client used conventional—almost primitive—techniques to cultivate and manage tobacco farms, according to Prasad. “Understanding total area coverage was another challenge for the management,” he says. “The client dealt with mostly smallholder farmers. These farmers used to round off acres of land that were under harvest. Adding all estimations would lead to a high discrepancy, which in turn adversely affected the output/yield prediction. Reporting was done using the pen and paper method, which was prone to human error.

    “Traceability at the end-to-end operations was missing, and many discrepancies were observed hence. Tracking operational tasks and harvest was proving to be difficult for the client since farmers take crops from multiple nurseries, and using paper to document all such important details would not work well as a scalable solution. There was no visibility regarding the risk of pest or disease infestations. It was also difficult to ensure that there was a consistency in the quality of tobacco produced every season. The stakeholders were facing issues recording and documenting corporate social responsibility activities.”

    Kunal Prasad

    Customized solution

    With its SmartFarm farm-management solution, CropIn introduced cutting-edge technology in the Indian tobacco fields. The technology includes data storage, machine learning, satellite monitoring and weather analysis. The company provides mobile data capture and assimilation and customized and near real-time data reporting. SmartFarm can configure data from agricultural labor practices (ALP) and good agricultural practices (GAP) in forms and takes appropriate signatures when needed. Data can be approved by senior management; real-time SMS are used for alerts.

    “The tobacco farmers know that to sell produce in the market, the produce needs to pass various kinds of tests,” Prasad says. “They have become aware only the best quality tobacco needs to be grown for fetching good prices and a good name in the market. Through the training and events module, they are trained on best practices for growing tobacco and maintaining them. Also, the GAP and ALP practices are followed by the farmers strictly so that when an audit happens, they pass in the same. The innovation [that] CropIn has designed has reduced a lot of paperwork and increased the efficiency of the farmers.”

    The project helped CropIn gain a better understanding of tobacco crops and what it takes to implement smart solutions in that segment. Until then, the company had been supplying its solutions to other agricultural sectors, including nursery growing, organic cotton and food.

    Tobacco is a complex plant to cultivate, not least because cultivation involves the growing of seedlings in nurseries for sixty days. “As we understood the nursery and main field breakup of the crop, we divided the whole operation into two parts,” explains Prasad. “First, nursery and secondly, the main field. The nursery planning and seed sowing starts almost 90 days before the main field. The nurseries are geotagged and activities captured till the seedlings are ready for transplanting. Once they are ready, the seedlings are transplanted into the main field.

    “The application takes care of the detail of the nursery and links it with the main field plots where they have been planted. This way, the traceability from nursery to main field and back is maintained. The labor that is involved is counted for every operation. The feedback can be captured in the forms and their signature [can be] taken for the fact that they are working willingly so that there is no forced labor. Even the cost incurred in the labor can be calculated to find out the cost per kg of tobacco. For weather advisories, we have weather-based notifications that can be sent to the farmers.”

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    Future-ready farming

    The implementation of smart tobacco farming was not without challenges. For starters, the farmers and extension staff needed training. “CropIn’s team assisted the farmers, and the field agents were given training in ensuring efficient utilization of the solution provided,” says Prasad. “Access to connectivity also was a challenge, given the geographical location and development of the area. Since a lot of documentation was happening in the traditional way, the transition to using digital methods of entry was a challenge for the stakeholders.”

    Now that it is installed, the solution offers a plethora of additional benefits for the customers. Importantly, SmartFarm creates a database that keeps track of farmers’ historical performance, yearly income and basic personal details. The forms are completely customizable based on requirements. Our solution provides the flexibility of setting up any type and number of crops and their varieties. It sets up configuration based on days to harvest, expected harvest per acre, allowed fertilizers and pesticides and addresses other general issues.”

    SmartFarm can help farmers forecast harvest quantity and dates and provides an optimized input plan, i.e., chemical application plan. “SmartFarm makes the farmer future-ready with actionable insights, real-time alerts and acts as a knowledge repository containing collected data and data-driven analysis,” says Prasad. “It helps farmers to improve their farming skills, get an optimum price for their yield, empower them with new or improved farming practices.”

    Having zero tolerance toward child labor and forced labor, CropIn has implemented a corresponding system in its solution. GAP-based and ALP-based survey forms help field technicians capture details on violations uncovered during farm inspections. The SmartFarm app enables them to find the sources of water pollution, child labor and any other audit-related information.

    Prasad is proud to share his customers’ feedback. “CropIn is helping us practice sustainable tobacco production by capturing the data exactly at the location of the farmer and what the farmer is practicing in terms of signature modules, geotagging and taking pictures,” a client representative told CropIn. “This is helping us to understand better the progress at the farm. After we started working with CropIn, our apprehensions about field technicians not collecting data accurately have been diminished.’”

    According to Prasad, CropIn’s solutions are designed to be dynamic. “As the tobacco industry keeps on changing with more rules and regulations, the challenges will also come in the audit and reporting,” he says. “We are making sure that we are engineering an innovation that is as close to addressing all the challenges in the work being done in tobacco farming as possible.”

    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.
  • Fresh Thinking

    Fresh Thinking

    Photo: Olrat

    The WHO and tobacco policy: a seven-point reform agenda

    By Clive Bates

    In the light of the global pandemic, there have been calls to abolish, repurpose or revitalize the World Health Organization. I am firmly in the revitalize camp. Naturally, most of the hindsight has focused on the WHO’s response to infectious diseases. In April 2021, Covid-19 deaths are approaching 3 million worldwide. However, according to the WHO, tobacco-related deaths exceed 8 million annually. So what would new thinking on the WHO’s approach to tobacco policy look like? Here is my seven-point reform plan.

    1. Commit to the goals that make a real difference

    The WHO is the lead agency for Sustainable Development Goal (SDG) 3—“Ensure healthy lives and promote well-being for all at all ages.” This broad goal is broken down into 13 targets, and SDG 3.4 is the target that really matters in tobacco policy:

    “By 2030, reduce by one-third premature mortality from noncommunicable diseases through prevention and treatment and promote mental health and well-being [compared to 2015].”

    This target should become the mission statement for the WHO’s work on tobacco. The WHO should have a laser focus on addressing severe disease—dying in agony of cancer, dropping dead with a heart attack, living in misery with emphysema—reducing real harms as far as possible as quickly as possible. It should not be distracted by dreams of a tobacco-free or nicotine-free society. It is possible to achieve radical reductions in disease burden by switching nicotine use from high-risk combustible tobacco products to low-risk smoke-free tobacco and nicotine products. This is the harm reduction strategy, and it provides a fast-acting way to reduce the drivers of disease among those most immediately at risk.

    2. Embrace innovation in the tobacco and nicotine market

    In theory, the WHO is open to innovation, and it recognizes that: 

    “Health innovation identifies new or improved health policies, systems, products and technologies, and services and delivery methods that improve people’s health and well-being. Health innovation responds to unmet public health needs by creating new ways of thinking and working with a focus on the needs of vulnerable populations.”

    This is a reasonable description of innovation in the technology and business models in the tobacco and nicotine market since 2007. No organization should be suckered by every new idea. Still, there is a pressing duty of curiosity and a moral obligation to see how innovations can be made to work for the greater good. Sadly, the WHO has been an enemy of innovation in this field, displaying indifference to significant opportunities while uncritically embracing prohibitionist or abstinence-only talking points and pseudoscience.

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    3. Implement harm reduction in the Framework Convention on Tobacco Control

    If a reimagined WHO focuses on addressing the drivers of disease and embraces innovation, it follows that a rethink of the design of the Framework Convention on Tobacco Control is necessary. Fortunately, Article 1d of the FCTC defines tobacco control to include harm reduction:

    “(d) ‘tobacco control’ means a range of supply, demand and harm reduction strategies that aim to improve the health of a population by eliminating or reducing their consumption of tobacco products and exposure to tobacco smoke.”

    But making this concept operational means more than trivial tinkering. It means restructuring the treaty to be “risk proportionate.” That means taking a differentiated approach to different tobacco and nicotine products according to risk. The idea is to discourage the use of high-risk products while promoting migration to low-risk products. For example, taxes on cigarettes would be high but low or zero on vaping or heated-tobacco products. Advertising of cigarettes would be prohibited, but the promotion of low-risk products would be permitted but subject to controls on themes, placement and media type. Warnings would be stark, bold and pictorial on smoking products but would be more nuanced risk communication messages on smoke-free products, positioning them as lower risk than smoking but not risk free.

    There is more to harm reduction than switching to reduced-risk products. A broad approach would address the whole spectrum of harms experienced by nicotine users. That includes harms induced by tobacco policy, including regressive taxes, stigma and intrusions into consumers’ autonomy to manage their own risks at their own expense and on their own initiative.

    4. Take a more sophisticated approach to policy appraisal

    Tobacco policymakers must make a realistic assessment of the impacts of their proposals, including the potential perverse consequences. The Royal College of Physicians captured the dangers very well in its 2016 report “Nicotine without smoke: Tobacco harm reduction”:

    “However, if [a risk-averse, precautionary] approach also makes e-cigarettes less easily accessible, less palatable or acceptable, more expensive, less consumer-friendly or pharmacologically less effective, or inhibits innovation and development of new and improved products, then it causes harm by perpetuating smoking.”

    This quite simple idea has yet to gain traction at the WHO. In January 2021, the WHO presented the findings of its expert panel on tobacco regulation to the WHO executive board. Recommendations include banning open vaping systems, banning all promotion of vaping products and treating heated-tobacco products like cigarettes in regulatory and fiscal terms. There is no sign that anyone involved considered how this could all go wrong and amount to regulatory protection of the cigarette trade, encourage smoking and cause more harm.

    A revitalized WHO would become the global expert on both the intended and unintended consequences of tobacco policy and be respected for the quality of its policy analysis and guidance on impact assessment.

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    5. End the drive for prohibition

    Outright prohibitions of low-risk products are a special case of bad policymaking. Through papers for the FCTC Conference of the Parties (for example, FCTC/COP/8/10) or decisions by the COP (for example, FCTC/COP8(22)), the WHO has used its influence to advocate prohibitions of low-risk products. The WHO’s prohibition reflex continues despite decades of evidence that nearly all prohibitions do more harm than good. Take the poster child of tobacco prohibition, the outright ban on tobacco in the Kingdom of Bhutan. Even the WHO has had to acknowledge it has been a dismal failure.

    “Despite efforts on the part of relevant authorities, a tobacco black market, as initially feared, has emerged. Shops that thrive on illicit sale of tobacco and its products have found a way around the law. A steady stream of loyal customers continues to sustain these shops that have, over the years, grown into a network of black market. Recent studies have found Bhutanese youth, who are among the highest in the region to be using tobacco and its products, to be at the center of this burgeoning contraband good. (WHO Country Office for Bhutan 2020.)”

    But that policy failure is compounded when the prohibition applies to much less risky products than the ubiquitously available market incumbent, cigarettes. Why would a health organization applaud India’s government for prohibiting e-cigarettes when India has around 100 million smokers? But the WHO celebrated with a tweet congratulating the country on its ban.

    A revitalized WHO would not be a cheerleader for prohibition. It would play a dignified and diplomatic role, quietly counseling its members against policies that have known and obvious negative consequences.

    6. Rethink the stakeholder landscape

    Some critical stakeholders have been almost entirely excluded from the deliberations of the WHO and the FCTC. This has usually been justified on the spurious basis that they may be acting as agents of the tobacco industry. The most obvious omission is the consumer groups that represent the populations at risk and those likely to be directly affected by policies promoted by the WHO. They can rightly assert “nothing about us, without us” and refer to the inclusive philosophy of the Ottawa Charter on Health Promotion, yet they have no voice and are often treated with contempt.

    The U.N. Framework Convention on Climate Change (UNFCCC) takes a more enlightened approach to stakeholders than the WHO FCTC. The FCTC restricts participation to international groups vetted and approved by the secretariat. It does not allow critical perspectives into its meetings. The UNFCCC, by contrast, welcomes anyone professionally engaged in the field, including climate change sceptics, the automotive trade and the coal industry, to register as observers even though their interests are not necessarily aligned with the objectives of the treaty.

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    7. Show some leadership

    The FCTC was finalized in 2003, and it predates much of the innovation that underpins the harm reduction opportunity. But the problem is not merely with the text, which is a product of its time, but the culture of hostility to these innovations. Bad science and poor policymaking are pervasive in the WHO, the convention secretariat and among many delegates and advisers to the FCTC. The culture is further distorted by the flood of money from American philanthropic foundations with a prohibitionist agenda directly funding the WHO and many of the “civil society” groups that engage with the WHO. This culture will not change without a thorough reassessment at the highest leadership level or, if necessary, revitalized leadership. Too many lives are at stake to allow neglect and negligence at the WHO to deny hundreds of millions of people the opportunities of tobacco harm reduction.

    Clive Bates is the director of Counterfactual Consulting and the former director of Action on Smoking and Health (U.K.).
  • “Grandfathered” Attitudes

    “Grandfathered” Attitudes

    Their legacy endures…

    New to the tobacco product industry? There are some things you need to know about past industry behavior that affect how U.S. regulators treat you.  

    By Cheryl K. Olson

    I was finishing my doctoral studies at the Harvard School of Public Health when this headline hit the newsstands: “Tobacco Chiefs Say Cigarettes Aren’t Addictive.” It was April 15, 1994.

    The New York Times opened its coverage with, “The top executives of the seven largest American tobacco companies testified in Congress today that they did not believe that cigarettes were addictive but that they would rather their own children did not smoke.” My professors shared studies showing that children could recognize Joe Camel (a then-ubiquitous cartoon cigarette spokesperson) as easily as Mickey Mouse.

    I shared this memory with a colleague of mine, who joined Big Tobacco as a newly minted Ph.D. in 1998, hoping to make a difference with modified-risk products. That year, the Master Settlement Agreement was upending decades of freewheeling industry practices.

    “Companies had been saying things like, ‘No one knows the mechanism for how cigarettes cause disease,’” he recalled. “And we still don’t know the mechanism. But that’s not the point. The point is cigarettes cause disease. With a relative risk of 15, they are the cause!” He described the tension created by his company “transitioning to, and being honest and open with, that truth.”

    If you’ve dealt with the Food and Drug Administration’s Center for Tobacco Products, you’ve seen the term “grandfathered.” Tobacco products marketed as of Feb. 15, 2007, are “grandfathered,” or not affected by new rules, and don’t need authorization to stay on store shelves.

    My colleagues in public health, medicine and science who are middle-aged or older might be said to have “grandfathered attitudes” about companies that sell nicotine products. These attitudes were shaped by years of exposure to industry bad behavior, recalled from advertising, news coverage and academic articles. Whether you’re coming to the tobacco industry fresh from university, transferring in from another field or starting a company meant to disrupt and transform how people consume nicotine … congratulations. To the eyes of public health, you wear the modern face of that old villain, Big Tobacco. The history of industry misbehavior is now your history too. When people hear you speak or see your products, marketing materials or research, they’ll assess everything in the context of that history.

    Based on two decades working with evolving tobacco technologies and regulations, toxicologist Willie McKinney shared this advice: “If you’re going to disrupt tobacco, because of all the baggage, you’ve got to know the history. Because it’s still nicotine. And still addictive.”

    Here are some examples of how yesterday’s misbehavior affects you today.

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    Misuse of research and statistics

    Past misuse of the trappings of science colors how industry research is perceived today.

    The 1954 advertisement “A Frank Statement to Cigarette Smokers,” signed by the heads of 14 companies and associations, is a landmark of the industry’s disingenuous promises and misuse of science. Claims include “Distinguished authorities point out that medical research of recent years indicates many possible causes of lung cancer” and “We believe the products we make are not injurious to health. We always have and always will cooperate closely with those whose task it is to safeguard the public health.”

    In his 2020 TEDx Mid-Atlantic talk, “The Past, Present and Future of Nicotine Addiction,” Center for Tobacco Products Director Mitch Zeller includes the famous 1930s advertisement showing a physician with a white coat and whiter teeth smiling at a pack of Lucky Strikes. The ad reads: “20,679* Physicians say ‘Luckies are less irritating’” and “Your Throat Protection against irritation against cough.” The asterisk points to a statement assuring that “the figures quoted have been checked and certified to” by an auditing firm.

    This misuse of the trappings of science colors how industry research is perceived today. McKinney served for three years as the industry representative on the FDA’s Tobacco Products Scientific Advisory Committee (TPSAC). He recalled with frustration that when FDA staff presented data to the TPSAC, “They would have a little asterisk by any references or papers that were published by the tobacco industry. That’s why I gave a talk once called ‘Life Without the Asterisk.’ Because FDA always seemed to have to call out, ‘this is a paper published by them.’”

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    ‘Safer’ cigarettes that weren’t

    Be sensitive to the history of products touted by the industry as technical advances in safety or pathways to quitting. Zeller’s talk mentioned two such safety snafus. In the 1950s, the innovative Kent Micronite filter turned out to be lined with asbestos. In the 1960s and 1970s, the “light” cigarette was a bust.

    In the transcript of the January 2018 IQOS TPSAC meeting, member Gary Giovino shared his personal experience with this: “I’m 35 years past cigarettes … but I relapsed a couple of times because I thought light cigarettes were safer, and we know now that that’s not true.”

    As it turned out, tar and nicotine levels were indeed lower when a machine “smoked” the cigarette but not when a human blocked the ventilation holes with his lips and fingers. From the industry’s perspective, the machine numbers were meant for comparative analyses, but their use in advertising was perceived as deliberately deceptive.

    As the Center for Tobacco Product’s website states, “FDA’s traditional ‘safe and effective’ standard for evaluating medical products does not apply to tobacco …. There is no known safe tobacco product.”

    Denial or trivializing of addiction

    Oh, that indelible front-page image of tobacco company executives, right hands in the air, being sworn in before Congress: seemingly swearing that cigarettes aren’t addictive! Industry testimony in the 1980s and 1990s tried to muddy the waters by mentioning addictions to coffee, television, tanning and (my weakness) chocolate. In 2005, some major companies’ websites were still waffling, saying smoking is addictive “as commonly understood today” but not “in the same sense as heroin [or] cocaine.”

    Denial of marketing to youth

    A tobacco industry youth smoking prevention campaign two decades ago

    In the 1960s, U.S. companies adopted voluntary codes to keep cigarettes away from minors nearly identical to some used today: No models who look younger than 25. No celebrity testimonials with youth appeal. No samples to persons under 21.

    Purported anti-smoking ad campaigns (Lorillard’s “Tobacco is whacko if you’re a teen!”) were colorful, creative and attractive. Researchers poring over millions of pages of industry documents made available through litigation (see tobaccoarchives.com) found ample evidence of industry targeting the historical age of starting smoking. For example, one 1989 internal market research report stressed the strategic importance of young replacement smokers, noting that only one in three smokers started after age 18.

    Menthol/marketing to minorities

    Industry documents showed that menthol cigarettes were perceived (and marketed) as healthier. They appealed especially to Black Americans and inexperienced young smokers. This helps explain the sensitivity to claims about flavors.

    The Responsive Chord

    Picture a public health researcher at an FDA meeting. He’s listening to an industry scientist present data on the addictive potential of her company’s product. But to him, what she’s communicating goes beyond her words or the images on her slides. When her message strikes his existing mental storehouse of tobacco industry science and lore, it creates in his mind what media theorist and advertising guru Tony Schwartz1 called a “responsive chord”—sensory impressions that provoke a predictable emotional response. The meaning of the communication is not found in what the speaker conveys; rather, the meaning is created when her listener combines her message with his existing emotions and knowledge.

    To avoid triggering negative stereotypes and suspicions, be mindful of the history above when presenting to regulators. Stick with the science and the data. Don’t refer to products as “safe” or “safer.” Avoid phrases like “we believe that …” which echo those deceptive “frank statements.” Rather than pledging to market responsibly to adult consumers, provide details of how you will verify age of purchasers and monitor and respond to any underage sales.

    Be especially mindful of reactions by reviewers from outside the FDA, such as TPSAC members. Center for Tobacco Products staff often rotate in from jobs as chemists, project managers or lawyers at other centers at the FDA and (as one put it to me) “don’t really have a horse in the race.” Rather, their loyalty is to their profession. Outside reviewers are more likely to have spent their careers in tobacco control and to have more “responsive chords” when it comes to tobacco science.

     

    1 Schwartz T. The Responsive Chord. How Media Manipulate You: What You Buy, Who You Vote For, And How You Think (2nd Ed.) Coral Gables, FL: Mango Publishing, 2017. (First edition published by Anchor Press/Doubleday, 1973.)

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

    Back in Business

    Photo: Tobacco Reporter archive

    The Uncommitted Tobacco Auction returns as an online marketplace.

    TR Staff Report

    The Uncommitted Tobacco Auction (UTA) is back. Reinvented as an online marketplace, the platform will offer tobacco companies an opportunity to anonymously sell uncommitted non-seller, distressed, substandard, damaged and stocks to the highest bidder.

    Confidentiality and anonymity are desirable in the early stages of a transaction so that buyers don’t favor one supplier over another. When similar types/grades of tobacco are on offer at differing prices, the electronic exchange system soon establishes a “published” market price, with prices escalating in times of shortages and declining in periods of excesses.

    The first UTA was created in 2006 by a group of tobacco veterans looking to inject new dynamism into the tobacco trade. Operating on thin margins, leaf merchants are keen to minimize surplus tobaccos on the balance sheet. Previously, their choice was to either sell excess leaf at a discount or pay for storage while waiting for prices to firm up.

    However, the potential market was limited because of competitive issues—most tobacco dealers would rather not directly sell to or buy from their competitors. In addition, tobacco merchants selling discounted tobaccos want to avoid giving buyers the impression that their “regular” tobaccos are overpriced. The UTA exchange process eliminates these concerns as neither party knows who the sale is made to or where the product comes from—transactions are simply confirmed on a willing-buyer-and-willing-seller basis.

    During the platform’s first iteration, warehouse operator Tabaknatie ran the physical auction at its premises in Antwerp, Belgium, and the UTA team handled the interactions between buyers and sellers. The process was supervised and controlled by trust office FTC, which also handled contracts and invoicing.

    According to initiator Rainer Busch, who also leads NewCo, the first UTA was a success. The initiative, he says, received lots of attention, and numerous traders participated in the platform. “There are many reasons why a seller would want to put damaged or excess stock on the market,” says Busch, adding that the original UTA processed “several million kilos” of tobacco during its existence.

    However, as the UTA gained momentum, Busch’s other business expanded even faster, requiring him to set priorities. With insufficient time to devote to both projects, Busch decided to put the UTA on hold. The first UTA ceased operations in 2009, but the concept clearly struck a chord. Over the following decade, customers continued inquiring about the platform at regular intervals, asking when it would return.

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    Rainer Busch

    Their patience is about to be rewarded. According to Busch, the time is now right for the UTA to make a comeback. The conditions that led to the original UTA—slim trader margins and a desire to avoid surplus tobaccos—persist, and plenty of surplus tobacco remains on traders’ balance sheets. Busch estimates that there is some 155 million kg of uncommitted packaged inventory sitting in warehouses worldwide, including 95 million kg of flue-cured Virginia, 35 million kg of burley, 10 million kg of tobacco byproducts and 15 million kg of other varieties.

    At the same time, technological and societal developments have turbocharged interest in online platforms. The Covid-19 pandemic has forced many activities online, and technology has evolved to handle them smoothly. Online business-to-business interactions have generated considerable efficiencies in many industries, reducing travel expenses and increasing profits. Even the traditionally conservative tobacco industry has become comfortable with online transactions.

    Unlike the first UTA, which featured a physical auction in Antwerp, the new iteration will be an exclusively online marketplace, eliminating the need for traders to send representatives. Bids will be visible to all involved, and multiple buyers can compete for a batch. If the buyer requires product samples, the seller will send two sealed samples to the UTA sampling room at Andromeda Forwarding & Logistics’ facilities in Antwerp. The UTA will forward one sample to the potential buyer and retain the other for mediation in case a dispute arises.

    Alan Rosenthal

    To ensure smooth operations, the new UTA will be managed by Alan Rosenthal in Dubai, who for decades has run a successful online spice trade platform based on the same concept.

    According to Rosenthal, most bulk commodities are similar in that there is a product, specification, packing and price attached to all transactions. Spices and tobaccos tend to thrive in similar climates and are often cultivated in the same geographical areas. The relationships between farmers and buyers in the spice trade are comparable to those between tobacco growers and tobacco buyers, and the industries share many concerns, such as those about pesticide residues.

    Of course, there are also differences between the sectors. Unlike tobacco, which is highly concentrated, the spice industry is characterized by thousands of manufacturers who produce, process, trade or manufacture finished food products around the world. While tobacco is a high value, high volume industry, the number of companies is limited due to the high capital cost of business entry and the enormous expense associated with launching new cigarette brands.

    Rosenthal believes his world spice exchange has enhanced business where dynamic companies are willing to embrace the new technological advances in trading. 

    “The world is moving towards electronic trading, so either willingly or unwillingly we will be pushed into this style of business due to its wide reach and low cost,” he says. “Everyone can see how electronic trading has affected the futures and forex markets. It’s my belief that in a short space of time, the physical movement of bulk commodities will also be done by exchanges and electronically.”

    Currently, Rosenthal’s company is in the developmental phase for an online marketplace for the B2B tea business, where traditional teas auctions still take place. Animal feed is also in developmental stages.

    Busch and Rosenthal believe the tobacco industry, too, stands to benefit greatly from an online marketplace. 

    UTA procedures and requirements will guarantee suppliers’ integrity, and a team of industry experts is on hand to inspect shipments, which will also be handled by Andromeda Forwarding & Logistics. A full report will be generated to satisfy all industry standards.  

    Sellers will pay a one-time registration fee of $2,500. After registration, the seller will enter his stocks on an online platform, which any interested buyer can access. If a buyer is interested, he can request a sample for evaluation. After evaluating the sample, he can make a counter bid online. The seller will be informed by the UTA, and if he accepts the offered price, the sale is confirmed under the terms and conditions set by the UTA.

    Before shipment takes place, the buyer must transfer the money to an escrow account of the UTA. The nominated shipping agent of the UTA will arrange the shipment from FOB origin to CIF destination port. After the arrival and approval of the tobaccos at the destination, the seller will receive his payment. The UTA will deduct its commission from the payment to the seller.

    If the industry interest in the first UTA is any indication, the reinvented platform can look forward to busy times. While it is difficult to predict the volumes that will pass through the new UTA at this stage, Busch says the organization is determined to continually drive up the volumes and create value for the industry.

    For more information on the new UTA, please visit www.utaproducts.com.

  • A New Dawn

    A New Dawn

    Kingsley Wheaton (Photo: BAT)

    BAT is keen to build “a better tomorrow.” Chief Marketing Officer Kingsley Wheaton explains what that entails.

    By George Gay

    I believe that Oscar Wilde, a man of fashion, once described fashion as “a form of ugliness so absolutely unbearable that we have to alter it every six months.” So I wonder whether he, as a fashionable smoker, would have supported altering the cigarette every six months, given he had known it posed an absolutely unbearable risk.

    I think he would have done so. He was a risk-taker, but he was also highly intelligent, and there comes a time when intelligent people, even risk takers, have to yield to reality. Time caught up with the tobacco industry years ago, and, during the past decade or so, it has been changing in the light of what to most people is smoking’s unacceptable risk. These changes have included offering consumers a burgeoning range of increasingly viable lower risk alternatives to combustible cigarettes, which, rather than appearing every six months, have been launched as a steady stream of innovative products that, yes, up to a point, are dictated by consumer-led fashion.

    Appropriately, Wilde talked of altering fashion while the tobacco industry talks usually of change. But there is a new word on the block: “transformation,” which seems to describe a more muscular form of change—one that is not just about the market but about the companies supplying the market and the consumers buying from the market. BAT is one company involved in transformation and, in April, Tobacco Reporter asked it what form this transformation was taking.

    “BAT has a clear purpose—to build ‘A Better Tomorrow’—by reducing the health impact of our business through offering a greater choice of enjoyable and less risky products,*” said Kingsley Wheaton, chief marketing officer, in an emailed reply. “We aim to generate an increasingly greater proportion of our revenues from products other than combustibles, and we are targeting £5 billion [$6.97 billion] New Category revenue by 2025. We aim to have 50 million consumers of our noncombustible products by 2030, and today, already 13.5 million consumers choose these products … 

    “We have the broadest New Categories portfolio in the industry, comprising vaping devices, tobacco-heating [products] and modern oral nicotine products. Our multicategory portfolio offers innovative consumer products that have been developed using cutting-edge technology and science. We are building the brands of the future.

    “From launching our first vaping device in the U.K. in 2013, our vaping products are now available in 27 countries. In total, our New Category brands are available in more than 50 countries around the world. 

    “We have come a long way, and our transformation continues to accelerate. We are building new capabilities around the world focused on science, innovation and digital technologies. Consumer preferences and technology are evolving rapidly, and we are staying ahead of the curve with our digital hubs, the creation of innovation super centers and further development of our world-class R&D laboratories. We are also leveraging the expertise of our external partners and are looking forward to exciting results from our venturing initiative BTomorrowVentures.

    “In December 2020, we also announced we had progressed our Covid-19 and seasonal flu vaccine candidates into human trials—a significant milestone that further demonstrates our commitment to innovation and science.”

    Endpoints

    It would be easy to dismiss the above reply from BAT as the sort of polished promotional prose you would expect from a multinational, and I’m certain some people will do so. But if this is your reaction, it is worth reading it again because the breadth of the transformation cannot be denied, even if you don’t like the direction of travel. As BAT pointed out, it started life in 1902 and, for more than 100 years, had a product portfolio comprising more or less only cigarettes, which themselves comprised mainly a processed plant. Now it is describing how it is harnessing science, digital technologies and innovation super centers to produce a range of new category products that will change the market and consumer habits significantly within a targeted time. And let’s not forget the vaccine trials, which are impressive in themselves, but which hint at scientific developments that might provide important cross-fertilizations.

    One interesting question that arises when considering the transformation of a company has to do with whether there comes a point at which the transformation is complete, or whether it is a continuing process without any readily identifiable endpoint.

    “From the start of our portfolio transformation journey, we have always been clear that no consumer is the same,” said Wheaton. “In order to meet differing needs in multiple marketplaces, a portfolio of suitable alternatives is required—that is the hallmark of a modern consumer products business. It’s about understanding consumer preferences and how the marketplace is evolving.

    “We are transforming from a company that defines itself by the product that we sell to the consumer needs that we meet. We are committed to driving a step change in our New Category business while also innovating new product areas that go ‘beyond nicotine.’

    “We recently entered a strategic R&D collaboration with Organigram, a leading Canadian cannabis licensed producer. This agreement augments our activities to expand our portfolio ‘beyond nicotine’ and follows the pilot launch of our first CBD vaping product, Vuse CBD Zone, in Manchester, U.K., earlier this year.”

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    The Shifting Regulatory Landscape

    Given the stated individuality of consumers and their inevitable turnover, it would seem that transformation will be a continuing business, especially since there is another significant variable in the equation: shifting regulatory landscapes. And at this point, the question arises as to how a multinational company can navigate regulations in a world where countries operate with different—sometimes vastly different—regulations in respect of tobacco and new-generation products.

    “The regulatory environment around tobacco harm reduction is evolving,” said Wheaton. “Science increasingly points to the reduced-risk* nature of our New Category tobacco and nicotine products as an alternative to smoking. This means we are seeing policy and regulatory shifts in several markets. Some countries have greater restrictions in place. Others, like the U.K., view tobacco harm reduction within a regulated framework, encouraging smokers to use potentially reduced-risk tobacco and nicotine products.

    “We believe a stakeholder-inclusive, whole-of-society dialogue, which includes regulators, policy makers, consumers and the industry, is key to developing effective policies that can accelerate tobacco harm reduction as fast as possible.

    “We also believe that accelerating progress toward more effective tobacco harm reduction policies needs an evidence-based approach; proportionate regulation; freedom to innovate; engagement, dialogue and communication; and responsible marketing freedoms.

    “Underpinning all of this is our ethos: It is about being bold, fast, empowered, responsible and diverse to create a future-fit culture at BAT.”

    Dropping the Pods

    Although change is always put forward as a positive by those bringing it in, it doesn’t take more than a second’s thought to realize this is not necessarily the case. And the same could be said about transformation, so Tobacco Reporter asked whether BAT was concerned the tobacco industry’s transformation to some new-generation products could be viewed as having negative consequences for the environment.

    As part of his reply, Wheaton said BAT’s group-wide circular economy strategy for all its product categories—including its New Categories portfolio—was guided by three strategic priorities:

    • Simplifying the design of products to improve recyclability and reduce the use of virgin materials and resources;
    • Maximizing the longevity of products to improve the experience for consumers; and
    • Minimizing waste through increased product recovery and recycling.

    “Responsible disposal of our New Category products is key to our approach,” he added.

    “We have implemented ‘drop the pod’ pilot schemes in France, Mexico and the U.K. for consumers to return their e-liquid pods. In Japan, we have a scheme that allows consumers to return tobacco-heating devices. We aim to implement takeback schemes for our New Category devices, in all markets where they are sold, by [the] end of 2021.”

    So it would seem that, as far as BAT is concerned, building a better tomorrow goes beyond addressing individual and societal health improvements. In answer to another question, Wheaton pointed out that the expectations of the broader society were that businesses should play a more active role in addressing and finding solutions to crucial social, economic and environmental issues. “At BAT, we welcome this shift, which is aligned to our company’s purpose and our ESG [environmental, social and corporate governance] agenda,” he said.

    “Reducing the health impact of our business by encouraging those smokers who would otherwise continue to smoke to switch completely to scientifically substantiated reduced-risk alternatives* is the greatest contribution we can make to society. This means growing our New Category business and increasing the proportion of our revenue coming from New Category products as fast as possible. 

    “Our work to reduce the environmental impact of the business will also drive growth and create shared value, delivering results that simultaneously benefit shareholders and wider society.

    “In support of our ‘A Better Tomorrow’ purpose, in 2020, we set three ambitious ESG targets: First, to increase the consumer base of our noncombustible products to 50 million by 2030; second, to become carbon neutral for emissions resulting from our own business by 2030 and accelerating our existing environmental targets to 2025; third, to eliminate unnecessary single-use plastic and make all plastic reusable, recyclable or compostable by 2025.”

    There is a saying that you can lead a horse to water, but you cannot make it drink, so what, Tobacco Reporter asked, could BAT do if a hard core of smokers decided they did not share the company’s vision of a better tomorrow? Would it keep manufacturing traditional cigarettes for them, or would it stop supplying such cigarettes when a country’s smoking population dropped below 5 percent or some such figure?

    “We are clear that cigarettes pose serious health risks,” said Wheaton. “The only way to avoid these risks is not to start or to quit. We encourage those who would otherwise continue to smoke to switch completely to scientifically substantiated reduced risk alternates.* Driving value from our combustible cigarette business is how we fuel our investment in, and transition revenue to, New Categories, so it will be an important part of our business for many years to come.

    “Providing smokers with factual information, about, for example, vaping, is essential to enable them to make informed choices. We are committed to providing this information and have launched www.vapeexplained.com, a digital information hub providing adult smokers and vapers with science-informed answers to the vaping questions most commonly searched for online. VapeExplained.com is built on the company’s vast technical expertise of over 1,500 R&D specialists and the experiences of offering vaping products in over 26 countries around the world.”

    That, of course, didn’t answer the question of how long BAT was willing to continue making combustible cigarettes for a diminishing consumer base, but an answer was hinted at in answers to the next questions, when Tobacco Reporter asked how the company would take with it on its transformation its commercial stakeholders, or, in the case of some stakeholders, such as tobacco growers, how it would help them transition to new, perhaps unrelated, activities.

    “Also on this journey to a better tomorrow, we expect tobacco growers to remain central to our supply chain for many years to come, and farmer livelihoods is one of the priority areas of our sustainability agenda,” said Wheaton. “We are committed to helping our contracted farmers and their communities to grow and flourish. Farm diversification is just one example of this.

    “Over 93 percent of our contracted farmers in our supply chain grow other crops alongside or in rotation with tobacco, ensuring they don’t rely on one crop. This has helped to increase their resilience as well as enhancing food security and preserving soil health. If there is a future impact on the overall demand for tobacco leaf, we have an established approach for working with impacted farmers to support a smooth transition into alternative agricultural livelihoods.”

    *Based on the weight of evidence and assuming a complete switch from cigarette smoking. According to BAT, these products are not risk free and are addictive. “Our 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,” the company points out.

    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.
  • This is a Man’s World

    This is a Man’s World

    Photos courtesy of the Foundation for a Smoke-Free World

    Bridging the gender gap will strengthen Malawi’s economy.

    By Stefanie Rossel

    Imagine you own a piece of land, but you are not free to decide what to grow on it. You do most of the farm work in your family, but you earn only a fraction of the income of your male partner. You lack basic reading and writing skills, and you cannot easily get a loan with the bank because you do not own assets that can be used as collateral. That’s the situation for many women in Malawi’s tobacco sector.

    Women represent a little more than half of Malawi’s estimated 21.2 million people, but they provide more than 70 percent of agricultural labor in the country. Malawi is one of the poorest countries in the world, with a young, fast-growing population. Its economy is heavily based on agriculture, which contributes 90 percent of exports and represents 22 percent of gross domestic product (GDP). Productivity is below 40 percent of potential because there is limited access to modern technologies such as mechanization and irrigation as well as to competitive financing and competitive structured markets.

    With tobacco accounting for 54 percent of merchandise exports in 2019 and about 15 percent of GDP according to Trendeconomy.com, landlocked Malawi is one of the world’s most tobacco-dependent economies. It is also the 11th largest tobacco producing country. Ninety-five percent of the tobacco grown in Malawi is burley, supplied mostly by smallholder farmers (80 percent). Of these, less than 10 percent are female. Tobacco marketing is managed through two systems—auction (20 percent) and contract farming (80 percent).

    According to the United Nations, poverty is a gendered phenomenon in Malawi, with female-headed households disproportionately represented in the lowest quartile of income distribution. Most Malawian women working in tobacco cultivation do not own farms but work as farm laborers. “Tobacco is predominantly a man’s crop,” says Candida Nakhumwa, country director for Malawi at the Foundation for a Smoke-Free World (FSFW). “The man is the tobacco farmer. The woman and other family members just support him. It’s the man who is on the payroll, but in terms of the work on the ground, you find that the bulk of that is still performed by women. They are involved in terms of land preparation, planting, weeding and reaping of the tobacco or grading when they’ve harvested.”

    In addition to their farm tasks, women spend time on childcare and household chores, such as preparing food, fetching water and collecting fuelwood. “While women are actively involved at every stage of tobacco production, they are rarely present at the marketing stage. Tobacco marketing is mainly handled by men,” Nakhumwa says. “As such, proceeds from tobacco cultivation and decisions on use of this money are mainly in the hands of the man. Even among the roughly 10 percent of women who are tobacco smallholder farmers themselves, you can still observe that when it comes to marketing of the crop, they still look for a male figure to support them.”

    Because tobacco is a labor-intensive crop and most of the labor is supplied by the family members, farmers in some parts of Malawi marry a second or third wife to have more support. “The more family labor you have, the more advantage you have,” Nakhumwa points out. For the most part, education levels among female smallholder farmers are low, and that makes them more dependent on the husband, who is the bread winner. 

    Backbone of Agriculture

    Women take on a significant part of the farm work in most tobacco-growing countries. They represent about 43 percent of the global agricultural labor force and almost 50 percent in Sub-Saharan Africa, according to a 2011 U.N. Food and Agriculture report. A 2016 study commissioned by the Public Health Institute in Oakland, California, USA, looked at the role of women in tobacco farming in China, Kenya and Tanzania. In China, the world’s largest leaf-producing country, women spend 30 percent to 50 percent of their time in tobacco farming, according to the study. This amounts to six hours to eight hours per day on average and more than 16 hours during the harvesting season. Their husbands spend only 30 percent of their time in tobacco farming.

    What’s more, female seasonal workers earned less than men, the study found. In Tanzania and Kenya, both women and men spend about 40 percent to 50 percent of their time on tobacco cultivation. Awareness of the health risks of tobacco cultivation was low in all three countries, and pregnant women were often working in the field.

    In contrast to their African counterparts, however, most female tobacco farmers in China were decision-makers or joint decision-makers regarding farming activities and finances. Almost 55 percent of Chinese respondents, the study states, were the sole signatory to the contract with tobacco companies, with access to bank accounts and the payment from the tobacco companies. In Tanzania and Kenya, the situation was very different, according to the study authors.

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    Substantial Disparity

    In Malawi, women are mostly seasonal workers providing their labor to other farms. “These women may even own a small piece of land where they can grow other crops, such as maize, groundnuts or soybeans. But if they spend more time offering themselves as casual laborers, it compromises the amount of time they can invest on their own farms,” Says Nakhumwa. “Hence, these farmers tend to be food-insecure. They are not able to produce food that will last them from one harvest to another. So the food security dynamics for women are still a challenge.”

    With an average of 6.6 family members, tobacco farmer households are larger than the national average, which stands at four family members, and this also influences the food availability of farmers’ households. Malawian farmers own far less land than their counterparts in Zambia and Mozambique. Coupled with low productivity among smallholders, tobacco cultivation does not guarantee a profit if the crop is grown on less than 0.75 ha. “This is not economically viable. The land women own is even smaller—that’s why they go out and offer their labor to other farmers,” says Nakhumwa.

    Most of the smallholder land in Malawi is inherited. There are two types of inheritance. In the central region and southern regions, a matrilineal society prevails, so the inheritance is through the mother. The northern region has a patrilineal system, where inheritance is through the father. However, in the central region—the hub of tobacco growing—the married woman relocates to stay at the husband’s home. “In this situation, the woman cultivates land that belongs to her husband,” Nakhumwa says. “Therefore, these women do not control land nor other productive assets. In terms of decisions on how to make use of her land, she will still be looking up to a male figure. This could be her husband, but in most cases, it will be her uncle who is considered the owner of the clan.”

    The fact that the women don’t control the land ends up affecting issues such as whether they are able to access financing from a commercial bank. “If you don’t own the land, it means you cannot present it as a collateral to access finance,” says Nakhumwa. “This also limits women in terms of which part of the value chain they participate in. Tobacco is a high-input crop, so if you cannot get access to financing for inputs, then it’s no longer your preferred crop, whereas for a man, because they are controlling the land, they can easily go to the bank and get a loan.”

    Men are also the ones who negotiate the contracts with leaf companies because they benefit from larger land ownership than women. To be contracted, farmers need to demonstrate that they own enough land to be able to rotate tobacco with three other crops.

    The pattern of women passing on responsibility to a male figure is deeply rooted. Families will dedicate their limited resources to the education of their male child, as he is expected to take on more responsibility over the woman he will marry, while the girl child is expected to get married and be taken care of by her husband. “This is also linked to a lot of school dropouts and early marriages among girls,” says Nakhumwa. “Around 10 percent of girls are married before the age of 15. Fifteen percent are married before the age of 18.” Laws against child marriages are in place, but enforcement is weak.

    Long Way to Go

    On the bright side, recognition of the hazards involved in tobacco growing, such as green leaf sickness, is improving, according to Nakhumwa. More leaf companies are working to create awareness about farm safety. “In a country where more than 80 percent of tobacco is contracted, more than 80 percent of farmers should get the message,” she says. “However, mostly male farmers take part in these awareness creation meetings, so it’s up to them to inform the women at home, but it’s not the extent to which this happens.”

    While many leaf companies supply their farmers with protective gear, this is helpful only if enough equipment is provided for all farm workers rather than just for the men, Nakhumwa notes. “More needs to be done for women to understand the dangers of tobacco cultivation,” she says. Yet even if women know about the risks, they will likely continue working in tobacco fields because they have few alternatives, according to Nakhumwa.

    Gender equality is one of the 17 U.N. Sustainable Development Goals (SDGs) supposed to be reached by 2030, which seems like an extremely ambitious target. Much work is needed to improve the situation of women working in Malawi’s tobacco sector. “The key priority is to provide women with increased opportunities and access to quality education,” says Nakhumwa. “If they attended school longer, their decisions would be different. They’d have access to other opportunities. Furthermore, we need to empower and enable women to have access and control over factors of production such as land and competitively priced finance, among others, to help them engage effectively in agriculture. If this happens, they can be involved in production and marketing of commodities other than tobacco.

    “The third area is that women need to be empowered to be involved in nonfarm activities and in decision-making to reap the benefits of the labor they are putting in and get control over the money they have made. I think education and empowerment will help us close this gender gap and also deal with issues of population in which women play a big role.”

    To close the gender gap, she continues, the men need to be taken along. “If this capacity building targets both the man and the woman to help them understand how much more they can do if they work as a unit, they might embrace that. I think men will be able to support women to be better off. In some communities, men and women are supported to have a joint vision for their families—if they don’t do that, you see that they are pulling in different directions. The man needs to understand that a woman is a critical player in this field and that he cannot leave her behind.”

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    Diversification is Key

    Elected in June 2020, Malawi’s new government is committed to reducing the country’s dependence on tobacco. Its “Malawi Vision 2063” plan aims to turn Malawi into a wealthy, self-reliant nation. The country is also a signatory to the African Continental Free Trade Area Agreement (AfCFTA), which is estimated to boost intra-African trade by 52 percent by 2022.

    “For Malawi to be successful in this, our agricultural exports need to be competitive and prioritize value addition,” Nakhumwa explains. “Otherwise, we may be the losers and fail to exploit the 1.3 billion population AfCFTA market. Further, the total value of food imports in Malawi has more than doubled between 1998 and 2020. These imports mostly consist of products from crops that the country produces itself, which is cereals and oil seeds. This demonstrates the readily available domestic market and points to some of the things we have to focus on as part of an import substitution strategy.”

    To support the country in its transition toward a more sustainable, diverse agriculture sector, the FSFW awarded a grant to a consortium led by Land O’Lakes Venture 37 to set up and manage the Centre for Agricultural Transformation (CAT) in Malawi in 2019. The CAT addresses an objective of Article 17 of the Framework Convention on Tobacco Control to assist tobacco farmers in the development of alternative livelihoods. The CAT includes several initiatives such as the science, technology, innovation (STI) program and business and incubation cohort (BIC), both of which will help smallholder Malawian farmers make economically viable, data-driven decisions for diversifying their livelihoods. The center facilitates the development of new technologies, partnerships and income opportunities to help farmers achieve greater economic success in the coming years, with a special focus on women and youth. Numerous programs under the CAT are dedicated to encouraging women and youths to engage in agriculture, link up farmers to markets to sell their produce at competitive prices or training them on vital entrepreneurship.

    In addition, through a policy program led by Michigan State University, FSFW is supporting targeted policy reforms while also working closely with Malawi’s National Planning Committee. Michigan State University has also supported the establishment of the Malawi Agriculture Policy Advancement and Transformation Agenda Institute. Institutions play an important role in helping women to develop a vision of what they want to do and where they want to be. Policies have been aligned accordingly, Nakhumwa says. “What we have to do as development partners is to ensure that we generate evidence that supports these policies so that governments recognize that if they change certain aspects in existing policies, women will benefit. There is need for legal review to ensure that all policy and legal instruments are tailor-made to support equality between men and women.”

    FSFW is also contributing toward human capital development efforts to strengthen the capacity of researchers and professionals, both men and women, in high-priority fields that will help the country transform its agricultural sector. Scholarships have also been awarded to candidates based in Malawi who are pursuing their master’s degrees and doctoral degrees and advancing their postdoctoral research in agriculture, business, data science, economics, ecology/environment and engineering. This effort is in addition to institutional capacity building and business incubation support offered through the CAT and policy programs.

    Nakhumwa says that diversification will be good because other commodities will allow women to participate in production and marketing. However, she notes, women will benefit from diversification only if certain conditions are met. “To support farmers, we need to enhance access to improved technologies for women so that they can experience increased productivity in production of the crops or livestock they will be producing. If they continue to produce at low productivity, the women will still fall behind.

    “We also need to help the woman to access competitively priced finance so that when she goes to the farm, she will be able to invest the required amounts of inputs and produce the volumes and quality that she can take to the market. Through the STI and BIC pillars of the CAT, tailor-made programs have been launched for women to learn about and access improved agricultural technologies and capital as well as develop necessary technical and entrepreneurship skills to grow their businesses. Focus on women and youth is at both the enterprise level—women and youth-led agri-enterprises—and the business model level, with emphasis on women and youth inclusion.”

    Other important factors include investing in labor-saving technologies as well as ensuring that women get access to structured and competitive markets as well as control over land. Nakhumwa emphasizes that to benefit from diversification, the woman needs to be empowered to upgrade in the value chain.

    “Instead of being laborers only, women need to be supported to own strategic factors of production and begin to add value to what they are producing to maximize the value they earn from their efforts. I also believe that when these women farmers are organized in groups, they can benefit from economies of scale. They can easily be taught new technologies and management practices. Finally, we need to deal with cultural barriers that exist so that even in these new commodities, the woman is treated like an equally important partner.”

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    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.
  • A Golden Age

    A Golden Age

    Photos: Curved Papers and Republic Technologies

    The Covid-19 pandemic notwithstanding, rolling papers, blunt wraps and cones are flying off the shelves in some markets.

    By George Gay

    Michael O’Malley

    If you speak about the roll-your-own (RYO) sector with Michael O’Malley of Curved Papers, much of what he says revolves around marijuana, so it is easy to come away with the idea that RYO’s future lies in this direction. But he dismisses this idea, pointing to the huge disparity in volume sales between those of tobacco and those of marijuana, which, of course, favors the former. However, he concedes that, right now, marijuana is making the news and the running, partly by providing what he describes as a “vortex of innovation.”

    I guess this is only to be expected. Tobacco has been on sale legally for a long time while marijuana is only now gaining the stamp of legislative approval in a limited number of jurisdictions. This is the time for marijuana-use research and fast-moving, follow-up innovation, something that has attracted the attention of a wide range of companies, including major corporations involved with tobacco, beverages and consumer packaged goods: companies that are investing directly or indirectly in marijuana and associated intellectual property.

    Overall, the RYO market was steady globally, said O’Malley, but, at the same, it was generating a significant expansion in brands and products because of the entry of marijuana, primarily in North America. In 2017, Canada and Mexico both passed federal legislation on marijuana and, recently, Mexico followed through with full adult use (previously more usually termed “recreational use” to distinguish it from medicinal use), leaving the U.S., by far the largest market, the laggard on federal legislation. However, 17 U.S. states, including some populous ones, had now opted for full legalization while almost every state had a legal medical marijuana program.

    That last point is significant because the dynamics of U.S. state legalization has tended to see medicinal marijuana leading the way before being followed by adult use. In some states that allowed only medicinal use, programs were based on “no flower consumption”—that is, no smoking. However, under pressure from people making use of these programs, and with the support of medical professionals, new regulations and/or legislative amendments have been introduced to allow for smoking to be part of these programs.

    O’Malley, who is based in the U.S., believes the legalization of marijuana will sweep from state to state and will eventually lead the U.S. to align nationally on this issue and broadly with its North American neighbors, despite the existence of considerable resistance in some states and powerful opposition at the federal level.

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    Flying off the shelves

    Even with the situation as it is, O’Malley was moved to say that now was something of a “golden age” for the RYO market, encompassing both tobacco and marijuana. Rolling papers, blunt wraps and cones were all flying off the shelves like never before, he said, notwithstanding the Covid-19 pandemic. In part, this was because, in the U.S., outlets selling RYO products, including convenience stores, gas stations and dispensaries, were largely deemed essential at the outset of the pandemic while smoke shops and head shops had also been open for some time.

    At the time of writing in mid-April, Curved Papers had suffered no supply chain interruptions because of the pandemic and, as a consequence, had been able to absorb an uptick in demand for its products. O’Malley said the legalization of marijuana was attracting new smokers and that many of these were drawn to Curved Papers’ products because their curved edge made it easier to roll a cigarette with inexperienced fingers. At the same time, he added, expert rollers continued to enjoy the “elegant convenience of the easy-to-roll curved edge.” And he is confident about the future, saying that economics and consumer preferences would remain favorable for hand-rolling.

    This confidence is steadfast even in the light of the emergence of machines capable of producing cylindrical joints resembling tobacco cigarettes. In fact, O’Malley sees the products of these new machines, some of which are expected to be launched this year, as providing competition more for the products of the knockbox machines used for filling cones than for hand-rolled cigarettes. “These new machines will not eliminate rolling joints,” he said. “We see them as complementary to and supportive of our markets.” Smoking the flower had survived the onslaught of speculative product introductions in the past, he added, including that of vaping devices.

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    Ancillary products

    While recent developments have seen the introduction of a lot of new products and product categories, O’Malley points out that rolling papers still comprise the biggest of the ancillary products in both tobacco and marijuana. But this should not be interpreted as meaning that O’Malley is anti-new developments or anti-technology. He describes Curved Papers as being an innovative company with a soon-to-be-announced development that will have an impact on how rolling papers are made in the future.

    For the time being, however, the company is content to remain a supplier of an ancillary product that doesn’t become involved directly with marijuana plants and therefore doesn’t become tied up with the accompanying regulations.

    However, it has consulted with companies that are so involved, including those researching CBD rolling papers and marijuana wraps. And, O’Malley said, because sustainability was a core value for Curved Papers, it had collaborated in the field of so-called hemp plastic, from which it would like to see produced a truly recyclable “doob tube,” which, for the uninitiated such as me, is a container in which to keep pre-rolled joints.

    Finally, O’Malley mentioned that while it was difficult to predict how U.S. relations with China would develop, there were likely to be implications for the RYO sector. China-made rolling papers had fueled a previously unseen white label market that had undercut European suppliers on price and that was continuing to narrow the gap on quality. But that surge might be slowed if East-West relations chilled during the next decade, and it was possible that the positions taken by the U.S. and the EU on China might differ, leaving the U.S. more isolated. In that case, he said, it would be interesting to see if product manufacturing returned to the U.S., even in the case of ancillary products such as tobacco rolling papers. “We see a possible window opening, again aided by developments around marijuana,” he said.

    Environmental considerations

    Santiago Sanchez
    Santiago Sanchez

    For the time being in Europe, one of the main concerns of the RYO sector is the EU’s Single-use Plastics (SUP) directive, which Santiago Sanchez of Republic Technologies International (RTI) described as almost surreal. He said he agreed that the use of plastics should be restricted because the damage being done to wildlife was immense and the situation had to be reversed. And Republic was committed to playing its part in protecting the environment, he added, as was evidenced by the company’s rolling-papers booklet factory, which, since the beginning of last year, had been running only on “green electricity.”

    Nevertheless, Sanchez is concerned that the SUP regulations are not realistic in that the period given for their implementation is unreasonable. Under the regulations, suppliers of filters marketed for use in combination with tobacco products are required to have printed on their packaging “plastic in filter,” a legend that must be rendered in the language or languages of each EU member state on which these products are sold. Of itself, this might not have posed a problem, but the text was published officially only in March, and products must include this message if they are “placed on the market” after July 3. Additionally, it is not clear what is meant by “placed on the market,” and the EU, at the time of writing, was yet to clarify the term.

    Sanchez said that major industries could not work with such short timeframes, which eventually could lead to a situation whereby manufacturers might have to destroy products that fell foul of such timeframes. In this event, it was possible that the regulation would, bizarrely, lead to a waste of energy and raw materials, not to mention the financial loss.

    One area where Republic had been concerned about the possibility of cost-induced losses has not come to fruition, however. The uncertainty over Brexit meant the company had had to play safe by placing additional stock on the U.K. market so as to avoid the possibility of product shortages in the shops. But whereas successive delays in the implementation of the Brexit accords forced the company to keep such additional stocks for quite some time, in the end, procedures worked quite smoothly, and Republic was not negatively affected by Brexit apart from some additional costs engendered by the necessity of producing extra paperwork. Currently, the company is bringing down its U.K. stock levels to normal levels.    

    Meanwhile, the Covid-19 pandemic seems to have caused a significant increase in sales in all of Republic’s product categories. Whether consumers smoked more due to the stress, whether they switched to cheaper products or whether both phenomena were in play, the result has been an increase in demand for the company’s products. A big factor here, of course, was that these products were distributed by major chains and tobacco shops, which were declared essential almost everywhere, which meant the public had access to smoking items.  

    In most of Europe, meanwhile, people don’t have easy access to marijuana as many do in North America, and most of those who do cannot smoke it legally. But Sanchez recognizes there is a boom in progress in North America and notes that this development could spread. Even in the U.K., where even medicinal marijuana is generally frowned upon, the mayor of London is launching a consultation; though, already, the central government has declared this is not a matter for London alone.

    In general, Sanchez said, demand for marijuana-related products was increasing and, in his opinion, would continue to do so. Companies, he added, should adapt to the new situation by taking advantage of the opportunities. “And in this sense, RTI is glad to confirm that it will launch shortly in selected markets a new range of rolling papers with CBD-infused natural gum,” he said. “It will be the first of its kind, and we are extremely proud of this development with a patented system that will bring a plus to marijuana consumers.”

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    In fits and spurts: Is the predicted growth in RYO sales sustainable?

    I’m told that the value of the global roll-your-own (RYO) tobacco product market is roughly about one percent of that of the all-embracing, global tobacco product market, but according to a February press note promoting analysis by Grand View Research, while the total product market is expected to expand at a compound annual growth rate (CAGR) of 1.8 percent from 2021 to 2028, the RYO market is expected to expand during the same period by a CAGR of 4.2 percent.

    This is positive news if you’re in the RYO business, especially if you are exclusively in that business. But before you start to cheer, it might be worthwhile spending a minute or two examining the reasons given for the predicted, relatively fast rise in RYO product business.

    “The rising consumption of [RYO] products among females and students is fueling market growth over the world,” the press note said. “The adoption rate of the product is increasing among the youth in major economies, including the U.S. Moreover, the financial stress caused by the Covid-19 pandemic has encouraged numerous smokers to shift from factory-made cigarettes to hand-rolled cigarettes due to the cost advantage of roll-your-own … tobacco products.”

    Although the Covid-19 pandemic might be seen as something exceptional, the reaction of smokers to the financial stresses that it has caused is anything but exceptional. It has been well documented in the past that, outside the core of RYO product consumers, there are smokers who move from factory-made cigarettes to RYO products and back again on a schedule that conforms roughly with the relative prices of RYO and factory-made cigarettes and with the health or otherwise of their finances, which might change according to their personal circumstances or local, national or global events, such as the economic hit caused by Covid-19. So the boost to the value of the RYO market that can be laid at the door of the pandemic is likely to evaporate if or when the virus is beaten, tamed or becomes part of the family, as with influenza; though, admittedly, with the current lack of attention to prevention, it’s always the case that another pandemic-inducing virus could be just around the corner.

    The other “problem” with the stated reasons for the predicted growth in the value of the RYO market is that they include rising consumption of such products among women and students around the world. Those opposed to tobacco consumption, especially the peculiar group that comprises people who seem to want tobacco manufacturer profits to be maintained as high as possible, will jump on this information as being indicative of the wicked nature of the RYO industry. In addition, the idea that RYO products should be sold around the world when, in the past, they have been confined largely to some specific geographical locations will not go down well. At the same time, even most of those championing sex equality will rail against any shift toward women of what has traditionally been a male-dominated habit. And, well, better we all fall down dead than a student or youth should be seen puffing on a rollie.

    What we have here is ammunition for those wanting to raise taxes on RYO products to the point where the cost of RYO smoking becomes as ridiculously high as that of factory-made cigarette smoking—all in the cause of helping the RYO smoker of course.

    It won’t help that the press note says the market for RYO filters will outperform that for other RYO products, with a 4.7 percent CAGR between 2021 to 2028, in part at least because of the introduction of biodegradable or environmentally friendly filters. Many people question whether cigarette filters perform any useful purpose beyond keeping tobacco out of the mouths of smokers, and they worry that filters tend to encourage smokers to keep smoking by giving them, in the view of those opposed to filters, a false sense of harm mitigation.

    But if there is one thing that is likely to raise the blood pressure of people opposed to smoking more than filters, it is flavors, and the report apparently describes how flavors are helping to propel the increase in the market for RYO products. And it gets worse. Flavors, different sized products and attractive packaging are said to be combining to propel a global demand for premium RYO products, an idea that will surely make it increasingly difficult to sell the idea that RYO is aimed largely at financially impoverished smokers.

    None of this is to say that the report’s authors should have shied away from describing what they see as the likely drivers of the market for RYO products; it’s just an interesting parallel to the phenomenon encountered by quantum physicists—that it is not possible to measure stuff without disturbing it. —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.