Category: Print Edition

Taming The Beast

Cormac O’Rourke (Photos courtesy of JTI)
JTI’s Cormac O’Rourke reflects on Malaysia’s struggle against the illicit trade in tobacco products.
By Stefanie Rossel
Malaysia holds a sad record: It’s the market most affected by illicit cigarettes. According to Nielsen, about 12.2 billion sticks of contraband cigarettes were sold and consumed in Malaysia last year, outstripping the number of cigarettes sold legally in the country.
Most illegal cigarettes are brought into the country, which has a total coastline of 4,675 km, through one of its numerous ports or through neighboring Singapore. Declared as nontaxable goods destined for a third country, they are not examined by customs. Instead of being shipped to their destinations, however, the cigarettes are smuggled into Malaysia.
Tobacco Reporter spoke with Cormac O’Rourke, general manager of Japan Tobacco International (JTI) Malaysia, about the strategies required to address the issue.
Tobacco Reporter: Illegal cigarettes accounted for 62.3 percent of the Malaysian cigarette market in 2019, up from 58.9 percent one year previously, according to Nielsen. What’s the situation today?
Cormac O’Rourke: The illegal cigarette trade situation in Malaysia remains critical in 2020. The latest reading of the Illegal Cigarettes Study for June 2020 shows illegal trade at 60.5 percent of the market. Malaysia continues to be No. 1 in the world for illegal cigarette trading, costing the country approximately $1 billion in lost tax revenues annually.
To what extent has the outbreak of Covid-19 and the related “movement control order” (MCO) contributed to the problem?
The MCO period posed several operational issues for the legitimate tobacco industry. In effect, supply of legal products was severely disrupted albeit not fully halted. During this period, the illegal trade syndicates pivoted to the e-commerce channel for sale. Even food delivery services were engaged for distribution. This resulted in a loss of earnings for retailers—[there are] approximately 60,000 throughout Malaysia who rely on the sales of tobacco as a primary source of income. The vacuum was filled by illegal traders where it is estimated that approximately $250 million alone of the annual $1 billion was lost in tax revenue during this short period. Normal supply has since resumed but illicit trade incidence remains stubbornly high at 60.5 percent.
The Malaysian Ministry of Finance has established a multi-agency task force (MATF) to combat illicit cigarette trade. How effective has this initiative been?
The establishment of a MATF in January 2020 led by the Royal Malaysian Customs has paved the way for a public-private sector partnership with a clear term of reference to comprehensively address the illicit trade issue in Malaysia.
Addressing the long-standing illegal trade problem in Malaysia requires a whole of government approach involving ministries and law enforcement agencies. We believe that the MATF with the involvement of the Royal Malaysian Police Force, Ministry of Domestic Trade and Consumer Affairs, [and] Ministry of Finance, among others, can drive enforcement efforts and also ensure sensible regulatory policies are discussed and validated so as to not exacerbate the problem any further. We are optimistic that the current government is now relooking into this issue seriously and [has] recently initiated a meeting in early August to reinstate the MATF with all stakeholders.
This is a national problem costing the country between $1 billion a year in lost tax revenue. It is further costing the small and medium enterprise sector, in particular retailers, billions of ringgits in lost margins. This is damaging not only from a jobs point of view but reputationally for the country as it strives to compete for its fair share of foreign direct investment.

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You have named cigarette transshipment and repeated excise tax increases as issues that exacerbate the illicit trade problem. Furthermore, Malaysian smokers have mentioned corruption as the biggest hurdle to controlling illicit cigarette trade in a recent survey by British American Tobacco. What has been done recently to tackle these issues?
Transshipment of illegal cigarettes through Malaysia is estimated to account for up to 50 percent of the illegal volumes coming into the country. This can only be done via the ports through a systematic approach to smuggling and abuse of documentation procedures. The industry has tabled recommendations for the government to ban the practice of transshipment for cigarettes. This, coupled with designating a single point of entry for tobacco products into Malaysia, would curtail the use of this channel for smuggling, remove the uncertainties related to processes and procedures as well as help address any corruption issues that may exist.
We believe that implementing the right policies in addressing this problem has to be the focus while enhancing enforcement effectively by deploying the various enforcement assets and powers available to relevant agencies controlling the borders, ports and even retail outlets. This has to be underpinned by a predictable stable tax environment, thus the call by the industry for an excise increase moratorium for the next two years. This will ensure that affordability will continue to improve while allowing time for the MATF initiatives to take hold.
What should be done in your view to better combat illicit cigarette trade in Malaysia? Is this a problem that can be solved at all?
Stamping out the black economy in Malaysia requires a real concerted effort that can only be addressed by absolute and resolute enforcement, which is why the setting-up for the MATF under the Ministry of Finance earlier this year was a significant step in the right direction and the reestablishment of the MATF a key action point to pursue by the government. Provided there remains a predictable stable taxation environment, targeted policies that close the loopholes currently being exploited, strong political will and stringent enforcement, there is a real chance to bring the situation under better control.
What are the consequences for your business in Malaysia, and what is your outlook on opportunities in that market?
The industry has been forced to make significant adjustments, addressing costs as well as reducing investment to cope with the elevated illegal trade situation. Illegal trading has impacted all parties throughout the legal supply chain.
Given the severity of the situation on the legitimate tobacco industry, retailers and associated enterprises, we call on the government to redouble its efforts to protect jobs and industry for Malaysia. A moratorium on excise tax would be a good start. Furthermore, there is an opportunity to lessen the load on the legitimate industry cashflows by deferring payment of excise and import duties, allowing for duty payment drawbacks for unsold goods as well as a reduction of import duties on ASEAN [Association of Southeast Asian Nations]-sourced products that is currently at 5 percent of cost. Releasing locked cash would ease some financial burden and more importantly would allow the industry to support retailer liquidity as they have been hard hit by the pandemic.
Malaysia also has a problem with illicit vapes, which reportedly made up 10 percent of the total Malaysian market in 2019. What’s the current situation, especially regarding the MCO during the Covid-19 pandemic?
The illegal vaping segment continues to grow unabated and accounts for an estimated 10 percent of the market. Nicotine-based vaping products are technically illegal in Malaysia given the provisions under the Poisons Act 1952 requiring any sale and distribution of nicotine-based products to necessitate a license from the Ministry of Health. However, no license has been issued to date.
The proliferation of vaping products, for which the Ministry of Health has indicated that 90 percent are nicotine-based, has been aided by not only the smuggling of such products that are sold in traditional brick-and-mortar stores [but also by] illegal online sales, most of which are imported and misdeclared as food items. Our position to government has been consistent for an appropriate regulatory framework to be established allowing for the proper introduction of vaping products in the country.
How is the problem of illicit vapor products also being tackled by the MATF and other stakeholders? How effectively has it been done so far?
It remains too early to assess given the recent reestablishment of the MATF, but we are hopeful that with proper policies in place and stronger coordinated enforcement, there will be a positive impact on the situation. We estimated that if illegal cigarette trading is reduced by 50 percent, the country would benefit from at least a $500 million increase in tax revenues. The efficiency of the MATF and its constituent agencies should be assessed based on the revenues that it can recover from reducing illegal trade, and we are confident that proper key performance indicators will be put in place toward that end.
Could you please describe the state of tobacco harm reduction in Malaysia?
The reduced-risk products segment is still in its infancy in Malaysia. While open tank vaping products have been around for the past several years, albeit illegally, heated-tobacco products have only been introduced in the past two years. Nevertheless, there remains an absence of a proper regulatory and taxation framework that would cover especially nicotine-based vaping products, which adds to the illegal segment in the country.
Our position has been consistent that a proper regulatory framework needs to be established to allow for the introduction of vaping products in the country. The current situation only allows for an unregulated and illegal industry to flourish.
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.

October 1, 2020
Living With Uncertainty

Photo: Delfort
Stagnating tobacco consumption and a persisting pandemic are challenging the cigarette paper business.
By George Gay
It is obvious that the effects of Covid-19 have not been evenly spread across businesses and industries. Since lockdowns and restrictions became the norm, that part of your business that manufactures personal protective equipment will have done a lot better than the division that sells overseas holidays, and, generally, the tobacco sector sits somewhere between these extremes on the continuum of business opportunities and risks created by the disease and its underlying virus, SARS-CoV-2.
And if you zoom in a little closer, you will probably notice that there are pockets of activity within the tobacco sector that have fared better than others have. I would guess, for instance, that sales of tobacco products whose consumption does not require inhalation would have stood up better than those of others. But within other pockets of activity, Covid-19 has delivered only yet another injection of instability into businesses already faced with considerable changes and uncertainties brought about by those changes.
For a long time, the tobacco papers sector had been operating on a reasonably stable market, albeit one that was the subject of much consolidation among its business consumers and, therefore, among its suppliers. Of course, many sectors have found themselves affected by such consolidation, but, for the tobacco sector, no sooner had consolidation reached a point where little more was reasonably possible than those suppliers that had navigated these consolidations were hit by a major technological disruption.
Up to a point, that disruption, led by liquid-nicotine vapor devices, meant a partial reversal of the consolidation, so tobacco suppliers that could turn their activities toward the supply of liquid nicotine, and the suppliers of flavors, for instance, saw fresh opportunities open up.
But if you were in the paper business, this disruption offered no new opportunities only the threat of a further reduction in the demand for cigarettes and, by extension, a reduction in demand for plug wrap and cigarette and tipping papers. Even now, with the arrival on the market of heat-not-burn devices, the picture has not improved to any great extent for the paper sector. After all, if a pack of heat-not-burn cigarettes replaces a pack of traditional cigarettes, the amount of paper required goes down, though admittedly not to zero as is the case when traditional cigarettes are replaced by vapor devices.

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Additional challenges
It goes without saying that the papers sector is being hit by the decline in cigarette smoking, a decline that is going to continue, but against that background, additional challenges have been and, to some extent, are being played out. And together, these challenges can be summed up in one word: uncertainty, which is perhaps one of the most despised words in the business lexicon. After all, even though the word “tax” has by no means a welcome ring about it, at least the inevitability of taxes raises them above the level of uncertainty.
Having said that, uncertainty, at some level, is ubiquitous in the business world, and, indeed, it can be the life blood of industries. Certainty does not breed disruption, and disruption seems to be what is currently being sought after in all but the most conservative industries. But there is a point where uncertainty tips over into negative territory, even chaos, and, as is described above, those operating in the tobacco sector have had to learn to live with high levels of uncertainty, especially in recent years. For instance, while it has been known for some time that smoking is in decline, trying to guess what level of decline is going to be experienced in the future is probably more difficult now than it has ever been, partly because we are living in a time of coronavirus.
And not only are markets for cigarettes declining, they are fragmenting with the appearance of a larger variety of products, some of them niche, a situation that translates into more but smaller orders for suppliers to tobacco manufacturers, such as those providing paper—in other words, a situation in which it is difficult if not impossible to maintain previous levels of efficiency. At the same time, the need to find solutions for the growing focus on cigarette litter is creating new demands in respect of filter-related papers.
There is no getting away from these challenges. Demand for combustible cigarettes will continue to decline while the demand for the special and niche papers needed to meet the requirements for new and reformulated products will continue to increase. The decline in demand for combustible cigarettes is likely to be driven by a number of factors but certainly in part by increases in demand for vapor devices and heat-not-burn products, especially now that the U.S. Food and Drug Administration (FDA) has authorized the marketing in the U.S. of IQOS as a modified-risk tobacco product.
But there is more to uncertainty than consumer-led demand. While laws and regulations on tobacco products differ from country to country and region to region, even within those countries and regions, regulations are subject to change as is clearly illustrated in the EU where the Tobacco Products Directive has the issue of change built into it. And while product preferences vary from country to country, such preferences are themselves the subject of change over time.
And these are just some of the challenges thrown up by uncertainties specific to the papers sector. Paper suppliers, of course, have also faced all the hurdles thrown up by the general restrictions introduced by governments in response to Covid-19.
Understandably enough, given that little was known about the SARS-CoV-2 virus when it first started to spread around the world, not all of these government responses have been consistent or coordinated, so, for instance, borders have been closed at short notice and some countries have reduced the number of border crossing points, causing long delays for commercial shipments.
Such closures and delays would have been difficult to deal with at any time, but they have been especially trying in the present circumstances when businesses along the tobacco products supply chain have been increasing orders from paper suppliers in an attempt to keep those chains well stocked as a buffer against other disruptions, such as the enforced short-term or long-term shutdown of factories. And to make matters worse, the challenge presented by trying to keep supply chains stocked can easily go into reverse. Once the increased orders have been filled and the supply chains well stocked, demand flattens until those stocks have worked through the system or until a new wave of factory closures and border restrictions set the whole disruptive process back into being.
The issues raised by Covid-19 have been considerable, and while some of them have been short-term, others are continuing. It is easy to forget that paper suppliers have had to respond to different customer ordering patterns and deal with new regulations and restrictions that differ from country to country and that can change from day to day, all while having to restructure their internal systems to deal with such things as working at home, video meetings and travel bans and restrictions.

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Diversification
Given all of the above, it would be easy to become downbeat about the future for the tobacco paper industry and, therefore, those supplying it. After all, while it might be the case that paper suppliers are free to offset reductions in demand for tobacco product papers by seeking new markets beyond tobacco, such a strategy can come up against technological and commercial challenges. On one hand, it has to be asked whether a supplier’s machinery is capable of producing the grades of papers required by other industries, and, if not, if it is worth investing in the necessary machinery when there is no guarantee about success on the markets of these so-far-untapped industries.
And on the other hand, many paper suppliers are already diversified, offering papers across a number of industries, so, presumably, if making further inroads into these other markets was a simple matter, the suppliers would have done so already. In fact, such a strategy will be made more difficult by the fact that all of the paper suppliers currently engaged with tobacco will doubtless be looking into diversifying further into the same industries. As Albert Einstein is often quoted as having said: football is made more difficult by the existence of the other team.
But perhaps there is another avenue of “hope” opening up. I place “hope” in inverted commas here because it is based on something that not many people would hope for or welcome—the possibility that increasing numbers of vapers will be “encouraged” to return to smoking traditional cigarettes and increasing numbers of smokers will be discouraged from trying to move to vaping.
As I write this, the liquid-nicotine vapor industry in the U.S. is facing something approaching wipeout as the Sept. 9 deadline looms for applying to the FDA for premarket tobacco product authorization for vapor products—million-dollar authorization applications that are way beyond the means of small-sized and medium-sized companies.
At the same time, the U.K. government has decided to abolish Public Health England (PHE) next year. PHE, an executive agency of the department of health and social care, is the body that has been supportive of the vapor industry’s efforts to help in the effort to reduce cigarette consumption and is famously known for having declared vaping to be 95 percent less risky than smoking. Although another body will take over some of PHE’s responsibilities, no decision had been made at the time of writing about what would become of PHE’s anti-smoking efforts.
The trouble is, as Queen Elizabeth I reputedly said, “Hope is a good breakfast, but it is a bad supper.”

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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.

October 1, 2020
Tyranny of the Majority

Photo: Olha Brahina| Dreamstime.com
The Covid-19 pandemic should not be used as an excuse to permanently restrict shisha lounges.
By George Gay
Since shortly after the start of this year, people around the world have been asked or required to change some of their habits to allow governments to implement strategies aimed at defeating Covid-19. Under these changes, people have been introducing certain hygiene regimes, staying at home except for essential outings, observing social distancing and wearing masks.
There is, in my book, nothing controversial in this. Democracy involves an unwritten agreement, part of which has it that citizens can expect their governments to protect them as long as those citizens are willing to fall in line with the reasonable requirements of their governments.
So far, so good. Of course, no system is perfect, and there are those who, brought up on a diet of neoliberal dog-eat-dog dogma, like to rail against any curtailments of their perceived rights while ignoring any social responsibilities they might have, even though, for many of them, the wearing of masks, for instance, would be aesthetically affirming. And there are those who, while believing that complying with such safety requirements is a good idea, believe it is a good idea only for others.
Such attitudes are not helpful. Since it is known that the coronavirus that causes Covid-19 is transmissible in a number of ways, including through human-to-human contact, it is necessary, in order to defeat the pandemic, for as many people as possible to follow the rules set out by responsible governments. But such unity is undermined by people who believe they can be free agents while enjoying the advantages of a rules-based society. And it is undermined by governments when rules are not applied fairly, which usually means, in part, universally.

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Touching lips
According to a story in the Hindustan Times, on Aug. 3, India’s national government banned with immediate effect the use of hookahs in public places, purportedly as part of its strategy for defeating Covid-19. But I cannot help feeling there is more to this ban than its use in the fight against Covid-19.
There has to be. The Hindustan Times reported that, in announcing the ban, the principal health secretary Vikram Dev Dutt had cited four reasons why the use of hookahs increased the transmission of Covid-19, but these reasons don’t stand up to scrutiny. The first reason was said to be that smokers were likely to touch their lips more often [presumably than were nonsmokers]. No evidence was given in the newspaper piece for this statement and, from my further reading, this seems to be an idea put forward in respect of cigarette smokers, which would at least align with common sense, given the way that a lot of cigarette smokers hold their cigarettes. On the other hand, my observations of hookah smokers tell me that they tend not to touch their mouths with their fingers when they place a hookah mouthpiece between their lips. Indeed, an Internet picture I saw of four Palestinian men enjoying shisha in a lounge showed the shisha-pipe mouthpieces being held with hands at least 25 cm from their faces and passing through face masks, which would have made it impossible for the smokers to touch their lips. I would suggest that any division between people who touch their lips with their fingers a lot and those who don’t has to do with factors other than hookah smoking or not.
The second reason given was that smokers were likely already to have lung diseases or reduced lung capacity [compared with that of nonsmokers]. This might be true, if it applies to all smokers, not just hookah smokers. Again, there was no evidence given for this statement, and it wasn’t mentioned that while some people claim that tobacco smoking leads to worse outcomes if a smoker contracts Covid-19, others claim that smoking can protect against contracting the disease. I hasten to add that, to the best of my knowledge, neither of these claims has been corroborated.
The third reason was that smoking hookahs involved sharing mouthpieces. This is simply wrong. It might be that some people share mouthpieces, but others don’t, as was the case with the four Palestinian men described above, who were each using not only separate mouthpieces but separate pipes. Sharing mouthpieces or pipes is not a condition of smoking hookahs.
The fourth reason was that conditions likely to increase oxygen needs or reduce the ability of the body to use oxygen properly would put Covid-19 “patients” at a higher risk of developing complications. This might be true, but it concerns the outcomes of individuals who have caught the disease, not the transmission of Covid-19, which is purportedly what the ban was put in place to reduce. And, in any case, if it is true it applies to all smokers, not just hookah smokers.

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Terrible irony
Indeed, it would apply much wider still. There is a terrible irony in the government’s having raised the issue of “conditions likely to increase oxygen needs or reduce the ability of the body to use oxygen properly.” The Indian national government sits in Delhi, which, according to a Wikipedia entry quoting a World Health Organization survey of 1,650 cities worldwide, has the worst air quality of any major city in the world. “On 25 Nov. 2019, the Supreme Court of India made statements on the pollution in Delhi, saying, “Delhi has become worse than narak (hell),” according to Wikipedia. “Supreme Court Justice Arun Mishra said that it is better to get explosives and kill everyone.” Quite.
Looked at through the lens of the health secretary’s four reasons, it seems laughable to imagine that a ban on smoking hookahs in public places is going to have more than a snowball’s chance in narak of slowing the tide of Covid-19. But that is not to say that such a ban is not useful. It probably is, but the real reason why it is useful is that, along with similar measures applied to other public venues, it helps prevent people congregating for nonessential reasons. Going back to the four Palestinian men, only one seemed as though he might be socially distanced.
It was and is perfectly logical for shisha lounges to be shut during lockdowns that have seen the closing of other public venues, including bars, restaurants and places of entertainment. And a quick check of the internet soon reveals that closures have occurred in many countries, including those where shisha use is traditional.
But, by the same token, it is perfectly logical for shisha bars to reopen after lockdown rules on these sorts of venues are relaxed and once general and specific regimes for keeping customers as safe as possible have been put in place. One London council has asked shisha venue owners to limit the number of customers allowed into their lounges and ensure social distancing; to ensure customers wash their hands before and after smoking; to thoroughly sterilize pipes after use; to use disposable mouthpieces; and to ban the sharing of pipes.
None of these requests is particularly onerous, and while limiting the number of customers might have implications for a business’ viability, this is an issue that all public venues are having to face as part of the trade-off between protecting health and reopening the economy.
What should not happen, however, is temporary and justifiable bans on the opening of shisha lounges be extended unjustifiably in relation to what is happening with other comparable venues, or even turned into permanent bans. And this is happening, or at least being suggested, in some countries led by people with what I would describe as highly focused puritanical attitudes—in countries where political opponents can be made to disappear, but heaven forbid they should be allowed to harm themselves by smoking.
And this sort of unjustifiable ban can be rendered “justifiable” in the eyes of many people by conducting polls. An Arab News Twitter poll of 1,500 people apparently found that 82 percent of people favored maintaining bans on the opening of shisha lounges even after lockdowns were otherwise lifted. But acting on the evidence of such polls is clearly unfair given that shisha smoking is a minority activity that has been given pariah status by authorities around the world but not banned. Such polls are like asking whether the authorities should ban the public playing of bagpipes—another activity defined by hoses and mouthpieces—in England, where I assume 99 percent of people not hearing-impaired would, somewhat selfishly, vote yes to a ban. Polls should not be used to enforce the tyranny of the majority.

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Case study
Faizan Aatif
In August, Tobacco Reporter asked Faizan Aatif, who, with partner Mohammed Sheikh, runs Afzal Shisha UK, about some of the shisha business challenges and responses that had been elicited by the Covid-19 crisis. Aatif, whose business supplies a novel shisha tobacco product to individuals and businesses and was the subject of a recent feature story in Tobacco Reporter, is closely associated with the world of shisha lounges.
Tobacco Reporter: Is it correct to say that shisha bars in the U.K. have been shut since the lockdown closed other venues, such as restaurants and pubs?
Faizan Aatif: Yes, indeed, all shisha lounges in the U.K. were forced to close along with restaurants and pubs in March.
Are these shisha bars now opening with new hygiene rules in place?
Yes, the majority of shisha lounges have now reopened but with reduced capacity and precautions as per government guidelines.
What sorts of rules are being introduced?
Mainly, those to do with social distancing between tables, the wearing of masks by staff, bans on the sharing of pipes, the use of disposable hoses and the introduction of hand-sanitizing stations. Some businesses even check the temperature of patrons prior to allowing entry to the premises.
Are these initiatives consistent across the country, or do they vary venue to venue?
As you would expect, some venues are better than others, but generally they are consistent in following guidelines.
Do you think shisha bars can be viable with these new rules in place?
For the time being, especially after such a prolonged lockdown, people are just thankful to have a venue so they can get out and socialize with friends. Many are nondrinkers, so the shisha lounge is their bar and club. The shisha is pretty secondary! All shisha lounges we deal with have been extremely busy ever since they reopened, so hopefully if there is not a significant second wave of infection and another lockdown, things will return to normal soon.
How has the lockdown affected your shisha business? Have you seen increased sales to individuals?
With lounges being forced to close, we were really worried as our trade sales dropped to zero literally overnight. However, we formed a strategy to focus on small retail packs, and that was very successful and kept us ticking over. A massive proportion of previously lounge-only smokers began purchasing shisha apparatus and shisha tobacco to smoke at home, and we spent a lot of time on social media giving advice to new home smokers to help them improve their sessions and troubleshoot any issues they were experiencing. We also ran some discount promotions and competitions for end customers, and those campaigns proved very successful.
Is there anything else significantly impacting the shisha business in the U.K. right now?
Our biggest problem in the U.K. shisha industry is the number of illegal black market “brands” emerging on the market, enticing lounges and retail customers with cheap, tax-free pricing. Many of these products are entirely unregulated and mixed up in underground factories, so there is a very real increased public health risk. We need greater policing of our segment of the tobacco industry by the authorities as it’s hitting the few official U.K. importers such as ourselves very hard. If the legitimate brands decide it’s no longer in their interests to pursue the U.K. as a viable market, then the entire industry will be driven underground and will be in the hands of criminals. —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.

October 1, 2020
The Women of Science
BAT’s women scientists share their experiences working for one of the world’s leading tobacco companies.
TR Staff Report
Diversity and inclusion are hot topics and rightfully so. The gaps in opportunity between different genders, ethnicities and ages, among other identifying factors, have become more readily noticeable as reporting has grown and many companies work hard to make progress around these issues.
British American Tobacco (BAT) has always championed diversity, and the company’s new ethos and diversity agenda reflects this ongoing commitment. With over 50,000 employees around the world, having diverse teams, cultures and skill sets are crucial to delivering success globally. The company is accelerating plans to create a more inclusive culture and has set some ambitions that include diversity of experience as well as having a range of nationalities across its leadership teams, and its gender ambitions remain a priority across the whole organization.
Launched earlier this year, the new ethos is about being bold, fast, empowered, responsible and diverse to create a future-fit culture. It was developed with significant input from employees and designed to drive the company’s vision to “build a better tomorrow” by reducing the health impact of its business through offering a greater choice of enjoyable products for its consumers.
To put this ethos into action, BAT introduced some new initiatives, such as Parents@BAT, which offers a range of benefits to support parents around the world, alongside its well-established programs such as Women in Leadership and B United, the firm’s self-governed global community of lesbian, gay, bisexual and transgender (LGBT+) employees and their allies.
“Diversity is a key part of our ethos,” said David O’Reilly, director of scientific research at BAT. “We have initiated a range of training and development programs to support our teams, including women in leadership, a 30 percent mentoring club, Parents@BAT, how to guard against unconscious bias as well as career break reintegration.”

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Recently, BAT published a series of interviews with some of their female scientists as part of the U.K.’s national Women in STEM campaign as well as a video as part of their own Women in Science campaign.
“We launched our Women in STEM (science, technology, engineering and mathematics) initiative in July 2019,” according to BAT. “Using external partnerships and internal learning and development platforms, the initiative aims to attract, develop and retain more women across our research and development, operations and information and digital technology functions. In the U.K., we have joined WISE, an organization that enables people in business, industry and education to increase the participation, contribution and success of women in STEM roles by organizing knowledge-sharing and networking events, training and webinars.”
BAT’s “Celebrating Our Women in Science” video was published to celebrate International Day of Women and Girls in Science, focusing on the achievements of the company’s female scientists and their work. Tobacco Reporter asked some of these scientists about diversity and inclusion and what it’s like to work in their fields.

Linsey Haswell
Tobacco Reporter: What drew you to science, and why did you choose to work in the tobacco industry specifically?
Linsey Haswell, clinical research scientist: I’ve been interested in science since I was a child. I remember going to visit natural history museums with my mum when I was little and being fascinated by the exhibits, and my dad reminded [me] recently that once I started to study science in secondary school, I had a periodic table pinned up on my wall. So I had a real interest in science before I realized you could make a career out of it. Until I saw a job advertised by BAT, I hadn’t thought of the tobacco industry as a career path. Then I started to read about the work and the science that BAT did, and when I went to the job interview, I really liked the facilities at the R&D hub in Southampton and how passionate and enthusiastic the people were about their work. I enjoy the variety my job offers and the fact that two days are rarely the same. I have spent 15 years in the preclinical team in the lab growing cells, but I equally enjoy engaging with people and communicating the science and work we do in R&D.
Emma Cheung, biological platforms scientist: I have always enjoyed science, and following chatting to my A-level biology teacher, I decided to apply for pharmacology courses at university. As part of my undergraduate degree, I undertook a year in industry and came to work at BAT, Southampton. I really enjoyed my year, the science that BAT was doing and the focus on in vitro work. Following my graduation, I was offered a temporary contract in the team and then a permanent contract, and I’m still here 13 years later.
Summer Hanna, principal science manager in the new sciences department: I didn’t seriously consider a career in science until I was approached by a professor during my first year of university who suggested I consider majoring in chemistry. Once I had the opportunity to take part in undergraduate research, I developed a passion for better understanding the world around me through science. I chose to work in the tobacco industry partially by chance. While I was in graduate school at Wake Forest University, there was a person in my adjoining lab who was working on their Ph.D. part time while working full time at R.J. Reynolds, so I learned a little about the company as a Ph.D. student. We wound up sitting next to each other at graduation, and he mentioned that there were opportunities in their summer internship program as I was still looking for a job. I thought it would be a good way to gain career experience, applied and was offered an internship in analytical research. I was a little apprehensive, but shortly before I started, a professor said to me, “You’ll be pleased at the quality of research that goes on there,” and it turns out he was right. I’ve had the pleasure of working with really fantastic scientists throughout my career, and I’ve always appreciated the welcoming culture within the industry. Colleagues both inside and outside BAT invest in the development of early career scientists, and there are lots of [ways] to get involved externally through technical organizations like CORESTA. It’s a great environment in which to build your professional network.
Anais Hoffmann, analytical scientist: I was interested in science from a young age and was drawn to physics. I remember collecting anything to do with planets and space as a child—and then getting into chemistry. The decision to go into science was made by discovering forensic chemistry, which is a fascinating area. I was drawn to the tobacco industry for its vastness in terms of products and in terms of scientific capabilities. All my experiences were very complementary—I have a background in forensic science and biophysics—and think it was very helpful to me.
Cristelle Antunes Santos, toxicologist: Science was the only option on the table for me. It was a natural choice from a really young age.
Isn’t it an exciting world right now? Nowadays, we have so many innovations in the market that give consumers a greater choice than before. As toxicologists, we conduct risk assessments, generate toxicological limits and take decisions about consumer products.
BAT has exceeded my expectations in both the quality of the science produced and the career opportunities available.

Emma Cheung
Can you tell me more about your work?
Cheung: A main part of my role is to develop and deploy biological testing techniques to assess our products and provide supportive data to our Consumer Product Safety colleagues. We also publish our in vitro data in peer-reviewed journals.
Hoffmann: I’m an analytical scientist, which means I work with techniques aimed to detect and measure different entities (compounds and materials). For me, it’s the sudoku/puzzle area of chemistry. The other aspect of my work is project management. I therefore divide my time between laboratory work and desk-based work. This is also dependent on the projects I am working on.
Santos: We identify possible risks by thorough assessment of our products throughout the development lifecycle. We identify the appropriate scientific package that will allow us to evaluate any potential concerns. It has also been seen through the years how continuous innovation is leading to more options for our consumers to choose from.
How do regulations and the differences in regulations across the globe affect your work?
Hanna: I have spent most of my career focused exclusively on U.S. regulations, but with the opportunity to participate in a multi-year international assignment based in the U.K. R&D Centre, I’ve gotten to think about regulations with a global lens. It has been a great learning experience to better understand how an international organization balances the needs of 180 markets and supports the regulations across all of them. Moving from exclusively a U.S.-based regulatory construct to considering the requirements across so many markets has helped me think differently about how I approach my work and respond to challenges I encounter.
Santos: BAT readily contributes to the debate and offers experience and expertise to governments and regulators to help address key issues. The U.K. is an excellent example of what can happen when toxicologists and regulators discuss science and the impact on the population.

Summer Hanna
How frequently do you collaborate with other scientists in other specialties, either within your company or globally?
Cheung: R&D is very collaborative between people in different departments. We usually work between teams to complete projects. We also have collaborative links to our U.S.-based site and other competitor companies.
Hanna: I’ve had the opportunity to collaborate with other scientists, internally and externally, throughout my career and continue to do so on a near daily basis. BAT’s R&D facilities in the U.K., U.S., Brazil and Germany allow for continuous global collaboration internally. We regularly have projects which depend on an international effort with a cohesive team mindset supported through scientific dialogue. Externally, I’ve participated in Coresta working groups, which are comprised of global teams of scientists, presented at international conferences such as GTNF and been active in the development of international technical standards via ISO/TC 126, which is comprised of 71 different National Standard Bodies.
Hoffmann: In my current role, I have the opportunity to collaborate with different teams within the company, which is really interesting and enjoyable.
Santos: As a toxicologist, we need to bring together a wide variety of expertise, including chemistry, biology, microbiology and many others. As it is impossible to be an expert in every field, we constantly seek support from these specialized professionals and incorporate their expert opinions into our assessments and recommendations. This very close relationship is extremely important to the development of our products.

Anais Hoffmann
What obstacles have you faced in your career? Do you feel like any of these obstacles are the result of being a woman in a traditionally male-dominated field?
Haswell: Becoming a parent is tough, and it is hard to balance home and work life. But the recent Covid situation has shown us all new ways of working and managing our work/life in a flexible environment. I hope some of these solutions will help parents find a better balance.
Cheung: I don’t think any obstacles I have faced have been particular to this industry. I think the attributes that make me a good scientist (quiet, reflective and analytical) can sometimes be seen as career-limiting in a business environment as it can be difficult to push yourself forward. This is something I particularly struggled with in my early career—how to be true to myself but also ‘raise my profile’ in the business.
Santos: I haven’t faced many obstacles throughout my career. As a student in different European countries, I have always observed a very low number of male colleagues compared to females. In Southampton’s R&D, I feel that gender is very equal. In engineering departments, there are more men than women but, for example, in my toxicology department, the team are 60 percent women, and I think many of the senior positions in the department are occupied by women as well. I believe this is a trend that we see in biological and biomedical sciences, but this is definitely not the reality in the STEM space as a whole.

Cristelle Antunes Santos
Have you seen a shift in focus as the industry, and companies as a whole, have put more pressure on themselves to create a more diverse and inclusive workforce?
Haswell: As long as I have worked at R&D, it has sought to be a diverse community, and this makes R&D a really interesting place to work and grow. The better we become at being a more diverse and inclusive workforce, the broader the range of experience and expertise we will have. And it will be great to be able to collaborate and capitalize on that.
Cheung: BAT has launched many campaigns and initiatives to promote diversity and inclusivity. As a global company, there are many opportunities for people to work in different geographical locations, which promotes diversity of culture and thinking.
Hanna: BAT has made diversity and inclusion a key part of the new company ethos. I think that really demonstrates that there’s a commitment from the top down to recognize and value different perspectives and experiences as part of how we operate. Within BAT, there are numerous company-sponsored organizations, such as B United, which supports the LGBTQ+ community, the Women’s Employee Resource Group or our Strength from Diversity team, which all help to support a more inclusive and engaged workforce.
Hoffmann: I’ve seen an increase in focus, in general, to promote diversity and inclusivity in the workforce, either with communications, events or representation either internally or externally. Women in science, for one, is something that has a good coverage. Other communities also start to have more focus and representation, such as the LGBTQ+ community—at BAT we have the B United network, which is great.

Have you seen a change in women working in STEM, and what does that look like?
Haswell: R&D has some great female role models, and their support and encouragement has been invaluable to me during my career.
Cheung: I have seen an increase in communication around supporting return from maternity leave and being given the flexibility to be able to work from home when children are ill rather than taking holidays or unpaid leave, which shows progress in this area. Sharing of parental responsibilities has also gained traction with shared parental leave gaining in popularity to enable the father to take part of the traditional maternity leave.
Hoffmann: I have come from a university (Universite Pierre et Marie Curie in Paris) with a good balance between male and female students across all fields, which from my point of view shows that the interest for science has always been present, no matter the gender. As a result, I don’t think that the increase of women in STEM is a change in women’s career interests but more due to an increase of opportunities given to women in those fields as well as better communication, representation and focus in areas that were historically only represented by men.
Santos: Out of the four STEM fields, I believe science has a better gender balance than the other areas, and this is probably why I have not faced the same challenges that some women in engineering or technology have. Society still has work to do, and we need to make sure everyone has access to equal opportunities.

How is the industry helping to normalize and promote women in STEM?
Cheung: At my level, I don’t think there is a gender bias, however, it’s fair to say there are less women in senior positions than men when you look at big organizations. I think this is the case across many industries, and sometimes women feel the need to park their career progress at a certain point to balance family pressures. BAT supports having a work-life balance, and initiatives like Parents@BAT is a good example of this in action.
Hanna: When I started in the industry, Susan Cameron had just retired the first time as CEO, and starting your career as a young woman in a company with the first female CEO of a major tobacco company was inspiring. For her to return as CEO a second time, having an executive leadership team with significant female representation and then conduct the third woman-to-woman CEO handover in the history of the Fortune 500 fostered an environment in which women in the workplace could see real opportunity for themselves. That sort of legacy becomes part of your company culture, and so while the industry may have been historically male-centric, my experience has been that there’s a real commitment to implementing company practices which promote equity across the board for all women in the workplace, not just those in STEM professions.
Hoffmann: I think there is a spotlight on Women in STEM, with regular articles and coverage of women working in those fields. The rise of the movement combined with internet and social media allows for more networking as well. This allows people to have more access to information about different fields of science that would have not been available prior to the Women in STEM movement.
The representation and diversity within the Women in STEM movement is empowering.
A focus on women having (or having had) successful careers in STEM is also very inspiring as it allows women of all generations to have great role models. I personally had the chance to attend a university named after Marie Curie, located next to the institute where she conducted her research, and she was definitely an inspiration.
I didn’t find it difficult to establish a career in the tobacco industry, which is great. I spent some time on a military base as part of my forensic science background. This was my first scientific workplace experience, and it was quite a male-dominated field. As [a] result, being a civilian, a female and with no prior experience, this was impressive and daunting. I was, however, included quite easily in those fields, mainly due to my scientific knowledge and contribution to the projects I was working on, but [I] also think my personality was a huge factor, and I can appreciate that some obstacles can be encountered by other women.
Santos: BAT has launched and supported many diversity initiatives; Women in STEM is one of many. We are such a multicultural company, and diversity is a key element of our DNA. Specifically on gender, BAT has many initiatives in place in order to promote diversity within the group. I do not think that women in BAT nowadays feel that it is harder to establish a career than in other industries—at least I feel that I have always had the same opportunities as my male colleagues.

Where do you see the biggest gaps in regard to women in STEM? How do you think the industry or companies could help bridge these gaps?
Cheung: If you have responsibilities at home, you can’t always stay late in the office; however, many people catch up in the evenings at home. In the past, I think this hasn’t always been acknowledged because it’s not seen. However, in the post-Covid world, I think this is changing, and there’s traction to the idea that people can work effectively from home and in the office.
Santos: I think everyone and every company still has a lot of work to do. But my experience has been very positive, and from the very first day I joined BAT, I looked at the female leaders and immediately thought, “I can be like them one day.” This is a very important point that sometimes we underestimate—the power of a mentor or role model in our careers. One of the greatest things about working at BAT is the welcoming and friendly work environment. The flexibility, medical leave policies, equal maternity and paternity leave, zero tolerance for discrimination and harassment should all be considered as priority to every company in order to retain good employees.

What are you excited about in the changing industry—either diversity and inclusion related or project/product related?
Cheung: The pace and thinking of the company have really changed since we have branched out into our new category products and brought in different skill sets to match this change in our product portfolio.
Hanna: I am excited to be a part of the industry in a time of such rapid transformation—not just in what our workforce may look like but also how we think about our products and ourselves as an industry. Every day presents new challenges and opportunities.
Hoffmann: I like diversity and collaborative work. I particularly enjoy the different perspectives and points of view it can bring, whether project related, work related or people related.
Santos: I am certain that we will start seeing more innovations, more advanced products, lots of different options, new formats, colors and flavors.

Do you have a favorite project that you’ve worked on?
Haswell: It has been really great to see our science grow and progress over my time at BAT, so one of the achievements I am proud of is the longer-term exposures we have done recently. We believe it’s important to look at the effects of repeated exposure on human lung cells using in vitro methods. It was a complex project with lots of challenges along the way, and being able to take that project from initial concept through the work in the lab and finally seeing the results at the end was something I feel was a great achievement.
Cheung: We have had our first publication on modern oral products accepted in Food and Chemical Toxicology Journal. This is a new category for the company, and it was exciting to develop the method for assessing this product type.
Hoffmann: All projects I have worked on are quite dear to my heart, but generally, the ones I have enjoyed most were the ones where I had to collaborate with multiple teams and multiple stakeholders. They often offer the opportunity to combine laboratory work, fundamental science and project management, which are three different aspects of my work. They are quite different, and translating scientific language to business-relevant language is sometimes a bit challenging, but it is something I enjoy.

What advice would you give to someone considering your field of study?
Haswell: The advice I would give to anyone interested in a career in science is follow your passion and do what you love. For me, being a scientist is a privilege that I don’t take for granted as not everyone gets to do what they love as a career.
Cheung: If you have an interest in industrial science, go for it. There are lots of opportunities in the industry for both scientific and personal development.
Hanna: Science is an incredibly dynamic, exciting space to work in. Some days it can be challenging, and like anything else, there will be days when you want to walk away. However, if you stick with it, the days where things come together make it worth the work.
Hoffmann: My advice would be [to] follow your instinct and believe in yourself. I’m a firm believer that when there’s a will, there’s a way!
Santos: Toxicology is an exciting and very challenging field. If you want to work in an area where you can work on lots of different challenges, you should definitely consider toxicology. We use robust science and our expertise. Toxicology is an area where the demand will not stop growing in the coming years, and academia should take the lead in keeping toxicology programs available to young scientists.
October 1, 2020
Up to the Task

Alliance One International and other reputable leaf merchants are working hard to ensure the children of their contracted farmers are at school rather than in the tobacco field. (Photo: Taco Tuinstra)
The elimination of forced labor in the tobacco supply chain is a top priority for Alliance One International.
By Kenneth Robeson
It’s a problem that can’t be ignored: a lot of the tobacco industry’s leaf is sourced in developing countries with loose labor laws and/or weak enforcement mechanisms. For example, last November U.S. Customs and Border Protection (CBP) issued a “withhold release order” on imports into the U.S. of tobacco from Malawi based on a suspicion that forced labor was used in Malawi to produce the country’s tobacco crop.
The U.S. Tariff Act defines “forced labor” as “All work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily.” The term “forced labor or/and indentured labor” includes forced or indentured child labor.
Forced labor, says Nate Peeters, a spokesman for the Office of Public Affairs for the CBP, is “a global challenge that is not limited to a single industry, product or region. The International Labor Organization (ILO) estimates that forced labor affects nearly 25 million people and generates an estimated $150 billion in profits every year.”
Indeed, forced labor is a global challenge that hurts millions of workers each year. The State Department’s annual Trafficking in Persons Report and the Department of Labor’s International Child Labor and Forced Labor Reports offer specific information about countries and regions in which forced labor occurs. CBP issues withhold release orders based on allegations that forced labor was used to produce goods that are imported or that may be imported into the United States. Since September 2019, CBP investigated allegations of forced labor and issued withhold release orders on such products as hair accessories and garments manufactured in China, bone char produced in Brazil and disposable rubber gloves from Malaysia.
“Forced labor is a human rights violation that is antithetical to American values,” Peeters points out. “Companies that engage in forced labor subject their workers to threats of physical and sexual violence, withholding of wages, restriction of movement and other abuses. Moreover, imported goods made with forced labor undermine the ability of similar American-made products to be sold at a competitive price.”
Top priority
Michiel Reerink
To combat forced labor and other human rights violations in the tobacco business, leading leaf merchants, such as Alliance One International (AOI), are going to great lengths to ensure their supply chains comply with the highest standards.
The elimination of forced labor in global tobacco production “is a top priority for Alliance One International and all of our subsidiaries,” says Michiel Reerink, international corporate affairs director for AOI. “As part of our long-standing commitment, we purchase the vast majority of our tobacco through direct contracts with farmers, which helps ensure the crops we purchase are grown in compliance with our human rights policy, child labor policy and agricultural labor practices [ALP] program.”
Having found that poverty is a leading driver of forced labor globally, he continues, “we work closely with farmers to improve their crop quality and yield, thereby enhancing profitability. This can be one of the best long-term solutions [to creating long-term change]. Visibility into the supply chain is also important when addressing these issues.”
AOI’s team of field technicians works closely with contracted growers to identify the root causes of these issues and collaboratively develop an action plan that allows for true change to be implemented. In some cases, those root causes are systemic and involve cultural or regulatory issues that need to be overcome through long-term interventions and multi-stakeholder groups.
The company records farm-monitoring visits, including labor incidents, in its Sentri traceability platform. “This allows us to follow up with farmers to ensure action plans have been implemented and problems addressed,” Reerink explains. “In addition, it allows us to aggregate the results to focus our education and training and related CSR programs at the country/community level.”
Following this year’s withhold release orders on tobacco from Malawi, AOI has demonstrated to the satisfaction of CBP that there is no forced labor in its Malawi supply chain. In response, CBP lifted its restrictions on AOI imports of Malawi tobacco into the United States. As of June 3, 2020, tobacco imported from Malawi by AOI is again admissible at all U.S. ports of entry.
“From our perspective, labor challenges can be found throughout the global agricultural supply chain,” says Reerink. “Regardless of the country in which we are operating, we work with our contracted grower base to ensure their crops are produced in compliance with our various policies and programs which are aligned with the objective of eliminating forced labor.”
Reerink and his colleagues recognize that improving agricultural practices can take time, “particularly when we are attempting to change long-standing cultural practices, and we work with our contracted growers to implement new measures in ways that provide tangible benefits to them.”
In 2011, AOI introduced its ALP program worldwide. The standards in the program were designed to meet ILO standards. Through the program, the company monitors contracted farmers for compliance with numerous requirements to ensure the rights of farm workers are respected. Its policies and programs create a comprehensive framework that includes, among other restrictions, a prohibition against allowing anyone under the age of 18 to conduct any hazardous tasks, and utilizes a combination of grower education and training, farm monitoring, third-party audits and third-party stakeholder engagement to document and improve compliance.
For example, in Malawi, AOI personnel conduct farmer training and education in group settings as well as one-on-one during frequent farm-monitoring visits. In 2019, representatives visited each contracted farmer an average of 10 times per season. In 2019, they conducted over 139,000 individual farm visits there in a combination of announced, semi-announced and unannounced visits. Adds Reerink, “To help enhance awareness and comprehension of ALP, the local Alliance One Malawi team also created radio broadcasts and drama performances to expand understanding of the risks of child labor into the community.”
Multi-stakeholder involvement plays a key role in improving labor practices as they are often tied to long-standing cultural traditions. For example, once again in Malawi, in 2019 Alliance One Malawi established 179 ALP Village Committees involving farmers, village headmen, teachers and religious leaders trained by company staff. These committees were set up to promote public discussion about ALP, help farmers improve agronomic practices by gathering and sharing information, and encourage community buy-in, accelerating the implementation and acceptance of ALP among farmers and supporting ALP compliance within the community.
The protection of human rights is an agricultural sector issue, Reerink points out, not specific to the tobacco industry. “Some tobacco industry suppliers, including Alliance One, have taken actions with their respective contracted farmer bases that have led to significant improvements in the experiences of farmworkers. However, without the alignment and support of other tobacco suppliers and supply chains for other crops, implementing long-term solutions becomes much more of a challenge.” It will, he feels, take a continued multi-stakeholder effort to truly drive long-term change in labor practices and address some of the systemic challenges facing the agricultural supply chain.

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Clear and direct message
The battle against forced labor is ongoing. CBP has a unique statutory authority to prevent goods made through forced labor from entering the United States. Its Office of Trade investigates allegations of forced labor and if substantiated, directs enforcement actions. CBP issues a withhold release order when it has information that reasonably indicates that goods produced using forced labor may be imported into the United States. These orders instruct CBP personnel at ports of entry to detain shipments that contain goods manufactured in whole or in part with forced labor. Withhold release orders “send a clear and direct message to the trade community that CBP will not tolerate forced labor in U.S. supply chains,” Peeters says.
Industry, Peeters suggests, has “the duty to exercise reasonable care and due diligence to ensure that goods produced with forced labor do not enter their supply chains. Companies are on the frontline and should use all available information about the conditions of forced labor in countries where goods are sourced from to ensure they do not import goods produced with forced labor.”
Maintaining transparency of company supply chains can help companies identify and remediate forced labor found in supply chains. CBP will continue to investigate allegations and pursue enforcement actions where evidence reasonably indicates that goods are manufactured with forced labor imported to the United States.
Getting consumers involved
Consumer awareness, CBP’s Nate Peeters insists, is essential for eliminating forced labor.
“Companies will not sell products that consumers do not buy,” he notes. “CBP urges consumers to ask for more details about where and how their products are made and to use their economic power to tell companies that forced labor is against American values.”
Generating and sustaining consumer awareness “is a challenge,” notes Peeters, “but one that is essential to addressing forced labor in U.S. supply chains.”
CBP has been working with its nongovernment and media partners to communicate forced labor enforcement actions to U.S. consumers through press releases, social media content and TV and radio appearances. It also continues to communicate frequently with the trade community about forced labor concerns and measures that companies can take to ensure that they have clean supply chains.
The agency urges consumers to ask for more details about where and how their products are made. “The great deals that can be found online and in stores may be inexpensive because the products were made through modern slavery,” Peeters points out. “Americans can use their economic power to tell businesses that we will not tolerate forced labor in U.S. supply chains.”
October 1, 2020
Recon Mission

Photos: SWM International
LeafLAB has revolutionized the all-natural hemp and CBD markets with its new, consistent and high-quality hemp-based botanical recon product.
By Timothy S. Donahue
Regulation is coming for the cannabidiol (CBD) industry. The U.S. Food and Drug Administration (FDA) has said that it recognizes the opportunities that cannabis or cannabis-derived compounds may offer and acknowledges the significant interest in these possibilities. However, the FDA is also aware that some companies are marketing products containing cannabis and cannabis-derived compounds in ways that violate the Federal Food, Drug and Cosmetic Act.
To prevent the health and safety of consumers from being placed at risk, the federal agency plans to regulate CBD and other consumable hemp products. It is expected that the FDA will regulate smokable CBD products much in the same way that it regulates traditional tobacco products. That means a product must be consistent and able to be tracked and traced back to the farm level. This could present several challenges for manufacturers, especially when trying to find consistency in quality and quantity of CBD and other variables in cannabis plants for smokable flower products.
LeafLAB, the botanical-based brand of SWM International, a manufacturer of tobacco papers and reconstituted tobacco technologies, can produce reconstituted cannabis substrates to use in the production of smokable CBD products and accessories. Among its many specializations in plant-based botanicals, LeafLAB produces product from all-natural industrial hemp biomass that complies with all regulations for THC content of less than 0.2 percent. The company also produces industrial hemp-based filtration media and papers for cigarette paper and traditional roll-your-own (RYO) applications, not to mention technical support, service and a global reach to its customers.
“We’re taking the knowledge and experience of our leadership in the tobacco industry to help bring a new market to fruition through the addition of new product opportunities for the existing consumer and our direct customer base,” says Alex Boone, director of alternative products for SWM. “Centuries of tobacco experience can now be used for those same components used in tobacco products but now replacing tobacco with all-natural industrial hemp-based raw materials.”

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Distinct parallels
Hemp wraps
LeafLAB’s ties to the tobacco industry play a pivotal role in the development of its smokable hemp products. “We believe the technologies and knowledge that we’ve developed over time in tobacco have a distinct and valued parallel for this new industry. Today, 45 percent of the legal cannabis market is still flower—smokable flower,” says Boone. “Not only have we created hemp-based botanical wraps to support the current combustible flower market, but our cut rag filler products allow our customers another opportunity to offer completely distinct product lines, including tobacco-free alternatives to mainstream cigarette smokers.”
LeafLAB specializes in all-natural products. Boone explains that with today’s lifestyles leaning toward more all-natural products, there are not many options beyond smokable flower. LeafLAB makes hemp products better through a patented process technology that eliminates the necessity for chemical additives, says Boone. Through its botanical process, LeafLAB uses legal cannabis flower to create smokable products efficiently using the same high-quality systems of infrastructure and quality control that is used in the tobacco industry.
“Instead of using hemp from just the stalk as is done in many textile and paper making processes, we are using the raw leaf and flower biomass to produce our product, and that’s the key. It’s naturally aromatic; you can still smell, and to a lesser degree taste, the natural terpene profile of the raw material. Many of our customers have said that our product looks, feels and smells like real hemp. That’s because it is—and all of this without a papery taste. By being neutral, our customers can apply their own terpene and or flavor profile,” Boone says. “The range of tastes from the consumer are infinite. From high terpene profiles to match cannabis-like flavors to heavy fruit and honey-based products for others. However, what they all want is something natural. Now, we can do that in a 100 percent hemp product that is completely tobacco and nicotine free.”

SWM’s Ancram Mill
Advances technologies
Over the last year, LeafLAB has developed advanced processes for making products such as hemp leaf and flower-based blunt wraps and cones and for machine-made CBD cigarillos (hemp pre-rolls). “We have a whole line of RYO hemp wrappers that complement our traditional lines of cigarette paper and RYO papers that can be used on machines to roll these new hemp sticks,” explains Boone. “In addition, we have an all-natural hemp-based filler or cut rag that is 100 percent hemp ‘recon’ in which terpenes, flavors and CBD can be added for mass market stick production where controlling levels of active ingredients is essential for meeting future potential regulatory control.”
SWM invented the reconstituted tobacco market in the mid-1950s, first with binders and wraps for machine-made cigars and later as a filler used by tobacco blenders, not only as a recycling option for expensive virgin material but also as a tool for blend design optimization through higher filling power and to control consistency from one tobacco crop year to the next.
“Much like in tobacco, LeafLAB’s hemp-based filler can use distinct blends to create this same consistency for its customer’s products year after year,” says Boone. “In addition to our cut rag offering previously mentioned, our hemp ‘recon’ is also a great blender with hemp flower allowing for better control. That blending not only enables a manufacturer to be able to blend from one crop to the next but allows for usage of high-speed machinery and control of sensory properties. Our recon substrates allow for excellent retention of flavor and active ingredients.”
LeafLAB uses specific biomass from suppliers or biomass that is directly specified by its customers. Boone explains that LeafLAB gives manufacturers that choice because many customers want that “farm-to-table” experience for their consumers. “We are also very choosy in the consistency of our raw materials. High leaf and flower content and low stem—that is the perfect fit for our process to allow for the best opportunity for paper forming characteristics and taste,” he says. “Regardless, all raw materials go through an extensive laboratory and taste profile testing prior to use in a commercial setting. Additionally, we require our suppliers to provide a full spectrum analysis—pesticides, heavy metals, THC/CBD content, etc.—and farm traceability of each biomass shipment. Our customers can be assured we are setting the appropriate standards necessary for safe and reliable products.”
Runnability
Alex Boone
The ability to have a hemp product work well on current cigarette rolling machine designs is important. Raw hemp flower is typically too sticky and granular to be used in traditional tobacco rolling machines. Boone says that LeafLAB’s hemp sheets help meet the needs necessary for bringing smokable hemp to a mass market.
“Today, legal cannabis runs very slowly on traditional cigarette machines. We estimate somewhere in the 300 sticks per minute range. This is not efficient for high-speed makers. We understand there is new machinery under development that is beginning to make the process easier. These new machines will run up to 1,500 sticks a minute and greatly improve pre-roll stick production,” says Boone. “With our product, you can run as high as 6,000 sticks per minute using our hemp wrapper and hemp cut rag combination and perhaps higher running a 100 percent hemp cut rag. Now, you are able to achieve the speeds of traditional cigarette production. So, suddenly, you can build to scale smokable hemp products that you otherwise could not have. This is a game changer.”
LeafLAB started in 2014 as a botanical innovation platform for SWM that was geared toward using something other than tobacco to bring new products to market. LeafLAB started with reconstituted tea and moved on to reconstituted mint, sage and even cocoa, to name a few. “Today, we have a line of packaging paper using cocoa shells as its base material called Cocoa Paper,” adds Boone. “It’s really rather cool.”
With the tobacco industry in decline, Boone said LeafLAB was a catalyst to start using the knowledge and experience of SWM to invent new products, such as the recon-style tobacco substrates used in heated-tobacco products (HTP). Today, this dedicated form of recon is an essential component of the consumables used. Currently, LeafLAB has 15 patents and over $7 million invested in its product development.
Packaging is also important when developing a brand of products. That packaging can be designed to have a familiar feel to the end user. If someone is using smokable CBD to help stop smoking nicotine cigarettes, for example, having the same style of packaging and consistency of product are major influencers of getting a consumer to commit to a brand, according to Boone. “We’re suggesting that, if you have a product that’s consistent—you can control it—you can get that into the mainstream market,” he says. “You can also make it taste like tobacco if that’s what’s desired.”
Looking ahead, Boone says LeafLAB will continue helping to improve the commercial hemp industry by teaching the supply chain how to conform to its legacy business quality control and proven SWM protocols coupled with the requirements of the non-THC legal cannabis industry. “We’re blending those two to have a very good quality product that follows strict standards and where our customers can trust in our COA [certificate of analysis] that says, ‘This is California regulation compliant’ or ‘this is FDA complaint’ when the time comes. That is the ultimate goal,” Boone explains.
Moving past the unknown regulatory environment, Boone says there is plenty of opportunity for LeafLAB’s products throughout the world. “We’re watching Europe. I would say that the U.S. and Canada are growing quickly—plus 18 percent CAGR [compound annual growth rate]. The next major markets in [the] EU are Luxembourg, Belgium, Spain and Germany,” he says. “South Africa just issued industrial hemp legislation but remains conservative in their approach. Overall, it will take time, but we are bullish on growth of legal smokable hemp products.”
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

October 1, 2020
Thank You!

The 2020 GTNF would have been impossible without the support of these generous sponsors.
TR Staff Report
In a crowded field of tobacco and nicotine events, the Global Tobacco & Nicotine Forum (GTNF) stands out. It is one of the few forums that brings together all stakeholders, including regulators and public health advocates, for a respectful dialogue and constructive exchange of ideas. The GTNF would not be possible without the support of our generous sponsors. We are honored to recognize them below.
Alliance One International is a tobacco leaf supplier that offers customers high-quality leaf they can trust. With more than 145 years of agricultural experience and customers in approximately 90 countries, Alliance One International purchases tobacco from a network of more than 300,000 farmers worldwide to produce products that are sustainable and fully traceable. Visit the company’s website at www.aointl.com.
Altria Group holds diversified positions across the tobacco, alcohol and cannabis industries. Through its wholly owned subsidiaries and strategic investments in other companies, Altria Group seeks to provide category leading choices to adult consumers while returning maximum value to shareholders through dividends and growth. Altria Group’s tobacco companies include Philip Morris USA, U.S. Smokeless Tobacco Co., John Middleton and Nat Sherman. Altria owns an 80 percent interest in Helix Innovations. Altria holds equity investments in Anheuser-Busch InBev, Juul Labs and Cronos Group. Visit the company’s website at www.altria.com.
Based in Richmond, Virginia, USA, Avail is a premium retailer that offers a broad array of products online and in its 97 stores across 12 states. The company delivers on the promise of quality and transparency. Information on Avail products is available through its retail stores and on the web at www.availvapor.com.
BMJ is the world’s No. 1 partner for specialty paper and packaging materials in the cigarette industry. BMJ produces cigarette paper, plugwrap paper, base tipping paper and printed tipping paper with standard weights of 18 grams to 40 grams per square meter. As a printing packaging company, BMJ represents high-quality packaging utilizing both rotogravure and offset. Visit BMJ’s website at www.bmjpaperpack.com.
Boegli-Gravures designs, develops and manufactures stateof- the-art embossing tools and solutions for an exacting worldwide clientele. The company’s combination of artistic vision and engineering excellence has brought it recognition as a world leader in high-precision embossing and as an original equipment manufacturer supplier. The secret of Boegli-Gravures’ success lies in the company’s vision and passion for innovation. Visit www.boegli.ch for more information.
British American Tobacco (BAT) is a leading multicategory consumer goods business. Its purpose is to build “a better tomorrow” by reducing the business’ health impact through offering a greater choice of enjoyable and less risky products. BAT’s ambition is to increasingly transition revenues from cigarettes to noncombustible products over time. BAT employs more than 53,000 people, operates in more than 180 countries and has factories in 43 of those countries. The company’s strategic portfolio comprises its global cigarette brands and a growing range of potentially reduced-risk products. These include vapor, tobacco-heating products, modern oral products, including tobacco-free nicotine pouches, as well as traditional oral products such as snus and moist snuff. In 2019, the BAT Group generated revenue of £25.8 billion ($33.86 million) and profit from operations of more than £9 billion. Visit BAT’s website at www.bat.com.
Broughton Nicotine Services (BNS) is a privately owned global contract research organization (CRO) offering fully integrated end-to-end services to deliver U.S. premarket tobacco product applications, EU medicinal product applications and EU tobacco product directive notifications. Its business culture is to continue to invest in new science and innovations. By partnering with BNS, clients will know they have access to some of the most experienced electronic nicotine-delivery system project managers and scientific professionals in the world combined with regulatory compliant CRO laboratory facilities committed to developing safer nicotine products. Find the company’s website at www.broughton-ns.com.
CNT is the world’s largest supplier of highly purified tobacco-derived nicotine to the pharmaceutical and e-cigarette industries. In addition to offering pure nicotine and derivatives such as Nicotine Polacrilex, CNT supplies pure synthetic S-Nicotine. The processing is done in Switzerland by CNT’s exclusive contract manufacturer, Siegfried, under pharmaceutical current good manufacturing practices. Complimentary to its nicotine platform, CNT is one of the world’s leading suppliers of sustainably produced tobacco leaf. For more information, visit http://nicotineusp.com.
Headquartered in Austria, Delfort is a global leader in tailor-made specialty papers. In addition to thin print paper, release base paper, food packaging paper and electrical applications paper, the company manufactures a complete portfolio of top-quality cigarette paper, plugwrap paper, tipping base paper and printed papers. By utilizing pure and certified raw materials with the most advanced equipment, Delfort ensures that its products meet the most stringent quality requirements. For more information, visit www.delfortgroup.com.
Part of Smoore, Feelm is a high-end atomization technology brand, a world leader in atomization. Focused on cutting-edge atomization technology research, Feelm also specializes in the development and manufacturing of high-quality atomization devices driven by Feelm black ceramic coil with metallic film. As the research engine of the global electronic atomization industry, Feelm delivers premium experience. Ever since the successful development of Feelm black ceramic coil in 2016, Feelm has had a significant impact on the research and manufacturing of closed vapor products, changing the whole competitive landscape. Feelm has won several domestic and international awards, including a Golden Leaf Award in 2018, a China Patent Award and the iF Design Award in 2020. For more information, visit www.feelmtech.com.

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Imperial Brands is a dynamic global business borne out of a strong tobacco heritage. Its core business is built around a tobacco portfolio that offers a comprehensive range of cigarettes, fine-cut and smokeless tobaccos, papers and cigars. As nicotine consumption trends continue to evolve, Imperial has broadened its portfolio to proactively transition adult smokers to next-generation products, potentially harm-reducing innovations that deliver nicotine without tobacco combustion. Visit www.imperialbrandsplc.com.
Japan Tobacco International (JTI) is a leading international tobacco and vapor company with operations in more than 130 countries. It is the global owner of Winston, the world’s No. 2 cigarette brand, and Camel outside the U.S. and has the largest share in sales for both brands. Other global brands include Mevius and LD. JTI is also a major player in the international vapor market with its Logic brand and its tobacco vapor brand Ploom. Headquartered in Geneva, Switzerland, JTI employs more than 44,000 people and was recognized with a Global Top Employer award for the sixth consecutive year. JTI is a member of the Japan Tobacco Group of Companies. For more information, visit www.jti.com.
Juul Labs was founded with the goal of helping to transition the world’s 1 billion adult smokers away from combustible cigarettes. The company believes that vapor products can offer adult smokers an alternative to combustible cigarettes and, in so doing, reduce the harm associated with tobacco. At the same time, Juul Labs also knows that providing an alternative to adult smokers is at risk if it comes at the expense of underage use. The company is committed to helping adult smokers transition away from combustible cigarettes while combating the serious problem of underage use. Visit the company’s website at www.juullabs.com.
Philip Morris International (PMI) is leading a transformation to ultimately replace cigarettes with smoke-free products to the benefit of adults who would otherwise continue to smoke, society, the company and its shareholders. PMI manufactures cigarettes as well as smoke-free products and associated electronic devices and accessories and other nicotine-containing products in markets outside the United States. In addition, PMI ships a version of its IQOS Platform 1 device and its consumables authorized by the U.S. Food and Drug Administration to Altria Group for sale in the U.S. under license. PMI is building a future on a new category of smoke-free products that, while not risk-free, are a much better choice than continuing to smoke. Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, PMI aims to ensure that its smoke-free products meet adult consumer preferences and rigorous regulatory requirements. PMI’s smoke-free IQOS product portfolio includes heat-not-burn and nicotine-containing vapor products. As of June 30, 2020, PMI estimates that approximately 11.2 million adult smokers around the world have already stopped smoking and switched to PMI’s heat-not-burn product, available for sale in 57 markets in key cities or nationwide under the IQOS brand. Visit www.pmi.com and www.pmiscience.com for more information.
Founded in January 2018, Relx is Asia’s leading e-cigarette brand. Relx’s mission is to empower adult smokers through technology, product and science ethically. Relx independently develops its e-cigarette products at its CNASstandard R&D center and continues to make significant investments in R&D, e-liquid testing and new product development to deliver the best possible experience to its adult users. To protect minors from accessing e-cigarette products, Relx developed the guardian program, a companywide initiative that stretches from product development to sales and marketing, leveraging cutting-edge facial recognition technologies, GPS data and cloud technologies. The company has attracted global talent from Uber, Proctor and Gamble, Huawei, Beats and L’Oreal. Visit https://relxnow.com for more information.
Smoore is a global leader in offering vapor technology solutions, including manufacturing vapor devices and vapor components for heat-not-burn products on an original design manufacturer basis with advanced R&D technology, strong manufacturing capacity, wide-spectrum product portfolio and diverse customer base. According to Frost & Sullivan, Smoore was the world’s largest vapor device manufacturer in terms of revenue, accounting for 16.5 percent of the total market in 2019. For more information, visit www.feelmtech.com.
Turning Point Brands continues to grow and evolve to meet changing consumer preferences. Along with a tobacco portfolio that features iconic, historic brands such as Zig-Zag and Stoker’s, the company has expanded into the vapor and tobacco alternative segments with innovative brands such as VaporBeast, VaporFi, Vapor Shark, RipTide and Nu-X. A highly effective sales force and distribution network ensure that consumers, retailers, partners and shareholders benefit from these products. Visit www.turningpointbrands.com for more information.
For more than 100 years, Universal Corp. has been finding innovative solutions to serve its customers and meet their agriproducts needs. The company built a global presence, solidified long-term relationships with customers and suppliers, adapted to changing agricultural practices, embraced state-of-the-art technology and emerged as the recognized industry leader. The company conducts business in more than 30 countries on five continents and employs more than 20,000 permanent and seasonal workers. Visit the company’s website at www.universalcorp.com.

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September 1, 2020
Out of the Bag

Photo: RAI
Regulators are trying to catch up with the rapid growth of nicotine pouches.
By Stefanie Rossel
It’s a niche within a niche, but it’s growing quickly. An analysis published by 360marketupdates values the global market for nicotine pouches at $619.9 million and projects it to reach $12.97 billion by 2026. This translates into a whopping compound annual growth rate of 53.8 percent.
The novel products have been rapidly adopted throughout Scandinavia and central and eastern Europe, according to Research and Markets. Nicotine pouches are the younger and “cleaner” siblings of Swedish snus, a pasteurized oral tobacco that has been around for some 200 years. Both products are discrete; consumers place them between their upper lip and gum where the nicotine and taste are then released. Snus and nicotine pouches are spit-free. After use, the pouch is disposed of in household trash.
Unlike snus, however, nicotine pouches don’t contain tobacco; they are white, pre-portioned bags composed of nicotine applied to a carrier material, such as food-grade fillers. They come in a variety of nicotine strengths and flavors, including mint, coffee and fruit. There are even nicotine-free variants. Like snus, nicotine pouches offer considerable potential for tobacco harm reduction because consumption does not involve combustion.
With 9 percent of men and 11 percent of women using cigarettes in 2018, Sweden has by far the lowest smoking rate in the European Union (EU). This enviable situation is widely attributed to the popularity of snus in that country. Decades of scientific research have confirmed the product’s efficiency as a smoking-cessation tool. A study published in the Harm Reduction Journal in November 2019 called snus “a compelling harm reduction alternative to cigarettes.” Using snus is estimated to be between 90 percent and 95 percent safer than smoking cigarettes, which puts the product on par with e-cigarettes on the continuum of risk scale.
Nevertheless, snus sales have been prohibited throughout the EU since 1992. (When Sweden became part of the EU in 1995, it negotiated an exemption from the ban.) Switzerland, a non-EU member, lifted its ban on snus last year. Following two unsuccessful legal challenges, the EU ban was again endorsed by the European Court of Justice in 2018.
In recent years, international tobacco companies have started including snus in their portfolios either by purchasing existing players or by developing their own products. And then they started developing the nicotine pouch. By now, all leading global tobacco firms are represented in the category, and nicotine pouches have been eating into the share of traditional snus. In the first quarter of 2020, nicotine pouches accounted for 6.7 percent of Sweden’s snus market, up from 3.2 percent in 2019, according to Swedish Match. In Norway, a non-EU member with a snus tradition, pouches today account for 25.8 percent of the snus market, up from 15.3 percent in 2018.

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All present
Competition in the pouch segment has heated up significantly, and manufacturers are increasing production capacity for their “modern oral” products.
It all started with the introduction of Zyn by Swedish Match, the world’s largest producer of snus in Sweden and a significant player in the U.S. market for smokeless products. In the first quarter of 2020, Zyn was sold in 13 countries outside of the U.S. and Scandinavia, including many EU member states, such as Austria, Croatia, Denmark, Germany, the U.K. and the Czech Republic.
Growth of Zyn has been so strong that Swedish Match CEO Lars Dahlgren spoke of a “transformational year” for the company, saying that the product had been the key driver of the company’s U.S. smoke-free sales in 2019. In the first quarter of 2020, Swedish Match sold almost 70 million cans of Zyn in the U.S., up from roughly 18 million cans in the same period a year earlier. Swedish Match also filed a premarket tobacco product application (PMTA) with the U.S. Food and Drug Administration (FDA).
Demand for Zyn has been so strong that Swedish Match announced expansions of its U.S. production facility twice in short succession. Scheduled for completion in 2020, the fourth phase of expansion will increase capacity to more than 200 million cans per year.
Swedish Match’s competitors have not been idle. By acquiring an 80 percent stake in the global business of Burger Soehne, Altria in June 2019 became the owner of the On! nicotine pouch brand. Altria will provide global distribution for On!, which currently is available at retail outlets in the U.S., Canada, Sweden and Japan as well as globally through the company’s online shop. On! comes in seven flavors, including coffee, berry and citrus, and five different nicotine strengths. In May 2020, Altria submitted a PMTA for 35 On! products to the FDA.
British American Tobacco (BAT) is represented in the nicotine pouch market through its Lyft brand, which it sells in the U.K., Sweden and Kenya. Going forward, BAT plans to market all its modern oral products under the name Velo—the brand under which BAT subsidiary Reynolds American Inc. (RAI) has been marketing its nicotine pouch product in the U.S. since June 2019.
To cater to the anticipated increase in demand, BAT in September 2020 built a nicotine pouch factory in Hungary. The investment, estimated at more than HUF7.5 billion ($24.3 million), the investment aims to boost production to more than 1 billion nicotine pouches in 2020, a figure that is expected to triple next year. Initially equipped with one line for the manufacture of nicotine pouches, the factory is supposed to receive a further five production lines by the end of this year. Its output is destined mainly for European markets, including Germany, Austria and the Nordic countries. The Hungarian factory is supposed to become one of BAT’s global hubs for the manufacturing of oral products.
In June last year, Japan Tobacco International (JTI) entered the race with Nordic Spirit, nicotine pouches that were developed in Sweden and sold in Switzerland and Sweden and online. Upon the launch, the company had said it intends to significantly increase distribution across various trade channels in the near term. Nordic Spirit is currently available in four flavors, including mint and bergamot wild berry.
Imperial Brands is present in the modern oral nicotine market with Zone X, Killa, BLCK and Pablo, among other products. With a high nicotine content of 50 mg per gram, Pablo is the “strongest” nicotine pouch in the market. Usually, nicotine content in the novel products vary between 2 mg and 24 mg per gram.

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Product regulation
In the U.S., tobacco-free nicotine pouches are required to carry the warning “This product contains nicotine. Nicotine is an addictive chemical,” and may be sold only to consumers over 21 years of age. Entry barriers are low compared to those for other tobacco products, but the product is subject to FDA regulation all the same. By contrast, the market for nicotine pouches in the EU currently operates in a regulatory vacuum. Containing no tobacco, the products are not covered by the EU Tobacco Product Directive (TPD2) nor do they belong to any other regulated product category. Unlike tobacco products, they may be advertised on television, radio and billboards throughout the common market.
Christofer Fjellner, who served as a member of the European Parliament from 2004 to 2019, expects new regulation to be adopted in all important markets in the coming years. In a report published in April 2020, he writes that Sweden and Norway will likely be the first countries to enact regulations for nicotine pouches—a development that could also influence how other European governments will shape legislation. For the time being, Sweden has decided that nicotine pouches are not a food product thereby indirectly approving the product to be placed on the market.
The country has started defining and categorizing nicotine pouches; its government has tasked a special commissioner with proposing new regulation. Meanwhile, Austria’s chemical authority is referring to the EU’s classification, labeling and packaging regulation, demanding that all nicotine-laced product carry health warning texts and symbols.
The World Health Organization has yet to take up the topic of nicotine pouches, according to Fjellner. He expects to receive an indication of how the European Commission views nicotine pouches in the implementation report for TPD3, scheduled for May 2021.
“How the EU chooses to regulate nicotine pouches is influenced by at least three factors,” he says. “Whether EU member states call on the EU to ban nicotine pouches, due to concern about the use of the product in member states—which was the reason for EU ban on snus—whether there are already specific product regulations or national bans in individual member states that new European legislation may be in conflict with, and the number of users of nicotine pouches, and thus a public opinion critical to a new restrictive legislation or ban.”
The latter, he adds, was one of the reasons e-cigarettes were not banned in the 2014 TPD revision. The way the EU regulated e-cigarettes in 2014, Fjellner says, could be an indicator of how it will likely deal with nicotine pouches, which would indicate a focus on warning texts and the introduction of a maximum nicotine level. For advocates of tobacco harm reduction, such an approach would be preferable over an outright ban.
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.

September 1, 2020
Turning the Tanker

Now would be a good time for the World Health Organization to change direction without abdicating from its tobacco responsibility.
By George Gay
A few lines from a song by the late Warren Zevon have taken up residence in my head of late: “You can dream the American Dream / But you sleep with the lights on / And wake up with a scream.” Whether or not they buy into the idea of the American Dream, a lot of people around the world, I imagine, are feeling that level of fear because of the Covid-19 pandemic. Take me, for instance: I have been waking with a scream brought on by a recurring dream in which, with the world in the grip of a post-Covid-19 pandemic, I am trying to discover whether the U.K. government has managed finally to get its head and technology around the concept of contact tracing. The answer is no.
But it’s not all bad news, I’m told. The government is now able to inform me of the whereabouts of every pack of cigarettes in existence, nationally or internationally. There is even some talk about how it might have been able to game Heisenberg’s uncertainty principle since, by using a track-and-trace system developed at the behest of the World Health Organization (WHO) that works in real time, even during deliveries, it is aware of both the position and momentum of each pack. It is at this point that I wake up screaming.
Why has building a track-and-trace system for cigarette packs apparently been seen as more important and more urgent than developing a globally adaptable, fast-to-implement and efficient contact tracing system for people during times of pandemics? I don’t know, but I can guess at a number of reasons, one of which was playing out across the world as I wrote this piece in June when many of those in authority were demonstrating once again the relative importance they attach to the preservation of people (low) and property (high).
In addition, as far as I can see, the cigarette pack track-and-trace system is in place to ensure that those who choose to smoke and thereby risk their health pay the full price for their cigarettes. The “free” market, which the WHO clearly supports, demands that a proper level of profit and tax revenue should be squeezed out of the products that make people sick and that a proper level of profit should be made in treating that sickness.

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Dismantling the arguments
But whereas it’s easy to see why some businesses dealing in tobacco and health would appreciate what they would see as the benefits of such a system, I struggle to understand why the WHO would find it advantageous. So let me take a guess about what we might be told if the WHO were, with the help of a nosegay, able to bring itself to answer questions from a representative of the tobacco industry. Firstly, though, it is necessary to understand that the WHO believes that the implementation of its track-and-trace system will reduce—it actually uses the word “eliminate,” but that is the stuff of dreams—the sale of illicit cigarettes and therefore smoking. Given this, I imagine it would say the consumption of tobacco causes the deaths of 8 million people a year whereas Covid-19 has so far (see below) caused the deaths of 430,241, so tobacco is by far the bigger threat.
There are a number of problems with this argument. The main one as I see things is that whereas tobacco has been around for a long time and therefore has to be subjected to control measures, there is still time to build robust preventative measures to combat the thousands of potential viruses that are lining up to devastate lives and economies around the world. And in the eyes of all but the most virulent free market supporters, prevention must be preferred to control, so a people contact tracing system should be regarded as being way more urgent than a cigarette pack track-and-trace system.
Another problem with the above argument is that it is based on two figures that are clearly wrong: one being ludicrously rounded, the other being ludicrously precise, even though they are both WHO figures published this year. The 8 million figure was published on May 26 without even the qualification of an “about” while the 430,241 figure was published in respect of the period of the Covid-19 crisis up to June 15.
Does it matter that these figures are wrong? To my mind, yes. It’s a matter of trust. We seem to have reached a situation whereby any information dumped on the unsuspecting public, no matter how distorted, can be justified on the grounds that it is meant to bring about the most advantageous result, seemingly defined as the result best suited to the ideologies of those putting that information out. And once people and organizations start to believe in this way of carrying on, especially as in the case of the WHO, if they refuse to engage with those of the outer dark, they become reckless. For instance, in recent times, the WHO’s annual tobacco-related deaths figure seems to have been playing 1 million unit leapfrog with its pollution-related deaths figure.
But it is not only the hyperinflation of these figures that make them look suspect. Given that many people who die of tobacco-related or pollution-related deaths will die from, say, lung disease, how is it possible to accurately ascribe these deaths to their rightful causes? If a smoker living in a flat adjacent to a city’s main diesel bus parking and servicing depot dies, is her death put down to pollution or to smoking? No prizes for correctly guessing the answer.
The end result of all this will surely be that no thinking person will trust such figures and, by extension, the individuals and organizations that pump them out with the further consequence that various people will be wringing their hands because the person in the street has become fed up with experts. It is necessary to remember that if you publish dodgy information, as it is passed down the line it will become further distorted until the point where it becomes drivel.
Take the 430,241 figure. In a story in my newspaper, the writer or editor, presumably concerned that it was not possible to justify such an exact figure, rendered it as “more than 430,000,” which sidesteps one problem but runs into another. What does “more than” mean here: 430,001, 4.3 million, 4.3 billion?
Meanwhile, a recent note by the British Heart Foundation (BHF), which claimed that “contrary to headlines suggesting that nicotine protects against Covid-19, smokers are more likely [presumably than nonsmokers] to contract the coronavirus.” It makes this claim, even though it quotes a WHO note that says, in part, “There are currently no peer-reviewed studies that have evaluated the risk of SARS-CoV-2 [the virus that causes Covid-19] infection among smokers.”
But not content with this nonsense, the BHF goes on to say, “Even if smoking did have a small protective effect against Covid-19, this would still be hugely outweighed by the well-known harm that smoking causes.” How can this be justified either at a personal or a smoker-population level, especially when no timeframe is mentioned? To make any such claim, you would firstly have to know what is the level of this so-called “small” protective effect, and this is not known. Then, on an individual level, you would need to know a good deal about the smoker’s personal details, including such things as her age and general state of health. And, as time goes by and we learn more about this novel virus and the disease itself, we would probably need to know more. After all, from my reading of some of the latest findings, the unprecedented damage done to the lungs and other organs while Covid-19 is active in the body far outweighs the damage done by smoking over a similar period.
The point is, we don’t know enough about Covid-19 to be handing out anything but the most basic advice about such things as hand washing and social distancing. And if we don’t know, we should say we don’t know. We should not be extolling the efficacy, nor the dangers, of nicotine in the fight against the virus unless we are fairly certain that we are right.

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Wanted: New direction
And, to give it its due, the WHO took a more balanced view than the BHF in this regard. In fact, despite the above, I’m very much in favor of having a health organization with global reach, but the WHO desperately needs to change the direction set by the previous director general. It has to change its focus from addressing those health issues that individuals can tackle on their own and that are far from existential in nature, such as tobacco and nicotine use, to addressing—and here I mean preventing in preference to controlling—those health issues that the person in the street has no or little control over and that could be existential in nature, such as species-jumping viruses.
Given the state of unpreparedness that the world found itself in when the Covid-19 virus started crossing borders, it is simply ridiculous that the WHO has held eight international conferences under the auspices of its Framework Convention on Tobacco Control, including more recently its meetings of the Parties to the Protocol to Eliminate Illicit Trade in Tobacco Products. It takes 40 years or so to die from a smoking-related cause—40 years during which the smoker provides an inordinate amount of revenue to the exchequer and, yes, derives pleasure and, perhaps, solace from her habit. It takes three weeks to die of a Covid-19-related disease, and just the threat of the disease causes economic mayhem.
The good news is that now is an ideal time for the WHO to change direction without abdicating from its tobacco responsibility. Businesses have been and are providing a string of innovative products that can help cigarette smokers switch to these much reduced-risk products, including vapor devices, snus, nicotine pouches and alternative nicotine-delivery devices. The WHO doesn’t have to endorse these products; however, it does need to stop pretending that they are not highly useful products in the fight against smoking—certainly more useful than the sorts of pharmaceutical products that it seems willing to endorse.
But it’s going to be a hard job turning the WHO tanker around. To coincide with World No Tobacco Day 2020 at the end of May, an international group of independent experts with no conflicting links to the tobacco or vapor industries sharply criticized the WHO for its backward-looking approach to innovation and new technology, such as vapor products. A press note, put out under the Iowa Department of Justice’s Office of the Attorney General, made the point that these experts had become exasperated by the WHO’s dogmatic hostility toward new technology and feared the U.N. health agency would squander the opportunity to avoid millions of premature deaths that will be caused by smoking.
The attorney general, Thomas J. Miller, the longest-serving state attorney general in U.S. history, who played a leading role in the 1998 Master Settlement Agreement, claimed the WHO had lost its sense of mission and purpose. “It’s as if the WHO has forgotten what it is there to do—to save lives and reduce disease,” he was quoted as saying. “We can do that by helping and encouraging consumers to switch from cigarettes to lower risk products. This means being honest about the much lower risks and by using smarter regulation to make switching more attractive.”
To my mind, honesty is vital. But it needs to be extended to other institutions—the U.S. Food and Drug Administration and the EU Commission spring to mind—and to governments. It is vital too, to keep in mind that the aim is “to save lives and reduce disease,” though I would like to once again put in a plea here that “reducing disease” should in the first instance focus on prevention and only after failure in that aim to controlling disease. It is necessary to keep banging on about prevention because it is the logic of the free market and of many of the authoritarian and would-be authoritarian regimes around the world that if we had a global health organization that managed through prevention alone to eliminate all diseases in the world, its funding would be cut to zero.
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.

September 1, 2020
Eyes on the Ball

Photo: PMI
Even as cigarette dollar sales increase during the Covid-19 pandemic, IQOS expansion remains Altria’s primary focus.
By Timothy S. Donahue
Covid-19 has slowed the traditional decline of U.S. cigarette sales. With less opportunity to spend on travel and entertainment, consumers have had more money to purchase tobacco products, according to Billy Gifford, CEO of Altria Group. Since the start of pandemic lockdowns in mid-March, traditional cigarette sales have increased over the same period last year, breaking a longstanding trend.
During Altria’s second-quarter earnings call, Gifford said that the cigarette category has proved resilient during the pandemic. Based on year-to-date industry volume performance, the largest U.S. cigarette manufacturer has adjusted its estimated 2020 volume decline rate to a range of 2 percent to 3.5 percent, down from its previous estimate of 4 percent to 6 percent. The company also increased its annual dividend by 2.4 percent, saying it had more clarity on the pandemic’s effects on consumer demand. It is the company’s 51st consecutive annual dividend increase.
“Remember, last year, the cigarette category peaked its decline at 6 percent, then it receded to 5.5 percent in the third, and then down to 4.5 percent in the fourth,” Gifford said. “So a little bit tougher comparisons were also included in that forecast. But it’s a fluid environment and it’s something that we’ll continue to monitor.” Altria’s forecast was lower than its prior outlook, which was withdrawn due to the uncertainties around the pandemic’s economic impact.

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Cigarette sales have seen a series of ebbs and flows through the first half of 2020. When some U.S. state governors began issuing stay-at-home orders in mid-March, combustible cigarette sales volume rose 1.1 percent for the week that ended March 22, according to Nielsen. Those sales were likely generated by consumer stockpiling, according to Gifford. For the four-week period that ended May 16, Nielsen reported only a 0.2 percent decline in sales volume for traditional cigarettes. Comparatively, sales volumes in 2019 fell 8.8 percent over the previous year (2018) in the four weeks to March 23, according to Nielsen data.
Bonnie Herzog
Bonnie Herzog, managing director at Goldman Sachs, stated in an email that the cigarette category is now holding steady. All channel cigarette dollar sales growth was up 3.1 percent for the two weeks ending on July 25. “Higher pricing more than offset a deceleration in cigarette volume, which was down 2 percent during the same time,” she said.
The pandemic is not the only factor driving increases in cigarette sales. Gifford says restrictions on e-cigarette flavors and the Sept. 9 deadline for premarket tobacco product applications (PMTA) to the U.S. Food and Drug Administration (FDA) have come together to create a perfect storm that is driving vapers back to combustible cigarettes.
Gifford told listeners that Marlboro’s second-quarter retail share for the overall cigarette category was 42.8 percent, down six-tenths versus the year-ago period. In April, Altria reported that older smokers who had switched to e-cigarettes were turning back to traditional cigarettes because of negative news coverage and regulatory crackdowns on vaping.
“As you’ll recall, earlier this year we noted an increase in the number of adult smokers aged 50-plus who moved from the e-vapor category back into cigarettes benefiting volumes from Marlboro and the cigarette category,” he said. “This demographic has a greater tendency to purchase discount brands than younger adult smokers, which increased the discount segment share at the start of the year. We believe the effect of this dynamic will have a lingering impact on Marlboro’s year-over-year retail share comparisons through 2020 … when you think about that, it’s a bit early on to tease out the exact impact from both of those, but that’s something that we’ll continue to monitor as we move forward.”

Altria’s headquarters in Richmond, Virginia, USA
Photo: Altria Group
Looking toward the second half of 2020, Altria has high hopes for its IQOS heat-not-burn device. On July 7, the FDA issued exposure modification orders to IQOS. Gifford said he was pleased with the FDA authorization to market IQOS as a modified-risk tobacco product (MRTP) with a reduced-exposure claim. The FDA’s decision includes the device’s holder and charger as well as Marlboro HeatSticks, Marlboro Smooth Menthol HeatSticks and Marlboro Fresh Menthol HeatSticks.
IQOS is the first next-generation product to receive an MRTP. In a statement, the agency concluded that the available scientific evidence demonstrates that IQOS is expected to benefit the health of the population as a whole, taking into account both users of tobacco products and persons who do not currently use tobacco products.
According to the FDA website, a reduced-risk claim authorization would generally allow a company to say a product is less harmful than combustible cigarettes. However, according to the FDA, the current reduced-exposure claim authorization allows the manufacturer to only state that IQOS heats rather than burns tobacco and significantly reduces the production of harmful and potentially harmful chemicals. The decision follows a review of the extensive scientific evidence package Philip Morris International (PMI) submitted to the FDA in December 2016 to support its MRTP applications.
IQOS is produced by PMI and marketed in the U.S. by Philip Morris USA (PM USA), a subsidiary of Altria Group. Gifford said PM USA is making the necessary preparations to communicate the reduced-exposure claim to adult smokers, which includes developing new marketing assets and submitting them to the FDA in advance of being used.
“We’re looking forward to communicating with adult smokers the additional benefits of switching to IQOS. We’re excited to get back on track with our IQOS rollout and our future expansion plans to accelerate adult smoker conversion,” he said. “As many parts of the country began lifting restrictions in June, PM USA reopened the Atlanta and Richmond IQOS boutiques and just last week launched IQOS in its third lead market by opening a boutique in the SouthPark mall in Charlotte.”

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Over the next 18 months, PM USA plans to launch IQOS in four new markets with large adult smoker populations and expand the availability of IQOS devices through retail partnerships, explained Gifford. PM USA also plans to expand its HeatStick distribution to the surrounding geographies in all seven IQOS markets. He said the commercialization approach for IQOS is designed to maximize the organic growth potential of the device by focusing first on the densely populated metro areas and then expanding outward as the user base grows.
“In Charlotte, PM USA launched a more disruptive retail fixture that communicates the benefits of real tobacco, no ash and less odor and expects to begin HeatStick distribution to retail stores in the next few weeks. By the end of August, we expect HeatSticks to be in a total of 700 retail stores across the three lead markets,” he said. “PM USA will continue to leverage its IQOS retail ecosystem, including IQOS mobile, pop-up and kiosk retail formats, which allows for more strategic and agile marketing plans. We’re making several digital enhancements to the IQOS website too.”
The IQOS website now includes virtual tutorials, and a new expert video chat functionality will be available this fall, according to Gifford. These digital enhancements and “the ability to have devices delivered to smokers in lead markets with the proper age verification” will provide smokers with a variety of options to “learn about and access IQOS,” said Gifford, adding that PM USA expects to use its “first-mover advantage” to expand IQOS responsibly.
“Our commercialization strategy is based on the learnings from our IQOS lead markets and PMI’s international results paired with our desire to continue avoiding use by unintended audiences. We believe that a sustained focus on the consumer journey from awareness to conversion is the key to achieving our vision,” Gifford said. “Word of mouth among IQOS users and their fellow adult smokers has been a critical factor to the global success of IQOS.”

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

September 1, 2020