Category: Print Edition

  • No smoker left behind

    No smoker left behind


    Working on a shoestring, the New Nicotine Alliance is encouraging smokers to switch to less risky products—while desperately trying to prevent others from botching the opportunity.
    By George Gay
    I know it’s not the done thing to mix editorial and commercial activities, but I want to start this piece with an appeal for money—though not on my own behalf for once. If you have some cash to spare, perhaps you’d like to donate it to charity—to the New Nicotine Alliance (UK).
    Given that tobacco smoking is such a breathtakingly serious cause of disease and death, there could be few more-deserving causes than one devoted, as the New Nicotine Alliance (NNA) is, to encouraging combustible cigarette smokers to switch to less-risky products. And yet I happen to know that the NNA is financially impoverished. It is trying to communicate what must be one of the most important public health messages of all without having a budget to do so. How ridiculous is it that an organization with such aims should be starved of cash?
    Even stranger, perhaps, is that despite such an obstacle, it manages to get its message across rather well: For instance, by providing a point of reference for health bodies focused on tobacco harm reduction; by providing a reliable source for journalists wanting to write about less-risky tobacco and nicotine products; by having a presence at any number of nicotine-focused exhibitions and conferences; by presenting evidence to parliamentary groups; and by appearing in court in support of its goals.
    In no small part, this success is down to Sarah Jakes, the organization’s chair. Jakes is quietly assertive, as is often the case with people on top of their subject. But don’t be fooled, she can be feisty, famously telling a U.K. E-cigarette Summit held at London’s Royal Society in 2017 that the people involved in the rowdy e-cigarette revolution were trying to stop others from “fucking it all up.”
    Speaking with Jakes during a meeting in London in May, it wasn’t difficult to understand the cause of such frustration. Contrary to what some people say, Jakes thinks there are lower-risk products available that could help just about every cigarette smoker switch from combustible cigarettes; and yet, the U.K., where the official line generally favors tobacco harm reduction policies, is suffering a hiatus in people switching from smoking to vaping.
    Distortion
    Without knowing some of the background, it is almost impossible to understand why this situation has arisen. Take electronic cigarettes. Not only do they clearly offer a huge health advantage, they also offer a massive financial saving, in part because they are not subject to excise tax. In fact, Jakes told me that she vapes for £0.40 ($0.54) a day whereas her former smoking habit would now cost her about £9.00 a day. Okay, there are several factors that could mean that Jakes, who mixes her own e-liquids, is able to vape for a lower cost than some other people who buy ready-mixed liquids, but even so, this price message should be one that is being shouted from the rooftops. Indeed, the government should seriously consider handing out devices to financially impoverished smokers, given that a decent starter kit can be bought for about £25.
    Jakes believes that the hiatus in switching has partly to do with the early adopters of vaping having already switched, but she says too that it is about distorted, adverse media stories. You can see her point. If a smoker’s primary reason for switching is to reduce risk, and she frequently reads in her newspaper that vaping is going to give her cancer, the incentive is removed. The incentive is removed too by public places bans, and, while there is no regulatory prohibition on vaping in public places in the U.K., vaping is banned in more places than it is allowed, partly because venue owners and transport providers find it easier to lump vaping with smoking than to come up with specific vaping policies. Another disincentive is provided by adverse media stories and public places bans coming together with other factors to heap the grossly unfair stigmatization smokers are subjected to onto vapers as well.
    Part of the reason for the adverse media stories lies with “junk science,” which is something that clearly rankles Jakes. When I suggested that perhaps such “science” was the result of incompetence rather than malicious intent, she politely called my observation “generous.” Apparently, a vast amount of the money that has been made available to researchers is used to look at the “issues” surrounding vaping and not its benefits—and it seems that the amount of funding you receive is in direct relation to the adverse findings you publish. This means researchers are coming to conclusions that are not supported by their results, and those conclusions are exaggerated in press releases that the media is happy to turn into lurid headlines. Many of the stories about vaping simply weren’t true, said Jakes. There was no way to dress them up. They were based on lies.
    Funding
    The NNA, which was formed in 2015 as a U.K. registered charity, relies heavily on the public health knowledge and organizational skills of Professor Gerry Stimson and Paddy Costall, two of the original and current trustees, but it is a consumer-led organization—and one that has found a niche. Jakes, who is also one of the original trustees, told me that the NNA had opened doors almost immediately after it was set up because it had given regulators and public health professionals a point of contact with consumers, and a point of contact that, because of its charitable status, was transparent and subject to oversight. There had been a desire within various organizations, and especially within Public Health England (PHE), to engage with consumers, and the NNA provided a path that they could comfortably tread, in part because the NNA did not take funding from any industry.
    As is mentioned above, the downside of this is that the NNA is financially impoverished. Last year, about half its funding came from a contract to advise on PHE-funded films produced by the National Centre for Smoking Cessation and Training. The rest came from activities such as fundraising at exhibitions, a raffle organized by Vape Jam and individual private donations.
    Funding problems are eased by the Internet, without which the NNA, and, arguably, the vaping industry, probably wouldn’t exist. The Internet—social media and online publications—is the place where vapers carry on their rowdy revolution. It is where vapers communicate; where they learn about new, alternative products; where they learn how to use those products; and where they get across calls for advocacy. Importantly, too, it is where smokers can listen to what is going on and perhaps join the revolution.
    Of course, the Internet is also something of a distorting lens. It contains so much information that it is easy to forget these are still early days for vaping. Jakes reminded me that vaping has been around for only 10 years, though for those involved in advocacy that seems like a lifetime. “The landscape of tobacco harm reduction is still forming,” she said. “What we have at the moment are groups with different objectives and priorities; so we don’t see a unified voice yet. But we are getting there. We all have the same core aim, and that is to reduce the harm caused by smoking.”
    One crack that appears in the harm reduction landscape has to do with the medicalization of cessation, which is a barrier to a lot of smokers who don’t see themselves as ill or patients. And there is a tendency for the cessation debate to focus on whether products are efficacious in getting people to quit smoking, while Jakes points out that it is important to look also at the recreational aspects of vaping and the pleasure it can deliver, along with harm reduction.
    The NNA has one part-time paid administrator, but the rest of its people are volunteers: mainly vapers and people with a range of experience in activities such as stop smoking services. It’s not easy. Volunteers must be willing to give up their time and the activities can be time-consuming. Jakes reckons that she spends about two working days a week on NNA business, something she can do only because she runs her own business.
    It’s not easy, but it seems to work, and the proof of concept can be seen in the fact that there is now an NNA (Australia) and an NNA (Sweden). Because the NNA had become prominent in the U.K. it was decided to allow people to fly the NNA banner in other countries. The offshoots, of which there will probably be more soon, operate autonomously but use the NNA name subject to certain conditions.
    Mainly, the NNA is U.K. focused, but it does get involved in wider issues. It supports organizations in other countries if they ask for help; for instance, after a request from vapers, it submitted a response to a consultation in Iceland that was discussing laws that were like those of the EU’s revised Tobacco Products Directive (TPD). And it gets involved on an international level if, for instance, the World Health Organization (WHO) is, in Jakes words, “up to something.”
    Junk science
    Both the TPD and the WHO could, I imagine, bring out the feisty side of Jakes. I asked her if she had noticed any movement in the WHO position on vaping following the appointment last year of a new head of that organization. On this occasion, she didn’t describe my position as generous; she simply said, “no, and I fully expect them to get worse.” All the evidence the WHO seemed to take notice of was cherry-picked junk science, mainly coming out of California, Jakes said, and it seemed to pay no mind to the section in the Framework Convention on Tobacco Control (FCTC) that provided for governments to take a harm-reduction stance in relation to tobacco. The WHO basically supported bans and seemed unlikely to change its position.
    Meanwhile, the TPD is particularly unpopular because it brought in a raft of arbitrary e-cigarette restrictions that were not based on evidence, that were not the subject of any impact assessment, and that, consequently, just made the life of vapers more difficult. The TPD restricts e-liquid tank sizes to 2 mL, refill bottle sizes to 10 mL, and nicotine strengths to 20 mg/mL. All of those are counterproductive. The 2 mL tank size is simply an inconvenience, but, because it is so small, the 10 mL refill bottle, as well as being an inconvenience, a hazard for people with conditions such as arthritis and an obstacle to those wanting to read what is on the label, is wasteful in respect to e-liquids and waste creating in terms of single-use plastics. The 20 mg/mL strength restriction is particularly damaging for heavy smokers who need higher nicotine strengths to get them off smoking initially.
    The TPD is unhelpful, too, because of the advertising restrictions it imposes. In the U.K., these restrictions lead to what would be a laughable situation if it weren’t so serious. Jakes says that while PHE is falling over itself to get the message across that vaping is safer than smoking, those that would disseminate this message for nothing—the vaping product suppliers—are not allowed to do so.
    Keep trying
    I couldn’t resist asking the $6 million question. Did Jakes think that the NNA could prevent others from “fucking up” the rowdy revolution. After all, the list of people involved, I said, took in smokers, vapers, cigarette manufacturers, vapor product suppliers, pharmaceutical companies, scientists, the media, pro-choice advocates, tobacco control people (of all hues), politicians, treasury officials and regulators. Probably not, was Jakes reply, but she vowed to keep trying. All the people listed were interlinked and all had a part to play. But as things stood, so much policy, such as that in the TPD, was based on ignorance. The voices of the experts in this field—the consumers—have to be heard. They are the people who know what the unintended consequences of policies would be.
    One additional problem is that there are differences of opinion within these groups, though the pharmaceutical industry takes a generally united line, supporting only nicotine-replacement therapy products. Even within the ranks of consumers, cracks appear. There are smokers who see vaping as a threat to their right to smoke. And there are vapers and vapor product suppliers who see heat-not-burn (HnB) products as a tobacco industry Trojan Horse.
    Jakes takes the view that HnB products should be supported because they add to the harm-reduction avenues that are open to smokers. “I don’t want anybody to be left behind,” she said. “I want there to be an option that is attractive to everyone.”
    While Jakes doesn’t want anybody left behind, she tends not to leave any product behind. She carries an array of reduced-harm products that she can use as the situation demands. And situations tend to be unpredictable for vapers who head overseas. Airline rules, sometimes arbitrarily applied, and laws in other countries can cause problems and it is best to be well prepared. As we were speaking, Jakes was using a Zyn tobacco-free, 6 mg nicotine oral pouch product that had been bought in the U.S. Zyn stands testament to the ignorance that can underpin policy and bureaucracy. Apparently, Zyn, the consumption of which must be six zillion times less risky than smoking, cannot be sold in the U.K. because there is no “route to market for it.” And it is not the only reduced-risk product to have hit this wall, which must have been built by descendants of Josef K’s tormentors.
    I don’t want to go into too much detail about which products are in favor and which are not because, frankly, it feels like a descent into madness. But it is interesting—if worrying—to note that the EU seems to favor products that are the most addictive, such as combustible cigarettes. It doesn’t seem to like electronic cigarettes, for which there is evidence to suggest that addiction is not an issue or is far less of an issue. Vapers tend to reduce their level of vaping, partly as they get more skilled at the habit and partly because of the better performance of newer products, and some change their habit to the point where they no longer use nicotine. Additionally, some vapers who are ex-smokers report that even if they lapse to smoking, they have little trouble going back to vaping exclusively.
    This seems to raise the question as to whether the issue of nonsmokers taking up vaping should be of concern. Well, according to Jakes, it should be of concern only if it leads to harm. “I think you would be burying your head in the sand if you said that no nonsmoker would ever take up vaping,” she said. “However, most people worry that vaping might lead to smoking, but there is no evidence of a gateway effect.”
    And it could be that vaping diverts people who would otherwise smoke to something that is very much safer. “I think we must be careful about attracting never-smokers into vaping because they tend to be young people who probably aren’t old enough to make a decision that could affect them for a considerable period of their lives,” Jakes added. “We need to be responsible about that, but we don’t need to panic about it.”
    That sounds like advice that, in large, friendly letters, could be a guide to the vaping galaxy.
     
     
     
     
     
     
     
     

  • Centennial success

    Centennial success

    Universal, one of the first companies in U.S. history to fend off a hostile takeover attempt, celebrates its 100th anniversary.
    By Timothy S. Donahue
    Few companies survive for 100 years. Less than 800 companies in the U.S. are estimated to have made the century mark. According to USA Today, just 23 private firms in the U.S. have audited financial statements dating back 100 years or longer. This year, Universal, the world’s leading global supplier of leaf tobacco, joins the club of companies to have achieved the milestone.
    The accomplishment says a lot about the company’s vision, strategy and culture, according to George C. Freeman III, who joined Universal in 1997 and has served as its chairman and CEO since 2008. “You have to be strong to stay in business that long. It’s also about people,” he says. “You have to hire and cultivate good employees. Our longevity would not be possible without our employees. They are our most valuable asset and continue to be the reason for our success.”
    It was a different time. When Universal was founded as Universal Leaf Tobacco Company in 1918, the world was preparing for the end of World War I, and a young heavyweight boxer from the U.S. named Jack Dempsey knocked out Carl Morris in 14 seconds. Mississippi became the first state to ratify the 18th Amendment (which declared the prohibition of alcohol) of the U.S. Constitution, and “Tarzan of the Apes” premiered at Broadway Theater in New York City.
    In 1927, Universal was listed on the New York Stock Exchange. By the 1960s, the company had expanded its operations onto four continents and developed economies of scale through the investment in “super factories.” Then, in 1977, Universal faced its greatest challenge to date: defending itself from a hostile takeover attempt waged by Congoleum Corporation.
    According to a 1977 article in The New York Times, Congoleum made a $153 million cash offer (more than $648 million in today’s money) to the directors of Universal. A week later, Universal filed suit to enjoin the takeover. After eight months in court, Congoleum withdrew its offer and agreed not to seek control of Universal. It was one of the first successful defeats of a hostile takeover attempt in American history. Freeman calls it “one of the most significant moments in Universal’s history.”
    The following year, David C. Moore, Universal’s current senior vice president and chief financial officer, joined the company as “green market” bookkeeper for one of its subsidiaries. He has been with Universal for 40 percent of its existence. This year, Moore will retire from the company. He says it’s difficult to recall what the world was like back in 1978, but he remembers a simpler time—when a man’s word was his bond.
    “A handshake constituted a binding agreement,” says Moore. “The business was more seasonal, and the international production of leaf tobacco had not taken on the importance that it commands today. Fortunately or unfortunately, we all traveled the world without the benefit of laptops, tablets, the internet, email or smartphones.”
     

    George Freeman III and David Moore
    Global growth
    What hasn’t changed, and what Moore says attracted him to the tobacco industry in the first place, are all the decent, ethical, hardworking individuals that he has encountered throughout the world. “As my career winds to a close, I would like to thank all of those wonderful folks throughout the tobacco industry, past and present, for what has been a very enjoyable and rewarding experience,” he says.
    By the 1990s, Universal had continued to expand its operations throughout the world. The company was constantly updating its focus, adapting to change and capitalizing on opportunities, according to Moore. It exited tobacco markets in Korea and Thailand, while expanding its operations into Eastern Europe and Tanzania. In the 1990s, the company continued to expand its activities in Africa, Brazil and Turkey and became the world’s leading merchant of Dark Air-Cured tobacco.
    According to Freeman, when he joined senior management in 1997, the company’s biggest issue was that its senior and regional management teams were operating somewhat autonomously. “We needed to start working together and working as a more global organization. I think we have done that and done it well,” he says. “If you look at our company today, I believe you’d characterize it as having strong, local management with strategic global coordination. Our regions complement each other instead of competing with each other. It seems so obvious, but it took a while to convince everyone.”
    Alongside the demise of the U.S. tobacco export markets and the rise of markets in Brazil (for flue-cured) and Africa (for burley), another significant moment in Universal’s recent history occurred when the company began its Mozambique operations. “We had the opportunity to start a market from the ground up,” says Freeman.
    In 2006, Universal opened a new leaf tobacco processing facility in Tete Province and continued to invest heavily in the production of the crop. Following the end of the country’s civil war, Universal began to see great potential in Mozambique—a country that grew to become Africa’s second-largest burley producer, behind only Malawi. “Mozambique has been a great success for our company. In Mozambique, we’ve had the opportunity to develop a compliant product that is highly desired by many of our customers,” says Freeman.

    The next 100 years
    Today’s tobacco environment is complicated. Declining use and a tightening regulatory framework provide significant challenges for Universal to overcome in the next 100 years. Universal will continue to focus on its successful strategy to meet the industry’s rapid changes, according to Freeman. He says that as cigarette volumes come down and regulation increases, manufacturers will increasingly focus on sourcing from the major production areas (such as Brazil and Africa). Universal already has significant operations in those areas and is well-positioned to capitalize on these opportunities.
    “Flue-cured is grown in 71 countries today, and we offer a wide array of services,” says Freeman. “In addition, we offer scale: Volumes are everything. The more volume, the more efficiencies and the more cost reduction for our customers and ourselves. I think we are seeing this happening right now in Brazil.”
    Moving forward, the company will maintain its commitment to remaining the world’s leading tobacco leaf supplier. Freeman says this means continuing to make investments in Universal’s core business and taking advantage of growth opportunities in the tobacco sector. “At the same time, we will look closely at adjacent industries and markets where we can leverage our assets and capabilities to ensure we are positioned to grow,” he says.
    Seeking opportunities to continue to prosper in a mature industry, Universal has been investing in other smaller-scale tobacco-related businesses. In 2013, the company initiated a joint venture with the creation of AmeriNic, which produces liquid nicotine for electronic nicotine-delivery systems. “AmeriNic’s products are manufactured in an FDA [U.S. Food and Drug Administration]-compliant facility in North Carolina, USA, under stringent United States Pharmacopeia standards,” says Freeman.
    Additionally, Universal’s wholly owned subsidiary, Global Laboratory Services, provides testing for crop-protection agents and tobacco constituents in seed, leaf and finished products, including e-liquids and vaporizers. “Analytical services include chemical compound testing in finished tobacco products and mainstream smoke,” says Freeman. “We are continually working with our customers to ensure that we meet their needs for both their traditional and next generation products.”
    As the global tobacco market becomes more challenging, Moore says that for Universal to remain relevant it must maintain its focus on customer service and customer satisfaction. “As we have in done in past, we need to be forever focused on recognizing trends as they occur, adapting to change and capitalizing on opportunities,” he says. “The most challenging issues facing the industry today are finding ways to improve supply chain efficiency, sourcing simplification and promoting sustainable agricultural production.”
    Freeman adds that the company also needs to hire great people—people just like David Moore. “First and foremost, our success is based on our employees and building strong relationships with our customers, our farmers and each other,” says Freeman. “Operate with integrity. Never stop innovating. Always support the communities where you operate.” Moore smiles and says, “Those words exemplify exactly what Universal is all about.”

     

  • Lease on life

    Lease on life


    Even as cigarette sales stagnate, engineers keep busy improving the efficiency, reliability and functionality of tobacco machinery.
    By George Gay
    The sales director of Godioli e Bellanti, Lorenzo Curina, has a challenge for us based on the fact that he doesn’t believe anyone could tell whether a used tobacco machine, after being reconditioned by his company, was used or new.
    Such easygoing enthusiasm seems to be built into Lorenzo’s DNA, so he doesn’t always use the term “reconditioned” machinery. Asked to describe Godioli e Bellanti in a few words, he said, in an emailed reply, that for almost 100 years tobacco machines had been the company’s “daily bread” and that today it was an engineering company specializing in designing, manufacturing and supplying new tobacco machines and complete processing lines, while also “revitalizing” and giving a “new life” to used tobacco machines.
    In fact, Lorenzo laid down his challenge (I’m not sure, but there might be a bottle of wine on offer) in answer to another question—one about whether Godioli e Bellanti was able to obtain the base machines required to fulfill its customers’ requests for reconditioned machinery. Yes, he said, the company had bought many used leaf tobacco processing lines at the time when tobacco factories were closing in Europe, and it still had warehouses full of used tobacco machines. So customers had a wide range of choice. Godioli e Bellanti, he added, tongue-in-cheek, even tried to accommodate those who wanted machines of very particular dimensions, that were hardly used, that performed as well as or better than new machines and that came at a very low price!
    In answer to the same question, Ron Woodthorpe, of Hampshire Tobacco Machinery Services (HTMS), said that his company tried to fulfill its customers’ needs from its own inventory, but that, in any case, it had good sources of supply in both Europe and the U.S., even though some machinery was destroyed, rather than sold, when it was no longer required. One other challenge was that whereas a certain donor machine might be available, the cost of acquiring it would render a rebuild prohibitively expensive.
    Peter Woodthorpe, also of HTMS, said that fulfilling the needs of customers with reconditioned machinery could be a challenge, which was why over the years the company had developed new machines it could build from stock and offer for a price similar to that of a reconditioned unit, given the purchase cost of a donor machine was factored in. Of course, HTMS cannot cover all bases with this option, but one important example of such a new-build replacement concerns the Molins HLP 1-2, in the place of which HTMS builds and offers its own HLP machine, the XL515.
    Auctions
    I was particularly interested in the question of donor equipment after having seen an advertisement for an auction in the U.S. that included tobacco machines. The online auction of goods was being conducted (June 7–14) as I wrote this piece by the Iron Horse Auction Co. of Rockingham, North Carolina, which had been ordered by a bankruptcy court to sell late-model and rebuilt cigarette manufacturing equipment owned by North Carolina Tobacco International.
    Clearly, such auctions would not comprise a big source of tobacco machines, though in this case the quality of some of them would have no doubt proved attractive. In an email exchange, William B. Lilly Jr., auctioneer/realtor at Iron Horse, told me that auctions involving tobacco machinery were quite rare, usually occurring when a company filed for bankruptcy protection. Generally, tobacco machines were either sold by dealers or destroyed to prevent the revelation of trade secrets.
    In fact, William told me that the June auction was only the second or third involving tobacco manufacturing equipment in North Carolina that he was aware of since 2011.
    It was what he referred to as a medium-sized auction, but the unique thing about it, he said, was that it featured what to him were late-model machines, a 2009 Decoulfe rod maker and Hauni Max-S tipping unit, and a 2010 Decoulfe rod maker and Hauni Max-S tipping unit.
    Most of the machines that William has dealt with in the past have been rebuilt several times. “The demand is high for the late-model machines and not above medium for the older rebuilt machines,” he said in an email. “The demand is created through the competitive bidding amongst domestic contract makers and international makers. We give these machines a time and place where they will be sold to the highest bidder. This differs from the traditional sale method where a machine may sit on the market for up to 12 months or longer.”
    The June auction created international interest, perhaps because of the machinery on offer, which also included a Molmac MK-9 PLC rod maker and a Molmac Max-S tipping unit; a Molmac HLP-R packer; an MTS-HLP packer; an AMF packer; wrappers; boxers; tray fillers and a tray unloader. William said he had been contacted by tobacco manufacturers from the European Union, the Middle East, Asia and the U.S.
    I asked whether the tobacco manufacturing machinery buyers tended to be tobacco manufacturers themselves or if they were more likely to be machinery dealers. “It is a mix between manufacturers and dealers,” said William. “The dealers usually get the bidding started by placing wholesale bids early in the auction. Then the tobacco manufacturers will usually jump in on the last few days of the auction when they see the machines selling for wholesale prices and then bid the prices up to retail levels.”
    Finally, I asked whether Iron Horse had to check that the buyers were not involved in the counterfeit-tobacco-product business. “We sell the machines ‘as is, where is’ and it is the buyer’s responsibility to determine the feasibility for their intended use and any permitting required by local, state or federal regulatory agencies,” said William. “The current auction has been ordered by the United States Bankruptcy Court, Middle District of North Carolina, and the Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury is aware of the auction.”
    As-new
    It stands to reason that machinery sold at auction is going be offered “as is,” but “as is” equipment is a business offering that HTMS has steered away from, even though Peter says it often receives enquiries for such machines. “All of our machinery is supplied to an as-new condition, tried and tested with a warranty for one year based on a single shift,” he said in an emailed reply to questions from Tobacco Reporter. “A full spares support service is available and usually a budget for such items is included within a quotation.”
    HTMS, which Peter described as a well-established re-engineering business with more than 50 years’ experience in the tobacco industry, will always recondition a customer’s machinery. “We recently completed a project which included four machines all the same type and format for a high-end customer in the USA,” he said. “A collection of the best donor machines were selected and sent to us in the U.K. for an ‘as new’ ground-up overhaul, with many upgrade features to the customer’s specific requirement.”
    Meanwhile, Ron said that HTMS was seeing a rise in customers wanting to refurbish, upgrade and size-change machinery they owned. In this case, HTMS could update mechanical, electrical and safety systems to improve the efficiency, reliability and functionality of equipment. The company had the ability to give a new lease of life to used machines, improving output by 30–70 percent in respect of some original Molins and Hauni machines.
    Both Godioli e Bellanti and HTMS say that their businesses are about 95 percent tobacco industry focused. In the case of HTMS, which occasionally supplies services to, for instance, the tea manufacturing industry, most of its tobacco business is focused on making and packing equipment, and downstream machinery, including high-speed tax-stamp applicators for packs and cartons, along with a related spare parts service.
    Customer types
    Lorenzo Curina

    Godioli e Bellanti will accommodate both requests for the supply of reconditioned equipment to customers looking for it to provide new-to-them equipment and requests from customers looking to have their own equipment reconditioned. Lorenzo said that most of the customers who were interested in buying reconditioned tobacco machines were “very new” investors in the tobacco sector, and that they were initially attracted to buying reconditioned equipment because of the lower investment such equipment required.
    Although they didn’t want to invest too much initially, they felt that the sector could be profitable, and therefore they wanted a quality processing line. And, Lorenzo added, it was undoubtedly true that during the past 15–20 years Godioli e Bellanti had earned an excellent reputation for reconditioning, rebuilding and refurbishing. “We do not brush the old with a few brushstrokes of paint!” he said. “For us reconditioning means really reconditioning: replacing ball bearings, checking the mechanisms, repairing the valves, testing electrical motors, and evaluating the characteristics and performances of fans.”
    On the other hand, multinational tobacco companies were usually interested in having whole plants relocated, and on such occasions they would take the opportunity to have machines reconditioned. “The old and well-tested organization of our company allows us to offer tobacco multinationals a complete service: from dismantling to shipping, from remounting and reconditioning up to the final start-up and commissioning of the reconditioned machines,” Lorenzo said.
    Asked what the in-demand reconditioned machines were, Lorenzo said that, in fact, most requests concerned complete processing lines, though the company was frequently requested to supply reconditioned “key-machines.” Without trying to exaggerate the importance of Godioli e Bellanti, said Lorenzo, the most widely demanded used and reconditioned machine was the Godioli e Bellanti press. Then came tobacco redriers, conditioning cylinders, and direct conditioning cylinders (DCCs).
    The next question concerned where, geographically, demand for reconditioned equipment was coming from. Easy question, easy reply, said Lorenzo. A big part of the tobacco industry had moved out of Europe and North America; so inquiries and demands for reconditioned tobacco machines tended to come from all countries, except those in Europe and North America.
    Peter, on the other hand, said that the spread of HTMS’ customer base for reconditioned machinery ranged from all parts of North America, through Eastern Europe and the Far East to the depths of the jungles of Papua New Guinea.
    And, in the past few years, its customers included businesses ranging from those of the largest manufacturers to new start-ups. In the case of the former, some of the machinery has comprised makers and packers for the high-speed manufacture of cigarillos.
    And as to the types of machines in demand? Peter said that the range of enquiries was broad: from tobacco cutters, to cigarette makers (MK8/MK9/G4), to hard- and soft-pack packing lines. But, he added, the hard box HLP was the first choice throughout the world.
    It was always thus.
     
     
     
     
     
     

  • The duty of curiosity

    The duty of curiosity

    GTNF—where the tobacco industry goes to think

    By Clive Bates

    In September I will be going to the Global Tobacco & Nicotine Forum (GTNF), which is to be held in my hometown of London and sponsored by the publisher of Tobacco Reporter and Vapor Voice. I’m proud to attend, and I’m looking forward to it. But why should someone who, like me, has spent years fighting Big Tobacco and who has a public health agenda go to a conference that has such a heavy tobacco industry presence? The industry will be there in force, with representation right through the full supply chain: growers, leaf merchants, machinery suppliers, the multinationals, retailers, and beyond to the analysts, consultants and lawyers that form the industry’s commercial ecosystem.

    Surely, with that lineup, this is exactly the event to avoid? And there is plenty of encouragement to avoid it, too. Official discouragement comes from the highest levels. Guidance to the World Health Organization (WHO) tobacco control treaty asserts that: “There is a fundamental and irreconcilable conflict between the tobacco industry’s interests and public health policy interests.” Why get involved if our differences are fundamental and our interests are irreconcilable?

    But is that statement actually right? The lowest smoking rate in the developed world by some distance is in Sweden. According to the European Commission’s 2017 Eurobarometer survey, Sweden’s adult daily smoking rate is now down to 5 percent, compared with a 24 percent average in the European Union overall. Sweden has significantly reduced smoking-related disease rates to show for it. And the cause of this outstanding public health triumph? The primary cause is, unambiguously, is a smokeless tobacco product, snus, marketed by a tobacco company, Swedish Match. So how can the WHO’s principle be universally and permanently valid if it fails a reality test like Sweden?

    But this is only the start. We are now facing the prospect of generalizing this Swedish experience at a far greater scale with new generations of reduced-risk products: vapor devices, heated-tobacco products, smokeless tobacco and novel nicotine products. I am convinced that a major disruption of the tobacco industry is now underway yet still in its formative stages. Take Japan. According to figures produced by Japan Tobacco (JT), cigarette volumes have fallen by an incredible 27 percent in the past two years. This is largely due to the rise of heated-tobacco products, led by Philip Morris International’s (PMI) iQOS, but with British American Tobacco’s (BAT) Glo and JT’s Ploom Tech in hot pursuit.

    Look at the phenomenal rise in the United States of the Juul e-cigarette product, which reached 60 percent e-cigarette dollar market share in convenience stores and 42 percent by volume in only a few months, and it is starting to hit cigarette sales. According to Adam Spielman, the lead tobacco analyst at Citigroup, “the U.S. tobacco market is beginning to be disrupted by Juul.” But as Spielman points out in the same April research note, that fight isn’t over. In fact, it’s hardly started: “Altria and Imperial have launched products that are similar to Juul but sold at a discount.” Bring it on, I say. Imagine another 10 years of innovation and disruption: What will the market look like then?

    But what about the conventional cigarettes? Yes, they are the entrenched problem and why there is so much hostility to the industry. But if you are rigorously pressing for health and welfare outcomes, what really matters is change, and who or what is causing and leading change. As public health advocates, we can choose to stand back and issue condemnations of a situation we don’t like. But if we are serious about health, we should invest our time and energy in changing that situation for the better.

    So, we are entering a fascinating era, a time of major technology disruption and upheaval in the tobacco policy world. Many of us in public health can sense a huge opportunity: a pro-health restructuring of the consumer market for nicotine, leading the market from primarily combustible products to primarily noncombustibles. And without the inhalation of the byproducts of combustion, the risks to the health of consumers fall dramatically.

    So why go to a conference like the GTNF? Because this is where the industry goes to discuss and argue about these seismic shifts in the tobacco landscape. It is where the pros and cons are debated, new technology is discussed and the role of regulation is analyzed. The industry’s top figures reflect on strategy and explain their business reasoning. The GTNF is where the industry goes to think. Here are four reasons why I think it is worth a public health advocate participating in this event.

    First, insights. I am constantly amazed by the conceit of many in the tobacco control world who claim to understand the industry but can somehow do this without ever talking to it. When 123 public health organizations recently called on PMI to “immediately cease the production, marketing and sale of cigarettes,” I was embarrassed by the naivety. Did they seriously not know why that is impossible and why, even if it were possible, it would achieve nothing? If your mission is change rather than position-taking, there is so much to learn. I want to know how they see reduced-risk products, who they take seriously in public health, where they are hurting and why, what’s in the pipeline, what affects their stock prices, what’s happening to the demand and profitability of cigarettes, and so on. It’s all under discussion at the GTNF.

    Second, advocacy. I make no secret of it: I have an agenda. I want the disruption of the tobacco market to proceed at the greatest possible rate and the move to noncombustibles to be as fast and deep as possible. Conferences are an opportunity to make that case and to persuade others and, more humbly, to find out if your own ideas are useful or unworkable. One of the abiding myths in the public health world is that “Big Tobacco” is a thing. It isn’t. The companies compete vigorously with each other, and each company has factions and fiefdoms with rival visions of the future all competing for promotion and preferment. “Big Tobacco” is anything but a monolith under the direction of a single controlling mind. This is where coalitions of the willing can be forged. Public health advocates need to identify and encourage the people pressing for disruption from within, not just dismiss everyone involved as old-style evildoers as if this is somehow self-evident.

    Third, engagement. It is always better to understand or at least listen to the perspective of others. I find contact with industry scientists, marketing and regulatory professionals and executives very worthwhile. It doesn’t mean I agree with or believe everything I hear. The public health side does not have a monopoly on truth and wisdom, and I am quite often surprised by what I hear at these meetings. Rather than bringing up quotes from decades-old industry documents as evidence of deceit or misconduct in the present, we need to listen to what insiders say about change in the industry, taking in the views of competitors, analysts, investors and critics. Businesses do business things for business reasons, and we in public health need to better understand what really makes them tick.

    Fourth, challenge. It also provides a forum to lay out some hard truths about the business practices of the industry. There is little doubt that industry leaders want, with varying degrees of enthusiasm, to modernize and move out of the “merchant of death” business to the extent that they can, given their competitive environment and obligations to shareholders. But that will require a kind of contract with society along these lines: Yes, you can and must modernize the nicotine market, but no, you can’t carry on “flogging fags to kids in Vietnam,” as the U.K.’s Daily Mirror once memorably put it, just because you think no one is looking. Those days are over, and this is a forum to reinforce that message and call out bad practice.

    I know that not all of my current and former colleagues in public health will accept this perspective. That’s their call, but I would like them to understand why many of us now think this is important. Public health is a tough discipline, with the lives of thousands, maybe millions, of other people on the line. So there should be a strong duty of curiosity: an imperative to think the unthinkable, to shake out our own long-held beliefs and not to let the threadbare cliches of tobacco control orthodoxy stand in the way of progress. The GTNF is a good forum to put that curiosity to the test and to feel the pulse of an industry undergoing a major disruption—a disruption that happens to be hugely positive for public health but challenges us to rethink society’s love-hate relationship with nicotine.

    The GTNF will be held Sept. 11–14, 2018, in London.

    Clive Bates is the director of Counterfactual Consulting and the former director of Action on Smoking and Health (U.K.).
  • Back in business

    Back in business

    Zimbabwe’s crop volume has recovered from land reform, but plenty of challenges remain.

    By Taco Tuinstra

    Plenty of ink has flowed describing the economic significance of tobacco. The direct and indirect employment created, the hard currency earned, the tax revenues generated—the figures never fail to astonish. Yet even the most impressive statistics and detailed spreadsheets don’t drive home the point in the way that a field trip does. If you want to see the multiplier effect in action, you should visit one of the tobacco sales floors in Harare, Zimbabwe.

    During the selling season, the areas surrounding these facilities turn into makeshift villages, occupied by farm families, vendors and creditors hoping to cash in on the farmers’ earnings. From shacks made of scrap wood, carton and tarpaulin, traders peddle wheelbarrows, hessian sheets and fertilizer, among other farming necessities.

    But the offerings aren’t limited to agricultural goods. Mannequins draped in various garments sit next to portable solar panels, which in turn are flanked by stereo systems. Farmers can buy computer memory cards, get their hair cut or charge their phones at a diesel generator. For the libidinous, there is female company available, according to a long-time Harare resident with no ties to the tobacco industry.

    The hive of activity surrounding the tobacco floors hints at the central role that the crop continues to occupy in Zimbabwe. Roughly 100,000 farmers—most of them small-scale producers—grew 200 million kg of tobacco here this season. More than 90 percent of the crop is exported, earning the country much-needed foreign currency. In 2017, tobacco generated $600 million for Zimbabwe. Encouraged by near-perfect weather conditions this growing season, the trade hopes to top that figure in 2018.

    But the bustle also reflects the massive change that has taken place in Zimbabwe’s tobacco industry. Until the late 1990s, the business was dominated by large-scale farming. During those times, a handful of farmers may have sat around in the auction cafeteria, discussing the latest rugby match while awaiting the sales of their leaf. Auctioneers would chant their songs and leaf buyers would shout their preferred prices, but compared with the spectacle surrounding the sales floors today, the auctions were a sea of tranquility. The same 200 million kg was produced by only a few thousand growers back then, creating an entirely different dynamic.

    Land reform

    Zimbabwe’s tobacco sector used to be the envy of the world, with state-of-the-art agricultural research, first-rate farming methods and a world-class marketing system, but it was controlled by a minority—white descendants of European colonialists. Up until the turn of the century, Zimbabwe’s prime farm lands remained in the hands of a group that accounted for a tiny share of the population.

    At independence from Britain in 1980, plans were made for the transfer of lands from whites to blacks on a willing-seller-willing-buyer basis, but for various reasons, including lack of funds, progress was slow. In the late 1990s, President Robert Mugabe, alarmed by his declining popularity, lost patience and started evicting white farmers from their lands. He encouraged mobs to invade the farms and declared all land property of the state. But instead of benefiting the black landless masses, the best farms ended up in the hands of generals, politicians and police commissioners—people selected for their connections rather than their farming skills.

    The result was as predictable as it was devastating. Many previously productive farms turned into grasslands, affecting not only tobacco but also food crops and livestock. Once a major exporter of food, Zimbabwe became reliant on imports to feed its population—but without generating the foreign currency required to pay for them. By 2008, Zimbabwe’s tobacco crop had plunged to 49 million kg, causing exporters to lament that the former tobacco powerhouse had become an “opportunity market.” At its peak, in 2000, Zimbabwe produced 237 million kg, making it one of the world’s largest tobacco exporters.

    John Robertson

    Unable to balance its budgets, the government started printing money, spawning the worst case of hyperinflation in modern history. At one point, it was cheaper for a farmer to let his tobacco rot in the barn than to sell it for rapidly depreciating Zimbabwean dollars. In 2009, Zimbabwe abandoned its currency in favor of the U.S. dollar. The last batch of Zimbabwean dollars printed included a z$100 trillion bill—the equivalent of perhaps us$0.40, depending on the time of day.

    The introduction of “real” money brought back a degree of stability, but tobacco growers still struggled. The transition from large-scale to small-scale growing caused many agricultural support services to collapse because the volumes no longer added up. “Whereas a mechanic in town might be happy to service 10 tractors at a single, large farm, the calculation changed when he had to travel to 10 different destinations spread throughout the countryside,” says John Robertson, an economist in Harare. Fertilizer companies accustomed to selling by the truckload suddenly were dealing with customers buying one wheelbarrow load each.

    The rise of contracting

    Knowing they could be evicted at a moment’s notice, the old-style commercial farmers who remained on their lands were reluctant to invest. The new farmers who wanted to grow tobacco, meanwhile, were unable to obtain funds. They had been resettled without receiving land titles, which meant that they could not use their land as collateral to secure bank loans.

    Concerned about their supplies, leaf merchants started contracting directly with tobacco farmers in the same way they had been doing in Brazil, another market characterized by small farms and vast volumes. Under this system, the dealers provide growers with seeds, fertilizers and crop-protection agents, along with agronomic advice. The cost of the inputs is deducted from the sales price after the tobacco has been grown. Driven by continued uncertainty about land tenure and customers’ increasing insistence on traceability, contracting spread rapidly in Zimbabwe. Today, 83 percent of the country’s tobacco is grown under such arrangements.

    The direct involvement of leaf merchants, together with the enthusiasm of many new farmers, helped volumes recover. In 2014, the crop surpassed 200 million kg for the first time in more than a decade. Quality is up, too, although today’s Zimbabwean tobacco is very different from that grown at the turn of the century—a development that reflects changes not only in the grower base but also in customer demand.

    “Quality” refers to the styles of tobacco in demand as well as the smoking quality, explains David Taylor, regional leaf production director for Mashonaland Tobacco Company (MTC), a subsidiary of Alliance One International. In the 1990s, the local market was dominated by European customers; today, most Zimbabwean tobacco goes to Asia. With cigarette consumption rapidly declining in Western markets, China now accounts for half of Zimbabwe’s crop by volume and more than half by value, according to Taylor. Contrary to the European buyers, who tend to prefer a riper, thinner style, the Chinese prefer a cleaner, “bodied” style of leaf, he says.

    Farmer and buyer representatives agree that the new farmers have performed remarkably well, considering the challenges. The gap in quality between their leaf and that produced by commercial farmers is rapidly closing, according to industry experts. “From field-handling, reaping, curing, packaging—there has been a vast improvement over time,” says Rodney Ambrose, CEO of the Zimbabwe Tobacco Association (ZTA), a growers’ organization. According to Alexander Mackay, managing director of Premium Leaf Zimbabwe, some small-scale farmers are now producing better quality than even their larger counterparts. “It’s a feather in their cap,” he says.

    Some believe there is room for improvement in grading, however, pointing out that individual farmer volumes are often too small to create consistent grades in a bale. Maintaining and improving standards will require continuous education, according to Taylor, because the grower base is constantly evolving. Attracted by the comparatively high prices for tobacco, new and inexperienced farmers enter the field every season.

    Planting trees

    In addition to good agronomical practices, merchants increasingly stress the importance of sustainable production in their training programs, particularly from an environmental perspective. Land reform has contributed to a rapid depreciation of woodland in Zimbabwe. Every year, the country loses 300,000 hectares of forest, according to the Forestry Commission of Zimbabwe. And even though only an estimated 15 percent of that figure is attributed to tobacco curing—cutting trees for cooking fuel and general land clearing are believed to be the biggest causes of deforestation in Zimbabwe—the industry is keen to reverse the trend. “If we continue at this rate, we will run out of curing wood within five years,” cautions Ambrose.

    Large-scale tobacco farmers use coal to cure their tobacco, but this fuel type is ill-suited for small operations due to price and practical considerations. The country’s primary coal mine, in Hwange, is hundreds of kilometers from its tobacco-growing region, adding to transportation cost. In addition, curing barns that run on coal require fans—and thus power—for proper operation. Electricity, however, is unreliable or unavailable in many rural areas. So, the industry is tackling the problem by increasing the supply of wood while reducing its consumption.

    The Sustainable Afforestation Association (SAA) was created in 2013 by Zimbabwe’s tobacco merchants specifically for this purpose. Funded by a voluntary levy of 1.5 percent on leaf dealers’ purchases, the association aims to create sustainable wood sources, conserve indigenous forests and research alternative fuels. Because native trees, such as msasa, can take up to 100 years to mature, the SAA has been planting eucalyptus in Zimbabwe. Originally from Australia, this tree genus can be harvested after a mere seven years.

    Rather than simply handing tree seeds to tobacco growers—which hasn’t worked well in the past—the SAA partners with farmers to set up commercial plantations. After each harvest, the association gets 80 percent of the trees, which it sells to tobacco growers, and the farmer gets 20 percent, which he can use as he likes. At the end of the contract, the farmer owns the plantation.

    Andrew Mills, operations director of the SAA, estimates that to cure a tobacco crop of 200 million kg, the industry requires 12,000–13,000 hectares of trees. The SAA plants approximately 4,000 hectares per year—14,500 hectares to date—which means the program is part of the solution and other sources are needed. As additional support to SAA’s program, tobacco merchants operate their own tree-planting schemes. Also, in 2015, the government introduced a levy on growers’ sales to fund additional reforestation initiatives. It has collected $20 million to date, but due to dispute over who should manage the money—the Tobacco Marketing and Industry Board (TIMB) or the Forestry Commission—not a single tree has been planted from this fund yet.

    Photos: Taco Tuinstra

    On the demand side, stakeholders are trying to reduce consumption with more efficient furnaces and alternative fuels. The latter has proved challenging, according to Mills. “The SAA looked at biogas but couldn’t make it work,” he says. “Ethanol cures well but isn’t viable because the process uses too much of it.” Mills sees potential in briquettes made from forestry byproducts. “The forestry industry generates lots of waste that can be used for this purpose,” he says.

    The industry’s concern about sustainability extends beyond environmental issues. Earlier this year, Human Rights Watch published a report detailing instances of child labor on Zimbabwean tobacco farms. But Isheunesu Moyo, public relations communications manager at the TIMB, says the report does not necessarily reflect reality. “They interviewed 125 out of 100,000 growers,” he says. “Of course, every instance of child labor is one too many. But how representative are the findings?”

    The shift from large-scale to small-scale farming has dramatically changed the tobacco workforce. Whereas the old-style commercial farmers employed hundreds of workers, the resettled farmers often rely on family members to work the land.

    The tobacco merchants insist they have zero tolerance for child labor. Their contracts include strict clauses against the practice. For example, MTC visits its growers every two weeks to train them on the best agronomy and labor practices (ALP). Any labor incidents are logged and immediately followed up upon by the company’s ALP team, which has been employed exclusively to train farmers on labor-related issues, according to Taylor. A farmer violating the specified agricultural labor practices risks losing his or her contract with MTC.

    Of course, growers operating on their own, without contracts, face less scrutiny. “That’s where the system breaks down,” says Taylor. Such lack of traceability has prompted some players to abandon the auctions altogether Others, however, see the facilities as a useful benchmark for the contracts. Currently the average price on the first day of auction sales serves as the floor price for contracts.

    While contracting presents many benefits to farmers—a guaranteed market, agronomic support and access to inputs—there is also a downside, according to Ambrose. “Growers never know if they are getting the best deal,” he says. “We like buyers to actively compete for our tobacco.” The trend, however, is toward even more contracting, and the decline in tobacco business has already prompted the auction floors to look into supplemental activities to make up for lost revenues. Boka Tobacco Floors, for example, is experimenting with the production of chia, a flowering plant in the mint family.

    Politics

    In the meantime, all eyes are on the country’s presidential elections, scheduled for this summer. The bloodless coup that ended Mugabe’s 38-year reign in November has raised expectations of an economic turnaround, which should also benefit the tobacco industry. While some remain skeptical, describing the situation as “same train, different driver,” many are hopeful that, once he has a proper mandate, President Emerson Mnangagwa will be able to change things for the better.

    “The president is making all the right noises,” says Mackay. Among other things, Mnangagwa has declared Zimbabwe “open for business” and rolled back legislation requiring all firms to be majority  black-owned. To international tobacco companies, his attitude marks a welcome change from that of the previous president, who, toward the end of his tenure, was outright hostile to foreign investors.

    During Tobacco Reporter’s visit in April, Harare’s hotels were full of foreign businessmen testing the waters, including South African farmers, Australian miners and representatives of various agribusinesses. An employee at the famous Meikles hotel reported full occupancy for the first time in nearly a decade. Even some of the evicted white farmers have reportedly returned. In some cases, they are renting back their farms from the new owners who accumulated debt because they did not know how to farm.

    Of course, Zimbabwe’s long-suffering economy will not be fixed by decree. To give farmers greater security of tenure, the government has proposed 99-year land leases, but the banks remain skeptical. “To serve as collateral, an asset must be easily transferable,” explains Robertson. The lease document under discussion, he says, includes 48 pages of conditions. “A similar contract in Europe takes up only a few sheets.”

    A big challenge for the new president will be reforming the civil service, which remains staffed with people appointed by the old regime. But change is evident already. One of the biggest drivers behind last year’s revolution was people’s frustration with corruption. Eager to supplement their meager salaries, Zimbabwean traffic police would set up roadblocks and fine motorists for invented infractions. They would find problems with a vehicle’s headlights, fire extinguisher or spare tire. “It would cost you $10 to $20 in fines every time you traveled to town,” says Robertson. Mnangagwa ordered the police off the roads, and the interference stopped overnight. But the absence of law enforcement also has a flipside: The number of unroadworthy vehicles and unlicensed drivers on Zimbabwe’s streets is said to have increased considerably since November.

    As it awaits the changes, the Zimbabwean tobacco industry can take comfort from the fact that, even as global cigarette consumption declines, its leaf will likely remain in the demand. Only a handful of countries can produce the flavor style tobacco that Zimbabwe is famous for, and industry experts believe that cuts in production will take place first in origins with less popular styles. “There is little unsold stock left at the end of each season, which proves there’s a market for our leaf,” says Ambrose. The number of buyers competing in Zimbabwe, too, seems to bear out that view. The TIMB licensed 23 contractors and 29 buyers this season, including Premium Tobacco, the world’s largest privately held tobacco merchant, which entered the market in 2016 with the acquisition of Tribac. With new customers in northern Africa and the Middle East, Zimbabwean leaf is now exported to 47 countries—up from 30 in 2011, according to ZTA.

    But even with still-healthy demand, the industry knows it will have to be on top of its game to succeed in a shrinking global cigarette market with increasingly demanding customers. Zimbabwe’s cost of production is high compared with that in other origins, but in a global market, the margin for price increases is limited. The use of the U.S. dollar means Zimbabwe cannot devalue its currency and make tobacco earnings go further domestically. In such an environment, the only way to improve farmer income is through higher yields and higher quality. Among other things, that requires the consistent application of good agronomic practices. Earlier this year, Zimbabwe struggled to contain an outbreak of potato virus Y. The key to the future, according to many stakeholders, will be property rights. Proper land tenure would allow farmers to fund their own operations and dealers to focus on their core business. “If that’s done correctly, we could have 250 million kg of tobacco and a huge maize crop,” says Mackay.

    Taco Tuinstra is Tobacco Reporter’s editorial director.Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors.On his watch, Tobacco Reporter has won several awards for editorial excellence.Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.
  • Big impact

    Big impact


    A little goes a long way to improve children’s lives in rural communities where tobacco is grown.
    Contributed
    Joseph, age 7, is one of more than 350 students at Malawi’s Mankhamba Junior Primary School who are struggling with primary education. With only four teachers at the school, Joseph receives little personal attention.
    “If only we completed these [teacher] houses, our children could see hope for better education,” the school committee chairperson told the Eliminating Child Labour in Tobacco Growing (ECLT) Foundation. He explained that the village of Mankhamba cannot recruit enough teachers because they do not have funds for proper accommodations. Currently, teachers walk up to 4 kilometers carrying books and lesson plans.
    When children in farming communities cannot go to school, they are more likely to work in fields with their parents. Mankhamba village is located in the Ntchisi District in Malawi, a main tobacco-growing region in which the ECLT Foundation has worked since 2011 to engage communities to promote education and fight the root causes of child labor.
    What does it take to turn things around for Joseph and other young students in Mankhamba? Working in collaboration with local implementing partner Youth Net and Counseling, the ECLT Foundation was able to act quickly, providing funding and mobilizing the community to renovate and finish three houses for teachers, as well as an office where books and materials can be safely stored away from rain and elements.
    Four bridges are also under construction in partnership with the Tobacco Association of Malawi (TAMA). They will make travel easier for more than 15,000 students, teachers and community members in tobacco-growing areas.
    This investment of just over $14,000 is relatively small, but it is already making a world of difference for children and their families. Since work started at the beginning of 2018, requested enrollment for Mankhamba Junior Primary School has already increased by more than 30 percent, and community members are contributing manpower and materials to build new classrooms with the hope of offering another grade level at the school.
    Through the ECLT Foundation’s larger Clear II project, a water pump has also been strategically installed close to the school and the fields, providing safe water for students and farm workers, as well as helping with irrigation. In addition to improving sanitation at the school, having a well nearby allows girls to attend more classes because they do not have to spend time walking to fetch water.
    A sustainable way forward
    Throughout this project, the ECLT Foundation has collaborated with local partners, which is the key to ensuring that communities are engaged and feel ownership for the improvements. “This is very important, as the sustainability of the projects is somehow guaranteed,” explains the ECLT Foundation’s project manager in Malawi.
    The construction on the teachers’ houses and bridges was set to be finished in May 2018. This “quick impact intervention” is part of the ECLT Foundation’s broader work in Malawi, where the organization has reached more than 190,000 children, farmers and their family members since 2013.
    About the ECLT
    The ECLT is committed to collaborative solutions for children and their families that combat the root causes of child labor in rural communities in which tobacco is grown. It advocates for strong policies, shares best practices to multiply impact and engages rural families so they can benefit from farming while ensuring that their children are healthy, educated, safe from exploitation and encouraged to reach their full potential.
     
    This article was contributed by the ECLT Foundation (www.eclt.org), an independent, Swiss foundation based in Geneva, Switzerland, since 2000.
     

  • Filter forum

    Filter forum


    Participants in Rhodia’s filter colloquium debate the challenge of transition.
    By Stefanie Rossel
    It’s an institution in the tobacco industry: From April 22–25, Rhodia Acetow hosted its 11th Filter Colloquium in Freiburg, Germany. The event, which has taken place every three to four years since 1985, brings together filter experts from all over the world.
    Attended by 170 delegates, this year’s symposium came after a turbulent period for the acetate filter tow manufacturer. In late 2016, the Blackstone Group, a U.S. private equity firm, acquired Rhodia from its holding company Solvay, a Belgium-based supplier of advanced materials and specialty chemicals. In June 2017, Blackstone and Celanese announced plans to combine their filter tow businesses. The deal would have created the world’s largest acetate filter tow company. In March 2018, however, Blackstone and Celanese canceled their project after EU regulators demanded “excessive” divestments to allay antitrust concerns.
    Rhodia CEO Philippe Rosier expects the company to stay with Blackstone for at least five years. With around 1,300 employees and five industrial sites around the globe, the tow manufacturer holds a 21 percent share of the global acetate filter tow market. It is the third-largest player behind Eastman (28 percent) and Celanese (25 percent). Accounting for 35 percent of Rhodia’s businesses, Europe is the largest market for the company, followed by Asia (22 percent), the Commonwealth of Independent States (22 percent), Africa and the Middle East (11 percent) and America (10 percent).
    Fresh start

    Philippe Rosier

    The 2018 Filter Colloquium marked a milestone for Rhodia, according to Rosier. “It is the starting point for the new company after the dust has settled,” he says. “For the first time in 100 years, we are now a standalone company dedicated exclusively to the tobacco industry. We seize this conference as an opportunity to reinforce the partnership with our clients.”
    The takeover by Blackstone, a renowned fund with about $100 billion in assets under management, came at a time of profound change in the tobacco industry. As consumption of conventional cigarettes continues to shrink, next-generation products (NGPs), such as heat-not-burn (HnB) devices are on the rise; many of them use components that are similar in construction to those used in traditional cigarettes and hence also require a filter.
    “We are excited about the future,” says Rosier. “Rhodia filter tow stands for quality and innovation. Our filters are used for product differentiation both in combustible cigarettes and next-generation products. The global acetow market is rather stable. Cigarette filters are expected to decline by 2 percent annually. However, we think that heat-not-burn products can compensate for the reduction in demand and expect growth in specialty products. Our target is to grow in this segment of the market.”
    For Rhodia to meet this goal, the sales volume of HnB consumables needs to be considerably higher than that of conventional smokes. The amount of cellulose acetate tow in a typical HnB filter amounts to only 50 percent to 80 percent of that in traditional cigarette filters, according to the company’s estimates.
    “It needs to be seen how this new category will develop,” says Rosier. “We expect to see several generations and innovations in the area of HnB and NGP in the coming years. We think that HnB is the combination customers are looking for, since these products are probably less hazardous to health than conventional cigarettes but provide smokers with the pleasure of smoking. We expect a large success of the category as the products will improve over time, especially with regard to taste. The filter will play a key role in taste improvement.”
    Dietmar Dahmen invokes Superman.

    Stable market
    Unsurprisingly, innovation and transformation were the overarching themes of the colloquium. Using the story of Superman as an analogy, inspirational speaker and creative consultant Dietmar Dahmen urged the audience to think outside the box when adjusting to transformation. Embracing new technologies, such as artificial intelligence, he insisted, would help players turn “business as usual” into “business as personal.”
    Mustering the courage to try out fresh approaches has indeed become a necessity for companies operating in the tobacco space. Rosier estimated worldwide cigarette sales at 6 trillion sticks in 2017, a decline of 1.3 percent from 2016. Following a drop of 5.6 percent in 2016, the Chinese market grew by 0.8 percent, to 2.5 trillion sticks, in 2017. The rest of the world saw a decline of 2.8 percent in the past year versus 2016, with consumption of 3.5 trillion sticks in 2017. Illicit cigarettes were estimated to represent 9.6 percent of the global market in 2016 and thought to have increased to more than 10 percent in 2017.
    The future doesn’t look promising, either. According to Rhodia estimates, global cigarette sales will fall to 5.783 billion sticks by 2021, a figure that includes licit, illicit and roll-your-own-equivalent sticks. Sales in China and Asia are expected to grow at rates only slightly above average. Higher growth levels are predicted for Africa and the Middle East.
    The global market for filter tow was estimated at 740,000 tons in 2017, a decrease of 0.3 percent from the previous year. China accounted for 290,000 tons (down 0.8 percent). Rhodia anticipates the worldwide filter tow market to grow by 0.4 percent to 757,000 tons by 2021, driven exclusively by China, where sales are forecast to pick up again.
    The rise of heat-not-burn
    One reason for the recent decline in the legal cigarette market are NGPs, which have begun to eat into conventional cigarette sales. This is especially true in Asia, where according to Rhodia, more than 90 percent of all HnB products were sold in 2017, and where this technology is the most widely accepted and fastest-growing NGP category. HnB sales accounted for 1 percent of the rest of the world’s cigarette market, where the new segment is expected to expand relatively quickly. Pricing and regulation will determine the segment’s future performance.
    The novel products have sparked innovation; they have, for instance, significantly affected filter design. According to Robert Whiffen, global quality and best practices manager at Essentra, the filter is critical to an HnB product’s functionality, and its design needs to be considered carefully with regard to its interaction with the full system.
    Humectant concentrations in HnB products are much higher than they are in conventional cigarettes, as the smoke aerosol body is formed of humectants. Consequently, the filter must help the aerosol form from the vapor phase by cooling it. At the same time, the filter needs to survive the heating process. Contrary to conventional cigarettes, the filter in an HnB product represents the largest part of the consumable, sometimes as much as four-fifths. The mono segment accounts for only 20 percent to 30 percent of the entire filter length. “New materials, such as polylactic acids or paper tubes, are required to provide additional functionality,” said Whiffen. “As the tobacco weight content in an HnB product is around 30–40 percent of [that in] a traditional cigarette, low filtration efficiency is needed in order to achieve the tar/nicotine ratio required to hit the yields.”
    In addition, an HnB filter will require structural strength so that the consumable can be inserted into the device. To evaluate their products’ performance, suppliers must rely more on testing and experimenting than they do with traditional products because experience with the new products is limited. HnB consumables are also difficult to handle because their weight center is different from that of cigarettes. Conveying a final product with a length of only 42 mm to the packer at high speed is a challenge, according to Witold Bialas, business development manager at ITM Poland.
    Like conventional smokes, HnB products need tipping paper to connect the tobacco rod with the filter plug. For HnB ventilation, the tipping paper used requires perforation. Beyond mere functionality, tipping allows for brand characterization via printing or hot-foil stamping and can act as a carrier for special substances, such as aromas, explains Tannpapier’s Michael Lindner. The tipping paper is the only part of an HnB product that is in direct contact with the lips of the user, and it’s the first item the consumer sees and touches after opening the pack. Addressing the tactile and haptic senses, it is therefore a perfect communication tool and a valuable means of product differentiation through surface features, such as textured, soft-touch or transparent tipping.
    Vassilis Chalkiopoulos reviews the global cigarette and filter tow markets

    Capsule and slim cigarettes growing
    For the time being, however, the conventional cigarette market dwarfs the NGP sector. Among other features, speakers at the Rhodia event highlighted the composition of a filter, which has to fulfill multiple tasks, including branding, feel and flavor, filtration and harm reduction.
    “Combining the individual segments of the filter and handling this on the maker is demanding,” Bialas said. “One could say that, instead of the cigarette maker, the filter combiner has now become the main machine in the factory.”
    The filter is also the component where taste solutions can be applied, be it to improve the tobacco taste or to create signature flavors. According to Andreas Briel, general manager of Borgwaldt Flavor, filter flavor treatment solutions can even mask the off-taste of charcoal filters to such a degree that the charcoal taste is no longer detectable, facilitating consumer acceptance.
    Capsule-filtered cigarettes and super slims are the fastest-growing segments in the combustibles market. They present both challenges and opportunities. Colin Fairs, head of the European development center at Essentra, explained that important requirements in filter design include correct capsule positioning and defect detection in the maker. In addition, the quality of a capsule-containing product needs to be assured during transportation and on the store shelf.
    Capsule breakages and leaks must be dealt with appropriately. In super-slim rods, capsule size also plays a role. As demand for these products grows, high-volume production increasingly becomes an issue. All these factors also apply to the manufacture of filters with a smaller circumference. Sales of demi-slims and super-slims have been growing at about 8 percent and 1 percent, respectively.
    New developments in filter technology may also create new challenges for filter wrapping materials. Filters equipped with oil-containing flavor capsules require barrier plug wraps. Biodegradability of filters (see sidebar) is another increasingly important theme. Bernhard Eitzinger of Delfortgroup showed that this can be addressed by paper technology.
    Rhodia’s filter colloquium demonstrated that, even in a rapidly changing industry, the filter—small as it may be—still holds considerable potential for further development.

    New tow products
    Rhodia Acetow’s 2018 Filter Colloquium provided an appropriate backdrop for the presentation of two new filter tow products.
    The new generation Rhodia DE-Tow has been designed for accelerated biodegradability in versatile environments. Available starting this month, the product degrades quickly in water—including marine water—soil, home composting and industrial composting, according to Rhodia. The product has been recognized with three third-party biodegradability certificates, and Rhodia expects two more to follow. DE-Tow is made of cellulose acetate and is free of titanium dioxide (TiO2). It contains a food/pharmaceutical-grade biodegradation enhancer. The filter tow performance is equivalent to standard tow, with a slightly different color impression.
    November 2018 will see the launch of Rhodia’s TiO2-free standard tow. A delustering agent used in paints, paper and many other applications, TiO2 has recently been suspected of being a cancer-causing substance. Although TiO2 has no substance-specific toxicity, and is not mutagenic or genotoxic, it is currently under review for classification as being potentially hazardous to health. To date there is no regulation of the substance. Hence, Rhodia’s decision to develop a TiO2-free tow was a proactive move. In the new tow, no other delustering agent is used. The product features a slightly different color impression, but within specifications, while its filter tow performance is equivalent to standard tow, according to Rhodia. —S.R.

  • Being prepared

    Being prepared

    Critical points to managing an FDA inspection
    By Karen Dixon
    A U.S. Food and Drug Administration (FDA) inspection is a careful, critical, official examination of a facility to determine its compliance with certain laws administered by the regulatory agency. Inspections may be used to obtain evidence to support legal action when violations are found. Therefore, given the criticality of the event, you must be prepared.
    Investigator will review your processes and procedures, document and collect information, and observe your operation while its under production. At your firm’s closeout meeting, the inspector will communicate potential violations to key management personnel.
    FDA authority in a tobacco inspection
    Your firms’ inspections will be performed by the tobacco operations staff of the FDA’s Office of Regulatory Affairs. These staff members may also be accompanied by representatives of the agency’s Center for Tobacco Products who are subject matter experts. Most of these individuals will have some type of life science degree, but they could also be engineers, chemists or microbiologists. Their background usually entails investigative techniques, evidence development, law and regulation training, and laboratory methods and techniques.
    This team will be acting on Section 905(g) of the U.S. Federal Food, Drug and Cosmetic Act (FDCA), which directs the FDA to inspect “every establishment registered with [the FDA] … engaged in the manufacture, compounding or processing of a tobacco product.”
    It will also act on Section 704(a)(1) of the FDCA, which states that the FDA has the authority to inspect any factory, warehouse or establishment in which tobacco products are manufactured, processed, packed or held.
    This authority requires the FDA to inspect each establishment at least once in a two-year period that begins the date you registered your facility with the FDA, as well as every two-year period thereafter.
    The importance of inspection preparedness
    The key to inspection preparedness is having a thorough inspection plan. The inspection tour is hosted by a key production manager or quality-control manager, and this person should be well-trained on tour routes, how to respond to the investigator and the rights of the firm during the investigation. As part of the inspection, be prepared to demonstrate written records of how the company is meeting all of the agency’s requirements, such as identification of who holds the key roles during the inspection as well as how the company meets all training requirements for those that play key roles. In addition, having key trained support personnel behind the scenes managing the requests in a “war room” is critical to a successful, well-controlled inspection.
    The opening of an inspection generally begins with your firm providing a brief (15–20 minutes) overview of your facility and production process. Having an accurate and updated presentation ready at all times will help you to have a smooth first interaction with the lead investigator. Some information that should be included in this presentation is: the firm’s contact information, who the most responsible individual on-site is, the firm’s history, a description of the facility and operations, the number of employees, hours of operation and an organization chart of top management officials. You should also include a list of the regulated products manufactured at your site.
    Also, be ready to have standard requests ready and on hand. Some of these requests include:

    • product listings
    • largest volume brand manufactured
    • diagram of facility layout
    • index of your standard operating procedures
    • copy of procedures for sanitation, pest control and water monitoring
    • CV or job description for key members of management team

    Managing the Inspection Process
    As mentioned earlier, you can help set the tone for the inspection by preparing a well-conducted reception and opening meeting. Make sure your receptionist or security team know who to contact when the investigators arrive, ensure the most responsible person at the site is immediately available to greet the investigators and accept the notice of inspection (FDA form 482), and have department managers and quality-control managers lead the meeting. Do not keep the FDA investigator waiting or delay the initiation of the inspection.
    Ensure that your meeting room is an appropriate size to handle the number of attendees and that it is also out of the employee traffic routes. This room must be in a quiet place and have a desk large enough to spread out papers and to take. It should also be equipped for your slideshow presentation.
    A well-trained site visit manager is imperative. This is the one contact that will take the request and direct the questioning to the right subject matter experts. The site visit manager should:

    • understand your company’s policy on taking photographs within the facility
    • understand the guidelines on tax and legal requirements for product removal
    • closely monitor and remain with investigators throughout the inspection
    • assure all questions and requests are fully addressed
    • assure all document requests are fulfilled
    • provide instruction to the inspection team and war room
    • provide expertise on quality issues

    The designated note taker(s) should also have training in the accurate capturing of pertinent data. Having good notes on the inspection will help with responding to any observations, assessing how you can improve upon the handling of future inspections, and the review of the establishment inspection report (EIR). The note taker should understand that it isn’t necessary or even feasible to attempt to record everything that is said. Rather, recording key questions and responses to those questions as well as indicating any concerns the company has about meeting investigator’s expectations are the types of key information to note. Also, if you have more than one investigator, assign a specific note taker to each investigator. This will ensure that all discussions are covered.
    The purpose of the war room is to manage and oversee the logistics of the inspection.
    A leader should be assigned to direct the employees within the room. This room should receive all FDA requests. In addition, all documents going in and out of the FDA room must pass through this room. The requests being fulfilled should be fully reviewed for accuracy to ensure that they completely answer the request from the FDA. A file containing all copies of documents should be created, and copies should be kept in the order in which they were fulfilled, including the time requested and the time submitted.
    A team, including the site visit manager, should accompany the FDA investigators within your facility at all times. This team should know the FDA’s authority over records, photographs, signing of documents and access to employees. Always obtain duplicate samples if the FDA takes samples of your products or labeling, and be sure you are provided form 484 documenting the samples.
    If during the inspection the FDA submits an affidavit to you, remember that you are not required to read or sign it. Do not even listen if the investigators begin to read it and refer the FDA to your legal counsel. Remember this is a serious interaction. Remain calm and exhibit control. Most companies adopt a policy of never signing any documents during an FDA inspection.
    The FDA may provide a daily closeout discussion with you. If during this closeout you determine there was information or data previously provided to them that needs to corrected or clarified, this is the time to correct and provide a clear explanation to the investigator. This is common, as there is a lot of information being reviewed throughout the day.
    While interacting with the FDA, it is important that all employees support the preparation efforts by ensuring that all work areas are orderly and that equipment and instruments are clean and calibrated. All records and logs should be filled out completely, accurately and legibly at the time of performance.
    Employees should be honest and direct. “I don’t know” is usually an acceptable answer if you are asked a question for which you have no responsibility. Refer the question to someone whom is a subject matter expert. Employees should be professional, courteous and cooperative. Employees should be trained to never volunteer information or guess on a response. They shouldn’t provide any misleading information or be confrontational or argumentative.
    After the inspection, which can last many days or sometimes weeks, the lead FDA investigator may provide the site with an FDA 483 form. This is a listing of objectionable conditions that the investigator feels need to be corrected. Post-inspection you should provide a letter to the FDA addressing the 483 observations. It is best to respond within 15 working days (not required) so as to minimize the risk of receiving a 483 warning letter from the FDA. If you do receive a warning letter, you are obligated by law to respond within 15 working days from receipt of the letter. Your responses must be thorough and supported by data and documentation. Remember, the FDA will confirm all of your committed corrections. You will also need to address the scope of each observation systemically.
    If the FDA is satisfied with the inspection and the site’s response, the FDA inspection team will prepare an EIR that will include the scope of the inspection, general topics of the inspection, FDA form 483 findings and any promised corrections at time of the inspection. This report will arrive via mail generally within a reasonable amount of time. The receipt of the EIR is an indication that the FDA considers your inspection closed.
    In conclusion, well-trained employees having a detailed and well-developed procedure and preparation is critical to a successful and efficient FDA inspection. Performing mock FDA inspections on a routine basis using an internal team or third party will keep your established process current and FDA-ready.
    Karen Dixon is an independent consultant at EAS Consulting Group.
     
     
     
     
     
     
     
     

  • Remaining relevant

    Remaining relevant


    Suppliers of primary equipment hold their own in the rapidly transforming cigarette market.
    By Stefanie Rossel
    One would think that the downward trend in global cigarette sales would give manufacturers of primary equipment little reason for optimism. Market data increasingly suggest that the entire tobacco industry is well on its way to what has become Philip Morris International’s declared goal: a smoke-free world. According to Euromonitor International, the share of combustible cigarettes as a proportion of the total global tobacco sales value in 2016 fell below 90 percent for the first time in decades. The business intelligence provider predicts that this share will decline to 86 percent by 2021, driven by restrictions on the manufacture, sale, marketing and packaging of tobacco products in nearly all markets.
    Logic suggests that lower cigarette consumption would mean less demand for manufacturing equipment. For the time being, however, this is not necessarily true for primary equipment. Several companies told Tobacco Reporter that they remain confident about the segment’s potential. “An economist said that, due to the global economic crisis, having a time horizon projected to six months would be a success—our time horizon is projected to one to two years,” says Lorenzo Curina, sales director at Godioli & Bellanti, an Italian supplier of leaf processing equipment. Curina says his firm has recently witnessed a revival of demand. “We hope it will continue for a long time,” he says.

    Marco Morandin

    Marco Morandin, sales director at Hauni subsidiary Garbuio, which is also based in Italy, says that 2018 started positively for his company, continuing the encouraging trend shown last year. “Investments in green-field plants for conventional cigarettes are generally slowing down. Global cigarette consumption is certainly shrinking, especially in western countries,” he states. “However, to keep up with technology, our customers continue to invest in state-of-the-art equipment to run their factories efficiently, profitably and, of course, digitally. Consolidation of existing factories, renovations and technology upgrades are presenting Hauni/Garbuio with opportunities to continue leading the primary business.” The investments, he says, are extending the life cycle of machinery, allowing the company to offer services such as maintenance and after-sales assistance.
    Stefan Hahn, sales director at Heinen Koehl, a Luxembourg-based supplier of processing and logistics equipment, is equally upbeat. Change is the only constant, he says. “Heinen Koehl must see the changes as an opportunity,” says Hahn. “In recent years, the tobacco industry has demanded a number of new products that we have been able to develop with our customers and sell successfully.”
    Focus on quality
    Each supplier has his own strategy to navigate the challenging environment. To Godioli & Bellanti, quality is key. “We want to assure our client that his investment will be valuable and profitable,” says Curina, adding that the company’s equipment is durable and 100 percent made in Italy. This strategy pays off, according to Curina. Investment in “cheap, cheap” machines does not pay off, he says. “We are serving our customers with valuable machines.”
    Godioli & Bellanti emphasizes continuous innovation. Recently, it launched new solutions for the automatic handling of cases and cartons. In addition, the company has introduced technology for the supervision of existing primary departments.
    Apart from that, the company has diversified its business: It now offers solutions for the processing of medicinal herbs and plants, food, and biomass. “Tobacco machinery still is our main pillar; it represents 90 percent of our annual turnover,” says Curina. “But diversification is a must at any time, especially now.”
    CPM Wolverine Proctor, a specialist in tobacco thermal processing, has also opted for diversification. In addition to the tobacco industry, the company serves customers in the food, snack, chemical, fiber and breakfast cereal markets. Declines in the tobacco market are offset by increases in its other markets.
    Sales manager Ed Wozniak points out that, even in the “golden years” of tobacco processing, it was not uncommon for investments to drop at times, forcing suppliers to diversify their operations. “This multimarket approach has allowed us to weather these lean years in tobacco relatively painlessly,” he says. Primary processing remains an important part of CPM Wolverine Proctor’s business, however. “There is the need for relocating equipment, upgrading and most certainly increasing the overall operating efficiency of the equipment,” says Wozniak. “These are the areas that we are focused on at present in the tobacco sector, together with requests for full conversion of tobacco dryers, to drying other products, such as vegetables and even snacks.”
    This approach requires more experienced field personnel who are capable of supervising and auditing equipment on-site. “To meet this demand, we have had to invest in a greater number of field service, project management and technical staff,” says Wozniak.
    The greatest steps to increased quality and reduced manufacturing costs have been made in electrical control systems and programs, according to Wozniak. The company has been testing a “smart” dryer, which, with the help of sensors and machine-learning technology, can run without an operator. “Dryers rely on a number of factors running correctly,” says Wozniak. “Change one and it affects all others—e.g., temperature, air velocity, process speed, humidity. We anticipate, in the near future, to have this [technology] perfected and available to our customers.”
    Tailor-made approaches
    For Morandin, flexibility is the key factor to remaining competitive. “We not only have the ability to design, manufacture and install high-quality bespoke green-field primaries, but we can take the best of a customer’s existing equipment—from several locations—overhaul and modify it and then reinstall [it] in another part of the world. This process can be carried out for full processing lines, complete primaries or just single items. [Equipment can be] overhauled to suit a technical specification, budget and timeline, including new control systems, digital management information packages and operator/maintenance training.”
    The consolidation of Garbuio and Hauni into a single organization has enhanced flexibility, too, according to Morandin. “This has resulted in a very broad portfolio of products that meet the ever-increasing demands of our industry, across all sectors and technical abilities. This adds to our strengthened research and development activities that are fully engaged in new projects, from conventional primary processing through to snus, shisha, heat-not-burn [HnB], and digital transformation and upgrade packages. The worldwide Hauni sales network maximizes the global reach and support network for our combined primary operations and customers.”
    Customization, Morandin adds, still plays a major role: “In an environment that demands more from factory optimization by using the latest in controls and digital technology and/or tailoring of machines and projects to meet our customer’s specific demand, it is the added value we deliver into every single project.”
    One example of this is the entry-level primary, which Hauni introduced in early 2016. It enables small and medium-sized cigarette manufacturers to manage their own tobacco preparation and processing. Morandin says the concept had generated considerable interest among the company’s customers. “We’re discussing various prospects,” he says. “The experience taught us that customization is again of the utmost importance in meeting customer needs for smaller-scale primaries. The smart solutions we offer enable customers to start cut rag manufacturing at very competitive conversion costs.”
    Customer requirements have changed significantly, he notes, with new products coming to market ever more quickly. “Time to market is another core value we grant our customers,” says Morandin. “Whether this is for a new product launch, an emerging market or trend, thanks to the combined capacity of Garbuio and Hauni manufacturing facilities in Hungary and Italy, supported by engineering divisions located in Hamburg, Treviso, Winchester and Pecs, we are certainly supporting our partners with [a] fast-track response to consumer trends.”
    Customization is at the center of Heinen Koehl’s strategy, too. “With innovative, customer-specific project concepts from our widespread business units and through the on-time delivery of state-of-the-art technology from a single source, we are able to respond flexibly to individual customer requests,” says Hahn. “We strive for long-term partnerships with our customers.”
    Heinen Koehl’s new primary solutions include an improvement of the Twister, a multipurpose processing machine for expansion and conditioning of short-fractured tobacco products such as raw stems, CRES, cut rag, cigar filler and cloves. “Due to its compact design and highly effective closed-chamber process, significant savings of tobacco, energy and investment costs can be achieved,” says Hahn.
    New opportunities
    As is the case in other parts of the supply chain, next-generation products are an increasingly promising field of business for manufacturers of primary equipment. As early as the 1990s, Godioli & Bellanti had developed a process to remove nicotine from tobacco leaves. The tobacco used in HnB products requires processes and equipment similar to those used for conventional cigarette leaf. To provide a taste close to that of a combustible cigarette, the consumables contain custom-engineered reconditioned tobacco leaf.
    Even as they have been closing cigarette factories, cigarette manufacturers have been setting up production lines for new products, creating opportunities for processing equipment suppliers. “We trust and believe deeply in this new segment,” says Curina. “We consider HnB an important way out for the future of the tobacco world and therefore also for tobacco machinery manufacturers.”
    “For sure, HnB products are attracting considerable investment at this time and have certainly contributed to the global market spend on primary,” echoes Morandin. “Processing of HnB can, in some instances, utilize similar technologies to that of conventional primaries. Other products, however, are totally different and require new processes. These require tobacco processing expertise to achieve the product design and preserve or enhance aromas and flavors of the tobaccos. We’ve combined R&D efforts to provide our customers with a full range of alternative tobacco-producing methods, including a more traditional recon process, a modular rolled-cast sheet line and a very efficient extrusion production line. Orders have been received for these products, and we anticipate strong growth in the coming years.”
    Heinen Koehl, too, has received orders relating to HnB products, according to Hahn. “We consider HnB products as very important,” he says. “In addition to the primary projects, we successfully placed a numerous amount of our flavor application system, FAS, from a total output of approximately 310 units, in the HnB secondary.”
    Wozniak is less enthusiastic about the new tobacco category. “While HnB products still utilize tobacco, it is very much in a reduced volume and different form of manufacture,” he says. “Quite simply, in no way do these products replace the volume [of] business in loss of primary processing equipment. These ‘new’ products themselves are anticipated to further evolve and require new and different processing equipment.
    “It would be tempting for a multimarket company, such as CPM Wolverine Proctor, to focus its entire resource toward other markets. However, we must not—and will not—forget the valuable contribution that the tobacco sector has played in our success, and indeed the multitude of equipment that we have globally. There is a commitment to keep on supporting this equipment for its entire lifespan, no matter if it is with the original customer or not. If possible, we will increase its efficiency or, if required, convert it entirely for other forms of processing.”
    Moving east
    As far as future potential for tobacco processing equipment is concerned, suppliers of primary equipment name Southeast Asia and the Middle East as promising regions. Morandin expects Asia to play a major role both in the conventional cigarette business and HnB category. “We’ve seen a revolution in Japan and Korea driven by the HnB category, and we are also seeing a very strong commitment in the traditional cigarette market, not only in Asia but the Indian subcontinent and Europe, where our customers have committed to significant investment in new green-leaf threshing lines and primary.”
    “I would say that thanks to the revived demand of tobacco machinery, we have interesting markets in very many countries of different geographic areas of the world,” says Curina. “In some areas, the relocation of processing plants and primary processing lines are more in demand. We have acquired a lot of experience in reconditioning and relocating old processing lines, and our reputation is very good. In other areas, our brand-new machinery is sought after. Finally, in other areas, we notice a lot of demand for rebuilt and refurbished secondhand machinery.”

  • Fundamentally flawed

    Fundamentally flawed

    The Chaffee vaping ‘gateway’ study should be retracted.
    By Brad Rodu

    Brad Rodu is a professor of medicine and holds an endowed chair in tobacco harm reduction research at the University of Louisville in Louisville, Kentucky, USA..

    Despite a record decline in cigarette use among teens over the past five years, government officials and federally funded researchers have repeatedly claimed that e-cigarette use is creating a new epidemic of teen smoking. The allegations are based mainly on misrepresentations of federal survey findings and inaccurate medical journal claims that vaping is a gateway to smoking.
    In some instances, published research is so fundamentally flawed it deserves retraction. A case in point is an article in Pediatrics by the University of California San Francisco’s (UCSF) Benjamin W. Chaffee, Shannon Lea Watkins and Stanton A. Glantz.
    A 2013 survey of teens was funded by the U.S. Food and Drug Administration to find out which factors contributed to regular smoking one year later. Since experience with e-cigarettes is a relevant factor for smoking, teens were classified in 2013 as “never users,” “ever triers” or “current users” (i.e., at least one puff in the past 30 days).
    Analyzing the survey data, the UCSF researchers concluded that teen e-cigarette users or triers in 2013 were much more likely to be regular smokers one year later—in short, e-cigarettes were a gateway to cigarettes.
    This analysis is incorrect. Chaffee and his colleagues ignored the number of combustible cigarettes teens had smoked prior to the 2013 survey (their lifetime cigarette consumption, or LCC), which varied widely, from one puff but never a whole cigarette all the way to 99 cigarettes.
     

    It turns out that e-cigarette triers and users in 2013 had smoked a lot more cigarettes than never e-cigarette users, as illustrated in the chart. Note that more never e-cigarette users had only puffed (i.e., were in the “blue”), while more e-cigarette users and triers had smoked a half pack or more (i.e., were in the “red”).
    Using the survey data, my research team re-ran Chaffee’s calculations. When we added the respondents’ LCC, the positive results for e-cigarettes and the grounds for Chaffee’s claim essentially disappeared.
    In short, Chaffee’s claim that using e-cigarettes is a gateway to smoking only stands if one ignores prior smoking of up to 99 cigarettes per teen.
    The relationship of one factor, like e-cigarette use, to another, such as smoking, is called confounding—a basic epidemiologic principle that competent researchers understand and address in their analyses. Chaffee and his colleagues failed to account for the important confounding factor of LCC. When we documented this in an online journal comment, Chaffee et al. incorrectly described our analysis as a “statistical trick … akin to suggesting that a study of hypertension [high blood pressure] should adjust for confounding by systolic blood pressure.”
    Their response further proved our case.
    Consider the analogy of a study of the effect of dietary salt consumption on development of hypertension after one year of follow-up among participants who were not hypertensive at baseline. Knowing that those with blood pressure close to hypertension at baseline are far more likely to subsequently become hypertensive, compared to those with low blood pressure at baseline, it would be improper to blame salt for causing hypertension while ignoring baseline blood pressure readings.
    Similarly, it is improper to ignore cigarette consumption at baseline and then to blame e-cigarette use for smoking one year later. The Chaffee article must be retracted.