Category: Featured

Illegal Cigarette Factory Dismantled in Denmark
Police arrested 13 individuals for smuggling counterfeit cigarettes from a clandestine factory in Denmark to the United Kingdom, reports Europol.
A timely exchange of intelligence via Europol between the Danish, Dutch and Polish investigators facilitated the investigation carried out in the framework of the European Multidisciplinary Platform Against Criminal Threats.
On March 2, law enforcement officers dismantled an illegal cigarette factory in Vamdrup. This is the first illegal cigarette factory to be dismantled in Denmark. Police arrested 13 individuals of Polish and Ukrainian nationality and confiscated 11 million cigarettes alongside 11 tons of raw tobacco and a full production line.
Forensic analysis is still ongoing to quantify the factory’s exact production capacity, which is presumably several million cigarettes per week.
The value of the seized tobacco products on the illegal market in the United Kingdom is believed to be in the region of €13 million ($15.5 million).
The action in Denmark led to another one in the Netherlands that same week. Investigators of the Dutch Fiscal Information and Investigation Service searched the premises of a warehouse in Ospel. Eight pallets of contraband cigarettes stored in maritime containers were seized, worth close to €1 million in the destination market.
The cigarettes produced in Denmark were shipped to the U.K. via the Netherlands.
March 12, 2021
U.K. High Court Revokes BAT Patents

Photo: Oliver Le Moal
The U.K. high court has revoked two British American Tobacco (BAT) e-cigarette patents, reports World Intellectual Property Review. In doing so, the court dismissed BAT’s claim that Philip Morris International (PMI) infringed on the patents with its IQOS tobacco-heating product line.
Justice Richard Meade on March 9 concluded that the BAT patents lack an “inventive step” over PMI’s patent.
One of the BAT patents, EP 3 398 460 B1, covers an “aerosol-generating device with housing and a cigarette” whereas the other, EP3491944, refers to a cigarette “for use with” an aerosol-generating device.
Meade argued the patents merely covered a method of getting reconstituted tobacco into a cigarette form, and all methods of which—including rolling, gathering a sheet or cutting—were limited and would be obvious to a skilled team.
Both patents were found invalid for added matter and obviousness. However, Meade also concluded that, if the patents were valid, PMI’s IQOS products would have infringed them.
The tobacco giants have been quarreling over intellectual property for several years.
In 2018, PMI filed a complaint against BAT’s heated-tobacco products in Japan. PMI alleged that some technological features of BAT’s Glo device infringed on two of PMI’s Japanese patents.
In May 2020, BAT’s R.J. Reynolds subsidiary filed a lawsuit against PMI in the U.S. and Germany claiming that the IQOS tobacco-heating technology infringed patents for Reynolds’ Vuse vaping system.
In June 2020, PMI filed counterclaims, arguing that R.J. Reynolds’ vapor products infringed multiple patents owned by PMI and its U.S. partners, Altria Client Services and Philip Morris USA.
The patents are also currently in dispute in Munich.
March 11, 2021
White Cloud Ends Online Sales Due to Mail Ban

Photo: White Cloud Electronic Cigarettes
White Cloud Electronic Cigarettes, a stalwart in the vaping industry, will end all online sales for U.S. customers after the U.S. Postal Service stops shipping e-cigarettes on March 26. In a post on its Facebook page, the vapor company said that it will continue to fill international orders and will post a list of retail stores that will still carry White Cloud products in the U.S.
“This was not a decision we wanted to make, especially after putting so much effort into submitting our PMTAs to the FDA and ensuring our products never reached the hands of minors,” the company wrote on Facebook. “But, after spending the last couple of months searching for a solution to the vape mail ban, we’ve reached the end of all possible options, and there is simply nothing we can do to continue shipping domestically.
This was not a decision we wanted to make, especially after putting so much effort into submitting our PMTAs to the FDA.
White Cloud Electronic Cigarettes
White Cloud asked vapor industry advocates to send a message to Congress and support the Consumer Advocates for Smoke-free Alternatives Association (CASAA) in its efforts to protect consumers’ right to access reduced harm alternatives. CASAA has organized a campaign to fight the U.S. mail ban.
White Cloud is not the first vapor company to suffer from the shipping ban. In March, Logic said it would end online sales of its e-cigarettes to U.S. customers. Securience announced a merger with VapinDirect to better cope with the shipping restrictions. Lizard Juice e-liquids also said it would stop mailing products to consumers.
March 11, 2021
Minton: Mail Ban Will Benefit Cigarettes
The U.S. Postal Service’s pending ban on shipping e-cigarettes, scheduled to take effect at the end of March, will likely drive vapers back to cigarettes, according to Michelle Minton, a senior fellow specializing in consumer policy for the Competitive Enterprise Institute, a free-market public policy organization based in Washington, D.C.

The real goal is to hurt the legal vaping industry.

Michelle Minton
Writing in the National Review, Minton cautioned against the unintended consequences of the measure. “Supporters of the law seem to think that if they force adults to quit vaping, they will simply quit using nicotine altogether. They’re dead wrong,” she wrote.
Minton also noted that e-cigarette manufacturers cannot simply switch to private carriers, such as FedEx or UPS, because these companies don’t deliver to all addresses, particularly in rural areas. “Private carriers actually rely on USPS to make ‘last mile’ deliveries,” she wrote.
Minton said that there are less extreme approaches to stop underage consumers from illegally purchasing nicotine products online, including ID checks on delivery. But reducing underage access is not the purpose of the law, she suggested. “The real goal is to hurt the legal vaping industry.”
March 11, 2021
BAT and Organigram Partner on Cannabis

Photo: Tobacco Reporter archive
The BAT Group (BAT) has signed a strategic collaboration agreement with Organigram, a wholly owned subsidiary of publicly traded Organigram Holdings, focused on research and product development activities of next-generation adult cannabis products with an initial focus on cannabidiol (CBD).
This agreement augments ongoing BAT activities to expand its portfolio “beyond nicotine” and follows the pilot launch of Vuse CBD Zone in Manchester, U.K., earlier this year.
Through the collaboration, BAT will gain access to cutting-edge R&D technologies, product innovation and cannabis expertise, complementing BAT’s extensive plant-based expertise and development capabilities.
Organigram has a proven track record of consumer-led innovation and developing high-quality adult-use recreational and medical cannabis products, which are legally available in Canada.

We believe this collaboration has significant potential to enhance our activities.

David O’Reilly, director of scientific research, BAT
“Today’s announcement underscores our commitment to accelerating our transformation and building ‘A Better Tomorrow,’” said David O’Reilly, director of scientific research at BAT, in a statement. “Our multi-category, consumer-centric approach, which is key to our transformation, aims to provide choice and meet the evolving needs of adult consumers. This choice provides reduced-risk alternatives to combustible cigarettes as well as going beyond tobacco and nicotine into new and exciting areas of product innovation.
“We believe this collaboration has significant potential to enhance our activities, allowing us to combine our world-class expertise while enabling scientists from both BAT and Organigram to work closely together and share information real-time. We know that in R&D, this is how you make real breakthroughs and accelerate progress.
“We have been impressed by the strong management team and culture at Organigram. This collaboration aligns with our long-term strategy and will enable us to work with Organigram at an R&D level as well as contributing to their wider operations.”

We have been extremely selective about aligning with a strategic partner.

Greg Engel, CEO, Organigram
“This is a tremendous milestone in the evolution of Organigram,” said Greg Engel, CEO of Organigram, in a statement. “It is instrumental in advancing our commitment to offering consumers innovative cannabis products and to furthering our long-term international strategy. We have been extremely selective about aligning with a strategic partner, and in BAT, we’ve found a leading consumer goods business with innovative product platforms, an impressive dedication to research and development, deep consumer insights, regulatory expertise and a commitment to responsible stewardship and consumer safety.”
March 11, 2021
Fighting Its Corner

Photos: Taco Tuinstra
Nyasa Manufacturing carves out a niche for itself in the competitive Malawi market.
Like their counterparts elsewhere, Africa’s cigarette markets are dominated by multinationals. Occasionally, however, a homegrown player manages to carve out a niche, using local knowledge to counter global resources.
Nearly a decade ago, several Malawi flue-cured tobacco farmers ventured into cigarette manufacturing. Confounding the naysayers, they have held their own against deep-pocketed rivals, capturing a share of the country’s—admittedly tiny—cigarette market.
“We were driving pickup trucks, and the leaf buyers were driving Land Rovers,” quips Konrad Buckle about the group’s decision to move up the value chain.
“Today, we are still driving pickups,” he chuckles.
That is not entirely true—Buckle, too, now owns a late-model Land Rover—but his joke hints at the challenges of establishing a cigarette company in a country with frequent power failures, a crumbling infrastructure and rock-bottom disposable incomes, not to mention a formidable incumbent.
The newly created enterprise, Nyasa Manufacturing Co. (NMC), set up shop in Blantyre, Malawi’s commercial capital. In 2009, Buckle spent three months in Indonesia, learning to operate the equipment that the company had purchased for its factory. NMC developed six brands, and soon it was producing cigarettes “out of its rear.”
But making cigarettes proved to be easier than selling them.
“We quickly learned about the importance of brand loyalty and price positioning,” says Buckle. With a gross national per capita income of only $340, according to World Bank figures, Malawi is said to be the world’s poorest country outside of a war zone. Cigarettes are considered a luxury, and the typical smoker can afford to buy only one stick at a time. Not only must cigarettes be priced extremely competitively in such an environment, but newcomers must also lure smokers away from multinational brands that have been around for ages.
The company struggled, and in 2012 it nearly went bankrupt. But Buckle and his partners persisted. Applying the lessons learned, they slowly but surely put NMC on the map.

Playing on its home turf worked to the NMC’s advantage.
Playing on its home turf worked to the company’s advantage. According to Buckle, importers tend to sell their cigarettes through supermarkets, which are located primarily in urban areas. The vast majority of Malawians, however, live in rural areas. So NMC invested in a fleet of cars and motorcycles, along with “a never-ending supply of replacement parts” to guarantee mobility on Malawi’s bumpy roads. “We sent our people into the countryside to ensure our products would be available everywhere, all the time,” says Buckle.
NMC also took notice of the particularities of Malawi’s economy, which is based on subsistence farming. “From January to March, spending grinds to a halt as farmers plant their crops,” says Buckle. “Until harvest time, they have many expenses but zero disposable income. You must consider that cycle in your cash flow projections.”
To further increase brand awareness, in 2016 the company bought the Nyasa Big Bullets, a Malawi football team with 8 million supporters. The move made NMC a household name overnight, even though the firm has been careful to avoid tobacco references in its sponsorship materials. Buying the team also brought on board a highly motivated sales force. “Ninety percent of vendors on the street are Big Bullet fans,” explains Buckle.
While the sponsorship of a sports team by a tobacco company raised eyebrows, the international governing body of football, FIFA, acknowledged that, in Malawi, there are few alternative sources of funding.

The government has been encouraging entrepreneurs to move up the value chain beyond leaf exports.
Of course, NMC’s competitors didn’t sit by idly as the newcomer encroached on their turf. To slow the company’s momentum, they temporarily dropped their prices—but NMC was ready for that scenario. “We bought all the discounted stock we could get our hands on,” grins Buckle. “When they eventually raised their prices again, we sold those cigarettes and doubled our money!”
Business grew steadily, and the Blantyre factory now runs two shifts per day, seven days a week. While statistics are hard to come by—Malawi’s puny market isn’t tracked by market intelligence firms such as Euromonitor—observers estimate domestic volume at 1 billion sticks. “Twenty-five percent of that is smuggled from neighboring countries,” estimates Buckle. “Of the remaining 750 million sticks, we have 50 percent.”
Buckle attributes the company’s success to a combination of determination and street smarts. And the advantage of being local, he stresses, cannot be exaggerated.
Even though he was born and raised in South Africa, Buckle has lived in Malawi for more than 30 years. “This is my home,” he says. His business partners, Dimitri Kalaitzis and Demokritos Kalaitzis, are fourth-generation members of Malawi’s small Greek community. “They understand the environment and the politics,” says Buckle.
As if to underscore the extent of his integration into the local community, Buckle was recently invited to join Malawi’s Ngoni people. In an elaborate ceremony overseen by the chief, Inkosi ya Makosi M’mbelwa V, he became an official member of the tribe. “Two leopards died because of me,” he says, with a mixture of pride and regret, referring to the traditional attire worn during the ceremony. Being part of a prominent tribe earns a degree of respect in Malawi and opens doors that might remain closed to outsiders.

We bought all our competitor’s discounted stock we could get our hands on. When they eventually raised their prices again, we sold those cigarettes and doubled our money!
Konrad Buckle, Nyasa Manufacturing Co.
The company’s local roots also earned it the support of Malawi’s government, which has been eager to capture a greater share of the tobacco value chain. Leaf tobacco accounts for a whopping 60 percent of the country’s export income, but the government wants Malawi to do more than export raw materials. For years, it has been encouraging investors start manufacturing cigarettes in Malawi but with little success. A plan, announced by Eastern Co. of Egypt in 2014, to build a cigarette factory in Lilongwe appears to have been quietly abandoned.
To encourage the new venture, the government granted NMC tax breaks and other benefits. NMC and its sister company Nyasa Distributing Co. now employ 200 people—a big deal in a country of peasant farmers, where only a handful of people hold formal jobs. And the benefits stretch further than the immediate positions created. According to Buckle, each employee supports an average of six people.
NMC intends to support Malawi’s economy going forward as well. Whenever possible, the company sources its materials locally, starting with tobacco. “Critics said it wouldn’t be possible to produce cigarettes using only local leaf,” says Buckle. “But Malawi has everything we need: burley, flue-cured and dark fire-cured.” Due to Malawi’s small industrial base, some imports are unavoidable. Cigarette paper, foil and wrap are purchased abroad, while cut rag is created in Zimbabwe, using Malawi leaf. The company has ordered a filter making machine and expects to start producing its own filters in September.
Plenty of challenges remain, but Buckle is optimistic about the future. The trials of starting cigarette production in Malawi, he notes, have taught the partners good business sense. “You must operate as lean as possible so that you will be covered also in bad times,” he says.
“As a small player, we must box cleverly.”
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.

April 12, 2017