Category: GTNF

  • At a Crossroads

    At a Crossroads

    Photo: mandritoiu

    Participants in the 2019 Global Tobacco & Nicotine Forum agreed that regulation will be decisive for the future of the vapor category.

    By Stefanie Rossel

    “The vaping market will look very different next year—there is no secure future of next-generation products (NGPs) anymore,” said Elise Rasmussen, founder and president of the Global Tobacco & Nicotine Forum (GTNF), at the opening of this year’s event, which took place in Washington, D.C., Sept. 24–26 under the theme “More choice, less risk.”

    The swiftly moving events outside the conference rooms of the Four Seasons Hotel only reiterated her prediction. During the two GTNF event days, Massachusetts and Rhode Island announced temporary bans on sales of flavored vapor products, following the examples of Michigan and New York, which had passed similar “emergency” legislation earlier in September. At the time of writing, Washington had joined them while Illinois, Delaware and New Jersey were considering like measures. Massachusetts announced a blanket ban on all vapor products.

    Meanwhile, Walmart announced it would stop selling all e-cigarettes. The U.S. Food and Drug Administration (FDA) opened a criminal inquiry into the supply chain of vapor products and devices. President Donald Trump also got involved in the debate. On Sept. 11, he announced that his administration would ban all nontobacco flavored e-cigarettes in order to cut down on the increasing number of youth e-cigarette users and to address widespread concern as a mysterious lung illness linked to vaping spread throughout the U.S.

    Trump’s plan would go further than previous restrictions announced by the FDA to ban the sale of all types of flavored e-cigarettes, excluding menthol and mint flavors, in stores that don’t have areas prohibiting people under the age of 18, the federal minimum age to buy tobacco products.

    The bans and Trump’s announcement hit the world’s largest vapor market at a time when the exact cause for the illness is yet unknown. The sudden turnaround in U.S. vaping policy also prompted Kevin Burns to step down as CEO of Juul Labs, the largest manufacturer of vapor products in the U.S. Juul Labs also suspended all broadcast, print and digital product advertising in the U.S. Furthermore, it caused Philip Morris International (PMI) and Altria to call off talks to reunite their businesses. Altria holds a 35 percent stock in the beleaguered Juul Labs.

    Opportunity for Progress

    “This is a pivotal moment for the industry, and strong leadership and action are urgently needed,” said Howard Willard, chairman and CEO of Altria Group, at the GTNF. “We must acknowledge that a key component of harm reduction, vaping, is at an inflexion point.” While the U.S. witnessed an epidemic of youth vaping and restrictions on vapor products for adults, he continued, the public had legitimate concerns about marketing practices and flavored products. “Vaping products including those that are illegal are at the center of a national investigation. Consumers are concerned and unclear about the health risks of these products. Given the tremendous progress made in tobacco harm reduction (THR) over the past 30 years, I find this very discouraging.”

    Nevertheless, Willard remained optimistic about the future, pointing out that the stakeholders, including industry officials, public health officials, policymakers, regulators and scientists, had confronted significant challenges before. “The next steps are critically important,” he said. Preserving the harm reduction potential of vaping by shaping proper regulation is a long-term process, according to Willard. With 37 million adult smokers and many of them demanding noncombustible alternatives, innovation and an appropriate regulatory framework, the U.S. has the opportunity to make more progress on reducing the harm caused by cigarettes in the next 10 years than they had in the past 15 years. The industry has an obligation to ensure that the public has access to scientifically grounded information.

    While the responsibility currently rests only with the manufacturers, those in public health and the FDA needed to be aware of the fact that adult smokers required their help in obtaining accurate and truthful information. From the confusion of the role of nicotine to the misinformation regarding the relative risks of different products, they had an important task in helping consumers make informed decisions, according to Altria’s CEO.

    Willard called for the FDA to optimize its premarket tobacco product application (PMTA) approval process to create a fluent, accelerated and predictable procedure that will be timely enough that consumers will still adopt those reduced-risk products (RRPs). The FDA, he said, should establish a process that accounts for different levels of complexity, permits changes to allow products to improve and gives manufacturers some certainty on what to expect for their efforts and investments.

    FDA’s approach criticized

    Some GTNF speakers criticized the FDA’s approach. Veronique de Rugy, economist and senior research fellow for the Mercatus Center at George Mason University, suggested that the effects of the regulatory hurdles erected were tantamount to having frozen development of the iPhone in 2008.  Referring to former FDA Commissioner Scott Gottlieb’s statements from 2017 that regulation should encourage not stifle innovation, health policy consultant Scott Ballin said that somewhere along the line in the last two years, the FDA had dropped the ball in moving the agenda forward. “Most of the discussion on e-cigarettes and harm reduction has become toxic, emotional and confusing to the public,” he said. “This didn’t have to happen.”

    Mitch Zeller, director of the FDA Center for Tobacco Products, listed the steps his agency had taken to reduce the health impact of tobacco. He underlined the FDA’s mission of a science-based review of tobacco products, stating that the FDA had helped make the review process more efficient, predictable and transparent while upholding its health mission. The day before,  acting FDA Commissioner Ned Sharpless testified before the House Energy and Commerce Subcommittee on Oversight and Investigation, saying that the FDA planned to “enforce existing law” rather than ban flavored cigarettes outright.

    Matthew Holman, director of the FDA Center for Tobacco Products’ Office of Science, stressed his agency’s efforts in tackling the surge in youth vaping, one of the big themes discussed at the GTNF. According to preliminary data for the 2019 National Youth Tobacco Survey (NYTS), he said, 25.7 percent of high school students were current e-cigarette users with the majority of them citing the use of fruit and menthol or mint flavors. The rise had occurred despite several youth and public education campaigns the FDA had launched in 2014. In 2018, the FDA announced a youth tobacco prevention plan that focused on preventing access, curbing the market of tobacco products aimed at youth and educating teens and their families. A major concern, Holman said, was the popularity of products that closely resemble USB flash drives, such as Juul products, that have high levels of nicotine and emissions that are hard to see.

    As part of its youth policy, the FDA had conducted a large-scale undercover nationwide “blitz” of brick-and-mortar stores and online retailers for illegally selling Juul products to minors, and the agency issued more than 1,100 warning letters and 131 civil money penalty complaints to retailers. Warning letters were also sent to Juul Labs and other e-cigarette manufacturers instructing them to submit plans on how they will address youth access and use of their products. An additional warning was directed at Juul Labs for marketing unauthorized modified-risk tobacco products. According to the FDA, the company had made unauthorized claims about the product’s safety to students.

    Get Your Data Right

    Brad Rodu, professor at the University of Louisville and senior scientist at the James Graham Brown Cancer Center, put the latest youth usage figures as well as the forecast of another 32 percent rise in teen vaping in 2019 into perspective: “The teen vaping epidemic will get worse in 2019,” he predicted, “because there have been changes in the NYTS questionnaire in 2019. It has been taken from paper and pencil to electronic on tablets. Juul is listed for the first time as a brand, and images representing the vape category are included.”

    The 2018 NYTS, he pointed out, assumed the high school e-cigarette “epidemic” to be large, showing a prevalence of 21 percent, or 2.29 million, of 15-year-olds to 17-year-olds in the U.S. currently vaping whereas others, such as Vallone and McKeganey, spoke of 11 percent and 9 percent, respectively. Of the vapers surveyed in the 2018 NYTS study, many vaped marijuana.

    Rodu concluded that while teenagers may vape more, there has been a historic decline in teen and young adult smoking. Among 12-year-olds to 17-year-olds, smoking rates dropped to under 3 percent in 2018, a decline of 11.5 percent since 2015. Among 18-year-olds to 25-year-olds, smoking prevalence fell by 9.5 percent during that period, standing at approximately 19 percent last year. These figures, he said, didn’t look bad compared to other “real” high school epidemics, such as texting/emailing while driving (39 percent), drinking alcohol (30 percent) or consuming marijuana (20 percent).

    Michael D. Stein, professor of health law, policy and management at the Boston University School of Public Health, sought to explain teens’ fascination with vaping by providing insights into the minds of youths. Looking at the question of whether adolescents can deliberate, he said that there were three vital factors determining youth behavior: self-control, the need for experimentation and taking risk, and future orientation. Self-control increases as adolescents are growing up. The quest for experimenting explains why driving fast is more rewarding for teenagers. Future orientation in teenagers is weaker, meaning that what they experiment with might not last forever. Vaping might thus soon no longer interest them.

    While smoking is at a generational low in the U.S., social sources remain the primary point of access, Jennifer Hunter, senior vice president of corporate citizenship for Altria Client Services, pointed out. Only a small percentage of 15-year-olds to 17-year-olds purchased their cigarettes, other tobacco products or e-cigarettes from stores; the vast majority had been offered the products, asked for them, gave money to someone to buy them or simply took them. Altria, like its competitors and most panelists, supports the recent U.S. policy to set the legal age of purchase for tobacco products to 21. The company has just started a new $100 million campaign to address youth vaping, Hunter said. The desired outcomes include that youth vaping rates will be on the decline and rates of traditional tobacco product usage continue to decrease by 2022. Furthermore, Altria hopes to see 21 as the legal age of purchase at the federal level or in the majority of states. Retailer compliance rates are aimed to stand consistently at 90 percent to 95 percent.

    The danger of twisted facts

    While panelists agreed that policy should be driven by facts and scientific data, many lamented the use of flawed science and the twisting of facts for ideological purposes. Konstantinos Farsalinos, research fellow at the Onassis Cardiac Surgery Center, pointed out that Michael Bloomberg’s public statement that most people who vaped had never smoked before remained uncontested despite publicly available data by the National Health Interview Surveys showing the opposite. He ticked off a series of flawed arguments used to support bans or restrictions of vapor products, including the suggestion that nicotine was a poison, that vaping was a trick of the tobacco industry to keep people addicted to nicotine and that flavors were introduced to hook kids on nicotine.

    He said that from an epidemiological viewpoint, the reports of respiratory failure should be classified as acute cases rather than problems relating to long-term use of e-cigarettes. Furthermore, the cases were unrelated to conventional e-cigarette products available in the U.S. and other countries—otherwise there would have been similar outbreaks in previous years and in other countries. Citing a characteristic case, he showed that the lung disease was most likely related to the vaping of THC oils, which use compounds such as vitamin E acetate as well as vegetable oils as solvents that are not used in conventional e-liquids.

    Despite these insights, alarmist headline writers have fingered vaping in general as the culprit.

    “There is a fierce opposition against e-cigarettes, with the U.S. becoming the leader,” Farsalinos said. “While concerns are legitimate and reasonable, they are presented in a distorted and irrational way. There is no clear warning on the real cause of acute lung failure cases. This unfortunate outbreak is used to speed up regulation, such as flavor bans that are irrelevant, while there is no debate about the uncontrolled illicit THC market. Most of the vape market will disappear, except for the big players, and there will be a relapse to combustibles.”

    Regulatory Superpowers

    Creating a smoke-free world with the help of reduced-risk products (RRP) will remain a challenge outside of the U.S. too, according to Michiel Reerink, vice president of global regulatory strategy at Japan Tobacco International (JTI) and outgoing chairman of the GTNF advisory board. “The World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC) recommended again that e-cigarettes should be banned,” he said. “There are now 14 countries where e-cigarettes are prohibited. Often, this regulation is initiated with a hint at use by minors.” By contrast, the United Kingdom, where 7 percent of the population vapes, had no youth use problems, said Reerink, quoting Action on Smoking and Health (ASH) U.K. In mid-September, India became the largest tobacco market to date to ban vaping. According to WHO data, the country has 1 million tobacco-related deaths a year. Of the 1.3 billion population, roughly 106 million adults smoke. Reerink said consumers would be better served by regulation than prohibition.

    Currently, there are three regulatory superpowers, according to Clive Bates, director of Counterfactual: the U.S., the European Union and the WHO, with the first two interacting with the latter. “They are different in approaching their task, but the most dangerous is the WHO,” Bates said. “It is a norm setter through political consensus and creates the legitimacy for a country to do the right thing. The system of the WHO is truly terrible—there is a tendency to extremes.” Countries compete to please the organization: “When India bans vaping, it gets a pat on the shoulder,” said Bates.

    The WHO’s strategy toward RRPs since 2014, he said, had been to deny any benefit of e-cigarettes. Two policies emerged from this point of view—outright bans and policies that treat vapor products like combustible cigarettes, subjecting them to measures such as plain packaging. Bates was concerned about next year’s FCTC Conference of the Parties. “More restrictive measures will go into the FCTC,” he predicted. “The WHO is a real threat; they want to stop development of RRPs in their tracks and to eradicate nicotine from their sketchbook altogether.”

    Mark Firestone, president of external affairs and general counsel for PMI, confirmed that internationally, RRPs are frequently treated by regulators as tobacco products. “We maintain the status quo of laws that are not contemporary with NGPs and innovation and technology. We have to challenge ourselves to have regulation internationally that is contemporary,” he said. Firestone recommended doing away with “false equivalencies” and listening to consumers in the literal and metaphorical sense when shaping regulation.

    Wanted: a culture-oriented approach

    While making an impact around the globe, regulation is mostly coined in only one region, according to Marewa Glover, director of the Centre of Research Excellence on Indigenous Sovereignty and Smoking. The FCTC, for example, is dominated by the Euro-Western school of thought. “What governments in the U.S. or the U.K. do has ramifications for the rest of the world, which is not always good,” she said. In her home country, New Zealand, a 10 percent tax hike on Jan. 1, 2015, made cigarettes unaffordable for many people. Tax increases are a tool promoted by the FCTC to drive down smoking rates. Because New Zealand’s isolated geography makes smuggling cigarettes into the country nearly impossible, criminals have found a different tool to “serve” the market—robbing convenience stores. Another example of the power of foreign influence was evident in New Zealand’s “vaping to quit” smoking campaign, which was delayed after U.S. President Trump announced his intention to ban flavored e-cigarettes. The New Zealand government is now too looking at banning flavors in vapor products.

    Tax increases dictated by the FCTC in Fiji, Glover continued, have driven indigenous Fijians back to smoking suki, a rope tobacco typical of the island state. In the north of Sweden, which has a cold climate, regulation had the opposite effect: Here, an indoor smoking ban caused the Sami people to switch from smoking to using snus, the country’s traditional oral moist snuff, which, as 30 years of scientific evidence suggests, is a less harmful alternative to combustible cigarettes.

    With vaping under pressure in many parts of the world, the U.K. continues to stand out as an example of effective regulation. According to ASH U.K., 7.1 percent of the British adult population currently uses e-cigarettes. Vaper, blogger and consumer advocate Martin Cullip reported that in the National Health Service’s 2018 Stoptober campaign, e-cigarettes were for the first time mentioned as a way to quit smoking. The U.K. government’s liberal stance toward vaping, he said, was all about saving healthcare costs. Nevertheless, its attitude is to quit smoking with vaping and then quit vaping—recreational nicotine use is not on the government’s agenda.

    Call for Industry Action

    In the light of delayed or abolitionist regulation of RRPs, initiating truthful and accurate communication with adult consumers has become a difficult task for the industry. James Dobbins, senior vice president, general counsel and secretary for Turning Point Brands, explained the negative effects of Juul Lab’s decision to stop all advertising in the U.S. “Most advertising was education about vaping and about switching. When 59 percent of people believe that vaping is as harmful as smoking and this advertising is no longer there, smokers will likely stay with combustibles.” He added that the situation had become chaotic since manufacturers couldn’t communicate that their products are at the less hazardous end of the risk continuum. “Is there room in the legal scheme statutes to make a reduced-risk claim?” he wondered.

    David Sweanor, adjunct professor of law at the University of Ottawa, feared that with FDA regulation slowed, there would eventually be recognition of the fact that the U.S. had a public health catastrophe. “Tobacco companies will be held responsible for not having done more because they had the better sales and health data but didn’t tell anybody.” He recommended that to be on the safe side in case of future liability claims by regulators, the industry should bring constitutional challenge to be able to inform consumers truthfully or even file complaint against itself for not disclosing information.

    George Adams, a cardiologist for Rex Healthcare at the University of North Carolina at Chapel Hill, insisted that robust scientific evidence that proves the absolute and not the relative risk of RRPs has to be the basis of truthful communication with consumers. He said that healthcare specialists, public health authorities and the industry should work together to initiate a study on smokers looking at preventing healthcare costs. Standardized trials to develop clinical trials should be used to show the safety and efficacy of RRPs, two factors that are vital to the recommendation of these products.

    Toward a Sustainable Future

    Ensuring a sustainable value chain was another topic this year’s GTNF tackled. Stephane Colard, project leader of Coresta who took over as the organization’s secretary general from Pierre-Marie Guitton on Nov. 1, 2019, examined whether the United Nations (UN) Sustainable Development Goals (SDGs) were a threat or an opportunity for creating value collectively and sustainably in the tobacco industry. The SDGs’ main objective is the reduction of inequalities within and between countries. The 17 goals of the 2030 development agenda, which UN member states adopted in 2015, include targets such as prevention of poverty and hunger, access to clean water and sanitation, and quality education. For the tobacco and alternative sectors, Colard observed, good health and well-being, decent work and economic growth, responsible consumption and production as well as industry innovation and infrastructure were the most important factors in the ranking. To remain competitive, companies needed to align their business strategies, decisions and actions with the SDGs, he said.

    Jim Lutzweiler¸ vice president of agriculture and livelihoods for the Foundation for a Smoke-Free World (FSFW), lamented that many in the NGO community do not understand how business works. “The world is not changing but restructuring,” he said. The FSFW is setting up a center for agricultural transformation in Malawi in order to reduce that country’s economic dependence on tobacco cultivation. “Our task is to start partnerships to help substantial development [growth],” Lutzweiler explained. “We are driven by one thing: profitability for small-scale farmers. It’s a complicated process and nothing short of changing their whole economic sector.” In order to achieve this objective, significant investments should be made in science, technology and innovation, policy transformation, and commercialization, he added.

    Gender equality is one of the UN sustainable development goals. In the traditionally male-dominated tobacco industry, 30 percent of employees today are women but only 21 percent of them are in managerial positions, according to Alexandra Solomon, senior research analyst for ethics and human rights at the FSFW. The number of women on boards is still low, amounting to 30 percent in Europe, 19 percent in Asia and 16 percent in the U.S. Yet studies have shown that companies with more women on their boards are more profitable. In most countries, the gender pay gap remains significant; in the U.K., where reporting on salary has become mandatory for companies, women working for British American Tobacco earn on average 34 percent less than their male colleagues and receive 67 percent less in bonuses, Solomon said.

    While challenges abound for the tobacco industry, investors agreed that the outlook for the sector was positive. Analysts predicted that in the U.S., the leading companies, including Juul Labs and PMI, were well prepared to eventually receive marketing authorization for their main products even after a court ordered the FDA to bring forward the deadline for premarket tobacco product applications. Smaller companies, by contrast, are likely to struggle to prepare the costly and time-consuming paperwork.

    On the global scale, regulation and affordability will be decisive for the development of the of NGP category, in particular, with regard to emerging markets. For investors, the combined tobacco and NGP sector will remain interesting, according to Jonathan Fell, partner and co-founder of Ash Park Capital. “Investors have moved away from tobacco recently, but in the long run, ‘sin stocks’ will be attractive,” he said. “They will boost the return for people that take the higher risk.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • TMA buys Tobacco Reporter

    TMA buys Tobacco Reporter

    The US-based TMA announced on Friday that it had reached agreement to acquire assets of the international multi-platform trade publisher and conference producer SpecComm International, based in Raleigh, North Carolina.

    ‘Assets acquired by TMA include the premier nicotine and tobacco conference, GTNF; the oldest tobacco and nicotine business trade magazine, Tobacco Reporter; vaping community stalwart Vapor Voice; tobacco farming staple Tobacco Farm Quarterly; and the leading international trade exposition and congress, TABEXPO,’ the TMA said in a press note issued through PRNewswire.

    ‘The upcoming TABEXPO Amsterdam 2019 will follow the success of TABEXPO London 2015 and is a marquee all-industry international showcase, networking platform and congress for the entire nicotine and tobacco community. The TMA’s involvement will further enhance TABEXPO’s profile.

    ‘Launched in 1994, TABEXPO grew to strategic importance under the dynamic management of British entrepreneur David Pike and the SpecComm events team led by publisher and global event director Elise Rasmussen. With David Pike’s retirement last year, the TABEXPO license was acquired by British businessman Steve Fowler.  Mr. Fowler built his pet-care business into a 50-store chain before selling it in 2016, and also served as a leading figure in his industry’s trade association. He is keen to bring his trading expertise to this new venture and work with TMA.’

    “Having served as a director and chairman of a trade association for more than 18 years, I’m delighted that TABEXPO 2019 will benefit from the support of TMA and its membership, and look forward to working with them,” said Fowler.

    ‘TMA was founded in 1915 to provide unbiased information to stakeholders at a time of policy and industry uncertainty, and act as a convener of forums to address pressing issues. Today, TMA remains true to the ethos of these founding principles as its members and the wider tobacco and nicotine stakeholder community grapple with pressing issues. Chris Greer, president and CEO of TMA said, “Our members will now be able to draw on the huge breadth and depth of knowledge that the combined team will offer, both in traditional and next generation products”.

    ‘Elise Rasmussen, the new TMA vice president of sales and marketing said she was confident that TABEXPO 2019 would be the best TABEXPO event to date, citing the continuity of experience and know-how that the original sales team brings, now backed by TMA and the expertise of Steve Fowler and TEM. “My sales team will provide its in-depth knowledge of our customers, their business needs and objectives, which will continue to benefit from the history and experience of our TMA colleagues,” she said.’

  • The Future Mapped

    The Future Mapped

    Participants in the 2018 Global Tobacco & Nicotine Forum celebrated innovation and worried about bad policies.

    By Taco Tuinstra

    While the timing was probably a coincidence, the U.S. Food and Drug Administration’s (FDA) Sept. 12 threat against e-liquid flavors underscored the relevance of an already salient program. The Global Tobacco & Nicotine Forum (GTNF), which took place Sept. 11–14 at the Rosewood Hotel in London, focused heavily on ways to reduce the risks to health associated with tobacco consumption. The latest FDA pronouncements provided a perfect example of how not to go about, in the eyes of many participants. Rather than enacting heavy-handed rules and restrictions, GTNF speakers argued, regulators should create a climate that encourages innovation. The market, after all, has a better track record of solving problems than bureaucrats do.

    Jerome Abelman, British American Tobacco’s (BAT) general counsel and director of legal and external affairs, drew an analogy with the GTNF host city’s transportation system. When traveling to the forum, said Abelman, he a had a wide variety of options to choose from. He could travel by car (electric, hybrid, diesel, petrol, Uber or traditional black taxi), public transport (bus or Underground), by bike (his own or one obtained through a bike-sharing scheme) or by foot.

    “Those choices weren’t available 10 years ago,” said Abelman. A combination of good government policy and innovation by private industry has given Londoners not only more options, but also cleaner air. The same principles, he argued, would help reduce the health risks of tobacco.

    Jeff Stier, senior fellow at the U.S. Consumer Choice Center and a keen carnivore, made a similar point using the example of meat consumption.

    He related the story of a biochemistry professor, Patrick Brown, who wanted to tackle industrial animal agriculture. When the typical academic approach—organizing a workshop—failed to make a difference, Brown realized that the only way to impact meat production would be to beat it in the free market. “All you have to do is make a product that the current consumers prefer to what they are getting now,” Stier quoted Brown as saying.

    Brown started a company called Impossible Foods to develop plant-based and laboratory-grown meat alternatives meant to appeal not to vegetarians but to meat lovers. Helpfully, the FDA backed the safety of Impossible Foods’ plant-sourced hemoglobin.

    “While I will not become a vegetarian, the Impossible Burger [one of Impossible Food’s products] increases the likelihood that I will reduce my meat consumption,” said Stier. “That’s good news for those who think the world would be better if I ate less meat. The outcome won’t restrict my freedom; rather, it gives me more choice.”

    This happy result was achieved by private sector-driven innovation and timely government clearance of the product—and without costly finger-wagging public education campaigns, according to Stier. Like Abelman, he believes such factors will also drive progress in the effort to reduce the prevalence of tobacco-related diseases.

    Derek Yach, president of the Foundation for a Smoke-Free World, drew attention to a wider trend of dirty legacy industries changing their activities to cleaner ones. “The past no longer predicts the future,” he said. “What was once unthinkable is becoming possible through disruptive technologies: Coal companies are shifting toward renewable energy, waste companies are shifting from dumping to recycling, and auto companies are reducing their reliance on the combustion engine.”

    Yach went on to describe the characteristics that these companies have in common. “They use technological innovation to transform core businesses,” he said. “They respond to consumer demand for better, healthier and more sustainable products. Change is supported by asset managers and investors, and smarter regulation allows governments to steer sectors to outcomes aligned with sustainable development goals.”

    The tobacco industry, said Yach, has a similar opportunity to reduce the unacceptable health toll of smoking. Citing British psychologist Mike Russell’s famous observation that people smoke for nicotine but die from tar, Yach pointed out that the industry now has a portfolio that cuts risk by decoupling nicotine from lethal smoke.

    Yet considerable obstacles remain, he noted. For example, the parties to the World Health Organization’s Framework Convention on Tobacco Control—which were scheduled to convene in Geneva shortly after the GTNF—systematically exclude from their discussions “the organizations responsible for creating tobacco-related risks and potentially holding the key to mitigation.”

    Consumer misperceptions, nourished by alarmist media stories, are problematic as well. Too many people still view nicotine as a cancer-causing substance, according to Yach, while an increasing number of consumers mistakenly believes e-cigarettes are equally harmful or more harmful than combustible cigarettes.

    “Failure to correct misperceptions will keep smokers smoking and encourage governments to ban harm-reduction products, which we have seen happening at an alarming rate,” he said.

    Clive Bates, director of The Counterfactual, attributed the fierce resistance against working with the tobacco industry to a powerful narrative—“the industry’s interests are fundamentally irreconcilable with public health”—enhanced by aggravating factors, such as the fact that some people don’t like solutions provided by the private sector. The goal of many tobacco control officials, he said, isn’t harm reduction but annihilation. There is a sentiment of “one last push and we’re there,” Bates noted. E-cigarettes, in this account, are seen as a last-ditch survival strategy before the industry is killed off by taxes and regulations.

    Confronted with such a hostile environment, the industry should drive the technology transition, embrace the role of “policy champion” and lead innovation, said Bates (also see “Mapping the Future,” Tobacco Reporter, August 2018).

    Mark Kehaya, chairman of AMV Holdings, offered a striking example of the private sector’s success in converting smokers to vaping. Sixty percent of guests who shopped with his company in May 2017 were still customers 12 months later, he said—which compares with a success rate of the medical device industry of about 6 percent.

    The existing philosophy, noted Kehaya, treats smokers as patients who need medical treatment. A more productive approach, he said, would be to acknowledge that consumers enjoy smoking—and to provide them with a more pleasurable and less risky alternative experience.

    Viewed from that perspective, many of the regulations in place make little sense. For example, rather than increasing enjoyment, EU limits on e-liquid bottle sizes and nicotine strengths merely make alternative products difficult to use.  

    Advertising restrictions, meanwhile, prevent vapor companies from building a connection with their customers—something that would increase both product enjoyment and the likelihood of smokers converting to less-harmful vapor products.

    Regulators should make it quicker and easier to bring continuously better products on the market, according to Kehaya. “The iQOS application should have been a slam dunk,” he noted, referring to the modified-risk tobacco product application that Philip Morris International (PMI) submitted to the FDA in December 2016 and is still awaiting a decision on.

    Kehaya said the U.K. is the closest of any country to having a regulatory framework that will allow a smoke-free future. “Brexit offers a unique opportunity to make changes to laws that will accelerate that process,” he added.  

    Historical Accidents

    Indeed, throughout the conference, speakers repeatedly praised the U.K.’s enlightened policies for vaping. In 2015, Public Health England famously declared vaping to be 95 percent less harmful than smoking. Rather than banning or heavily restricting e-cigarettes, as other countries have done, the U.K. government has tolerated them on the market, allowing the sector to grow and improve its offerings.

    Today, 5 percent of U.K. citizens vape—more than twice the average share in the EU. At the same time, smoking prevalence has plunged. The U.K. now has the lowest rate of smoking in Europe after Sweden, where the tobacco market is dominated by a smokeless product that is outlawed in other EU member states—snus. Earlier this year, a report published by the House of Commons Science and Technology Committee said that the rules around e-cigarettes should be relaxed even further to encourage more people to vape instead of smoke.

    GTNF speaker Matt Ridley, a member of the House of Lords and acclaimed author, attributed Britain’s progressive stance to two historical accidents.

    In 2010, he related, advertising executive Rory Sutherland called on his friend David Halpern, who ran the Prime Minister’s Behavioral Insights Team (BIT), popularly known as “The Nudge Unit.” While they were talking, Sutherland pulled out a “cigalike,” which Halpern had never seen before. After investigating the category, Halpern and his team urged against a ban on the product.  

    “Indeed, we went further,” Halpern later wrote in a book about the BIT. “We argued that we should deliberately seek to make e-cigarettes widely available and use regulation not to ban them but to improve their quality and reliability.”

    The other historical accident, according to Ridley, is the history of harm reduction in the U.K. When the AIDS epidemic took off in the 1980s, Norman Fowler, who was the health secretary in Margaret Thatcher’s government, made the unpopular and unusual decision to provide heroin users with clean needles.

    Despite widespread opposition—critics said the initiative was condoning and encouraging illegal drug use—the policy was wildly successful. By 2010, only 1 percent of British drug injectors had HIV, compared with 18 percent in America and 48 percent in Brazil. The concept of harm reduction, therefore, got embedded in the British civil service system, according to Ridley. “The people who had worked in this key policy of harm reduction and drug use were also at the forefront when e-cigarettes came along,” he said.

    Ridley reminded his audience that the modern e-cigarette was invented as a harm reduction tool when the Chinese chemist Hon Lik designed a vapor device to help him quit smoking. Harm reduction, he said, is about relative risk; a product does not have to be harmless to be beneficial. “You don’t ban seat belts because they very occasionally kill people,” said Ridley.

    Much of the opposition to harm reduction products, he said, was based on an extreme version of the cautionary principle—better safe than sorry. “The problem with the extreme version of the cautionary principle is that it effectively holds the new to higher standard than existing technology,” said Ridley. He quoted a friend who memorably defined this principle as, “never do anything for the first time.”

    John O’Sullivan, senior fellow at the National Review Institute, noted that risk aversion had risen dramatically in Western society—a development that he considered a serious problem.

    O’Sullivan cited the example of a professor giving a lecture on Nazi Germany at an American university who was told his students might not come to the class because it would give them distress. The university set aside quiet rooms with comfortable sofas where students could recover.

    “If we become completely risk averse, we become different people,” cautioned O’Reilly.

    “In a world from which physical danger had been banished […] would physical courage be likely to survive?” he asked, citing from The Road to Wigan Pier by George Orwell. “The truth is that many of the qualities we admire in human beings can only function in opposition to some kind of disaster, pain or difficulty.”

    O’Sullivan stressed that once people have been given all relevant information, they are entitled to enjoy a product that makes life fun or a bit more bearable. A conservative rather than a libertarian, he doesn’t regard this principle as overriding everything else, however. “If something imposes an immediate threat to health, it should be open to control,” he said.

    And if the threat can be clearly reduced by scientific innovation, then suppliers have a moral duty—and in time probably a legal duty—to reduce that harm, O’Sullivan added. “They also have a duty toward their shareholders to reduce that harm or else they are going to face crippling legal expenses down the line,” he said.

    Peter Nixon, managing director of Philip Morris Limited U.K., related his experience at the forefront of tobacco harm reduction from a business perspective. Having worked for PMI for 15 years, Nixon’s career took an unusual twist when in 2017 the company announced its ambition to end the combustible cigarettes business.

    “The first half of my career, I was selling cigarettes, and in the second half of my career, I have been trying to get people off cigarettes,” said Nixon, reflecting on the unusual pivot.

    To help achieve its vision of a smoke-free world, PMI is encouraging smokers who cannot or will not quit to transition from combustible products to less-harmful alternatives such as its iQOS tobacco-heating device. Nixon stressed that in this process, the role of science and sales are equally important. “You can have the best products, but if nobody buys them, it is useless,” he said.

    Prior to directing PMI’s U.K. business, Nixon led the launch of iQOS in Russia and helped pave the way for the product in Japan. One of the lessons he learned from those experiences was that simply putting the product on the market—like the company was used to doing with cigarettes—is not enough. “When smokers make the change from a smoking product to an alternative, it’s a massive change in their lives, and they have to fully understand the benefits of what they are moving to,” he said. “We have to help consumers make that journey, and it has meant we had to change our business model.”

    To educate consumers, PMI has established dedicated iQOS stores in the markets where the product is sold. Unlike with cigarettes, the process doesn’t end with the sale. The company provides coaches to help smokers with their transformation, and many say that such support has been instrumental in helping them switch.

    “Six out of 10 who buy iQOS are able to completely quit cigarettes and switch to iQOS,” said Nixon.

    The Japanese Experience

    The most stunning example of smokers abandoning cigarettes, of course, has been in Japan, where between 2016 and 2018, cigarette sales declined by 24 percent. In 40 years of tobacco control and 10–15 years of tobacco harm reduction, this development is unprecedented, according to Delon Human, president of Health Diplomats, who moderated a discussion about the phenomenon at GTNF.

    Clive Bates once memorably said that the sky should be darkened by airplanes full of public health specialists flying to Japan to find out why this is happening. Yet somehow it is still the best-kept secret in public health—a condition the panelists attributed to the polarization of the debate. Putt off by the industry’s past behavior, many health advocates are finding it difficult to accept that the sector might be part of the solution.

    The panelists explored the factors that contributed to the rapid decline in Japanese cigarette sales and whether it would be possible to replicate the experience elsewhere. E-cigarettes are banned in Japan but tobacco-heating products are legal and have captured a whopping 21–22 percent of the market since they were first introduced to Japan in 2014.

    Remarkably, as became clear during the panel discussion, many consumers who switched to such products did so out of social considerations (about ash, smell, etc.) rather than health concerns—a reflection of the emphasis placed on harmony in Japanese society.

    Rupert Wilson of Strategic Consulting also pointed out that menthol cigarettes account for a comparatively large share of the Japanese combustible tobacco market. Smokers of such cigarettes, he speculated, might be more receptive to flavored tobacco-heating consumables than smokers of nonmenthol cigarettes. What’s more, Rupert added, the price gap between premium and value cigarettes is smaller in Japan than it is in many other countries, which makes it more likely that smokers of value brands will convert to higher priced tobacco-heating products.  

    The affordability of new products was repeatedly raised throughout the GTNF as a potential hurdle to harm reduction. With the majority of cigarettes now being consumed in emerging markets, panelists agreed reduced-risk products should be made available at a wide range of price points. “One size does not fit all,” said one panelist.

    While acknowledging the importance of tobacco harm reduction, Suzanne Wise, senior vice president of corporate development at Japan Tobacco International, cautioned that the industry should take care to retain its access to capital. “We must maintain the confidence of the financial markets,” she said.

    For decades, investors have looked at tobacco stocks as a reliable source of shareholder returns. The business model was relatively straightforward, with pricing increases offsetting volume decreases. The dramatic impact of noncombustible products in Japan has shaken some investors, according to Wise, causing them to ask pertinent questions such as: Is this the end of a trusted business model? Will the huge amounts channeled into product development pay off—and when? Will consumers transition to less profitable product options, and what impact might this have on margins?

    Wise then drew an analogy with the automobile industry, which is also in the middle of groundbreaking transformation. While there’s lots of excitement about driverless cars, she said, commercialization is still a long way off. “Carmakers stress that continuous improvement to conventional products must fund resolution of driverless technology challenges for a long time to come,” she said. “But there is no shortage of capital to fund research and development in the automobile sector, which suggests investors are open to disruption as long as it’s under control.”

    The same principle, Wise ventured, applies to the tobacco industry’s transformation. “JTI’s positive growth outlook in the noncombustible category is additional to the strength and sustainability of the traditional business,” she said. The company expects both to evolve in parallel over the next 15–20 years.

    Animal Spirits

    The FDA’s Sept. 12 announcement loomed heavily over the GTNF panel discussions, which, in addition to the Japanese experience, focused on risk communication, regulation and flavorings. Panelists lamented that the threatened ban on flavored e-liquids would extinguish the promise of vapor products as tobacco harm reduction tools, and many discussions focused on how to respond.

    Neil McKeganey, founder of the Centre for Drug Misuse Research at the University of Glasgow, urged the industry to establish a robust body of evidence so that it could contest proposed legislative changes with “something other than a purely commercial framework.”

    While doing so would not guarantee success, the absence of such evidence would guarantee failure, McKeganey said.

    “Little Vape,” he suggested, should become more like Big Tobacco in that respect—or risk losing domain. For example, when the FDA extended its deadline for premarket tobacco product applications, many vapor companies were at the cusp of initiating research. Yet instead of doubling down on those efforts, many simply grasped the opportunity to sell their products for a longer period, McKeganey lamented.  

    David Levy, professor of oncology at Georgetown University and an economist, asserted that the impact of regulations would depend on how they affect competition, which he believes is essential in developing lower-risk products.

    Controlled by a handful of large players, the traditional cigarette industry, he observed, is anti-competitive with high barriers to entry, no price competition and little innovation. The vapor industry, by contrast, has large numbers of players, low barriers of entry and many outlets in addition to mass market retail, which dominates in cigarette sales.

    The fierce competition in the vapor category has caused product quality to increase and prices to decline considerably in a short time. Regulation, said Levy, should maintain a level playing field so that competition remains.

    The GTNF concluded with an eight-member panel discussion moderated by Mark Littlewood, director general of the Institute of Economic Affairs. Instructed to rate their level of optimism about the regulatory environment on a scale of 1 to 10, the panel returned a gloomy average of 4.5. Yet when an audience member later asked what to tell a potential investor in the vapor sector, the panelists were unanimous in their advice—invest now. One speaker pointed to the $800 billion cigarette market that could be eaten into, another expressed confidence that science would eventually prevail, while yet another said that it would require only three to five countries with U.K-style regulations to make the global vapor market take off.

    Despite its considerable promise, tobacco harm reduction continues to face many challenges, including inaccurate consumer perceptions, hostile politics and misguided regulations. In addition, there is the problem of deviating goals: While the industry is trying to get people off of smoking, many in the medical community want to get them off of tobacco and related products altogether. But one thing became crystal clear during the 2018 GTNF: If harm reduction fails, it will not be due to a lack of industry commitment to the concept.

    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.
  • Historic Juncture

    Historic Juncture

    Participants in the 2017 Global Tobacco & Nicotine Forum debated the unprecedented current opportunity for public health and business.

    By Taco Tuinstra

    The 2017 Global Tobacco & Nicotine Forum (GTNF) convened in a magnificent place—New York City—at a momentous time.

    “We are at a historic juncture,” said Debra Crew, president and CEO of Reynolds American Inc. (RAI).

    “This is an extraordinary opportunity,” noted Mitch Zeller, director of the Center for Tobacco Products at the U.S. Food and Drug Administration (FDA).

    “We are living in the most dynamic period of change the tobacco industry has ever encountered,” said Kingsley Wheaton, director of next-generation products at British American Tobacco (BAT). “When I think of my own two decades in the industry and the challenges during that period, nothing compares to where we are now.”

    The speakers were referring, of course, to the unprecedented alignment of commercial and public health objectives, brought about by rapid innovation and changing attitudes among the primary stakeholders. Technological breakthroughs have allowed for the delivery of nicotine—a relatively benign yet highly addictive substance—in a way that satisfies consumers without generating the toxins associated with combustion. At the same time, regulators and some in public health have started to acknowledge the continuum of risk—the fact that not all nicotine products are equally harmful.

    The shift began in 2015, when Public Health England stated that e-cigarettes are 95 percent less risky than combustible products and that they may play a role in smoking cessation. That view has gradually gained ground, even among former skeptics.

    In July of this year, FDA Commissioner Scott Gottlieb announced a new tobacco strategy aimed at reducing the amount of nicotine in combustible cigarettes while encouraging innovation in less risky products. By making the most harmful tobacco products less addictive—and by promoting alternatives for adult consumers who still need or want nicotine—the agency hopes to make a bigger dent in tobacco-related death and disease than it would otherwise be able to achieve.

    Also this year, Philip Morris International (PMI)—one of the world’s largest tobacco companies—made a historic pledge to phase out combustible cigarettes. Emboldened by the success of its iQOS tobacco-heating product (THP), the company is now firmly committed to a smoke-free future. To help bring about its vision, PMI announced it would donate nearly $1 billion over 12 years to the recently created Foundation for a Smoke-Free World (also see “Unfinished business,” page 30).

    “We are making one of the greatest single changes in how we are thinking about tobacco control in the past 50 years,” said Derek Yach, president-designate of the new foundation, at the GTNF. “This is putting the finger on the product with seriousness—and it is done using market forces, which means it’s going to be sustained.”

    That insight—that the combination of smart regulation and free enterprise will result in better public health than would a tobacco control regime comprising only top-down edicts—featured prominently throughout the 2017 GTNF.

    “The cigarette train is running out of track,” noted Michael Cummings of the Hollings Cancer Center, with visible satisfaction. Nonetheless, he accepted that there would be opportunities for tobacco companies willing to make the transformation to reduced-risk products. “The smart money is betting on those who invest in the future,” he said.

    Debra CrewRepresenting a company on the forefront of that transformation, in her opening address Crew elaborated on RAI’s ambitious portfolio conversion, which, like PMI’s initiative, envisions a shift from combustible cigarettes toward less harmful alternatives.

    Decades of innovation, she said, have taught RAI two important lessons: the need to satisfy consumers and the importance of educating them. RAI pioneered the THP segment in the 1980s, with its Premier cigarette, but the company was ahead of its time. There was no support for tobacco harm reduction in those days, and, detrimentally, smokers didn’t like the product. RAI learned from the experience and went on to develop more appealing reduced-harm products, not only in heated tobacco but also in the vapor and smokeless segments.

    But even if you have alternatives that satisfy users, consumer adoption still depends on public perception. In the case of vapor products, this remains problematic. “Many consumers incorrectly believe that vaping is just as harmful—or more dangerous—as is smoking,” said Crew. “Negative media and misleading statements from some in public health create confusion about facts and science.”

    She compared Gottlieb’s challenge to develop breakthrough technologies to U.S. President John F. Kennedy’s 1961 call to land a man on the moon. If NASA can put a man on the moon, said Crew, surely the industry can put into smokers’ hands nicotine products that are less harmful than cigarettes but just as satisfying.

    While acknowledging the remarkable public health opportunity, the next speaker, Zeller, reminded his listeners that some of the enthusiastically debated ideas are not new. The tobacco industry, he said, has long understood the roles played by nicotine and combustion in addictiveness and disease, respectively.

    He cited the “particle size dilemma,” in which tobacco researchers recognized that the smoke particle size that most effectively delivers nicotine to the lung—1 micron—is also the one most likely to cause disease. Asked to help solve this conundrum, the research and development organization Battelle suggested to PMI an “instant cigarette” that would deliver the desired components in the form of an aerosol rather than smoke. That was in 1959, according to Zeller—prompting an audience member to quip that PMI came close to having a “predicate” product for its current vapor offerings.

    Zeller expressed concern about the U.S. debate on harm reduction, which he described as “a total stalemate.” He said he hoped Gottlieb’s announcement would reframe the discussion and help realize the agency’s vision of a future where young people would no longer get addicted to cigarettes and adults who still needed or wanted nicotine have access to less harmful products.

    Dorothy Hatsukami, Forster Family Chair in Cancer Prevention at the Masonic Cancer Center of the University of Minnesota, lamented that the tobacco product with the highest toxicity—the cigarette—currently has the greatest addiction potential. A more desirable landscape, she said, would be one in which the most toxic product is substantially less addictive than the least toxic product. An immediate reduction of nicotine would more quickly achieve the FDA’s health goals than a gradual one, she suggested, because it would lead to less “compensatory” smoking, among other unintended effects.

    GTNF speaker Amy Fairchild of the Texas A&M University School of Public Health was more optimistic about the U.S. discussion than was Zeller, having detected movement toward common ground. At the outset of the e-cigarette debate, she said, harm reduction sharply divided the tobacco control community. Many saw in alternative nicotine-delivery systems a Trojan horse that was going to seduce young smokers, result in dual use and “renormalize” smoking.

    But many skeptics, such as the Truth Initiative and the Campaign for Tobacco-Free Kids, have come around to the concept of tobacco harm reduction, according to Fairchild.

    She cautioned, however, that broad acknowledgement of the principle might come at the price of diluting the scope and goals that reformers have sought to achieve. In addition to the continuum of risk, stakeholders should recognize a “continuum of harm reduction,” with varying levels of strictness, said Fairchild.

    “The least restrictive approach requires toleration of the possibility of dual use, recreational use, lifelong nicotine consumption, some youth uptake and, most controversially, the recognition that the tobacco industry is going to be instrumental in manufacturing harm-reduction products—and that it will profit,” she said. Alas, the latter is enough for some health advocates to damage harm reduction as a viable approach.

    Science featured prominently throughout the GTNF, just like it does—or should—in the overall tobacco-and-health debate. Julian Kinderlerer, immediate past president of the European Group on Ethics in Science and New Technologies, which advises European Commission President Jean-Claude Juncker, examined the interaction between science and policy. “Science should provide the information on which policymakers should be basing decisions,” he said. “Often it is the other way around, with policymakers asking scientists to provide that bit of information that will back up their prejudices.”

    Kinderlerer worried about the growing tendency of policymakers to dismiss science altogether. “When the secretary of state for justice in the United Kingdom at the time of the Brexit referendum said, ‘We don’t need experts to advise us,’ one realized we had a problem,” he said.

    Historically, science had been supported through patronage, explained Kinderlerer. Galileo’s work in the 16th and 17th centuries was supported by wealthy individuals, including the pope. As soon as the research didn’t meet the funders’ requirements, the funding stopped. “So, no change there,” he said.

    Kinderlerer stressed that both policymakers and scientists should be held to account. “When policymakers ignore advice, they should tell us why,” he said. In turn, he added, policymakers should insist that, when public money is involved, scientists demonstrate the relevance of their work. “They should ask, ‘What benefit does it provide to our people?’” said Kinderlerer.

    He reminded his listeners that most science is done in industry, a fact that is often overlooked. Industry has a right to have its voice heard, Kinderlerer insisted—and to be shown up if what it says turns out to not be based on evidence.

    While most speakers at the GTNF in New York focused on tobacco and nicotine in the U.S. context, Mark Firestone, senior vice president and general counsel at PMI, provided an international perspective. Globally, he said, reduced-risk products face several types of regulatory hurdles. Some governments ban them outright; others allow them on the market but prevent truthful communications about their benefits. Yet others fail to create a framework altogether, leading to a regulatory vacuum.

    None of these approaches are desirable, according to Firestone. “Launching a potentially reduced-risk product carries uncertainty,” he conceded. “However, there is a paradox in addressing that uncertainty through a pre-emptive ban.” Firestone said it makes no sense to limit the market to current combustible cigarettes, which are certain to be harmful.

    He called on regulators worldwide to establish clear pathways, with standards for product design, oversight of the supply chain, and enforcement against false and misleading statements. “We need a system to bring products to market responsibly, efficiently and effectively,” he said.

    Firestone also urged “pragmatic diplomacy,” citing the example of the French and the Germans, who after World War II created a common market to prevent future conflicts. “For all the EU’s problems, it has worked in its primary objective,” he said. If the French and the Germans could get together after such a devastating battle, Firestone suggested, the belligerents in the tobacco wars should be able to do the same.

    Whereas most GTNF speakers approached the topic of transformation figuratively, describing their new business operations and product portfolios, Hugh Haydon, president of Kentucky BioProcessing (KBP), spoke about the subject literally. KBP uses tobacco plants to produce vaccines more quickly and less expensively than can be done using traditional methods. His talk highlighted a positive utility for a much-maligned crop.

    Jose Luis Murillo, vice president of regulatory affairs at Altria Client Services, agreed with Firestone that viable regulatory pathways are crucial for reduced-risk products—and found the existing U.S. avenues wanting. “Right now, the FDA’s pathways are in significant need of clarification and streamlining,” he said. “Without that, many innovative products will not stay on the market or perhaps even make it to market.”

    The FDA’s “substantial equivalence pathway,” he noted, is essentially closed because it requires tobacco companies to base their applications on a predicate product that was on the market as of Feb. 15, 2007—a time when there were virtually no e-cigarettes commercially available in the U.S. The modified-risk tobacco product (MRTP) application and premarket tobacco product application (PMTA), meanwhile, are unduly burdensome and costly, according to Murillo.

    “If harm reduction is the goal, quickly moving vapor, heat-not-burn and smokeless [products] through the premarket regulatory process should get more and better reduced-harm products to smokers,” he said. “The faster we can do that, the faster we can make an impact on public health.”

    The other key to success, says Murillo, is meeting consumer expectations. “If we develop a reduced-harm product that nobody buys, that’s a failure.”

    Customer satisfaction is also at the front and center of BAT’s approach, as became clear during Wheaton’s presentation. “By creating a range of inspirational products, we aim to ensure that all consumer preferences are met,” he said.

    BAT has invested a whopping £1.5 billion ($1.98 billion) in next-generation products over the past five years, and Wheaton was candid about how the transformation is being funded. “It is the combustible earnings reinvested into a portfolio of next-generation products that have and will propel this business forward,” he noted.

    Wheaton detected in the present environment a win-win-win scenario in which BAT’s new products would benefit consumers, the company and society. “The triple win is about social benefit, delighting consumers and making BAT more sustainable—and profitable,” he said.

    Like other speakers, Wheaton stressed the importance of an appropriate regulatory framework. “Regulation is often draconian, leading to unintended consequences,” he said.

    That was a topic right down the alley of the next speaker, Mark Littlewood of the Institute of Economic Affairs. Littlewood said tobacco attracts heavy regulation because it is different from any other legal consumer good: It is highly addictive, presents risks to health when consumed as intended and offers no “ancillary benefits.”

    “People have to eat or drink something,” he explained. “That doesn’t mean your diet has to be beer, wine, donuts and fast food, but these products provide a secondary life support. With tobacco, on the contrary, you can either smoke or not. It’s a luxury product—a product that is largely self-referential.”

    Littlewood said the advent of less harmful nicotine products would cause the health-damage argument to slip away as a justification for heavy regulation and taxation. “We might get into a situation quite quickly in which a regulatory environment established for combustible cigarettes is simply an anachronism and simply does not apply to the world of next-generation products,” he said.

    To illustrate his point, Littlewood cited several U.K. laws that have been rendered absurd by the passing of time. For example, it remains a criminal offense to wear armor in Parliament, you are not allowed to be drunk in charge of cattle in Wales and England (but presumably it’s OK to be drunk in charge of cattle in Scotland), and it is illegal to handle a salmon “in suspicious circumstances.”

    Littlewood said the force of logic would eventually change the regulatory environment but that progress would be slow. He advised the industry to reach out to the media. The mainstream media, he said, does not like good news, so the industry should tell them how bad regulation is—“that there are perverse consequences—potentially costing many lives—if we don’t get it right, because it will be harder for people to switch from relatively dangerous products to relatively safer ones,” he said.

    Littlewood also called for greater stakeholder engagement. “There are 1 billion smokers, but they are not particularly mobilized,” he said. Compared with other segments of society that consume a product or have a hobby, smokers and even vapers have been astonishingly politically ineffective, according to Littlewood. “Find, inspire, mobilize and motivate consumers—then you’ll have a colossally politically influential group on your side,” he said.

    In his much-anticipated closing address, David O’Reilly, chairman emeritus of the GTNF advisory board and BAT’s group scientific and R&D director, evaluated the momentous changes in the tobacco business over the past decade through the lenses of the GTNF, the consumer and the industry.

    Consumers have never had so much choice, he observed—and the industry is engaging them in a fundamentally different manner. “If we are going to convert smokers to safer, smoke-free alternatives, we can’t just go into a traditional tobacconist and pop the product on the shelves and hope they notice and buy it,” he said. “There is a hurdle that has to be crossed.”

    Vape stores have led the way in consumer education. Visiting one, O’Reilly marveled, is an incredible experience. “You’re taken care of; you’re taught about the product. … You’re made to feel not like an idiot wrestling with this new technology,” he said. BAT’s flagship THP stores were inspired, in part, by vape stores, according to O’Reilly. “And that’s what it’s going to take to convert smokers to smoke-free alternatives.”

    Meanwhile, the advent of new technology has made the “employer brand” of tobacco and nicotine products more engaging.

    “It used to be hard to recruit people into our companies; who would want to work in tobacco?” said O’Reilly. “Now they are flooding us. We are competing for millennials not just with the other [tobacco] companies but with Unilever, P&G, GlaxoSmithKline. Working in our company is more exciting than developing a new washing powder or a beverage or an ice cream—and, by the way, they are going to save a billion lives.”

    Twenty percent of BAT’s senior R&D population has been hired in the past three years, according to O’Reilly. The new recruits have backgrounds in variety of sectors, such as pharmaceuticals, technology and fast-moving consumer goods.

    BAT’s supplier base, too, has changed dramatically. “It used to be fairly static—tow, paper, leaf, wrapping materials,” he said. “Now we are working with some of the best technology companies in the U.S., China and elsewhere—big battery suppliers, consumer electronic suppliers, 3-D printing, prototyping.”

    For O’Reilly, the fundamental takeaway from the New York GTNF was how far behind regulators are—behind the consumers, the science, the products and the manufacturers.

    “Part of me says, ‘Screw them; we’ll make this change’—but of course they could screw this up for us,” he said. “So, we must work with them, to help them see that the industry has changed—that the consumer landscape has changed.”

    O’Reilly then spoke about the need for compassion. When it comes to consumers, it’s easy to rattle off numbers, he noted: 40 million smokers, 11 million smokeless users, 20 million vapers. “But these are people—fathers, mothers, brothers, sons and daughters,” he said. In this context, O’Reilly expressed concern about the FDA’s plan to significantly reduce nicotine in cigarettes. “They are about to experiment on 40 million Americans,” he said. “The experiment could be fantastic; it could rival water sanitation, transforming public health—but it could also go badly wrong. One thing that will help us collectively make the right decision on that is compassion—we need to see our consumers as people.”

    Looking ahead, O’Reilly questioned what the industry would be talking about at the GTNF in 2018. Change, he predicted, would continue at a rapid rate. “How high will tobacco heating go in Japan? How many vapers will there be in the U.S.? Let’s see what happens in the policy and regulatory environment in the U.S.,” he said. “The [FDA’s] July 28 statements were very positive, but as one of my colleagues at Reynolds said, ‘Words are wind. We need to see action.’”

    “Whatever happens,” he concluded, “the GTNF will be at the heart of the discourse of this important transformation of the industry that we love so much.”

    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.
  • Raising the Bar

    Raising the Bar

    Photo: Ekaterina Belova

    Informative, well-attended and transparent, the 2016 GTNF set new standards for tobacco-related events.

    By Taco Tuinstra

    In the eight years since its creation, the Global Tobacco & Nicotine Forum (GTNF) has gone from strength to strength, with each event setting new benchmarks in terms of participation and discussion. True to form, the most recent GTNF, held in Brussels, Sept. 27–29, again raised the bar. Not only did the event attract speakers of an unprecedented caliber; it also broke ground in terms of transparency.

    Unlike previous GTNFs, the 2016 gathering took place without the Chatham House Rule, allowing participants to use and attribute the received information. In addition, the forum was open to representatives of the mainstream press (also see sidebar), providing a stark contrast with the Conference of the Parties (COP) to the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC). Over the years, the COP has repeatedly drawn criticism for banning reporters and other observers from its proceedings.

    The 2016 GNTF also stood out because of the participation of prominent public health advocates, many of whom braved criticism from within their ranks for attending a tobacco event. Prior to the forum, some of the health representatives received a warning letter from the Campaign for Tobacco-Free Kids, urging them to stay home. “We hope your participation in the GTNF 2016 program was just a misunderstanding, which will soon be rectified,” the letter said.

    Reflecting the seismic changes taking place in the tobacco industry, the conference’s theme was “Managing transformation—a sustainable future of tobacco and nicotine.” In his opening address, GTNF advisory board chairman Mark Kehaya thanked the health professionals for their involvement and stressed the importance of engagement. While regulators understandably seek to protect policymaking from vested interest, he said, this is no justification for industry exclusion. “We have valuable expertise to contribute.”

    In recent years, noted Kehaya, the tobacco and vapor industries have developed revolutionary new products to reduce health risks while satisfying the consumer. Such private-sector initiatives have arguably done more to enhance public health than any state intervention. Health authorities in the United Kingdom have even credited e-cigarettes with an unprecedented decline in smoking. “The government got out of the way and did not spend a single penny,” said Kehaya, who is also chairman of Alliance One International and Madvapes.

    Not every country has been as pragmatic, however. In the United States, for example, the Food and Drug Administration (FDA), has consistently ignored studies supporting e-cigarettes. The EU has implemented strict rules, and other governments have banned vapor products altogether.

    GTNF host Patrick Basham, who heads the fiercely pro-market Democracy Institute, raised eyebrows by praising Russia’s Communist Party. While the U.S. Democratic Party banned e-cigarettes at its Philadelphia convention, he explained, the Communists have enthusiastically embraced the new product category. One of their campaigns features an image of Stalin holding a personal vaporizer instead of his trademark pipe, accompanied by the slogan, “Comrades, transform yourself!”

    Presciently, Basham cautioned that vapers might “get their revenge” at the U.S. election, as a disproportionate share of them live in so-called swing states. “Hypothetically, vapers could decide the election,” he said.

    Basham then drew attention to the fact that, after a period of progress, free speech was in retreat worldwide, with governments increasingly prosecuting those expressing contrarian viewpoints. Placed into that context, he argued, events such as the GTNF are even more important. “The best defense against bad policy is free speech,” he said.

    Reassuring his host, the first keynote speaker, Iuliu Winkler, expressed his commitment to sound lawmaking. “We must legislate wisely and manage conflicting interests,” said Winkler, who is vice chair of the European Parliament’s Committee on International Trade.

    In a passionate presentation, Ian Paisley, member of Parliament for North Antrim, U.K., described what happens when politicians discard such advice.

    Paisley’s electoral district is home to the U.K.’s last remaining cigarette factory, JTI’s plant in Lisnafillan. Since its opening in 1941, the facility has employed thousands of workers and contributed millions of pounds in tax revenues. Due to various reasons, including regulatory pressures, the factory will close in 2017.

    Denouncing “regulation for the sake of regulation,” Paisley detected a deliberate failure among lawmakers to understand the consequences of their actions. Recent anti-tobacco legislation, he maintained, had been about destroying the factory rather than promoting health. “None of the measures will stop even one person from smoking,” said Paisley.

    But politicians ignore voters at their peril. While most of Northern Ireland voted to remain in the EU during the recent referendum, North Antrim voted to leave—even though it has received “bucket-loads” of EU subsidies. “People felt that Brussels’ edicts had taken away their factory,” said Paisley.

    Brexit, he ventured, was a response to micromanaging by Eurocrats. According to Paisley, the lofty ambitions that prevailed in the EU’s early days have been replaced by petty rule-making. “Instead of promoting world peace, the EU is now arguing about the font size of health warnings,” he lamented.

    Lofty goals also featured prominently in the presentation of the following GTNF speaker, Alan McGill of PricewaterhouseCoopers, who focused on sustainability. But unlike the EU leaders, who seem to have lost sight of their founding ideals, McGill had given careful thought on how to keep such objectives front and center.

    He encouraged his listeners to reimagine their businesses in the face of societal, environmental and demographic challenges, urging them to move from a shareholders’ mentality to a stakeholders’ mentality.

    And while sustainability is sometimes dismissed as a “soft” goal, McGill insisted it can translate into hard cash. “Green can be profitable,” he said, citing efforts to reduce the use of raw materials or to transform waste into a profit center, like when Puma started using rubber from discarded tires to manufacture shoe soles.

    Giovanni Giordano, British American Tobacco’s (BAT) group director of human resources, focused on the industry’s most valuable asset—its people. The negative public perception of their business means tobacco companies must work harder than other firms to attract the best and brightest.

    Giordano explained that, when first approached, 25 percent of potential recruits rejected BAT out of hand, 25 percent had no problem with tobacco and 50 percent were “reluctantly open-minded—they wished the call had come from another industry.”

    But once BAT’s recruiters dispel the myths about tobacco and communicate the company’s values, an amazing conversation takes places. According to Giordano, BAT ends up recruiting 95 percent of the candidates in the reluctantly open-minded group.

    Marc Firestone, senior vice president and general counsel at Philip Morris International (PMI), illustrated the challenge of establishing a regulatory framework for tobacco by quoting from an imaginary conversation at the WHO.

    “The answer,” he said, “is C10-H14-N2.”

    By citing the molecular formula for nicotine, Firestone demonstrated that some things are a matter of fact, not dogma. To improve decision-making, he said, stakeholders need to move beyond preaching and counter-preaching. Polarization should be replaced by pragmatism.

    A regulatory framework, in Firestone’s view, must be fit for purpose. In this context, he also cautioned against “the risk of risk aversion.” Tools to manage uncertainty should not block innovation.

    “The goal is to avoid a drug-adverse event,” said Firestone. “Regulators should minimize unintended consequences and reduce barriers to progress.”

    Too often, unfortunately, lawmakers fail to fully consider the impact of their proposals. Recent suggestions to mandate severe nicotine reductions in tobacco products could well yield the unintended consequences Firestone warned against.

    Jack Henningfield, vice president of research and health policy at Pinney Associates, led a panel discussion about the promise and the peril of nicotine reduction strategy.

    Having lain dormant for some time, the concept of nicotine reduction has recently resurfaced. While the FDA is by law prohibited from reducing nicotine contents to zero, it has authority to reduce nicotine to nonaddictive levels. Furthermore, the 2014 U.S. Surgeon General’s Report and a 2015 WHO TobReg advisory note discussed a regulatory approach that would require the reduction of cigarette nicotine content to a level that could not readily cause or sustain dependence.

    Most speakers agreed that mandating nicotine reduction is a bad idea. “Forced change works only if there are viable alternatives,” said David Sweanor, adjunct professor of law at the University of Ottawa.

    A better approach toward harm reduction, he said, would be to incentivize the market, through lighter taxation on less harmful products, for example.

    “If there are viable alternatives, you won’t need the coercion.”

    This viewpoint was echoed by Rolf Lutz, director of product policy at PMI. “Nicotine is the primary addictive substance, but most toxins result from burning tobacco,” he said. “We must move people to noncombustible products.”

    Clive Bates of The Counterfactual dismissed nicotine reduction as “the worst strategy ever.”

    “Let’s face it: Nobody will use such cigarettes,” he said. “Smokers will divert to counterfeits, thus subverting the intentions.”

    Day 2

    The second day of the GTNF followed the same format as the first, featuring a plenary session focusing on the industry’s grand themes in the morning, followed by breakout sessions on more narrowly defined topics in the afternoon. (To read about individual breakout sessions, please visit www.gtnf-2016.com.)

    Carolyn Hanigan, president of the recently established RAI Innovations Co., said technological progress presented a once-in-a-generation opportunity. But even as vapor products held much potential, she said the category also faced obstacles, such as a lack of epidemiological data, negative press coverage and poor product integrity. Two-thirds of Americans believe vaping is as harmful as smoking, she noted, while exploding batteries continue to generate negative headlines.

    According to Hanigan, the proper way to deal with such challenges is to obtain clarity regarding the relative risks of vaping and to establish product standards.

    Technology, too, must further improve, as too many consumers are returning to smoking, unsatisfied with the current vaping experience. “We need game-changing innovation,” said Hanigan. “That’s RAI’s mission—to help realize the potential.”

    Francis Crawley, executive director of Good Clinical Practice, highlighted another obstacle: the increasing difficulty tobacco companies are facing in getting their research published. In recent years, prominent publications, such as The BMJ, have stopped accepting papers from the tobacco industry, arguing that tobacco companies profit from nicotine addiction and have in the past used research to produce ignorance.

    Crawley believes such policies are wrongheaded. “There is an obligation to review all science,” he said. Research, he added, should be judged on its quality rather than its source. What’s more, organizations such as the WHO and the EU require tobacco companies to conduct research. “You cannot oblige people to do science and then prohibit them from publishing their findings,” said Crawley.

    Peer review can be an effective way of exposing bad science, and Sinclair Davidson, professor of institutional economics at RMIT University in Melbourne, Australia, had a field day debunking a government study suggesting that Australia’s plain packaging experiment had been successful in reducing smoking prevalence.

    By cherry-picking the data, said Davidson, the study’s authors had created an optical illusion of an above-trend decline in smoking following the introduction of generic packs, which he described as “medical pornography.” In reality, according to Davidson, the most significant change in smoking behavior has been a significant increase in sales of deep-discount cigarettes at the expense of more pricey varieties.

    The morning ended with a panel discussion titled “Advancing public health with new products and regulatory frameworks.” Moderator Henningfield said the recent alignment between health and commercial interests presented considerable opportunities, but added that success would depend on effective regulatory frameworks.

    George Adams, a cardiologist for Rex Healthcare at the University of North Carolina, showed a video explaining vascular disease, which he compared to a plumbing blockage.

    While the medical guidelines promote smoking abstinence, Adams noted that traditional cessation therapies are successful only for highly motivated people. From experience in his practice, he believes that e-cigarettes are more effective in weaning people from combustibles. “I need you to help me help them by developing effective devices,” he pleaded with his audience. “Give me something to save lives.”

    Germana Barba, director of corporate affairs and reduced-risk products at PMI, which has had considerable success with its new iQOS heat-not-burn technology, said her company intended to do just that. PMI’s mission, she maintained, was to convince every smoker to switch to less harmful products.

    However, because the new products are vastly different, they need an appropriate regulatory framework. “We cannot simply extend cigarette regulations,” said Barba. Health warnings should reflect the different nature of the new products, she added, and governments should allow companies to communicate their innovations.

    Bates argued for a hands-off attitude toward new products. “Doing nothing has been the approach until recently—and it has worked remarkably well,” he said, referring to the historical low smoking rates in the U.S. The FDA’s deeming regulations, he noted, clearly don’t meet the do-nothing criteria.

    Bates also cautioned against unintended consequences. “Banning e-cigarettes ads may seem reasonable, but it protects combustibles,” he said.

    Nicotine dependence expert Karl Fagerstrom said the concept of harm reduction need not be proved to regulators, because a successful example already exists. The legal availability and social acceptance of snus in Sweden has contributed to a male smoking rate of only 7.9 percent—the “endgame” level targeted by some health advocates.

    Mike Ogden, vice president of scientific and regulatory affairs for RAI Services, said regulators and the industry should work together to create a framework that allows for innovation and common-sense regulations. New products, he said, ought to balance harm reduction with customer satisfaction. “A zero-risk product has zero health benefits if nobody uses it,” he said.

    Summarizing his takeaway from both public health panels, Henningfield said, “The race to transform the market and migrate smokers from cigarettes to less harmful noncombustible products should be embraced by both proponents and opponents of nicotine reduction because it is essential to enable a nicotine-reduction policy, but it could also reduce the apparent need for such a policy and tolerance for the potential perils of the policy.”

    The panel participants agreed that moving consumers away from combustibles would require a broad selection of products to suit diverse preferences, a concept that neatly aligned with the topic of the GTNF’s final presentation.

    Like last year, the much-anticipated closing keynote was delivered by David O’Reilly, BAT’s group scientific and R&D director and chairman emeritus of the GTNF advisory board.

    O’Reilly focused on the fragmentation of the market. Stimulated by social media, today’s consumers are increasingly looking for unique sensory experiences; they expect choice. This trend is not limited to nicotine products but extends to many other categories. Consumers can now select from a bewildering array of coffees and breakfast cereals, for example. The U.S. beer market—traditionally dominated by large conglomerates—has recently experienced an explosion in the number of microbreweries.

    For the tobacco business, the 20th century was unique in that it was dominated by a single product, the combustible cigarette—but that is changing rapidly. O’Reilly reminded his audience that tobacco is the only fast-moving consumer goods business where most users want to stop using its main product. Price hikes, smoking restrictions and social stigmatization have only added to the pressure to abandon cigarettes.

    Until recently, that did not matter for the industry because nicotine-craving smokers had nowhere else to go. But with the rise of next-generation products, users have started switching, and tobacco companies are forced to adapt. “We must change with the consumer, not vice versa,” said O’Reilly.

    To win in the new nicotine space, companies should develop a solid understanding of consumer switching, while gaining sharp insights into next-generation products. O’Reilly went on to describe the platforms that BAT is developing to meet the changing consumer demands—Vype (vapor), Glo (heated-tobacco), iFuse (hybrid) and Voke (licensed medicinal product).

    Tobacco companies have a choice, he said, returning to the conference’s “Managing transformation” theme. “We allow disruption to happen to us, or we do it ourselves.”

    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.
  • A compelling intersect

    A compelling intersect

    Im age: Vivida Photo PC

    Convening in Bologna, industry stakeholders detect a win-win-win scenario—provided that certain conditions are met.

    By Taco Tuinstra

    Held Sept. 15–17 in Bologna, Italy, the Global Tobacco & Nicotine Forum (GTNF) took place shortly after Public Health England’s remarkable acknowledgment that e-cigarettes are substantially safer than their combustible counterparts—the strongest such recognition yet by a prominent government-sponsored agency. The announcement fit into a pattern that many GTNF participants had already detected but that hard-line industry critics remain reluctant to acknowledge: the unprecedented alignment of commercial, consumer and public-health interests.

    The win-win-win scenario was cited repeatedly throughout the conference. But even as speakers extolled the potential for tobacco harm reduction, they recognized that the window of opportunity is small and that the hope represented by next-generation tobacco products could easily be extinguished by ill-conceived regulation, excessive taxation and misinformation.

    The Bologna gathering was the sixth iteration of the event, which Tobacco Reporter pioneered in 2008 under the name Global Tobacco Networking Forum. After its debut in Rio de Janeiro, subsequent GTNFs in Bangalore, India (2010); Antwerp, Belgium (2012); Cape Town, South Africa (2013); and West Virginia, USA (2014) each attracted a greater diversity of participants than the one before it. In addition to senior executives from the tobacco and vapor industries, the 2015 forum brought together suppliers, academics, public health advocates, government officials, consumer groups and representatives of the financial community, among others, demonstrating that these widely divergent groups now have more in common than ever.

    The “tobacco” industry, of course, has changed significantly since 2008. Many of today’s products—vaporizers, tobacco heating devices, nicotine strips, etc.—bear little resemblance to combustible cigarettes; some don’t even contain tobacco. In recognition of the evolving market, Tobacco Reporter, at the urging of the GTNF advisory board, changed the name Global Tobacco Networking Forum to Global Tobacco & Nicotine Forum.

    The Bologna forum was the first to convene under the new moniker. It also marked the end of David O’Reilly’s tenure as chairman of the GTNF advisory board (also see sidebar). O’Reilly, who is group scientific director and R&D director at British American Tobacco (BAT), has led the GTNF board for the past two years and is credited with elevating the event to new heights, bringing in speakers of unprecedented caliber and fostering top-notch discussions.

    Tobacco Reporter’s publisher and global events director, Elise Rasmussen, presented O’Reilly with a plaque to thank him for his guidance and leadership. She also gave him an inscribed silver tankard, teasing that if he wasn’t already a drinker, the GTNF-related stresses and responsibilities would have surely driven him to become one. O’Reilly’s successor as GTNF advisory board chairman is Mark Kehaya, chairman of Alliance One International.

    Like previous GTNFs, the Bologna event was hosted by Patrick Basham of the Democracy Institute, a think tank with offices in London and Washington, D.C. Basham jokingly compared his recurring performances to those of Sisyphus, a Greek mythological figured condemned to repeatedly push a boulder up a hill, only to watch it roll back down.

    He said Bologna was an inspired choice as host for the GTNF. Affectionately known as La Dotta—“the learned”—the city is home to the Western world’s first university, established in the 11th century. (Bologna is sometimes also referred to as La Grassa—“the fat”—for its fine cuisine, and La Rossa—“the red”—for its characteristically colored roofs and left-leaning politics. But while the food served during the GTNF more than lived up to the city’s reputation, none of the speakers advocated greater state intervention.)

    The Bologna region later stood at the cradle of the Renaissance, a period of scientific revolution, skepticism of authority and respect for individuals—beliefs that are now under threat, according to Basham. Describing the present as “the age of unreason,” Basham bemoaned what he saw as a push to limit choice and thwart technology, particularly in the tobacco and nicotine sectors. Basham insisted that progress would happen only through innovation, reminding his audience that “the Stone Age did not end for lack of stone.”

    The themes of innovation and reasonable regulation were echoed by Marco Mariotti, senior vice president of corporate affairs at Philip Morris International (PMI). Now is an important time for the industry, he noted, with tobacco harm reduction objectives and commercial objectives starting to align.

    While combustible cigarettes are likely to remain at the core of PMI’s business for years, the company has been investing heavily in next-generation products. In 2014, PMI launched its revolutionary iQOS product (manufactured near Bologna), which heats rather than burns tobacco, and as a result greatly reduces the smoker’s exposure to toxicants. The heat-not-burn principle, of course, has been tried—and abandoned—before, but advances in technology suggest the current generation of products stands a greater chance of being accepted by both regulators and consumers.

    Mariotti said governments have three options when dealing with new technologies—they can stop, slow down or accelerate their development. Unsurprisingly, Mariotti preferred the last: “Regulators should incentivize smokers and innovation,” he said. “They must promote trials, allow communication and set high standards—but not so high as to discourage innovation.”

    The next speaker, Japan Tobacco International’s (JTI) senior vice president of global leaf, Paul Neumann, covered another issue prominently on the minds of many attendees—sustainability. In 2009, the cigarette manufacturer entered the leaf tobacco business through the purchase of Tribac and Kannenberg, among other initiatives. But contrary to what some might think, saving money was not the objective, according to Neumann. “The purpose was to take responsibility and secure a long-term supply of tobacco,” he said. Among other things, this meant addressing environmental and governance issues, such as deforestation and child labor. The company also wanted to send a message to growers that tobacco farming, if done properly, can be profitable. From JTI’s perspective that entails being loyal and paying fairly, according to Neumann. “We are working to make the tobacco supply chain a model for other agricultural businesses,” he said.

    Sticking with the topic of leaf tobacco, Airton Hentschke, senior vice president and chief operating officer of Universal Corp., detailed his company’s efforts to increase the efficiency of its field operations through technology. Following the philosophy that you cannot manage what you cannot measure, the company pioneered an information technology system, Mobileaf, that allows it to gather and process field data in real time using computer tablets connected to a central database. The reduction in paperwork, together with the higher quality of information, allows the company to better plan its operations, respond faster to field developments and, ultimately, produce tobacco more cost-effectively. Mobileaf is also a boon to traceability, a topic that will become even more important as Universal expands into the liquid nicotine business.

    Wan Saiful Wan Jan, CEO of the Institute for Democracy and Economic Affairs, a pro-market think tank based in Kuala Lumpur, Malaysia, said he had been surprised to receive an invitation to speak at the GTNF, the conference of a “sin industry.” But after contemplating the location—“a city with so many churches”—he had felt comfortable accepting, quipping that finding redemption would be easy in Bologna. Wan said he was not a supporter of the tobacco industry—just like he didn’t support the pharmaceutical or automotive sectors. “In fact, I don’t support any industry,” he said. “But I support the market and consumers’ right to choose.”

    Wan cautioned against the habit of multinational companies operating in developing countries—particularly in Southeast Asia—to speak only to government representatives. While businesses happily engage with civil society in developed countries, he observed, their views mysteriously change “on the flight from Washington or London.” As a result, when issues come up in the developing world, companies have little leverage to influence policies.

    The recent calls in Southeast Asia to exclude tobacco from free trade agreements are a case in point, according to Wan. “The industry has few friends left who are willing speak up for it,” he said. Wan suggested tobacco companies change their strategies. “It’s not enough to talk to power. You must engage the public and hope for more organizations complementing our work.”

    The ensuing panel discussion on trade issues saw an impassioned plea by Francois van der Merwe, chairman and CEO of the Tobacco Institute of South Africa, to protect the most vulnerable members of the tobacco supply chain—farmers. “It’s easy to talk about the impact of trade from air-conditioned offices in Geneva,” he thundered. “We must make governments recognize the contributions of tobacco.” The damage done to farming communities by extreme anti-tobacco measures is greater than the advantage to public health, according to Van der Merwe. “The industry must draw a line in the sand.”

    Karen Blakeley, a senior lecturer at Winchester Business School, led an inspiring discussion about ethics, a field that deals with issues of right and wrong but is easily confused with questions of, say, what is practical. Needless to say, the issue of ethics features prominently in the tobacco industry, whose products—especially its combustible ones—present a well-established risk to health. But while the tobacco industry has contributed to the problem, some suggest it is increasingly part of the solution, as new technologies have enabled the development of potentially less-harmful products.

    Kgosi Letlape, president of the African Medical Association, reminded the panelists of the doctor’s oath, which is “do no harm,” rather than “do less harm”—but then he quickly pointed out that doctors practice harm reduction already, because that’s all they can do. “In the end, people die anyway,” Letlape said. The question for tobacco ethicists, he explained, is how to deal with human vice and reduce suffering. Clive Bates, director of Counterfactual, presented the audience with a thought experiment: Would you accept half the number of smokers if it meant twice the number of nicotine users? Developing harm-reduction products makes sense from both a commercial and an ethical standpoint, the panelists agreed.

    Day 2

    The second GTNF day had the same format as the first, featuring a plenary session focusing on the industry’s grand themes in the morning followed by breakout sessions on more narrowly defined topics in the afternoon (to read more about individual breakout sessions, please visit www.gtnf-2015.com).

    Kingsley Wheaton, managing director of next-generation products at BAT, kicked off the morning with what he described as a reassuring yet challenging message.

    Over the past three years, BAT has invested a staggering $750 million in researching and developing next-generation products. Eager to lead the segment, the company aims to offer consumers a choice of products across the risk the continuum, including vapor, tobacco-heating and licensed medicinal products. According to Wheaton, BAT was the first international tobacco company to launch an e-cigarette (Vype). Its licensed medicinal product (Voke) will be the world’s first cigarette-shaped, breath-activated nicotine inhalation product. Later this year, BAT plans to test-market a tobacco-heating product.

    While combustible cigarettes—the product ranking highest on the risk continuum—would remain the mainstay of BAT’s commercial delivery for a long time, that business also generated the funding required to develop less-harmful next-generation products, noted Wheaton.

    Wheaton believes that next-generation products have the potential to create a win-win-win situation—a win for society as public health aims are advanced, a win for consumers as exciting new products become available and a win for shareholders as sustainable value is generated.

    However, for next-generation products to deliver on their promise, he said, several conditions would need to be met: Companies would need to have the freedom to develop and market compelling products, governments would need to enact appropriate regulatory frameworks to ensure consumer safety, a “coalition of the willing” should communicate cohesively on the benefits of next-generation products, and fiscal treatment should be aligned with the continuum.

    Providing useful context to the discussions about next-generation products, Jack Henningfield, vice president of research, health policy and abuse liability at Pinney Associates, reviewed the history of tobacco harm reduction. Henningfield disagrees with the often-heard criticism that harm reduction undermines smoking cessation, which is generally accepted as the healthiest course of action. Harm reduction, he said, is practiced successfully in many areas, such as when motorcyclists wear helmets or intravenous drug users participate in needle-exchange programs or use government-approved replacement drugs for heroin.

    Encouraged by the U.S. government, tobacco companies in the 1950s and 1960s focused on reducing tar deliveries through filtration and other technologies. “Light” cigarettes did not result in lower rates of smoking-related disease, however, and as a result developed a bad reputation in the tobacco control community. In the 1980s a consensus emerged that harm reduction had failed. Pharmaceutical companies stepped into the void with nicotine-replacement therapies (NRT), but with limited success. Regulators resisted the use of NRT as a harm reduction tool to reduce smoking.

    Henningfield suggested smoking cessation should be viewed as a means, not an end, to better health. Endorsing harm reduction for those who can’t or won’t quit is a potentially important complementary means to better health, he said.

    The 2009 U.S. Family Smoking Prevention and Tobacco Control Act includes harm reduction, but with very high standards—a fact that Henningfield attributed to lingering mistrust of the tobacco industry.

    E-cigarettes provide the best harm-reduction opportunity yet, according to Henningfield, but they have divided the public health community and confused regulators, leading to travesties such as vapers being forced to use their devices in smoking rooms, where they are exposed to the very toxins they want to avoid.

    Henningfield pled for urgent product-performance standards and for cooperation among stakeholders to help tobacco harm reduction efforts succeed. “Together we can do this,” he said.

    In a passionate presentation, Patricia Kovacevic, general counsel and chief compliance officer at Nicopure Labs, in the U.S., urged the audience to avoid a future characterized by aggressive over-regulation, or even full-blown prohibition, and help bring about a scenario of sustainability and growth, while improving consumers’ quality of life and enjoyment.

    Kovacevic recalled how, growing up in communist Romania, she became fascinated with Umberto Eco, a novelist, philosopher and semiotician, perhaps best known for his book The Name of the Rose. (Eco is also president of the Bologna University Graduate School for the Study of Humanities.) “Some girls at 14 wanted to meet Michael Jackson; I wanted to meet Umberto Eco,” she said. So her mother brought her to Bologna twice—but each time it was summer so the university was not in session. Finally, in the early 1990s, she came to Bologna by herself and managed to listen to one of Eco’s lectures.

    Kovacevic said the episode taught her two things—that perseverance can get you anywhere and that 30 years pass in the blink of an eye.

    Using those insights, she speculated on what the tobacco and nicotine industries might look like in 2045. Regulation, said Kovacevic, is the single most important factor in harm reduction today, reminding her audience that, by the time of the next GTNF, e-cigarettes will be regulated in all European countries. Different regulatory outcomes in different jurisdictions could point the industries into opposing directions, however. This, according to Kovacevic, would not be a constructive approach.

    Despite the challenges, she expressed cautious optimism about the future. “We have the knowledge, the willpower, the motivation and the resources to act and steer the course toward constructive action, meaningful and sound harm reduction research, toward compelling and long-lasting results.”

    Riccardo Polosa, professor of internal medicine at the University of Catania, examined the characteristics of nicotine as the industry is developing methods of “cleaner” nicotine consumption—that is, nicotine without the combustion byproducts that are reckoned to be the major contributor to smoking-related disease. The ensuing public health panel discussion, led by Delon Human, president and CEO of Health Diplomats, touched on the challenges of getting industry research published, the importance of reliable and accurate information on the health effects of e-cigarettes, and the appropriate fiscal treatment of tobacco-related products along the continuum of risk, among other topics.

    Having opened the conference the previous day in his role as GTNF advisory board chairman, O’Reilly also delivered the GTNF closing speech, this time as BAT’s group scientific and R&D director.

    He called for a reframing of the “endgame” envisioned by some in public health. With the advent of reduced-risk tobacco and nicotine products, O’Reilly said, consumers, industry shareholders and the tobacco control community had arrived at a crossroads where their interests intersect. The tobacco industry had become part of the solution, rather than just the problem. Its formidable research and development capabilities, consumer understanding and financial resources—for the time being still funded mostly by the sale of combustible cigarettes—put it in a unique position to further reduce tobacco-related death and disease by bringing new products to market.

    Yet some in the public health community remain stuck in the past, according to O’Reilly. Driven by irrational hatred of the tobacco business and contempt for its consumers, they refuse to engage with the industry, calling even for its eradication. Illustrating his point, O’Reilly reminded his audience of the chilling words spoken by World Health Organization Director-General Margaret Chan during this year’s World Conference on Tobacco or Health: “We should not give up until we make sure the tobacco industry goes out of business.”

    O’Reilly was adamant that such reluctance should not be allowed to get in the way of progress. “The market has almost always been a better driver of change generally than government interference, and the potential health benefits to the individual consumer and the economic benefits to the industry present a potential win-win scenario,” he said.

    Ending the conference on a positive note, O’Reilly insisted the endgame should be not for the industry but for tobacco-related disease.

    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.
  • Civil discourse

    Civil discourse

    Photo: AIGen

    The GTNF reached new heights at The Greenbrier in 2014.

    By Taco Tuinstra

    The Greenbrier was a good choice for the 2014 Global Tobacco Networking Forum (GTNF)—not just because staying at a posh resort is more conducive to highbrow debates than “roughing it” at lesser venues, but also because the history of the famous West Virginia property mirrors that of the tobacco industry and its detractors.

    In the late 1950s, at the height of the Cold War, the U.S. government secretly built a massive nuclear- fallout shelter underneath the complex. Fearing a Soviet attack, it wanted to create a place from which lawmakers could safely manage whatever remained of their country in the aftermath of such an event. Protected by almost seven meters of topsoil, 60-centimeter reinforced concrete walls and a blast door weighing 25 metric tons, The Greenbrier bunker contained enough supplies to sustain government business for years.

    Fortunately, the Cold War did not turn hot, and the bunker was never used as intended (although it was put on high alert during the Cuban missile crisis). After The Washington Post revealed its existence in 1992, the facility was decommissioned and opened to the public. The shelter now attracts hundreds of visitors each year, including tobacco people. During the GTNF welcome reception, the host of the evening, Alliance One International, encouraged its guests to join guided tours of the underground structure.

    Industry Analogy

    The evolution from secrecy to openness, along with the shift from keeping people out to inviting people in, are familiar themes to those working in the tobacco industry. During the infamous tobacco wars of the previous century, the industry and its adversaries “dug in,” as convinced as each party was of its position. Only relatively recently have representatives of both sides started speaking with one another, having realized there is more to be gained from dialogue than from confrontation.

    The bunker mentality is slowly giving way to one of cautious engagement, and Tobacco Reporter’s GTNF has played a role in that process. After its debut in Rio de Janeiro, subsequent GTNFs in Bangalore (2010), Antwerp (2012) and Cape Town (2013) each attracted more visitors than the previous event, with an ever-greater diversity of participants and discussion topics. By bringing together people from all sides, the GTNF has helped nurture a discussion among industry representatives, health advocates and other stakeholders, such as regulators.

    The Greenbrier GTNF, which took place Oct. 1–4, 2014, went a step further in its pursuit of transparency. During the plenary session on opening day, the organizers suspended the Chatham House Rule, which governs the way information obtained at the GTNF can be shared outside of the event, and invited members of the mainstream press. Articles subsequently appeared in prominent media outlets such as USA Today, Bloomberg and Businessweek.

    In his opening address, David O’Reilly, British American Tobacco’s group scientific director and chairman of the GNTF advisory board, described GTNF as a conduit for reengagement with society. “As a respectable business, it is incumbent upon us to be upfront,” he said. Acknowledging that the industry had not always lived up to that standard, O’Reilly said the sector should admit past failings while advocating its legitimate role going forward.

    Like previous GTNFs, the Greenbrier event was hosted by Patrick Basham of the Democracy Institute, a think tank with offices in London and Washington, D.C. Making light of his attempts to dodge the role in West Virginia, Basham related a dream in which Tobacco Reporter’s famously-persistent global sales and events director, Elise Rasmussen, managed to recruit him for the GTNF even after he had died. As Basham was about to enter heaven, in his dream, St. Peter handed him his cellphone, with the dreaded words, “It’s Elise.” Basham went on to dismiss the mindset he suspected to be behind some of the more extreme anti-tobacco measures—“The nightmare that someone, somewhere might be happy.”

    Top Guns

    Since the event’s Rio de Janeiro premiere, each successive GTNF has attracted a higher caliber of speakers. Whereas the early events were dominated by consultants and marketing managers, GTNF today is able to recruit from the industry’s highest echelons, thanks in part to the assistance of the advisory board. The Greenbrier conference featured the CEOs of two prominent tobacco companies—Reynolds American’s Susan Cameron and Lorillard’s Murray Kessler—and the director of the U.S. Food and Drug Administration’s (FDA) Center for Tobacco Products (CTP), Mitch Zeller.

    Cameron had recently returned from retirement, drawn by “the unfinished business of transforming tobacco.” Reynolds has been expanding its portfolio to include tobacco products with different risk profiles, including smokeless tobacco, dissolvable products and snus. According to Cameron, it is the only tobacco company offering quit-smoking aids. In 2013, the firm entered the vapor segment with its own e-cigarette, Vuse.

    Cameron said the success of such harm-reduction initiatives would depend on collective action by the industry and regulators. She pleaded for the equal treatment of all companies, and for an even distribution of the financial burdens, so that user fees and taxes would be collected not only from the larger, easier-to-find businesses.

    More controversially, Cameron argued for the strict regulation of open-system vapor products, which in her view present a unique risk. Open systems, she said, are subject to tampering, and with thousands of permutations on the market, it is difficult to know what consumers are getting. Cameron suggested such concerns threaten the industry’s long-term viability. And while insisting Reynolds didn’t want to put vape shops out of business, she called on the FDA to keep close tabs on all such establishments.

    In a testament to GTNF’s mission of promoting engagement, Cameron’s comments sparked a lively debate, both at The Greenbrier and in the U.S. vapor community. In one of the GTNF breakout sessions, a vape shop owner remarked that his company would not have survived without open-system products. The closed-system cigalikes, he pointed out,simply don’t provide the satisfaction his customers are looking for.

    Lorillard CEO Murray Kessler lauded the timeliness of The Greenbrier GTNF, noting that the industry was at a critical junction. After 50 years of polarization, he said, there was an opportunity to break down the ideological walls. Speaking underneath an image of the infamous 1994 Waxman hearings, during which the CEOs of America’s leading tobacco companies testified to Congress that nicotine is not addictive, Kessler predicted that the future would be based on science, not rhetoric.

    There is new leadership at the FDA and in the industry, he observed—and both parties are committed to tobacco harm reduction. But Kessler insisted the harm-reduction strategy should include abstinence and risk modification, given the fact that tobacco will continue to be legal (Congress has explicitly ruled out prohibition). “We need an alternative to the quit-or-die message,” he said.

    CTP director Zeller—a representative of the new leadership referred to by Kessler—provided insight into the center’s strategy and priorities. The CTP was created in the wake of the 2009 Family Smoking Prevention and Tobacco Control Act, which gave the FDA the authority to regulate tobacco.

    Zeller reminded his audience of tobacco’s toll on public health, which includes hundreds of millions of premature deaths in the 20th century. Fifty years after the surgeon general first warned people against the risks of tobacco use, some 42 million Americans still smoke, he said, with 3,200 teens lighting up their first cigarette every day.

    “Product regulation is an opportunity to reduce the death and disease associated with tobacco use,” he said.

    The CTP’s mission, Zeller explained, is to reduce harm at both the individual level and at the population level. Like the industry, the agency recognizes a continuum of risk, with combustible cigarettes—the most harmful product type—on one end of the spectrum and nicotine-replacement therapies on the other. Regulation, he said, could help shift people down the risk continuum, although the best outcome would still be consumers discontinuing tobacco use altogether.

    Reduced harm products present the CTP with a challenge, however. While they may reduce the risk to an individual user, their availability could also prevent consumers from choosing the healthiest option—tobacco cessation—or entice new users to the category, thus increasing risk at the population level. Some are also concerned about consumers “upgrading” to more dangerous tobacco products.

    Because it is difficult to determine the population impact of a product before it hits the market, Zeller said that any approvals for modified-risk tobacco product claims would be time-limited, and applicants would be required to renew their applications at regular intervals.

    Zeller also commented on the agency’s backlog in processing substantial-equivalent and modified-risk product applications, which has been a source of industry frustration. He attributed the problems to limited resources and the poor quality of some applications. Howver, considerable progress had been made,  he suggested, while admitting that more could be done.

    An entirely different presentation came from John Cameron, creator of Emperor Brands and brother of the famous filmmaker James Cameron (Avatar). Cameron started by declaring his love of smoking—“If I could, I’d smoke in my sleep”—and then went on to predict the demise of the traditional tobacco sector.

    Drawing analogies with the fates suffered by the music and print-publishing industries in the wake of new technologies, he insisted tobacco’s end was nearer than even the gloomiest analysts anticipated. “It’s over,” he said, flipping through graphics to illustrate his point.

    In tobacco’s place will arise a vibrant high-tech business, according to Cameron. E-cigarettes, after all, are not tobacco but technology. And the required hardware and software could become “the largest business on the planet.”

    “All major brand owners—Harley Davidson, Starbucks—will have their own line of e-cigarettes,” said Cameron. Enthralled by the possibilities, he described technologies to monitor lung function, nicotine uptake and puff counts. “In the future, when you see an e-cigarette, you will think health, not harm,” he marveled.

    Part 2

    The second GTNF day had the same format as the first, with a plenary session in the morning followed by breakout discussions on more narrowly defined topics in the afternoon. Chris Koddermann, Philip Morris International’s (PMI) director of government affairs, reflected on two years of generic tobacco packaging in Australia during the plenary session.

    While Australia’s discount cigarette segment and illicit trade have grown since the measure’s introduction in December 2012, overall cigarette consumption has not declined in excess of the long-term trend, according to independent research commissioned by PMI. Koddermann also dismissed “evidence” for plain packaging in the form of increased calls to quit-smoking lines after the law came into effect. He said such spikes were to be expected in January, when people make their New Year’s resolutions. Overall, the limited impact of plain packaging had not justified the destruction of the industry’s valuable intellectual property, according to Koddermann. (For an entirely different view on the topic, see “Pleased as punch,” on page xx.)

    Mark Kehaya, chairman of AOI, said the tobacco industry has a unique opportunity and responsibility to contribute to global food security. As populations increase and diets change, he noted, agriculture is increasingly under pressure. In order to meet the growing demand, subsistence farmers must become net food sellers. The tobacco industry, which contracts with tens of thousands of small growers and often has sophisticated grower-management systems, can help bring this change about. Kehaya said AOI’s efforts had resulted in a threefold increase in food production in some of its growing areas. He stressed the importance of tracking progress in promoting responsible agricultural practices and solving food needs, which would help build credibility. The industry needs to be part of the solution, according to Kehaya. “If not, we will be blamed.”

    Tobacco’s public-image problem was the subject of two presentations. Communications and issues management expert Paul Richmond explained how technology and social media have changed the field of reputation management beyond recognition. People today expect to know everything, he said. “You cannot engage too much.” Noting that tobacco’s voice had been lost in the debate, he suggested the industry do more to demonstrate the diversity of opinion. In particular, it should tackle the widespread misgivings about its involvement in the vapor business.

    Speaking on the same topic, another expert encouraged the audience to study examples of instances in which public opinion had shifted considerably, such as alcohol. In response to concerns about alcohol-related traffic accidents, the U.S. alcohol industry created the campaign “Friends don’t let friends drive drunk.” As a result, the public debate is now focused onresponsible drinking, rather than not drinking.

    Of course, the concept of responsible smoking is more tenuous, but that may change with the rise of vapor products. Other examples of U.S. public opinion shifts relate to gay marriage, marijuana use and nuclear energy, all of which enjoy considerably higher levels of acceptance today than they did in the past. To improve its public image, the industry should develop strong networks with its suppliers, especially farmers, and develop customer communities, according to the GTNF experts.

    That suggestion was right up the alley of the next speaker, Forest’s Simon Clark, who argued that, throughout the debate, one group had been consistently underrepresented: consumers. Established to defend the interest of both smokers and tolerant nonsmokers, Forest celebrated its 35th anniversary in 2014. Clark took the opportunity to look back on some of the organization’s initiatives and to contemplate the future in a rapidly changing business environment.

    Throughout the years, Forest campaigns have had varying levels of success, according to Clark. The organization’s “Save our Pubs & Clubs” campaign could not prevent a comprehensive public-smoking ban in the U.K. Its “Hands off our Packs” initiative, against the implementation of plain packaging, has been more successful. Three years after the start of the discussion, the U.K. government has yet to decide on the issue. The difference, according to Clark, is funding. Whereas the “Save our Pubs & Clubs” initiative was carried out on a shoestring budget, the “Hands off our Packs” campaigners had more money to work with.

    Clark promised Forest would continue stressing consumer choice and attacking excessive regulation in its defense of smokers. But he cautioned that, in their enthusiasm about e-cigarettes, tobacco executives should not forget their traditional customer, the smoker, who still accounts for the vast majority of the business.

    The last speaker of the GTNF preliminary session was special—not because of his skin color, as Kgosi Letlape jokingly suggested, but because of his professional background. As the president of the Africa Medical Association, Letlape’s decision to attend a tobacco forum elicited strong criticism from fellow health advocates.

    As a pragmatist, however, he believes the goal of public health is better served by engagement than confrontation. Cigarettes, says Letlape, will remain part of the landscape because of various forms of addiction—smokers’ addictions to nicotine, companies’ addictions to profits and governments’ addictions to tobacco tax revenues. In order for harm-reduction efforts to succeed, new products would need to satisfy all these addictions, according to Letlape. “We need to find a way to live with addiction, as opposed to dying from it,” he said.

    One of the biggest challenges to progress, Letlape suggested, is ignorance. “The average South African doctor is unfamiliar with e-cigarettes,” he said. The best chance for better health lies with an informed public, said Letlape: “Not just with consumers, but with the collective public—all 7 billion of us.”

    Letlape sees a role for all stakeholders, including health activists, regulators and industry. “You don’t have to love or even trust each other,” he said. “Just respect each other and be civil.”

    Whether intended or not, Letlape’s remarks succinctly captured the spirit of the 2014 GTNF. The audience acknowleged his speech with a standing ovation.

    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.
  • Coming together

    Coming together

    Photo: Deyan

    Celebrating its fifth anniversary in Cape Town, the Global Tobacco Networking Forum has firmly established itself as the venue for industry interaction.

    By Taco Tuinstra

    Tobacco Reporter’s Global Tobacco Networking Forum (GTNF) has grown relentlessly since its debut in 2008. After a cautious start in Rio de Janeiro, subsequent gatherings in Bangalore (2010) and Antwerp (2012) each attracted more visitors than the previous event, with an ever-greater diversity of participants and discussion topics. But the most recent GTNF, held in Cape Town, Nov. 6–8, topped them all, boasting record attendance and an unrivaled program.

    The 2013 conference took place under the motto simunye, which means “we are one” in Zulu and is used to remind people that no one can operate in isolation. The concept fit seamlessly with the GTNF philosophy of bringing together people—even those who don’t always see eye to eye—to share ideas and solutions that will benefit business, customers and society at large.

    Like previous GTNFs, the Cape Town event attracted senior leading tobacco executives, financial analysts and prominent health advocates, among other stakeholders, but the caliber of participants was higher than ever. The speaker list even included a two-time Nobel Peace Prize nominee (Leon Louw, executive director of the Free Market foundation, who contributed to the creation of South Africa’s post-apartheid constitution). Attendees praised the quality of the discussions, which focused on topics such as regulation, tobacco harm reduction and the never-ending fight against illicit cigarette trade.

    Each morning of the event opened with a plenary session, comprising speeches and panel discussions. After lunch, delegates broke into smaller groups to discuss various topics more in-depth. In between the official sessions, participants had a chance to network in less formal settings. The idea was that this would allow them to discover shared interests and identify new opportunities—and there was evidence of that happening, with people who otherwise may not have met realizing they could help each other or do business together.

    Over the past five years, the forum has clearly come into its own. Whereas in the run-up to the first GTNF, event-fatigued industry representatives required some persuading to come to Rio, tickets to the Cape Town gathering sold out a month in advance. Further validating the GTNF’s claim to be the industry’s premier discussion forum, the 2013 conference was supported—both financially and with speaker participation—by all leading cigarette manufacturers.

    The decision to stage the 2013 GTNF in Africa proved well-timed, too. As Michael Lalor, lead partner at Ernst & Young’s Africa Business Center, pointed out during his keynote address, Africa has lately become the place to be for investors. The continent is home to six of the world’s 10 fastest-growing economies and is expected to continue growing in a diverse range of sectors. Contrary to popular perception, the growth has been driven not by commodities, but by domestic demand. “This is a structural transformation,” said Lalor, adding that the benefits have been trickling down to ordinary people, who enjoy higher standards of health care, education and general welfare than before. According to the World Bank, half of Africa’s countries now qualify as middle income—up from a handful in the 1990s. Governance is improving as well; more than 35 African countries now qualify as democracies—a far cry from the days when the continent was ruled almost exclusively by generals and presidents-for-live.

    Of course, it wasn’t always so. In 2000, The Economist magazine famously portrayed Africa as “the hopeless continent,” lamenting its intractable civil wars, high levels of corruption and decaying infrastructure. But even as that issue hit newsstands, a turnaround was already underway. Lalor said the foundation for Africa’s takeoff was laid at the end of the Cold War, when the world’s superpowers stopped using the continent as a proxy battlefield.

    Despite the gains, investors in Africa still face plenty of challenges. For starters, it is easy to underestimate the continent’s size and diversity. Africa is larger than China, the United States and Europe (excluding Russia) combined. It is home to 54 countries and an even greater number of cultures and languages. Distribution is a tremendous hurdle for anyone, including tobacco companies, hoping to do business here. (The challenges facing tobacco companies and their suppliers in Africa are vividly described in “The distribution trail,” TR August 2004” and “Out of Africa,” TR August 2008.) Those who get it right, however, like British American Tobacco South Africa, stand to reap tremendous gains.

    But while Africa offers significant opportunities as an end market, it remains best known in the tobacco industry as a supplier of leaf. Charles Graham, regional director for Universal Leaf Africa, said the continent offers both skilled farmers and ideal growing conditions. Accounting for 27 percent of the world’s arable land but only 13 percent of its people, Africa produces some 600,000 tons of leaf annually, with significant volumes originating in Zimbabwe, Malawi, Mozambique and Tanzania. Unlike other big African industries such as mining, tobacco farming benefits people in rural areas. There are some 1.1 million tobacco farmers in sub-Saharan Africa, each supporting multiple dependents. And despite attempts by some to promote alternative crops, tobacco’s returns to the farmer are unrivaled. Graham was quick to point out that the tobacco industry strongly opposes monocropping, however. “We encourage our farmers to become well-rounded agro-businessmen, producing a variety of crops, including food crops,” he said.

    Several speakers commented on how competitive the global market for leaf tobacco had become, with customers and governments insisting on full traceability and regulatory compliance. “The definition of quality is changing to one of total product integrity,” said Mark Kehaya, chairman of Alliance One International, who detailed his company’s initiatives to optimize its supply chain in Africa.

    In addition to competitive pressures, African tobacco farmers, like others in the industry, are increasingly targeted by public health activists. In a passionate speech, François van der Merwe, chairman and CEO of the Tobacco Institute of Southern Africa (TISA) and global president of the International Tobacco Growers Association, implored the industry to face its challenges with simunye. There was a lot of unnecessary distrust within the sector, he noted—even though the legal players had many shared interests. For example, the industry should cooperate to fight illicit trade and senseless regulation. While supporting the health agenda, TISA vehemently opposes the extreme rules inspired by the World Health Organization’s (WHO) Framework Convention for Tobacco Control. Van der Merwe also insisted on the right of the industry to be included in talks about tobacco regulation, from which it is increasingly banned. But with rights come responsibilities, he noted. The industry should get its own house in order, by working toward regulatory compliance, for example. He encouraged his audience to keep their heads high in spite of the almost unbearable pressure. “Don’t apologize,” he said. “Be proud of your business.”

    The theme of pride resurfaced during a breakout session on tobacco product regulation, when Louw—a self-described health puritan—questioned why the industry discourages consumers from using its products. “If you are not proud of your products, you cannot complain about what is thrown at you,” he commented. “You should encourage tobacco consumption as a perfectly legitimate choice to make.” Earlier, during the Nanny State panel discussion, Louw had argued for the “privatization of the mouth”—the freedom to decide what comes out (controversial opinions, for example) and what goes in (“tobacco smoke, fatty foods and certain other, unmentionable things”).

    Views favoring personal freedom and limited government were also aired by other members of the Nanny State panel, which had a strong libertarian flavor. Jeff Stier, senior fellow at the U.S. National Center for Public Policy, argued that public health is better promoted through private-sector innovation than through government interventions, as demonstrated by the success of e-cigarettes. Simon Clark, director of the smoker lobby group Forest, lamented the U.K. public smoking ban, which fails to provide for separate smoking rooms. “A blanket ban is not about the protection of nonsmokers but about forcing consumers to change their behavior,” he protested. Clark also cautioned against unintended consequences of smoking bans, such as loneliness among old people who are now staying at home rather than going to the pub. In this vein, Mark Littlewood, director general of the London Institute of Economic Affairs, urged the industry continue fighting yesterday’s battles. “Revisit all the bad laws and regulations,” he said.

    The tone was more conciliatory during the Public Policy panel discussion. Delon Human, a prominent health care consultant specializing in tobacco harm reduction, said South Africa’s bloodless transformation from apartheid to democracy held lessons for the tobacco industry and its detractors. “I believe a win-win-win is possible,” he said. Human invoked the image of two big ships—one representing the tobacco industry and the other the public health community—that had recently been joined by a smaller ship, symbolizing tobacco harm reduction and containing “a curious mix of pragmatists looking for a middle way.” But Human cautioned against reviving the tobacco wars. “Do not consider engaging in a war with public health unless you want to move back into the fruitless confrontations of the past,” he said.

    Another distinguished health advocate on the panel stressed that harm reduction was about striking a balance. “We may not like intravenous drugs, but we still allow needle exchanges,” he observed, adding that harm reduction initiatives relating to tobacco have had a harder time gaining acceptance among health advocates because the industry had not been truthful in the past. The suspicion in the public health community runs deep, he said—to the extent that Gro Brundlandt believed her phone to be tapped by the industry while she was director general of the WHO. “It’s a big step for us to be seen in the same room with the tobacco industry,” he said.

    During the question-and-answer session, Van der Merwe brought up a point that had been on many tobacco representatives’ minds. The industry has changed, he pointed out to the health advocates on the panel. “We want to engage—but in practice, the door is closed. What is the first step to opening the door?”

    Panel member Kgosi Letlape, president of the Africa Medical Association, replied that the tobacco industry has no right to play victim, given its past behavior. But he suggested the industry stake its demand to participate in the discussions on universal legal principals. “You are a legitimate stakeholder,” he said, acknowledging that the tobacco industry generates employment and raises tax revenues. “Tell the regulators, ‘you don’t have to like me, but you must talk with me.’”

    The conference also offered a good opportunity to reflect on the rise of e-cigarettes, which present both a challenge and an opportunity to the tobacco industry. Displaying a slide depicting a typewriter, one GTNF speaker urged his listeners to rethink their business. To most in the audience the picture was just that—a typewriter. When shown to a group of young people who had grown up in the Internet age, however, the machine apparently elicited an entirely different response: “Cool—a laptop with a built-in printer that doesn’t need to be plugged in!”

    Rather than simply manufacturing smoking products, one could argue that tobacco companies are in the business of mood modification. Seen from this perspective, cigarette manufacturers compete not only with other tobacco firms, but also with, say, producers of energy drinks. The industry also would do well to take notice of the changing attitudes toward ownership. Young people increasingly rent or subscribe, rather than own. Many features that previously required hardware are increasingly downloadable, a development that extends beyond smartphone applications.

    With the advent of e-cigarettes, competition will be increasingly about nicotine delivery rather than tobacco smoke. Nicotine remains a widely misunderstood drug, however, and David O’Reilly, British American Tobacco’s scientific director, took advantage of the GTNF to help set the record straight. O’Reilly called nicotine “an important cultural drug” because of its unique ability to relax and stimulate simultaneously. Throughout the day, there are many consumption moments. “It brings you up after lunch, and down post coitus,” he quipped. It also offers therapeutic properties such as improved cognition and weight control.

    While nicotine is not without risks, at the level normally used in humans it is considered to be safe. According to O’Reilly, the lethal dose of nicotine is 60 mg, but 1 mg-2 mg is enough to supply the “hit” that smokers crave. What’s more, the body tells the user when he needs to stop (by giving him a headache for example). Unlike “tar,” nicotine does not cause cancer or serious cardiovascular problems. But it does raise a person’s heart rate and blood pressure.

    While the idea of an e-cigarette has been around since the 1960s, it is only recently that the product has started catching on commercially—a classic case of the pioneers getting killed and the settlers taking the land, said O’Reilly.

    The trick, going forward, he said, will be reasonable regulation—regulation that will encourage good manufacturing and marketing practices without restricting innovation. Like Human, O’Reilly cautioned against belligerency. “We will not renormalize nicotine by going to war with the WHO. To be successful, the WHO needs to be part of this development,” he said.

    O’Reilly’s presentation concluded the official part of the GTNF, but the organizers still had a surprise in store for the delegates: a performer who embodied not only the agility, speed and determination that many in the industry aspire to, but also the fragility of a species under threat—a condition that many in the tobacco business can relate to. Under dead silence—the audience had been asked to refrain from clapping so as to not unsettle their intrinsically shy guest—volunteers from Cheetah Outreach escorted one of their big cats to the podium.

    Based near Cape Town, Cheetah Outreach’s goal is to raise awareness of the plight of the cheetah and to campaign for its survival. After explaining their work and fielding questions about their loudly purring companion the handlers invited the audience to the podium for group pictures.

    Photographers jostled for position, competing for the best angles. Flashes fired and light transformed into pixels. And when the cameramen checked their LCD displays, they saw tobacco executives, free-market advocates and public health officials standing side by side, flanked by a majestic African cat. If there were ever an image that captured the simunye spirit that prevailed during the Cape Town GTNF, this would be it.

     

    Editor’s note: This report was compiled in compliance with the Chatham House rules that governed the GTNF. All people mentioned provided permission to be quoted in Tobacco Reporter.

     

    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.
  • Rising tide

    Rising tide

    Photo: tonyv3112

    The Global Tobacco Networking Forum comes into its own.

    By Taco Tuinstra

    After a cautious start in Rio de Janeiro in 2008, and a significant boost in Bangalore in 2010, Tobacco Reporter’s Global Tobacco Networking Forum truly came into its own in Antwerp this past June. The event not only attracted a record number of attendees from all parts of the world, it also enjoyed the support of major global and regional manufacturers. Some participants have already dubbed GTNF the tobacco industry’s “Davos,” after the prestigious World Economic Forum meetings in Switzerland.

    The background of the GTNF is by now well-known. Aware of the industry’s increasing need for timely information and meaningful interaction, Tobacco Reporter in 2008 came up with an alternative to the congresses that dominated tobacco events at the time. The traditional congress concept was based on one-way traffic, with participants listening to a series of prepared presentations. Interaction with experts was typically limited to a brief question-and-answer session, after which the respective parties went their own ways. The messages of the speakers, however inspiring, were often quickly forgotten as attendees returned to their offices and resumed business as usual.

    Talking with experts from inside and outside the tobacco industry, Tobacco Reporter realized it was possible to make its events more impactful. By tweaking the Congress format to allow for more interaction, the quality of communication would improve significantly. Instead of asking the audience to passively consume a series of lectures, event organizers should offer attendees an opportunity to directly engage with the experts. And because every member of the audience was inevitably an expert in his or her own field, the value of the resulting exchange of information would be greater than the sum of its parts. Thus the GTNF was born.

    While the networking concept had been successfully applied in other industries, it was new to tobacco at the time. Tobacco, of course, is a notoriously conservative industry, so the sector’s initial response to the new forum was cautious. A relatively small number of people attended the first GTNF in Rio de Janeiro, Brazil, but those who did so were well rewarded. When Dayton Matlick, the president of Tobacco Reporter’s parent company, SpecComm International, asked participants at the end of the event to share their thoughts about the forum, the response was overwhelmingly positive. Attendees said the gathering had given them an opportunity to interact with people they would otherwise have not encountered, and that the intimate nature of the discussions lowered the barriers to communications.

    As every marketer knows, there is no better marketing tool than word-of-mouth, and word about the GTNF spread quickly. When Tobacco Reporter held its second forum in Bangalore, India, in 2010, attendance was significantly higher than in Rio. More than 200 industry representatives, including senior executives from leading cigarette makers, traveled to Bangalore to see what the buzz was about. They did not leave disappointed. Some left the event determined to take actions based on the discussions they had participated in. Others said they had become aware of fundamental issues that would affect their business. And virtually everybody Tobacco Reporter spoke to acknowledged that the GTNF had given them new ideas that would benefit their organizations.

    The word continued to spread after Bangalore, and Antwerp became the best-attended GTNF to date. As the number of participants rose, so did the buy-in among the companies that the industry looks to for leadership—the major cigarette makers. GTNF Antwerp was supported, through participation in the forums, by the world’s leading tobacco companies: Philip Morris International, British American Tobacco, JTI, Imperial Tobacco Group, R.J. Reynolds TobaccoCo., National Tobacco and many others.

    Cigarette makers sent some of their top talent, with the GTNF list of speaker biographies reading like a who’s who of the tobacco industry.

    But perhaps the most striking thing about the event’s attendee list wasn’t who participated from the industry, but who participated from outside the sector. In addition to leading financial analysts such as Erik Bloomquist (Berenberg Bank), Bonnie Herzog (Wells Fargo Securities) and Jonathan Fell (Deutsche Bank), the GTNF attracted journalists from some of the world’s leading publications. Jon Copestake and Kevin Dunning of the Economist Intelligence Unit, a sister organization of The Economist magazine, evaluated the industry’s outlook against the global economic environment. Other prominent media speakers included Jamie Dettmer, who has written for The Times of London and the Sunday Telegraph, among other publications, and Mick Hume, editor-at-large of Spiked.

    Even more remarkable was the participation of several leading public health advocates. Scott Ballin of the Alliance for Health Economic and Agriculture Development and Jeff Stier of the National Center for Public Policy are by now familiar faces at Tobacco Reporter events, but the participation of Francis Crawley, Delon Human and Anders Milton represented a true coup. Crawley is executive director of the Good Clinical Practice Alliance, Europe, and aWorld Health Organization expert in ethics; Human is president and CEO of Health Diplomats, a Swiss advisory and consulting practice; and Milton has been a senior adviser to the Swedish government delegation to the World Health Assembly and president of the Swedish Red Cross.

    Participating in sessions on harm reduction, smokeless tobacco and alternative nicotine products, these high-profile health advocates offered the industry an opportunity to interact with its critics in a constructive manner—something that hasn’t always been possible in other settings.

    The GTNF also proved a useful platform to announce new developments. Coresta, the association that promotes international cooperation in tobacco research, announced its new guideline for the treatment of cigarette beetles during the GTNF. The organization’s secretary-general, Pierre Marie Guitton, had graciously agreed to moderate a session on infestation management (and another one on low-ignition-propensity cigarette papers). The organization’s endorsement of the controlled-atmosphere technology as an alternative to existing beetle-control approaches provided a fertile base for discussions.

    In a separate forum, Oded Shoseyov of the Hebrew University of Jerusalem, Avi Tzur of Recon Inc. and Juan Sanchez Tamburrino of ATC Biotec discussed alternative uses for tobacco.

    Other sessions covered topics such as illicit trade, security of leaf supply, the impact of ingredient bans and the threat of plain packaging, which is currently under way only in Australia but is being considered in other jurisdictions. The plain packaging panelists examined the tensions between health considerations and intellectual property rights. They also assessed the strength of the industry’s pending court challenges against the measure and the potential unintended consequences, such as increases in counterfeiting.

    The presence of both manufacturers and suppliers on the panel and in the audience enabled participants to view the topics from different angles than they might have been accustomed to. For example, corporate affairs people, who might normally look at the plain packaging issue from a legal perspective, had an opportunity to see the issue from a printer’s perspective, and vice versa.

    Patrick Basham, director of the Democracy Institute, was in top form as he set the agenda and guided the audience through the program. In doing so, he skillfully drew on his extensive industry knowledge and sense of humor. On the morning following the Golden Leaf Awards banquet and celebration, Basham helpfully recited the dictionary definition of hangover.

    Fred Vandermarliere, director of Gryson Tobacco Co., welcomed delegates to his home country and provided an entertaining overview of Belgium’s history, covering the kingdom’s various occupiers, its linguistic struggles and cultural treasures, such as Duvel bier and Manneken Pis, the famous bronze sculpture depicting a naked little boy urinating into a Brussels fountain basin.

    Unlike the previous editions of the GTNF—which were held on dry land—the Antwerp event took place on two event boats that had been reconfigured to accommodate conferences. The setup proved ideal for networking—although in the downstairs rooms the noise of the engine at times forced participants to raise their voices, especially during docking maneuvers. In between sessions, delegates mingled in the bar area or went outside on the deck to enjoy a smoke and—on the first day of the event—the abundant sunshine.

    This being northern Europe, the pleasant weather didn’t persist, but that didn’t dampen the mood. The passengers simply moved inside to the upper deck, where instead of banning smoking, the organization had simply asked smokers to be considerate in deciding where and when to light up.

    As the Belgian and Dutch landscape slid past in the background, you could see procurement managers mingling with leaf suppliers and instrumentation manufacturers talking to health advocates. CSR managers drank coffee with automation specialists, while financial analysts exchanged cards with fumigation experts. The interaction continued during the gala dinner. Instead of sitting only with colleagues, many participants stepped out of their comfort zones and shared a table with people they didn’t know before. Some even dined with their competitors.

    If anybody ever doubted the GTNF concept, the networking crowds on the Oceandiva conference ships would have convincingly disproved their reservations.

    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.
  • A New Concept

    A New Concept

    Photo: marchello74

    The Global Tobacco Networking Forum debuts in Rio de Janeiro.

    By George Gay

    There are other ways of looking at situations than the one that first comes to mind, or the one that is presented to you, gift wrapped. And this was one of the ideas behind Tobacco Reporter’s Global Networking Forum 08, which was held at the Intercontinental Hotel, Rio de Janeiro, Brazil, on Oct. 15-17.

    The forum was a horizontal conference at which all the delegates were potential speakers and all the speakers were delegates. There were set subjects and moderators to keep the debates jogging along where that was necessary, but by and large the sessions were ad hoc and participants were able to discuss the unthinkable if they so wanted.

    The forum was an experiment—and a brave experiment given that it was put on in Brazil, where, to my knowledge, no large-scale, global tobacco conference or exhibition had previously been staged successfully. As with most experiments, it needed fine tuning, but it was successful in its primary aim of extending the debate. Some of the moderators reported up to 100 percent participation from the attendees at the various sessions.

    There was variation, of course. One of the sessions at which the moderator was clearly much better informed about the received wisdom on the subject than were the other participants turned into a mini conference. The moderator spoke to the subject and the others listened. But even here there was a difference because, when the moderator stopped speaking, the questions came thicker and faster than is the case at less intimate gatherings.

    At other sessions, the moderator did little more than introduce the subject before sitting down and becoming one of a number of expert speakers.

    If I seem to be avoiding the subject, or subjects, here, it is because the forum was staged on the understanding that what was said would not be reported. This presumably allowed participants to feel freer to assert their opinions and to ask probing questions.

    And in Rio, this freedom was probably underlined because most of the major manufacturers were either not represented or were little represented. Their presence was missed at times because only they could answer certain questions, but to some extent this gap was filled by people who had previously worked for those manufacturers.

    Questions certainly arose and some of them could not have been answered even by the representatives of major manufacturers. In fact, it became clear that people were looking to find out the answers to questions that had been bothering them for some time. Breaking—or perhaps bruising—the rules of reporting just once more, I was pleased somebody asked a question that has been bothering me for some time and about which I wrote a year ago: are covert marks on cigarette packs worth applying as part of the fight against counterfeit cigarettes? Clearly, they might help you identify and count counterfeit products already manufactured, and they might win brownie points from governments, but do they prevent counterfeiting?

    If only I could let you know the answer that was given to that question, but, as explained, reporting restrictions will not allow me to do so. You’ll just have to attend the next forum.

    What Tobacco Industry?

    The Rio forum, and especially the absence of the major manufacturers, raised one enormous question. Is there such a thing as the “tobacco industry” in the sense that it comprises a united grouping of businesses linked by common interests and, generally, traveling in the same direction? The answer is, I think, no. From “regulation” to “plain packaging” and from “tobacco harm reduction” to the “illicit trade” (all subjects covered by the forum), different segments of the industry have different outlooks, different concerns and different drivers.

    Given the absence in Rio of the major manufacturers it was reasonable to reflect, also, on whether or not the presence on the world stage of a number of huge tobacco companies is a positive thing for the tobacco industry as a whole. Certainly, on the face of it the answer would have to be no. These companies have tended to break the links between tobacco manufacturing and the communities into which the former, small, family-owned businesses were embedded, and thereby to lose whatever support those businesses might have had in their communities. And the major manufacturers have provided the “Big Tobacco” target at which the anti-tobacco, anti-smoker groupings have found it easy to aim.

    Perhaps there is another way of looking at this issue.

    In one way, the absence of many of the major manufacturers was a major loss. The tobacco industry is being forced to address some fundamental issues that inevitably challenge our notions about what it is to consume tobacco, and unless those of us who work within the tobacco industry have discussed these new ideas and understood them, how can we communicate them to those in the outer dark?

    Let me give you an example. How do we define smoking? How do we know if someone is smoking? I guess that if there were any doubt—and I grant that normally there is not—one way to test this would be a sort of Turing Test for artificial exhalation. You stick the person in an airline toilet and wait for the alarm to go off. But supposing somebody could light a cigarette and then inhale and exhale tobacco smoke without setting the alarm off—would the person still be deemed to be smoking?

    I ask this question because, as I understand it, by the time this article is published, a product will have appeared on the market that would allow a smoker to consume a cigarette without people around her being aware that she was smoking or being in any way affected by that smoke. And so the question arises as to what our response should be to this product. I cannot help feeling that the industry should try to present a modicum of solidarity for once by having a response to the naysayers ready before the naysayers know what is happening.

    Clearly, the naysayers will complain that this is a device designed to allow people to smoke in pubs and even in airline toilets without being discovered. And of course, the body blow will be that this is a product designed so that children can enjoy a few drags under the covers as daddy is reading them a bedtime story.

    In fact, it is a device that, providing it works as it is said to work, would allow adult smokers to smoke at home without annoying or, as the antis would have it, harming, the nonsmokers in the family.

    Irrational Behavior

    Harm reduction was the subject of one of the sessions during the forum, as was illicit trade, with which I started this report. To my mind, there are connections between these two subjects, some of which have to do with the fact that the “industry” responses to them often seem to make little sense.

    Let me stretch a point or two. The industry is basically opposed to the illicit trade in tobacco products. In fact, the major manufacturers become quite indignant about this trade and often put forward what to me is the very dubious and, as far as I can tell, unsubstantiated argument that tobacco products made by illicit manufacturers may contain non-tobacco-related materials that would make these products more harmful than those made by the regulated industry. In fact, I cannot help thinking that by buying illicit cigarettes and thereby making sure that they spend less on their cigarettes, consumers are actually protecting their health—given that poverty is a major cause of ill health.

    So it would be interesting to know what is the major manufacturers’ response to the fact that tobacco users in places such as the U.K. are starting to consume snus, which is banned there and which consumers can obtain only through the illicit trade? Would they condemn them for buying illicit products or support them for trying to instigate a little harm reduction?

    In both instances of illicit trade, I would have to say that the consumers are acting rationally while governments and those that support the government positions are acting irrationally.

    It could be argued, too, that it is irrational for the industry to try to work with governments and organizations such as the World Health Organization in respect of industry regulation, which was another of the subjects discussed at the forum. Often, it would surely be worthwhile letting governments get on with it, because without input from the industry, they will bring in policies that will implode under the weight of the misinformation on which they are based.

    Take plain packaging. I shouldn’t mention this, but the introduction of plain packaging and the banning of certain cigarette manufacturing ingredients were seen by one person at the forum as being the worst threats posed to the industry.

    I cannot accept this, partly because, as previously noted, there is no “industry.” The banning of certain additives will hurt some manufacturers and some markets more than others. And the introduction of plain packaging will affect some manufacturers, along with some board suppliers and some converters, more than others. But these issues are not about the end of tobacco consumption.

    If both of these policies were brought in it would simply raise the industry’s game—make it even more innovative than it currently is.

    And both of these initiatives would have their upsides. What would consumers make of cigarettes that had no additives and whose packaging was dirty gray apart from the health warning? Well, no additives mean healthier smoking, right? Otherwise the government wouldn’t make the manufacturers remove those ingredients. And gray packaging means no bleach, which is better for the environment, right?

    The major point here is that the threat posed by each of these proposals is limited. They will not prevent people smoking licit products and will probably make them more likely to smoke illicit products. To my way of thinking, smoking bans are much more worrisome because they have a tendency of slipping out of their workplace homeland into private accommodation—hotels, apartments … And a ban is a ban.

    Shrugging off the Challenges

    It is perhaps amazing that with all of the negative issues discussed at the forum, there was a remarkable level of optimism among the participants. One moderator seemed to sum up the mood when he said with a shrug, “We’ve faced crises before.”

    Of course, when I say there was an amazing level of optimism, I am talking about the atmosphere at the sessions I attended. Because of the way the forum was structured, it was necessary to make choices, and there were a lot of sessions that I would like to have attended but could not because they clashed with others: cost management, tobacco regulations, future automation in the tobacco industry, sustainability, NTRM, dark markets and how to rebuild old machines for the future.

    And there was one other session that I didn’t attend; it was on leadership. I have to say that I avoided this one because I was told that participants were divided up into small groups that discussed the subject and then came together with the other groups to deliberate on what each had come up with. It all sounded a little bit too structured for my liking. But now I regret not having attended. After all, leadership is probably the key issue at the moment.

    In my view, if there is one positive to come out of the whirlwind currently blowing through the old economic order, it is that our “leaders” have lost the right to the deference that some of them seemed to think was theirs by right. From here on, if they want respect, they have to earn it. Right? Politicians, economists, bankers and businessmen have been caught out subscribing wholesale to the most ludicrously fragile systems, and they—both the people and the systems—need to be swept away and, eventually, replaced with different people and systems.

    Dream on: there’s no chance of that happening. These “leaders” have built an overarching system designed to keep them in place no matter in what buffoonery they become involved—from the faintly absurd, once-ubiquitous mission statement that they required their employees to worship to the massively destructive game of pass the parcel that bankers have been playing with contagious debt.

    The system is designed so that if there is a failure, those in power do all that they can to justify what brought that failure about and take it to new heights of absurdity. The banking system is on the verge of collapsing under the weight of its own greed, so the answer is to pump more money into it. It never seems to occur to those in power that perhaps it might be an idea to go back to square one and start rebuilding on ground that is more solid. That would require admitting irresponsibility.

    And outside of the leadership there seems to be a fear of the unknown that has become a phobia. In the U.K. in recent years, if anybody ever suggested that the pay of businessmen should be capped, the cry went up that the country would lose those business leaders to overseas companies, and that would be enough to put an end to the idea. This theory was never put to the test despite the fact that one of the mantras of many of these business people was that people should not fear change. In fact, the most rational response would have been to offer these leaders a lift to the airport. Right now, most of them would be hard put to find a job driving the airport car.

    But if you really want to get a sense of the massive scale of the failure of our leaders, all you have to do is to return to the start of this report. The tobacco business, in which the tobacco industry has a share and in which governments have a massive share, is starting to sag under the weight of an illicit trade clearly caused by grasping governments applying ludicrous levels of excise tax. So what is the solution sought by governments and supported by many tobacco manufacturers? The lowering of taxes? No, stiffer penalties for those caught in possession of illicit tobacco products.

    This is madness. Stiffer penalties imply more police, more court time, more jails; all of which have to be paid for by higher taxes and social breakdown.

    But the consensus of our leaders is to increase penalties. They are locked into a cycle of failure because they are largely divorced from the real world. They don’t understand how ordinary people think and they won’t unless they get out more.

    They should attend the next forum—on the understanding that they are just participants like everybody else.

    George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.