Category: Markets

  • RELX Launches its Products in Saudi Arabia

    RELX Launches its Products in Saudi Arabia

    Photo: Mohammed

    RELX has launched in the Kingdom of Saudi Arabia. The e-cigarette brand is already available in the United Arab Emirates and Kuwait—and has further plans to expand into the wider Middle East and northern Africa (MENA) region this year.

    The Kingdom has announced new regulations, similar to those set across Europe, following the standard setup for e-cigarette packaging and labeling, which was introduced in September 2020.

    “The MENA region is one of our category’s fastest-growing markets, growing at a rate just short of 10 percent until 2024,” said Fouad Barakat, KSA general manager at RELX International, in a statement. “Saudi Arabia is one of the region’s largest and most prosperous markets, hence the need for any brand to launch there if it wants to thrive and grow bigger.”

    There are two products available: RELX Infinity and RELX Nano2.

  • Large Companies Likely to Dominate U.S. Vapor

    Large Companies Likely to Dominate U.S. Vapor

    Photo: bimserd

    Large companies may soon dominate the U.S. vapor market while e-cigarettes produced by smaller companies may disappear, according to new research by ECigIntelligence.

    Analysis of FDA premarket tobacco product applications (PMTAs) shows that more applications for simpler disposables and cigalike devices were submitted than applications for open systems. According to ECigIntelligence, the simpler products usually come from large companies while the open systems usually come from smaller businesses.

    Only about 30 open system brands have filed PMTAs, implying that 85 percent of open system brands will be removed from the market, even if all 30 filed PMTAs are approved.

    “This may indicate the discouragement nontobacco companies face when applying for PMTA approval,” said ECigIntelligence Managing Director Tim Phillips. “The PMTA process can be a grueling one for nontobacco companies without sufficient financial means or know-how. And if smaller brands are to become less prevalent in this category, consumers may soon only have the option of a few models provided by a handful of big companies.”

  • Critics Astonished by PMI Pharma Deal

    Critics Astonished by PMI Pharma Deal

    Photo: Ljupco Smokovski

    Public health groups have reacted with astonishment to PMI’s takeover of Vectura Group, according to The Evening Standard.

    “It’s ironic that a tobacco company wants to invest in the lung health industry when their products are the biggest preventable cause of cancer, including lung cancer,” said Cancer Research U.K. Chief Executive Michelle Mitchell.

    “If PMI really wanted to help, they could stop aggressively promoting and selling their products altogether.”

    Sources told The Evening Standard that the Vectura board had a “fiduciary duty” to recommend the offer to shareholders based purely on its value.

    “PMI claims it holds more than a quarter of the global market for cigarettes, so its drive to become a ‘wellness company’ is a long way from fruition,” said Deborah Arnott, chief executive of Action on Smoking and Health.

    “I can’t imagine the scientists working for Vectura, a respectable company making products that treat lung cancer, are going to be at all happy waking up to find they’re going to be working for Big Tobacco.”

    Vectura declined to comment on what its employees might think about working for a tobacco company.

    PMI says it is working on using the technology it has developed for its smoke-free products to help drug companies develop inhalable medicines.

    PMI aims to generate $1 billion of net revenues from “beyond nicotine” products by 2025. Last year, total net revenues were $76 billion.

  • Taiwan: E-cigarette Use Tripled in Few Years

    Taiwan: E-cigarette Use Tripled in Few Years

    Photo: Richie Chan

    E-cigarette use in Taiwan has tripled since 2018, reports The Taipei Times, citing a study by the Ministry of Health and Welfare’s Health Promotion Administration (HPA).

    In 2018, e-cigarette use was at 0.6 percent; in 2020, that rate grew to 1.7 percent, according to the study, which looked at responses from 25,000 people 18 years and older.

    The highest e-cigarette use rates were found in men ages 26 to 30, at 6.3 percent, and women ages 21 to 25, at 4.6 percent.

    “To put this growth into perspective, use of traditional cigarettes grew only marginally over this period, from 13 percent in 2018 to 13.1 percent in 2020,” said Lu Meng-ying, HPA Tobacco Control Division official. “The situation needs urgent attention, especially as new e-cigarette users are almost all young people.”

    Most respondents said they use e-cigarettes out of curiosity while 17.3 percent use them to quit smoking combustible cigarettes and 9.7 percent use them because friends use them.

    Use of flavored tobacco products is increasing as well, from 8.2 percent in 2018 to 15.6 percent in 2020. Majority of the increase was seen in women.

    “There are more than 1,200 additives used in flavored tobacco products, and the vast majority of them are chemically derived,” Lu said. “The goal of manufacturers is to prevent new smokers, especially young women, from being turned off by foul smells.” He added that the effects of long-term use of flavored products are not well understood.

  • Sales Resume Historical Drop as U.S. Reopens

    Sales Resume Historical Drop as U.S. Reopens

    Photo: Africa Studio

    U.S. demand for combustible cigarettes declined 11.3 percent year over year, resuming their historical rate of decline following a temporary increase during 2020, reports The Winston-Salem Journal, citing the most recent Nielsen survey of convenience stores. The report lists total nicotine volumes down 9.4 percent for the same period.

    In the early months of the Covid-19 pandemic, U.S. smokers increased their cigarette purchases in response to stay-at-home orders. This year has seen a return to more typical shopping conditions.

    Philip Morris USA traditional cigarette volumes fell 9.5 percent year over year while Reynolds had an overall 9.2 percent decrease and ITG Brands was down 6.3 percent.

    Tobacco manufacturers have been able to offset much of the recent volume declines through a series of per-pack list price increases in recent months.

    For example, R.J. Reynolds Tobacco Co. will increase the list price of certain brands by $0.14 per pack on July 5, according to a report by Goldman Sachs analyst Bonnie Herzog.

    Meanwhile, sales of electronic cigarettes were down 4.9 percent.

    Sales overall have slumped since February 2020 when the Food and Drug Administration implemented its latest round of heightened regulations on the products.

    Those restrictions required manufacturers of cartridge-based e-cigarettes to stop making, distributing and selling “unauthorized flavorings” by Feb. 6 or risk enforcement actions.

    With a share of 49.5 percent, Juul remains market leader, followed by Vuse (33.5 percent), NJoy (4.5 percent) and Blu eCigs (3.1 percent), according to Nielsen.

  • Heating Up

    Heating Up

    Photo: JT

    Massive growth in Japan’s tobacco heating products market has helped push cigarette sales to historic lows.

    By Timothy S. Donahue

    Japan is the world’s largest market for heated-tobacco products (HTPs). Brands like Philip Morris International’s IQOS, Japan Tobacco’s Ploom and BAT’s Glo have garnered a significant share at the expense of their combustible counterparts.

    In the first quarter of 2021, domestic cigarette sales in Japan totaled about 25 billion sticks. In 2016, during the same period, Japanese smokers bought 43.6 billion cigarettes. Over the past five years, cigarette sales have declined nearly 43 percent, according to Euromonitor International.

    Since the introduction of IQOS in Japan in 2014 as part of a trial, the annual cigarette volume decline has accelerated beyond its historical trend of 3 percent to 4 percent. Last year, sales dropped 4.2 percent; in the first quarter of 2021, they fell by another 6.5 percent in the first quarter, according to Pieter Vorster, managing director at Idwala Research. HTPs have continued to grow and held a 30 percent share of the total market in the first quarter of 2021, he said. This is up from 26 percent in 2020 overall and 28 percent in the fourth quarter of 2020.

    In an interview with Nikkei, Japan’s economic newspaper, Jacek Olczak, who took over as PMI’s CEO on May 5, predicted that Japan will become a smoke-free society within 10 years. PMI expects to gradually pull out of combustible tobacco products globally in the next 10 years to 15 years, and Olczak said he wants the transition to happen first in Japan.

    Following its successful trial in 2014, PMI began selling its IQOS device nationwide in Japan in 2016. The company held a 70 percent share of Japan’s market for HTPs in 2019, according to Euromonitor International, while JT held 10 percent and BAT held 20 percent. In June, BAT stated that its reduced-risk products had gained share in all key markets, including the United States and Japan, with the company adding 1.4 million new customers in the first quarter.

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    The Japanese reduced-risk tobacco product market is unique in that nicotine vaping products are banned whereas HTPs have been embraced, according to Vorster. Consumers who take up HTPs also tend to switch completely from combustibles faster than they do with e-cigarettes, where prolonged dual use is not uncommon.

    “The net result of this is the direct substitution effect that we have seen in Japan since 2017, when IQOS first started making headway in the market. For Japan Tobacco, it has been problematic because, as the largest cigarette producer, it has lost the most volume to HTP,” said Vorster.

    Japan’s Pharmaceutical Affairs Law classifies nicotine-containing liquids as drugs and liquid-inhaling devices that contain nicotine as medical devices, according to Dinesh Babu Thotakura, general manager of JT’s Media & Investor Relations Division. “Therefore, vaping products sold in Japan are nicotine-free. Currently, we do not have plans to launch vaping products in Japan.”

    Nicotine-containing e-cigarettes are regulated by the Japanese Ministry of Health Labor and Welfare, according to Vorster. “Private importation is allowed, provided it is for personal use only and amounts to less than one month’s supply,” he said. “HTP, on the other hand, is classified as a tobacco product and therefore regulated by the Ministry of Finance.”

    While part of the success of HTPs is due to Japan’s ban on e-cigarette sales, the country’s comparatively accommodative regulatory framework has made an impact as well, according to Thotakura. Last year, when Japan restricted smoking in restaurants, it made an exception for HTPs, which can be consumed in bars and restaurants if certain conditions, such as having ventilation equipment in place, are met.

    “The Japanese [combustible cigarette] market had been declining historically even before the introduction of HTPs; however, the introduction of HTPs has accelerated that decline,” said Thotakura. “Although we are aware that the number of cigarette smokers in Japan is on a downward trend due to a combination of factors, including tighter regulations, aging population and increased health awareness, our Ploom series of HTPs are gaining popularity among consumers who are especially conscious of their surrounding environment.”

    When asked if there is room in Japan for another HTP product besides the Big Three, Vorster said it is hard to see the status quo changing meaningfully. “For either BAT or JT or a new entrant to make meaningful inroads, they would need to offer a product that provides consumers with a superior sensorial and nicotine-delivery experience compared to IQOS,” he said. “A product that can deliver an experience closer to a cigarette stands to gain meaningful category share and expand the category to those smokers who have not been prepared to switch to currently available products.”

    For either BAT or JT or a new entrant to make meaningful inroads, they would need to offer a product that provides consumers with a superior sensorial and nicotine-delivery experience compared to IQOS.

    Pieter Vorster, Idwala Research

    Another challenge to the continued growth of HTPs is the World Health Organization’s opposition to tobacco harm reduction. In 2004, Japan joined the WHO Framework Convention on Tobacco Control (FCTC). The treaty’s guidelines are intended to assist parties in fulfilling their obligations under the Convention and are not legally binding to impose new obligations on the parties, according to Thotakura.

    “Although we cannot speak on behalf of the Japanese government on the country’s stance in its involvement with the WHO and FCTC, the JT Group’s fundament lies on the belief that the use of tobacco products entails health risks and that appropriate regulations are necessary from the perspective of preventing underage smoking,” said Thotakura. “We believe that regulations in the Japanese market have already been evaluated and implemented appropriately by the relevant authorities, taking into account the environment surrounding tobacco in Japan. We will continue to operate our business in an appropriate manner in accordance with the laws and regulations of Japan and other countries/regions.”

    Vorster believes that Japan’s involvement in the FCTC will have little to no impact. “Overall, the Japanese government has been slow to introduce smoking restrictions, and I suspect it is unlikely that it will change its view on HTPs because it is a signatory to the FCTC,” he said.

    When asked why Japan’s success in reducing combustible use through HTPs is not viewed as a “success story” by other countries, Vorster said that few countries have embraced the principle of harm reduction when it comes to tobacco, partly because the WHO advocates abstinence. Governments, he says, are often forced to find a balance between WHO recommendations and what actually works.

    “Governments can only create a regulatory and tax framework conducive to reduced-harm products being accessible and affordable and provide smokers with accurate information about the relative risks posed by these products,” said Vorster. “Consumers will ultimately decide whether they want to switch and which products they will use. The U.K. is about the only market I can think of where this is the case. When HTPs were introduced into the U.K., there was already a large and established e-vapor category, and thus far, it [the HTP sector] has had limited traction with consumers.”

    Appreciating consumers’ diversifying needs, JT aspires to offer them an even greater choice of products by focusing on quality, innovation and the reduced-risk potential of products, according to Thotakura.  “We believe that the options for tobacco products should not be limited to a specific category or product, but rather, it is important for consumers to have the freedom of choice to choose the most suitable product according to their preferences, living environment and life-stage transitions,” he said.

    PMI is expected to launch its next generation of its IQOS, ILUMA, before the end of the year. The innovative device is supposed to play a major role in the company’s transformation, according to Olczak. “IQOS ILUMA is simple and intuitive,” explained Olczak. “It self-activates and requires less explanation, which will save time and cost of acquisition as well as aftercare and retention. It supports easier switching and higher conversion for legal-age smokers.”

    PMI Chief Financial Officer Emmanuel Babeau expects consumers to embrace ILUMA. Because the product is more intuitive and easier to use than previous IQOS iterations, PMI may be able to convert smokers whom it had not been able to convert before, he said during a call with investors. “We’re going to also have a number of IQOS users or other [HTP] users switching to ILUMA because it’s really a … product with a lot of benefit for the consumer.”

    JT, meanwhile, intends to continue improving consumers’ user experience through the evolution of the HTP category, and not just with hardware. JT also plans to expand its flavor portfolio to meet consumers’ diverse preferences.

    JT is the parent company of Japan Tobacco International. JT directly manages the Japanese-domestic tobacco business while JTI directly manages the international tobacco business. Currently, operations and resources are distributed between these two organizations. In recent years, JT’s and JTI’s R&D functions have been cooperating to develop next-generation HTP products with the goal of introducing and expanding these products on a global scale, according to Thotakura.

    In the second half of 2021, the company intends to launch Ploom X—first in Japan, then in Russia and other markets.

    Starting in 2022, the JT Group will combine its Japanese and international operations into a single business. “We will utilize the entire JT Group’s resources to provide products and services that exceed the needs and expectations of consumers,” said Thotakura.

    There is no denying the role HTPs have played in reducing the number of combustible cigarette smokers in Japan. Vorster said the world should take notice. “Japan has been a showcase for many years now of reducing the harm caused by combustible cigarettes,” he said. “Whilst the category’s growth will likely slow without the introduction of more satisfying products, there is no evidence of that yet.”

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

    Fewer Smokers but More Nicotine Users

    Photo: sezerozger

    While the number of young Danes smoking cigarettes has fallen, the number of young people who use at least one tobacco or nicotine-related product has increased since last year from 27 percent to 28.6 percent, reports the Copenhagen Post, citing a new report released by the National Institute of Public Health.

    Researcher Lotus Sofie Bast noted that the April 1, 2020, cigarette excise tax increase drove the nicotine consumption habits of young people from the more expensive cigarettes to less expensive vapor products. The report will be an annual examination of young people’s tobacco and nicotine habits.

    Researchers hope to monitor the effect of newer measures like higher cigarette prices, standardized tobacco packaging and products hidden behind the counter in the coming years.

  • Lil Expands into Eastern Europe and Central Asia

    Lil Expands into Eastern Europe and Central Asia

    Lil Solid 2.0 with Armenian health warnings
    (Phot: KT&G)

    KT&G’s Lil Solid 2.0 device and its Fiit heated-tobacco stick continues its global expansion with new launches in Central Asia and Southeastern Europe.

    As part of a collaboration agreement between KT&G and Philip Morris International, Lil Solid 2.0 has been introduced into four Eurasian countries during the second quarter of 2021.

    The device and its consumables debuted in Armenia on June 14. The products were also commercialized in Serbia and Kyrgyzstan on June 3 and 7, respectively. Lil Solid 2.0 and Fiit were previously introduced in Kazakhstan on May 13.

    Lil Solid 2.0 is a second-generation model of KT&G’s heat-not-burn product with enhanced performance and design to improve consumer satisfaction. The product was first launched nationally in Korea in January this year. According to KT&G, it gained significant traction with its upgraded battery efficiency and induction heating technology.

    The Lil Solid 2.0 device is available in two colors, Stone Grey and Cosmic Blue, in its new markets. The sticks come in seven types, including Fiit Regular, Fiit Viola And Fiit Crisp. Three or four types are sold in each country depending on the market situation.

    Following the recent commercialization of Lil Solid 2.0 in four new markets, the Lil brand now is present in seven markets outside of South Korea. Previously, varieties of the brand were introduced in Russia, Ukraine and Japan.

    “As Lil Solid 1.0 and Lil Hybrid 2.0 have been well received in their respective markets, we look forward for encouraging performance from Lil Solid 2.0 as well,” said Wang Seop Lim, chief of KT&G’s next-generation products business division, in a statement. “We will continue to provide broader choices to consumers outside Korea in the second half of this year through collaboration with PMI.”

  • Foreign Firms Dominate Iranian Cigarette Market

    Foreign Firms Dominate Iranian Cigarette Market

    Photo: Emanuele Mazzoni

    Despite recent gains by Iranian Tobacco Co. (ITC), multinationals continue to dominate the Iranian cigarette market, according to a report by PressTV, citing ITC CEO Siavash Afzali.   

    Speaking at a press briefing on May 17, Afzali said that Japan Tobacco International (JTI) and British American Tobacco (BAT) control more than 61 percent of sales and some 70 percent of the value of the cigarette market in Iran. Afzali estimated that JTI and BAT supplied 46 billion cigarettes to Iranian consumers in the calendar year to late March.

    Afzali said ITC’s share of the market was around 9 billion over the same period against an estimated supply of 20 billion cigarettes that entered the market by traffickers.

    In the year to March, ITC increased its cigarettes sales in Iran by 50 percent. Its output and market share increased by 23 percent and 70 percent, respectively, over the same period.

    However, the company is responsible for only 5 percent of the value of the cigarettes sold in Iran, a market that is believed to be worth around IRR400 trillion ($1.74 billion).

    Afzali said that ITC could triple its output to 25 billion cigarettes per year, although he insisted that existing laws favor local manufacturing by foreign brands.

    “Foreign companies easily import raw material and control the market,” he said. But ITC generates more local employment than the multinationals, Afzali insisted. Including farmers, ITC employs 12,000 people—far more than JTI and BAT, according to the CEO.

  • No PMI Cigarettes in Japan Within 10 Years

    No PMI Cigarettes in Japan Within 10 Years

    Photo: beeboys

    Philip Morris International (PMI) plans to stop selling cigarettes in Japan within 10 years.

    In an interview with Nikkei, Jacek Olczak, who took over as the company’s CEO on May 5, predicted that Japan will become a smoke-free society within 10 years. PMI expects to gradually pull out of combustible tobacco products elsewhere over the next 10 to 15 years, and Olczak said he wants the transition to happen first in Japan.

    According to Olczak, the company will be focusing on its heat-not-burn (HnB) products instead. In 2016, PMI began selling its IQOS HnB device nationwide in Japan. The company held a 70 percent share of Japan’s market for such products in 2019, according to Euromonitor International—far ahead of its rivals Japan Tobacco, with 10 percent, and British American Tobacco, with 20 percent.

    Smokeless tobacco, which includes HnB and e-cigarettes, made up 11 percent of Philip Morris’ total shipments of 704.6 billion cigarettes in 2020, up 3 percentage points from 2019. The global market for combustible cigarettes has shrunk by just under 10 percent over the past four years.

    Smokeless tobacco products are currently sold in 66 countries and regions, and Olczak said he wants to increase that to 100 percent by 2025.

    Nearly 30 percent of all Japanese tobacco sales are now heated products. Part of their success is due to the country’s ban on e-cigarettes sales and its comparatively accommodative regulatory framework.

    When Japan last year prohibited smoking in restaurants, it made an exception for HnB products, which can be consumed while eating or drinking if certain conditions are met, such as having ventilation equipment in place.

    In 2019, tobacco companies sold 118.1 billion cigarettes in Japan, around one-third of the peak in 1996.

    Jacek Olczak

    Olczak said Philip Morris would introduce devices that use new technologies and consider expanding the functionality of heated devices. In addition to providing an age verification function to prevent minors from smoking, the company will also begin developing an application to help smokers manage their health.

    Philip Morris’ sales for the fiscal year ended December 2020 totaled $28.6 billion, down 4 percent from the previous year, while its net profit reached $8 billion, up 12 percent.