Category: Markets

  • Reintroduction of Zim Dollar Dampens Cigarette Sales

    Reintroduction of Zim Dollar Dampens Cigarette Sales

    Zimbabwe’s previous currency was rendered worthless by hyperinflation.
    Photo: Taco Tuinstra

    The reintroduction of the Zimbabwean dollar late last year has taken a toll on legal cigarette sales, reports New Zimbabwe.

    Market leader British American Tobacco experienced a 17 percent drop in sales for the fiscal year that ended Dec. 31, 2019. The company attributed the decline to the weakening of the Zimbabwe dollar, which has eroded disposable incomes and forced people to cut down on smoking.

    “It was a challenging year for the business mainly driven by significant changes to the macroeconomic policies and in particular, the introduction of the Zimbabwe dollar that was floated against the U.S. dollar,” said company Chair Lovemore Manatsa.

    Manatsa said the local currency devalued against major trading currencies further impacting consumer disposable incomes, which saw inflation increasing to 521 percent by the end of December 2019.

    Zimbabwe replaced its currency in 2009 with the U.S. dollar to stop hyperinflation. In November 2019, Zimbabwe’s central bank reintroduced the currency to ease a severe cash shortage, but the new Zimbabwe dollar too is quickly losing value.

  • BAT Opens Threshing Plant in Fiji

    BAT Opens Threshing Plant in Fiji

    Photo: HeikoBrown from Pixabay

    British American Tobacco (BAT) has opened a $10-million green leaf threshing factory in Votualevu, Fiji.

    Speaking at the inauguration, Minister for Economy Aiyaz Sayed-Khaiyum said cooperation from all stakeholders and sectors of the economy will ensure there are job sustainability and creation in the country.

    The new factory, he added, will not only provide high-quality products to consumers but also create more employment opportunities.

    BAT’s local general manager, Jeremy Hackett, said the new factory represents the culmination of more than two years of planning and hard work.

    “Fiji is one of the very few countries where BAT undertakes tobacco farming to support the growth of local agriculture, providing employment to approximately 1,100 seasonal workers and hundreds of local farmers,” he said.
     

  • Pakistan Moves up the Value Chain With Cigarette Exports

    Pakistan Moves up the Value Chain With Cigarette Exports

    While Pakistan has long exported raw tobacco, this is said to be the first time it exports cigarettes.
    Photo: Taco Tuinstra

    Pakistan has earned at least $6.28 million from cigarette exports over the past 11 months, reports Pakistan Today.

    Although Pakistan has long exported leaf tobacco and raw materials to various countries, this was the first time that the country exported finished products, a step that experts believe would help the country capture more markets and earn better returns in the future.

    According to government data, there was zero export of cigarettes in fiscal 2019, whereas negligible quantities of some tobacco products were exported in 2018, 2017 and 2016, amounting to $50,000, $92,000 and $78,500, respectively.

    An official attributed the increase in imports to improved quality. At the request of customers in the Gulf, manufacturing plants in Khyber Pakhtunkhwa upgraded the quality of their tobacco, paper, filters and packaging.

    Over the past 11 months, Pakistan collectively exported tobacco worth $38.12 million, which included $15.26 million kg of tobacco and 720,000 kg of cigarettes.

    Major tobacco export destinations include South Korea, Malaysia and Indonesia.

  • Double Whammy

    Double Whammy

    First, vapor companies selling in China lost the internet. Then the coronavirus closed their physical stores.

    By Mark Miao

    By Mark Miao

    In 2019, the Chinese tobacco industry recorded a mid-single-digit growth in current sales value terms and a slight decline in volume terms, largely thanks to new product development in the vapor market and consumers’ growing preference in premium and mid-priced cigarettes due to the increasing disposable income. As the largest category in tobacco, cigarettes achieved a value of CNY1.5 trillion ($211.71 billion) in 2019, a 3.1 percent growth rate in current sales value. However, sales volumes stagnated in 2019 at 2.3 trillion sticks. Under China’s longstanding state tobacco monopoly system, the China National Tobacco Corp. (CNTC) dominates the nation’s tobacco supply from manufacturing to retailing, leaving a tiny space for international brands (Table 1).

    Table 1:

    Company

    Volume exposure to China as share of total cigarette sales in 2019

    China National Tobacco Corp.

    98.47 percent

    Philip Morris International Inc.

    0.13 percent

    British American Tobacco PLC

    0.10 percent

    Japan Tobacco Inc.

    0.02 percent

    Slim cigarettes volume growth rate surpasses superslim in 2019

    In terms of cigarette sizes, slim cigarettes surpassed superslim cigarettes in 2019 in sales volume growth rate. As an innovation of cigarettes, the introduction of slim and superslim cigarettes has attracted the attention of consumers, some of whom are eager for an alternative to standard cigarettes. While there are technical challenges in maintaining aroma, comfort and satisfaction in superslim cigarettes, these can be addressed, and the potential consumer benefits of slim cigarettes quickly attracted the attention of local tobacco monopoly administrations. By the end of 2019, there were more than 80 premium slim cigarette brands on the market, which together account for 80 percent of the slim cigarette market, according to the State Tobacco Monopoly Administration (STMA).

    36,37,38_DoubleWhammy.indd
    Advertisement

    Smoking control, production drop and declining smoking prevalence

    The decline of cigarette volumes in 2019 can be attributed to stricter enforcement of smoking restrictions in public areas, lower production and declining smoking prevalence. The first public smoking restrictions date from December 2013. The Communist Party of China Central Committee and the State Council have asked officials to take the lead in adhering to the smoking ban in public areas such as schools, hospitals and other venues. On Nov. 23, 2014, the Legislative Affairs Office of the State Council released a draft regulation crafted by the National Health and Family Planning Commission, which intended to ban smoking in all indoor public areas nationwide. This marked the first time that China formulated regulations to control public smoking comprehensively throughout the country. Since the draft regulation was released, at least 20 cities in China have passed regulations to control smoking in public areas.

    According to the National Bureau of Statistics, cigarette production in November 2019 was 12.4 percent lower than in November 2018. Production also fell in August, May and June. Cigarette sales are likely to drop further. Under the Healthy China 2030 Initiative that was implemented in 2016, China aims to lower the proportion of smokers above the age of 15 to 20 percent by 2030.

    Despite these developments, the sales value of cigarettes has not been severely impacted thanks largely to the tobacco industry’s significant tax contributions to the state’s revenue. Taxes paid by CNTC account for more than 6 percent of China’s fiscal revenue. In 2018, CNTC paid CNY1 trillion in taxes, and in 2019 the figure increased by 17.7 percent. Moreover, revenues from tobacco sales have become an important source of income for local governments, such as Yunnan Province, where the restriction of smoking has proved to be a tough task.

    Illicit manufacturing

    On Jan. 20, 2020, the STMA announced its progress in the crackdown on tobacco counterfeiting and smuggling. A total of 10,826 cases involving counterfeit cigarettes with value above CNY50,000 were investigated in 2019, which was an 18.97 percent increase in comparison with 2018. According to Euromonitor International, the volume of illicit trade decreased by 10.1 percent, to 87.5 billion sticks, in 2019. It is worth noting that the Chinese market for illicit cigarettes is significantly smaller than it was in 2014 (Table 2).

    Table 2: Illicit Trade Penetration in China

     

    Units

    2014

    2015

    2016

    2017

    2018

    2019

    China

    percent

    5.3

    5.0

    4.9

    4.6

    4.1

    3.7

    Although the anti-counterfeiting and anti-smuggling campaign has achieved significant results, the situation remains grim. Driven by the exorbitant profits, illicit trading of cigarettes is bound to exist for a long time. Increasingly illicit traders have moved their operations to Southeast Asia, only to smuggle their products back into China for distribution.

    The STMA, together with departments such as public security, customs and the coast guard, is determined to crack down on these illegal activities, especially in Guangdong Province and Guangxi Zhuang Autonomous Region, as these two provinces, bordering Southeast Asian countries such as Cambodia, Burma and Vietnam, have been hardest hit by counterfeiting and smuggling operations.

    The boom of non-cigalike closed systems driven by online availability comes to a halt

    Advertisement

    During an internal symposium in August 2018, Jianmin Zhang, director general of the STMA, urged the tobacco industry to strengthen its research into the transformation of traditional cigarettes and develop a new type of tobacco industry. Although still small, the new-type tobacco market is developing at an unprecedent pace, reaching a 101.6 percent growth rate in terms of current sales value in 2019 thanks to the vigorous growth of non-cigalike closed vapor systems.

    Starting in 2018 with only a few brands, the market has welcomed an increasing number of new products in 2019. Both local vapor manufacturers and original equipment manufacturers have set foot in the non-cigalike closed systems market. These non-cigalikes have been warmly welcomed by consumers, especially the young adults, thanks to their fashionable designs, convenience and affordable prices.

    Before the advent of the internet, the vapor market in China had kept a comparatively low profile. However, in June 2018, a CNY38 million injection of angel financing in the vapor firm Relx led to a boom of vapor startups.

    In January 2019, the launch of FLOW with the endorsement of a leading internet enterprise accelerated the growth of vapor industry. This growth continued even though the vapor products were named and shamed by China Central Television for their alleged health risks and lack of industrial regulations. A total of 35 vapor brands in China received financing in the first three quarters of 2019, and the total financing amount exceeded CNY1 billion.

    With the help of significant investments, non-cigalike closed systems have become widely known among consumers. However, the supervision of the vapor industry did not keep up with the rapid development of the market and led to some areas of concern, manifested, for example, by the question of whether nonsmoking younger consumers are being attracted to the category, as well as marketing issues such as irregular labelling of e-liquid. These phenomena accelerated the arrival of regulations.

    On Nov. 1, 2019, the STMA and the General Administration of Market Supervision and Administration issued Circular on the Further Protection of Minors from Electronic Cigarettes, which prohibited sales to minors, along with internet sales and advertisements of vapor products.

    The circular hit the hot vapor market like a bucket of cold water. Before its announcement, the sales of domestic vapor brands were carried out mostly through major online B2C channels such as Tmall and JD.com, which accounted for 80.7 percent of value share in the vapor market in 2019. The internet retailing ban put vapor and combustible tobacco products on the same level. The sales of vapor products have been transferred from internet retailing to other channels such as social media and offline vapor stores.

    The circular also severely impacted the sales of vapor products because of decreased accessibility. Contrary to offline buyers, online shoppers face no time and geographic restrictions to purchase vapor products; they can buy as long as they have access to the internet. This is an important benefit particularly for vapers in smaller cities where there are fewer vape stores.

    Besides, selling offline requires a large investment in the creation and operation of physical stores. In the short term, the high entry barrier will phase out small and uncompetitive brands, and intensify competition. In the long term, the market will concentrate as leading players with deeper pockets can open stores more rapidly than their smaller counterparts. Physical stores also provide existing and potential consumers a place to experience vapor products, which will probably contribute to the sales increases.

    TBR_Universal.indd
    Advertisement

    The potential of heated tobacco

    Rather than burning tobacco, heated tobacco products create an inhalable vapor. It is claimed that heated tobacco products offer a 90 percent to 95 percent reduction in harmful and potentially harmful substances and toxicity, thereby reducing risk while maintaining satisfaction. Currently, China prohibits the sales of heated tobacco products. However, in its July 2018 reform notice, the STMA urged departments and bureaus to deepen innovation and reform of new-type tobacco products and promote the development of customization, industrialization and branding of new-type tobacco products, as well as the corresponding policies and regulations.

    China Tobacco Sichuan Industry Corp. was the first Chinese provincial tobacco manufacturer to launch a heated tobacco product: Kung Fu-Kuan Narrow. The product debuted in South Korea in October 2017. Since then, other tobacco monopoly administrations and private companies have entered the heated tobacco market. Although current regulations reserve heated tobacco products for exports, they might still have domestic potential in the future.

    Covid-19 likely to dampen consumption

    The Chinese tobacco industry reached CNY1.7 trillion in 2019 with a steady growth momentum over the past three years. However, the industry is currently going through a rough period given its reliance on offline channels. The closure of shops and restaurants in response to the coronavirus has not only reduced shopping but also decreased smoking opportunities, especially in smaller cities that were not enforcing smoking bans. In China, cigarettes have traditionally played an important role in social gatherings, which were largely banned in early 2020.

    The slow return to normal, along with the stagnation of logistics, will undoubtedly decrease supply in the first quarter of 2020. In the meantime, the epidemic will also slow the physical store expansion of vapor players, which will further affect sales of vapor products in 2020. Due to the deceasing accessibility of tobacco products, smoking prevalence might decline and lead to a tobacco products consumption decrease in the short term. However, in the longer term, the industry will likely remain resilient in China due to the addictiveness of cigarettes and the strength of consumer behavior.

  • Lonely Leader

    Lonely Leader

    Photos: Taco Tuinstra

    In March of 2005, Tobacco Reporter’s editor, Taco Tuinstra, visited the Himalayan Kingdom of Bhutan. His editorial assignment was to prepare a firsthand report from the world’s only smoke-free nation. Taco’s personal goal was to prove wrong his publisher, Noel Morris, who had bet that he wouldn’t dare light a cigarette in the central square of Bhutan’s capital, Thimphu.

    Bhutan was the world’s first country to ban tobacco. Will it remain the only one?

    By Taco Tuinstra

    As Druk Air flight KB127 starts its descent into Paro airport, a passenger in the back of the cabin screams in terror. The gray clouds have abruptly given way to towering mountains left and right—the foothills of the Himalayas—and the pilot must make a series of sharp turns to avoid collision.

    I, too, am starting to lose my nerve, but not because of the stomach-turning approach. Druk Air recruits its pilots from the British and American air forces, and surely these flyers are accustomed to more hair-raising maneuvers than landing a civilian jet in a quiet mountain country.

    Besides, after nine years at Tobacco Reporter, I take the risks of international air travel in stride. I have survived a Russian airliner carrying more passengers than seats; a lightning strike at 20,000 feet; and, en route to a tobacco auction in Malawi, a chicken (or something else with feathers) flew into the engine of “my” plane, just as the pilot revved up for take-off. Set against such horrors, what is a bit of turbulence?

    Rather, the source of my anxiety resides in my carry-on bag—a pack of Krong Thip cigarettes purchased that morning prior to departure from Bangkok. In compliance with Thai law, the pack carries a disturbing picture of what my lungs might look like if I smoke too many of its contents, but that doesn’t worry me, either. I am well aware of the risks of smoking; and besides, to fulfill my personal mission, I have to smoke only one cigarette.

    I am nervous because I am about to enter the Kingdom of Bhutan, the world’s only country with a nationwide ban on tobacco sales and public smoking. The customs declaration form still shows an allowance of 200 cigarettes per traveler, but that paragraph has been crossed out with ballpoint, suggestion that the information has recently become outdated. There is no mention of any new allowance or of what might happen to people caught violating the rules.

    To ease my mind, I re-read an article in the in-flight magazine that describes Bhutan as a peaceful Buddhist country, with friendly people and a benevolent king. But my thoughts drift to the novel Lost Horizon, James Hilton’s classic about a group of air travelers who crash near Tibet and are taken to an idyllic, hidden mountain resort, Shangri-la—only to find that they may never leave. Travel experts have likened Bhutan to Shangri-la, and I am not certain whether to draw comfort from that comparison now.

    As the plane touches down, a group of relieved passengers burst into applause. I, on the other hand, start to sweat. Noel might win this bet.

    Photo: Jiali Chen | Dreamstime

    Smoke-free society

    I have come to Bhutan to see what a smoke-free society looks like. Is it the utopia the public health movement makes it out to be, or is it a make-believe paradise with an Orwellian tinge, like Hilton’s Shangri-la?

    One thing is certain: Bhutan’s experiment is unprecedented in modern history. Even as governments around the world step up their anti-smoking rhetoric, none seems prepared to take the argument to its logical conclusion.

    None except Bhutan. While ratifying the World Health Organization’s Framework Convention on Tobacco Control (FCTC) in August 2004, the country’s national assembly announced that it would go beyond the treaty’s proposed tax hikes and advertising restrictions and declared tobacco illegal.

    After a three-month transition period during which shopkeepers were allowed to exhaust their stocks, the ban became effective in December 2004, with authorities in Thimphu igniting bonfires of unsold cigarettes and stringing banners across the main thoroughfare exhorting people to kick the habit.

    Cautioning people to take its decision seriously, the government announced hefty fines for violators. Shopkeepers caught selling cigarettes risk losing their business licenses and can be fined up to $220, a hefty sum in a country with a per-capita income of $660. Two months later, and perhaps a tad redundantly, given that cigarettes were no longer legally available, Bhutan banned smoking from all public places. The only place where smokers may still light up is at home.

    Bhutan’s bold move is significant not only because it is unprecedented, but also because it renders obsolete one of the tobacco industry’s most effective defenses. For many years, cigarette companies have silenced their detractors by reminding them that tobacco is a legal product everywhere. If tobacco is truly the evil weed its critics purport, governments should ban it—which of course they never did, conscious of the impracticalities and loss of tax revenues associated with such a measure.

    Until now.

    A world apart

    One of the reasons Bhutan managed to pull off what other countries can seemingly only pay lip service to might lie in its isolation, both geographically and culturally. Wedged in the Himalayas between China and India, Bhutan remains a closed society that regards outside influences, including smoking, with suspicion.

    This becomes apparent the minute you start planning a visit—you can’t just buy a ticket and go. One would expect an impoverished yet stunningly beautiful country like Bhutan to welcome tourists with open arms—and count the dollars. Yet Bhutan didn’t even permit tourism until 1974, and the government continues to restrict its numbers (only 9,000 people visited in 2004), willfully forgoing significant amounts of revenue. Visitors are required to purchase tours with strictly supervised itineraries and pay all expenditures in advance.

    The only way for me to experience the world’s first and only smoke-free society was to sign up for a guided tour of Dzongs and local festivals. Not that I minded, of course. Bhutanese culture is quite fascinating and its natural beauty unrivaled. But it also limited my freedom as a journalist. For example, when the agenda called for a tour of Thimphu’s textile museum or a visit to a shrine honoring Guru Rinpoche, the saint who brought Buddhism to Bhutan, I could hardly insist on visiting the health ministry instead. Blessed with a direct mandate from God, King Wangchuk would probably have felt little inclination to justify his policies to Taco Tuinstra from Tobacco Reporter, anyway.

    Nonetheless, between temple visits and scenic drives, I managed to get a good feel for life in a smokeless society by speaking with several current and former smokers, a few shopkeepers and a police captain. I also talked at length with my guide, Gopal Wanghug, an ex-smoker who says the ban forced him to kick the habit because, even though cigarettes are still available on the black market, they have become quite expensive. Despite the discomfort associated with quitting smoking, Wanghug says he and many other Bhutanese smokers support the ban. I couldn’t determine whether, as a state employee, he felt he had to defend the official line, or whether his feelings were genuine.

    Despite my waving of increasingly larger wads of cash, the shopkeepers I spoke to insisted they carried no undocumented inventory for smokers willing to pay the right price. Captain Dorji Tshering of the Thimphu police force said that, personally, he had not caught any vendors selling illegal cigarettes, but he knew of colleagues who had. A private security guard later boasted that “rules are meant to be broken,” but he didn’t light up in my presence, professing he had left his cigarettes at home.

    Shangri-La

    While each of my conversation partners had his own perspective, they all agreed that only in Bhutan could a government get away with a blanket tobacco ban. The country, they said, is different.

    They might be on to something. Through most of its history, Bhutan has marched to its own peculiar drumbeat. The country’s first paved roads date from 1961. Before 1986 it had no banks. Until 1999, there was no television or access to the Internet. Mobile phones, too, are a recent phenomenon, although transmission towers continue to be greatly outnumbered by Buddhist prayer flags. Thimphu still advertises itself as the only national capital without a traffic light.

    The government is governed by a king, who is regarded as an incarnation of God and as such is universally obeyed. While other nations fret about their gross domestic product, impoverished Bhutan emphasizes “gross national happiness.”

    And it’s not just smoking that’s banned. To preserve its pristine environment, Bhutan prohibits the use of plastic bags and sales of secondhand cars, which emit more pollution than do new vehicles. Environmental protection ranks high among government priorities and may have played a role in the decision to ban smoking. It’s interesting to note that when Thimphu authorities torched unsold cigarettes in the days before the ban took effect, their superiors quickly put an end to the practice, complaining about air pollution. 

    Wanghug, my guide, also told me that, while anti-tobacco sentiments are a recent phenomenon in most Asian countries, they have deep roots in Bhutan. Last year’s widely published announcement was merely the culmination of an anti-smoking policy that had been growing progressively stricter for years. Prior to the nationwide ban, tobacco sales had already been banished in 18 of the country’s 20 dzongkags. The new rule only extended prohibition to the last holdouts—the capital district of Thimphu and the eastern district of Samdrup Jongkar. Sales of tobacco products in duty-free shops have been banned since January 2003.

    In fact, Bhutan’s anti-tobacco tradition can be traced to the nation’s creation. The founder of modern Bhutan, the warrior monk Shabdrung Ngawang Namgyal, enacted the first ban on public smoking when he outlawed the use of tobacco in government buildings in 1629. Guru Rinpoche, Bhutan’s spiritual father, believed that the tobacco plant sprang from the menstrual blood of a female devil who wished for an intoxicant that would obstruct religious practice. Although Buddhist scholars suspect Rinpoche may have been referring to opium, the government clearly felt comfortable extending his concerns to tobacco.

    Unlike governments in other countries, Bhutan didn’t have to worry about alienating voters or special interest groups. Bhutan neither grows tobacco nor manufactures cigarettes, which means there were no tobacco farmers or cigarette factory workers to placate. Tax revenues weren’t much of a concern, either. Smokers account for less than 5 percent of a population that is estimated at less than 2 million. The use of chewing tobaccos is reportedly more widespread, but there are no reliable statistics. Many Bhutanese prefer chewing betel nut, a stimulant that turns saliva red and that, like tobacco, has been linked to health problems. Needless to say, the sale and consumption of betel nut remains legal.

    Bhutan’s remote location, combined with its small population, has made the country uninteresting to multinational cigarette makers pursuing economies of scale. As a result, the most popular cigarette brand in Bhutan was not Marlboro or Mild Seven but Wills, which is manufactured by ITC in neighboring India. Even so, the declared value of all tobacco imports from India was only 200,000 ngultrum—a mere $400—in 2003, according to Kuensel, Bhutan’s English-language newspaper. How much tobacco entered—and continues to enter—Bhutan unofficially remains anyone’s guess.

     

    Setting a precedent

    Is Bhutan as different as my sources suggest, or should the tobacco industry be concerned about other countries copying its policies? The Bhutanese government clearly wishes for the latter. During a meeting of health ministers at the WHO in Geneva, Bhutan’s secretary of health, Sangay Thinley, expressed hope that Bhutan’s example would prompt other countries to follow suit.

    So far, that hasn’t happened. Even a WHO official, while praising Bhutan’s initiative, admitted that a blanket ban might prove impractical in other countries. Indeed, Bhutan’s northern neighbor, China, is home to one-third of the world’s smokers and its government is said to derive almost 10 percent of its revenues from taxes on tobacco products. Following its ratification of the FCTC, China will likely place more restrictions on its tobacco industry. Considering the tobacco industry’s enormous economic clout in that country, however, it is safe to assume that Beijing will not slaughter the goose that lays it golden eggs.

    South of the border, the Indian government, too, has ratified the FCTC, restricted tobacco advertising and limited smoking in public places. A blanket sales ban appears unlikely, however, as bidi cigarettes continue to enjoy wide popularity among smokers and the bidi industry employs millions.

    Farther from home, countries such as Ireland and Italy have passed far-reaching public smoking restrictions, but they are not outlawing tobacco sales as such.

    Perhaps the country that is closest to following Bhutan’s example is South Korea, where a health-minded member of Parliament has been collecting signatures to prohibit domestic manufacturing of cigarettes within a decade.

    Nevertheless, while Bhutan is an unusual place and its cigarette market tiny, the industry would be unwise to dismiss its radical experiment completely. For example, nine cancer centers in Asia recently signed an agreement to work with their respective governments to ban tobacco. The group is not comprised of eccentric mountain kingdoms like Bhutan, but of leading industrial nations, including Singapore, Japan and China.

    Anticlimax

    My editorial mission was a success: I experienced life in the world’s first smoke-free society and realized that it will probably remain the only one for the foreseeable future. But what about my personal assignment; was it successful also? Here’s what happened: When a customs officer told me to open my bag, I lit a cigarette, blew smoke into his face and lectured him on smokers’ rights and the importance of mutual tolerance. Persuaded by my compelling arguments, the official called the royal palace. King Wangchuk, embarrassed about his mistake, revoked the ban that very day.

    Okay, I made that up. Instead, increasingly concerned about an involuntary extended stay in Shangri-la if someone were to search my bags, I silently conceded defeat before I even left the airplane. As the passengers shuffled toward the exit, I sneaked the cigarette pack into the seatback pocket of a first-class traveler—so authorities wouldn’t be able to trace me via my seat number if they found the pack. I met my guide and toured the country, which, as described in Druk Air magazine, was stunningly beautiful and full of friendly people.

    Then, on the last day of my stay, as I was packing my suitcase, something fell out the pocket of a shirt I hadn’t worn during the trip. It was a cigarette! Or rather, it was a pen shaped like one; a promotional gimmick that Tobacco Reporter once gave away at trade exhibitions.

    The “cigarette” looked remarkably realistic; it even had “ash,” which doubled as the pen’s cap. I told my guide I wanted to run a quick errand before driving to the airport, and rushed to Thimphu’s central square, which was only a block away from our hotel.

    Standing on in the middle of the square, I hesitated again, having to remind myself that I wasn’t breaking any laws. I stuck the pen in my mouth, cupped my hands around the end as if I were lighting a real cigarette, and then pretended to smoke.

    I looked around triumphantly, but nothing happened. The passersby just ignored me. Then, five young boys entered the square to play football. As they walked by, the tallest one whispered something to his friends and they giggled. But after the last boy had passed, he suddenly turned around and gave me the thumbs-up sign.

    What a victory. I had defied the world’s strictest anti-smoking regime and the local population worshipped me as a hero defending their rights. Well, maybe not. Perhaps the thumbs-up sign means something else in Bhutan than it does in western Europe or America. I should probably count myself lucky if Noel allows a fake cigarette to win the bet.