Category: Technology

With Ploom Tech, Japan Tobacco is ready to face increasing competition in the heated-tobacco products category.

By Stefanie Rossel

Much has been said about Big Tobacco’s late entry into the vapor segment, that once-little, revolutionary grass-roots movement, but it can’t be denied that the traditional cigarette industry’s financial muscle has also sparked innovation in the sector.

Four years after U.S.-based Lorillard, now part of Reynolds American Inc., became the first tobacco manufacturer to acquire an e-cigarette company, consumers have access to a vast and growing range of alternatives to combustible cigarettes. Not only are these products believed to be less hazardous, but they also cater to consumers’ diverse tastes.

Among the reduced-risk products (RRP), the heated-tobacco category in particular has seen many new developments recently and appears to promise commercial success. While heated-tobacco products, as studies suggest, present lower health risks than do combustible smokes, they deliver a flavor similar to that of conventional cigarettes and therefore have the potential to appeal to smokers who remain unimpressed by e-cigarettes. Despite all their innovations, vapor companies have found it challenging to convincingly mimic tobacco flavor in e-liquid.

Japan Tobacco Group (JT) was the last of the big international cigarette manufacturers to enter the e-cigarette category through acquisition—but it has caught up quickly. In short succession, the company purchased U.K-based Zandera, maker of the popular E-Lites brand, and Logic Technology Development in the U.S. The deals provided JT with a global footprint in the e-cigarette market. The takeover of Logic made it the No. 3 U.S. vapor company overnight.

Complementing these acquisitions, JT in February 2015 purchased the Ploom trademark, including the modelTwo vaporizer and pods product line, from the U.S. startup company Ploom Inc. The Ploom products had been on sale in JT’s domestic market, Japan, since 2013.

Since then, JT has been investing to extend its product pipeline. The effort is being led by JT’s international division, Japan Tobacco International (JTI), which, when it comes to emerging products, is also responsible for the Japanese market.

January 2016 saw the launch of Ploom Tech, a hybrid system that, JTI claims, merges the best of e-cigarettes and tobacco. Containing both tobacco and a non-nicotine e-liquid, the device comprises a battery and cartridge, into which a tailor-made tobacco capsule filled with granulated tobacco is placed. Vapor is generated from the liquid in the cartridge and passes through the tobacco capsule, thus creating a clear tobacco taste without ash or smoke. Unlike the original Ploom, the Ploom Tech can be used instantly; it is activated merely by inhaling. JT says that due to its light weight and compact stick shape, the device is easy to hold and carry.

In for competition

Ploom Tech was launched in March in nearly 900 stores in Fukuoka, Japan, as well as in online shops nationwide. Known for its novelty-seeking consumers, Japan was a logical choice to test the revolutionary product. Ploom TECH will be competing with Philip Morris International’s (PMI) iQOS, which has been available nationwide since April. Both companies have tied their new products to their best-selling cigarette trademarks: Ploom Tech is available with three varieties of tobacco capsules under the Mevius brand name, while iQOS is sold with Marlboro-branded “HeatSticks.”

While it is still early days, initial sales of Ploom Tech have exceeded expectations, according to Xavier Lubino, JTI’s emerging products business vice president. “Demand continues to remain high,” he says. “Our competitors launched their product a few months prior to us, therefore like-for-like comparisons would be challenging, but our results are very encouraging.”

Price may play a role: While the iQOS device retails at ¥9,980 ($93.39), the Ploom Tech is priced at ¥4,000, according to a Reuters report; a pack of 20 HeatSticks and a pack of five Ploom Tech capsules are available at ¥460 each.

Without giving a specific time frame, Lubino says that JTI plans to roll out Ploom Tech globally. “Based on our findings and positive outcome in Fukuoka, we are obviously extremely excited about the prospects for expanding the availability of Ploom Tech,” he says. “Globally, we see great potential for the device and [we] envisage entering several markets.”

He declines to comment, however, on whether JTI intends to submit a modified-risk tobacco products application to the U.S. Food and Drug Administration for Ploom Tech, as PMI intends to do for iQOS toward the end of the year. “It is too early to say, as we are currently in the process of collecting additional scientific data on the device,” Lubino explains. “Once this data is in and has been reviewed, we will determine our next steps.”

What can and cannot be claimed about the product will play a decisive role in the marketing of Ploom Tech. “Clearly, recent regulations in the EU and the U.S. have had an impact on the heated-tobacco category,” says Lubino. “However, we put in place a strong strategy in anticipation of increased regulations. For us, Ploom Tech redefines the enjoyment of tobacco by blending nature and technology to give consumers an entirely new experience, rather than just a smoking alternative. We believe early adopters will see Ploom Tech as groundbreaking and share this experience with others. The smoking experience is evolving daily, and the best way to keep up is by consistently developing new products and technologies. For example, Ploom Tech removes the smell of smoke but not the flavor of tobacco, and consumers will appreciate such innovations.”

Competition in the heated-tobacco products category is likely to, well, heat up. With their innovative technologies, tobacco companies appear to be inching toward what analysts have long described as the industry’s “holy grail”—a commercially viable yet “safe” cigarette.

The new devices are said to have the potential to change “the trajectory of smoking” and replace a significant part of combustible cigarette sales in the midterm. In addition to iQOS and Ploom Tech, there is also Glo iFuse, a tobacco-heating device developed by British American Tobacco, which is currently being test-marketed in Romania.

As manufacturers of reduced-risk products increasingly compete for market share, there certainly is no harm for consumers in having a larger choice of alternatives to combustible cigarettes.

For today’s machinery suppliers, flexibility is key, both in terms of technology and operations.

By Stefanie Rossel

As the tobacco industry finds itself at a crossroads, selling make-pack machinery has become a challenge. By closing manufacturing facilities and consolidating production, multinational cigarette companies have begun to adapt their operations to the shrinking demand for combustible cigarettes and increasing regulatory restrictions.

Following the shutdown of Imperial Brands’ Nottingham site this month, no more cigarettes will be produced in the United Kingdom, for example. As a consequence of such closures, a significant amount of comparatively new equipment has been freed for use in the remaining factories, eliminating the need to invest in new equipment.

Paul Knight, CEO of CME, a U.K.-based supplier of custom-made and generic packaging machinery that also rebuilds and upgrades making equipment, acknowledges that sustaining business in tobacco is tough at the moment. “However, it reinforces the need for a culture of continuous improvement and lean-enterprise thinking—something that I feel very strongly about,” he says.

While CME’s multinational customers demand high levels of equipment flexibility, its independent customers tend to seek value for money and flexible financing. The independents also typically want less equipment complexity, to match the operator skill sets available, according to Knight. For each customer, CME tries to find the most appropriate solution. “Even after the initial equipment investment, the installation and after-sales support costs are scrutinized and refined to suit our customers’ exact requirements,” says Knight.

The focus these days is on value for money, agrees Norbert Schulz-Nemak, sales manager at TMQS in Hamburg, Germany, which concentrates on technical solutions to bring older tobacco making machinery up to date. New machinery might offer better value in terms of speed, efficiency, connectivity to management information systems and obsolescence avoidance, he says, but upgraded machinery can present a cost-effective alternative.

Karsten Mutschall, sales manager at Emkon, a German provider of flexible packaging solutions, stresses the need for flexibility in tobacco machinery. “The flexibility to produce different products with different materials, even in different styles, has to be possible in a very effective way,” he says. “Production output following a change has to be back to par within hours, not days. Effective flexibility with a reliable output is the key.”

The need for adaptability extends beyond technology, explains Mutschall. Tobacco machinery suppliers need to be flexible in their operations, as well. “The new market requirements necessitate a new business concept to become even more flexible and to respond in a quicker fashion,” says Mutschall. “Our business is less predictable, therefore working with different industries to absorb individual fluctuation will be necessary.”

Some years ago, Emkon began to diversify into other lines of business, such as the food industry—a horizon-broadening experience that created new synergies. “Since we have already identified and intensified business relations with other quickly changing and demanding industries, we feel well-prepared to jointly find new opportunities to be conveyed into the tobacco industry,” says Mutschall.

Restrictions rule

Over the past months, equipment manufacturers have also felt the impact of the revised Tobacco Products Directive (TPD2), which is due to be implemented May 20 and has further discouraged investment in machinery.

With much of the directive revolving around pack standardization, cigarette manufacturers have been focusing on preparing their packers for this new requirement. “Since the budget does not rise because of such a regulation change, it needs to focus on certain areas and this is packing machinery,” says Schulz-Nemak. As a result, he adds, demand for making equipment has declined.

For Emkon, which among other equipment offers a range of modular pouch packers and fillers for the roll-your-own and make-your-own segments, the legal uncertainty surrounding the content and integration of TPD2, in particular, presented a challenge.

“Even to this day, some uncertainty and controversy still exists,” says Mutschall. “Since an unrealistic timeline was set and time is running out, the industry had to make a decision, which resulted in TPD2-related changes and adaptations, not knowing the outcome of the final TPD2 version. The flexible design concept we offer allowed us to implement the necessary TPD2-related changes into our equipment with negligible efforts. The [TPD2] minimum tobacco weight and pack style restrictions, on the other side, limited the developments we had already started. We had to review, cancel and scrap some of our ideas and designs.”

TPD2 regulations require RYO packs to have a cuboid or cylindrical shape and contain at least 30 grams of tobacco—requirements that leave a lot of room for interpretation. Emkon has tested and implemented all necessary changes for its RYO/MYO packing technologies, including tax stamp positioning or flap extension.

“Solutions to improve and optimize communication space are available, and we can offer them,” Mutschall explains. “Today, innovative ideas to differentiate the product or brand by pack styles, appearance, variations and types not only have to pass the [management] board but also have to take place in a very restricted arena. Following the early stage of TPD2 implementation in May 2016, it needs to be seen how much initiative the industry is willing and able to put forward.”

Finding new ways

Like Knight and Schulz-Nemak, Mutschall does not expect major investment activities in standard equipment over the next years; for machinery suppliers, the future lies in individual, highly adaptable solutions, he says. In November 2015, Emkon introduced Flexbag, its first fully modular, in-line stand-up pouch maker, suitable for use in the tobacco and food industries. According to Emkon, the machine offers multiple sealing possibilities, higher reliability, quick changeovers and reduced downtimes. It also enables improved product quality through gentler product handling.

Emkon also released Sideload, a new case packer. Its main focus at the moment, however, is on intelligent, self-learning machines, according to Mutschall. “Our new operator-guidance system will further improve the ease of operation, which is one segment of our ‘Industry 4.0’ developments,” he says. “In the near future, our machines will detect and cope independently with material and environmental changes.” The company will imbed expert know-how into its machines so that they can make their own adjustments instead of relying on operators with varying skill sets and opinions. The machines will also be able to directly request raw materials as needed, avoiding unnecessary downtime. “Our new generation of packaging machines is more digital, more open with regard to hard- and software, and more flexible,” says Mutschall.

Schulz-Nemak, too, has noticed the tendency toward increased and more sophisticated automation. “The current trends are to use machine information systems to a higher degree and also make use of improved sensors, monitoring systems and controls,” he says. This, he explains, gives more control over the machinery resources, enabling tailored maintenance schedules and better planning of equipment utilization. “I believe that speed is not among the most important factors here; it rather comes down to flexible machinery with the highest efficiency and uptime possible.”

TMQS has developed many solutions to revitalize existing machines through “e-kits,” providing up-to-date Beckhoff electronics and direct drives, avoiding obsolescence and improving overall controls to a modern level. “In conjunction with a tailor-made mechanical maintenance [program] for single-rod makers, which will guarantee 85 percent efficiency, this will bring a machine back into full modern swing without having to pay a fortune,” says Schulz-Nemak. Such programs, he adds, provide the best possible cost-value ratio and “future-proof” machines.

Knight says it is crucial for machinery manufacturers to be forward-thinking and responsive to their customers’ desire to reduce operating expenses. In line with this, CME concentrates on increasing the efficiency levels of existing machines, offering health checks and preventive maintenance packages, and updating both old and new equipment to meet new industry legislation.

In addition, the company offers tailor-made machinery. “Over the last five years, bespoke CME machinery has played a big part in a number of up-and-coming harm-reduction products,” says Knight. “With the design of each new product differing so greatly, there is rarely an ‘off-the-shelf’ solution. When faced with this, we use our technical team to design from the ground up, utilizing our decades of experience in automation.”

Difficult and dynamic market conditions also challenge the traditional concept of competition, according to Knight. “Collaboration and partnering, instead of competing, to combine strengths can be highly effective, particularly for smaller businesses. We see this as a positive outcome for us and our customers. Solutions can be tailored around multiple OEMs’ strengths, often providing increased value and performance to the customer.”

Despite the many challenges facing their business, tobacco equipment manufacturers are keenly aware of the opportunities. Knight sees them in new demand for after-sales products, such as upgrades, size changes, rebuilds and machinery relocations. And, he adds, one area of the tobacco industry that isn’t declining is the “Other Tobacco Products” segment. “New and innovative products are emerging at a rapid rate,” says Knight. “Combine this with the rise of pharmaceutical-style harm-reduction products being offered by the big tobacco companies, and this creates demand for new and innovative machinery solutions.”

The latest filter technology from Celanese uses active carbon to reduce toxicants in cigarette smoke without the loss of desired nicotine.

By Timothy S. Donahue

Innovation in the tobacco industry proceeds at a comparatively slow pace. When advances do happen, they are usually quite revolutionary. Celanese Corp. proves that point with its latest breakthrough in cigarette filter technology. Commercially launched in Japan in late 2014, Celanese’s new CelFX filter is proven to not only remove more gas-phase compounds but also enhance the consumer’s smoking experience.

“This revolutionary cigarette filter delivers a taste and experience consumers want while dramatically reducing many of the toxicants in smoke,” says Perry Aliotti, vice president of global cellulose derivatives sales at Celanese. “CelFX provides all the satisfaction and flavor of smoking with less of the compounds of concern.”

Several factors set CelFX apart from traditional carbon cigarette filters. One of these is that CelFX comprises just four ingredients, three of which are already being used daily by manufacturers of carbon-filtered cigarettes. CelFX uses an industry-standard carbon, paper and glue. The fourth ingredient, a high-tech binder, is a well-known and well-studied material listed as approved for use in filters under the German tobacco ordinance. The binder even meets stringent food and drinking water contact requirements.

CelFX filters are also a drop-in solution for manufacturers. The rods run on standard combiners and cigarette makers with no new parts needed, so no capital investment. Because the binder holds tightly to the carbon particles, the rods run cleaner with less dust. Additionally, CelFX rods have no shelf life limitation—that is a further benefit over carbon-on-tow filters, which can sour with age.

“Using industry-standard carbon was important for helping our customers quickly accept the platform. We can use other carbons, but we don’t need to,” says Kevin Norfleet, commercial manager for CelFX at Celanese. “We get four times more carbon in our filter than in normal filters. Specialized carbons are an option, but generally we have all the activity and performance we need with standard carbon.”

At its core, the CelFX technology binds carbon or other potential additives together into a highly efficient structure for filtration. Large amounts of carbon can be securely fixed into a porous matrix while keeping up to 90 percent of the surface area available. That means that the micropores in carbon—key to selective filtration of gas-phase compounds—are not only still available but also presented uniformly and evenly to the smoke stream, making the filter significantly more efficient.

Additionally, that porous structure enables draw resistance to be tightly controlled so that no changes occur in tar or nicotine levels. “Essentially, CelFX maximizes the surface area of the carbon available to smoke without sacrificing product performance,” says Norfleet. “CelFX gives product designers new freedom to innovate.”

Third-party testing has shown the increased carbon in CelFX helps to reduce the levels of certain toxic compounds dramatically when compared to other types of cigarette filters, according to Aliotti. The World Health Organization has a list of known tobacco smoke toxicants, some of which are gases. “We filter up to 80 percent more of those gas-phase toxicants than mono-acetate filters and up to 60 percent more than carbon-on-tow,” says Norfleet. “While others are looking at reducing tar to reduce toxicants in smoke, we are reducing the gases while maintaining tar, nicotine and flavor. Things like benzene, acetaldehyde, acrylonitrile, formaldehyde, 1,3-butadiene, hydrogen cyanide, isoprene and more are all significantly reduced.”

Aliotti says that the construction of CelFX is unlike anything seen in the industry before. “We can hold the carbon within the filter, evenly spaced out in such a way that even with high carbon loading, it can achieve as gentle an airflow as a normal acetate filter with no risk of collapse or bypass,” he says. “For the cigarette industry, this is as revolutionary as ventilation. Plus, consumers really notice the extra firmness of CelFX and like that firm segment when they extinguish their cigarette.”

Teamwork

CelFX technology is a result of Celanese’s devotion to teamwork and unity among its scientists. Celanese developed the CelFX technology through collaboration between two of its divisions: Cellulose Derivatives (CD) and Engineered Materials (EM). The two sides joined forces and set out to develop and commercialize a new technology that could cleanly and simply put high levels of carbon into a cigarette filter.

The CD side had a long history of working within the tobacco industry, supplying acetate tow for manufacturers worldwide. The EM division excelled at producing various high-technology plastics, including the leading binder technology used in producing water filters. One day, team leaders got together and discussed how the two divisions could create an ancillary tobacco product using their combined products and experience.

“We decided to see if we could make a porous block suitable for the tobacco industry,” says Aliotti. “We knew we had something when we started testing lab-made products, but it took a long time to adapt the binder technology and develop our own process. Fortunately, teamwork and perseverance allowed us to perfect it and to take CelFX to market.”

The CelFX technology is more than just a significant step forward for manufacturers. Beyond simply improving filtration, the benefits in taste and filter feel offer tangible features for consumers as well.

“This marriage of the best water- and smoke-filtration technologies results in a filter that can outperform both carbon-on-tow and cavity filters in taste, ease of draw, filtration efficiency and cleanliness,” says Norfleet. “Additionally, Celanese has a proprietary process to produce CelFX at the scale required to properly serve the industry. Our production facility that is established in the U.S. has proven fully capable of meeting the demanding quality and product requirements of the tobacco sector at a viable price point.”

The CelFX filter is available in a full range of lengths and sizes, from super-slim to standard. The brand Floyd was launched by Montepaz in Japan as the first to incorporate the CelFX technology and has had such good success that the Uruguay-based cigarette manufacturer has now launched the brand in Colombia as well. In fact, Celanese will announce several additional customer partnerships with CelFX in 2016, according to Aliotti. “We are very excited about the future of this product.”

Glo iFuse, a hybrid vapor device, is the latest innovation in British American Tobacco’s expanding next-generation products portfolio.

By Stefanie Rossel

In the light of the ever-increasing regulations for tobacco products worldwide, declining global volume sales of traditional cigarettes and the phenomenal success of the e-cigarette, the race among the leading tobacco manufacturers to bring to the market next-generation products (NGP) has accelerated. All big tobacco companies have implemented a broad range of tobacco harm reduction strategies, ranging from smokeless tobacco to specifically treated, toxicant-reduced cigarettes and heat-not-burn products. Through acquisitions and in-house development, they all have also secured their share of the e-cigarette market.

Much has been said by the vapor community about the tobacco industry entering its product category, and not all of it was friendly. Basking in the glow of apparently having found the Holy Grail of reduced-risk nicotine delivery products that tobacco companies had long been searching for in vain, vapor enthusiasts would argue that Big Tobacco was too old-school, too stolid to fully comprehend this new, technology-driven product category and, in particular, cater to users’ dynamic consumer behavior and evolving preferences. Tobacco companies initially offered cigalikes targeting smokers, critics claimed, neglecting the trend toward open systems among more advanced users.

The key to success for all harm reduction initiatives, however, is consumer acceptability, and not every smoker who wants to quit is willing to switch over to e-cigarettes. Some may prefer a product that is more reminiscent of their traditional smoke—without the exposure to most of the toxicants contained in tobacco smoke. The quest for the Holy Grail, it seems, is far from over.

Catering to all consumer needs

Focusing on the ever more heterogeneous consumer needs, British American Tobacco’s (BAT) NGP strategy takes a fresh approach. During its investor days in September 2015, the company declared its ambition to achieve global leadership of NGPs by 2020. To achieve this, BAT has developed a portfolio of products spanning three categories: tobacco heated products (THP), e-cigarettes and licensed medicinal products. The company expects the global NGP market outside the U.S. and China to triple from £2.8 billion ($4.09 billion) in 2015 to £8.4 billion in 2020.

BAT’s most recent innovation is in the THP category. In November 2015, BAT started test-marketing in Romania Glo iFuse, an electronic tobacco device that is designed to work with specially engineered “Kent NeoPod” cartridges, containing tobacco and a nicotine liquid, to deliver a real tobacco taste and aroma. The Kent NeoPod cartridges comprise three main sections: a heating element, a liquid tank and a tobacco cavity. The heating element atomizes the nicotine-containing liquid into an inhalable vapor, which then passes through a tobacco section, delivering tobacco-flavored vapor to the consumer. A range of different tobacco flavors and aromas can be achieved by using different types of tobacco.

Containing e-liquid as well as tobacco, the Glo iFuse is a hybrid. “We believe we have a unique product,” says Kingsley Wheaton, managing director of next-generation products at BAT. The tobacco itself is not directly heated, he goes on to explain, comparing the process to the warming of mulled wine, where warming enhances the flavors whereas boiling would destroy some of the aromas. To release the tobacco flavor in the Glo iFuse and create an authentic tobacco taste, a comparatively low temperature will suffice, he says. By avoiding combustion of the tobacco, toxicants in cigarette smoke that cause the majority of smoking-related diseases will not be set free, making the product potentially less harmful than a conventional cigarette. Basic toxicological studies conducted by BAT suggest that the aerosols that come out of the iFuse are similar to the aerosols released by vapor products, according to Wheaton.

Out of its five combustible cigarette “global drive brands,” BAT selected Kent to partner with the Glo iFuse device. According to Wheaton, Kent has always been “a natural home” for innovations, with a consumer base that is constantly looking for something new. Romania was chosen because it is an important market for BAT but not a very developed vapor market, as Wheaton points out—and it is a big market for Kent, which has a share of 29 percent there.

Romanian users will have to pay ron100 ($24.02) for the iFuse hardware and ron30 fora pack containing two Kent NeoPod cartridges. One NeoPod cartridge, BAT claims, is equivalent to one packet of cigarettes. For comparison: A pack of traditional Kent cigarettes retails at ron15.

BAT chose a rather unconventional test-marketing method, recruiting a selected group of consumers and explaining the new product to them; Glo iFuse was then offered to them via the Internet. “This approach is new to us; we are committed to testing and learning fast about the category,” explains Wheaton. “Although it is still early days, Glo iFuse is performing ahead of expectations,” he adds. The next step will be to bring the product into Romanian retail outlets.

Glo iFuse is the first product on the market that contains both tobacco and a liquid; because of its tobacco share, the hybrid is classified as a tobacco product and will be regulated and taxed as such. Tax, however, is expected to be lower than for conventional cigarettes, since the amount of tobacco by weight in the Glo iFuse is small. Packaging and health warning requirements, such as those associated with the revised EU Tobacco Products Directive, will apply only to the cartridge packs.

More novelties to come

Glo iFuse is one of BAT’s current two core THP platforms under the Glo master brand. The second innovation in this segment will be a heat-not-burn device named Glo, scheduled for launch in the second half of this year. Glo will have a two-part design, consisting of an intuitive device that can be charged and also serves to heat the second component, the consumables, which look like a slim, filter version of Kent cigarettes.

Placed into the device, the tobacco stick is warmed by a heating system surrounding it completely. BAT claims that its new tobacco heated product device will have enough battery life to allow for the consumption of 20 tobacco sticks.

The company has also further developed its second pillar of NGPs, vapor devices. In 2014, it added the Vype eStick and Vype ePen to its original Vype e-cigarette. In July 2015, BAT became the first among the international tobacco companies to introduce an open-system device: The Vype eTank is a refillable e-cigarette that gives users control over the nicotine strength and flavor combinations that suit them. The company has also launched a variety of e-liquid flavors for its Vype range in various nicotine strengths, which are manufactured with pharmaceutical-grade nicotine in Italy and the U.K.

In September 2015, BAT acquired the CHIC Group, Poland’s leader in the vape segment with a market share of around 65 percent. In addition to manufacturing nine of Poland’s leading e-cigarette brands, including Volish, PI, Provog, Cottien and LiQueen, the group has more than 800 retail stores in Poland. And the country has growth potential: Poland’s vapor market was valued at pln500 million ($125 million) in 2014, according to data provided by STEP, Poland’s association for e-smoking. In 2014, about 1.2 million Poles used e-cigarettes, according to data from the eInstitute, a Polish advocacy group for e-cigarettes.

BATs third NGP category is managed as a pharmaceutical business. At the end of 2015, its e-cigarette e-Voke, designed in compliance with medicinal standards, became the first of its kind to be licensed by the U.K.’s Medicines and Healthcare products Regulatory Agency (MHRA) to help smokers reduce, replace or stop smoking. Given the rapid change and innovation that characterizes the e-cigarette category, BAT is currently evaluating the commercialization and consumer resonance of the e-Voke offer.

BAT’s earlier development in this category, Voke, was the first cigarette-shaped, breath-activated nicotine inhalation product to be granted a medicinal license by the MHRA in September 2014. Work toward its launch continues.

Comprehensive product selection

“We are very proud that we have a comprehensive, diversified portfolio to meet every adult consumer taste,” says Wheaton. Such versatility is vital for success because each of the NGP categories has its pros and cons, as Wheaton points out. While THPs allow for a closer experience to smoking and the utilization of established tobacco brands, they also require users to develop new rituals and are regulated and taxed as tobacco products. Vapor devices benefit from greater social acceptability, sensory variety and choice, as well as relative marketing freedoms and lower excise. On the downside, the category operates in regulatory uncertainty, and product development still needs to be driven much further.

Licensed medicinal products have market freedoms other products lack and can make health claims. In the U.K. they also enjoy a preferential VAT rate, but product development and regulatory approval procedures are expensive and time to market can lengthy. As a result, by the time a product is licensed, its technology may no longer be state-of-the-art.

With its combustibles and NGPs, BAT is capable of covering the entire continuum of risk, from conventional cigarettes to tobacco-heating products, e-cigarettes and licensed medicinal products.

Today, the tobacco industry is at a crossroads, says Wheaton. “At BAT, building on over 100 years of history, we are at the vanguard of what it means to be a tobacco company.”

Worldwide, consumer interest in nicotine alternatives, such as e-cigarettes, is increasing. Despite its promising growth rates, however, the global vapor sector continues to be dwarfed by the tobacco industry, the value of which is estimated at $800 billion. Clearly, the combustible tobacco business will remain the mainstay of BAT’s commercial delivery for a long time to come, says Wheaton.

“And yet,” he points out, “it is that commercial delivery which generates the investment funding for research and development activities—funding which will enable the pipeline of products that consumers demand, and upon which category growth is predicated.”