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  • Swedish Match Publishes 2021 Report

    Swedish Match Publishes 2021 Report

    Photo: Swedish Match

    Swedish Match has published its annual report for 2021.

    The annual report describes Swedish Match’s operations, strategy and financial development and is available to download at www.swedishmatch.com/annual-reports.

    Swedish Match reported record sales and operating profit in 2021, with double-digit growth in both revenues and earnings in local currencies across all product segments.

    Full-year growth was driven by strong performance in the Smokefree product segment with considerable growth in both the U.S. and Scandinavia. Growing demand for natural leaf cigars drove the robust full year local currency financial performance for the Cigars product segment. The lights product segment too displayed strong underlying performance.

    “Our sales performance in 2021 was outstanding, hitting a new all-time high,” said Lars Dahlgren, CEO of Swedish Match, in statement. Dahlgren was particularly pleased with the performance and potential of the company’s nicotine pouches, which grew by more than 50 percent in the U.S. and Scandinavia in 2021.

  • Multinationals Continue to Monitor Situation in Ukraine

    Multinationals Continue to Monitor Situation in Ukraine

    Photo: JTI

    Multinational tobacco manufacturers have not stopped their operations in Russia but have done so in Ukraine.

    In the wake of Russia’s invasion of Ukraine and the stance taken by companies such as Apple and Stora Enso in halting sales in Russia, Tobacco Reporter asked the multinationals whether they had stopped sales of their products in Russia or when, if ever, they intended to do so. They were further asked why they had not stopped sales, given that this was the case. 

    “Our priority is our employees, and we are taking the necessary measures to ensure their safety,” said a spokesperson for Japan Tobacco International. “Our operations in Russia are fully functional and we have contingency plans in place to ensure business continuity if the situation were to change. As a responsible international company, we are fully committed to complying with all applicable national and international sanctions.

    “We are closely monitoring the situation and cannot comment any further.”

    Meanwhile, a spokesperson for Imperial Brands said: “We are monitoring the situation in both Ukraine and Russia very closely. Our prime concern remains for the welfare of our people in Ukraine, where we have suspended our operations for safety reasons. We will continue to update our plans as necessary.”

    And a spokesperson for British American Tobacco said: “We are deeply concerned about the conflict in Ukraine. The safety and wellbeing of our people in Ukraine and across the region is our first priority.

    “We have suspended all business and manufacturing operations in Ukraine and are providing all the assistance we can to our colleagues, including relocation and temporary accommodation.

     “In Russia, our wholly owned subsidiary has been in operation for more than 30 years. BAT always complies with relevant regulation and legislation wherever we operate, and we are aligned with all international sanctions.’

    “We continue to closely monitor the situation as it evolves.”

    Philip Morris International had not responded by the deadline. 

  • Watch Your Mouth

    Watch Your Mouth

    Image: martialred

    What the industry can’t (and could) say about harm reduction

    By Cheryl K. Olson

    Surveys show that the public perceives nicotine as the devil behind most of the cancer and heart disease caused by smoking. E-cigarettes and nicotine-replacement therapies alike are misperceived as relatively risky by many smokers. Even physicians are likely to believe nicotine is dangerous. The now entrenched view of nicotine as public health villain is the predictable result of years of emotion-based anti-vaping campaigns from government and advocacy groups and a steady drip of media reports on the latest perceived danger or deception from the nicotine industry. This includes coverage of the e-cigarette or vaping use-associated lung injury crisis that wrongly linked deaths from THC vaping to nicotine vapes.

    The hundreds of thousands of deaths from smoking take place out of sight; they’re old news, not worth mentioning. When I was a public health graduate student in the 1990s, there was much conversation about how to make those deaths newsworthy. Advocacy groups looked for vivid imagery and metaphors to make their case: Hey, deaths from smoking are like a jumbo jet crashing in flames every day! Those deaths are still happening; the campaigns are not.

    The Real Cost media campaign, run by the U.S. Food and Drug Administration since 2014, now targets vaping instead of smoking. Creativity in advertising is now focused on fanciful brain worms and similarly unsupported high-fear imagery.

    Over drinks at the 2021 London GTNF meeting, I heard conversations bemoaning the passing of those government antismoking efforts and wondering how the FDA or Centers for Disease Control (CDC) could be persuaded to target nicotine misperceptions. In the “before times” (pre-FDA regulation and pre-Tobacco Control Act of 2009), as an academic who consulted to the industry, I headed a multi-year stop-smoking campaign funded by Philip Morris USA. QuitAssist was created to expand upon and encourage the use of existing smoking cessation materials from government and nonprofit organizations. This naturally made me wonder whether, even in this changed regulatory environment, the industry could find a way to pick up the dropped baton and lead a new communications effort.

    What stops nicotine product companies from pushing back against this tide of misinformation and misperceptions? You’d think there would be a strong incentive for companies to educate the public. After all, if everyone believes that the health danger in cigarettes comes from the nicotine instead of the byproducts of combustion, why would smokers who can’t or won’t quit even consider switching to vastly less dangerous alternative nicotine products?

    Since the GTNF meeting, I’ve talked with people from legacy and upstart nicotine product companies working with these issues from various corporate communications, regulatory and legal angles to try to understand the “carrots and sticks” that shape how the industry responds.

    Companies reflexively blame the FDA regulations for their inaction. This has merit. To prevent new outbreaks of old Big Tobacco deceptive practices, the wording of the law can block companies from speaking obvious truths. But there are also surprising hidden disincentives to educate the public about nicotine. Will it upset shareholders? Will it upset regulators? Is it worth the money? Will it create litigation risk?

    What makes nicotine product makers watch their mouths when it comes to public education? It’s complicated. If we envision the forces blocking industry communication as an iceberg, let’s start with the visible tip: what the law says that you can’t say.

    The Rules

    The most commonly cited roadblock to correcting misperceptions about nicotine harm reduction is Section 911 of the Family Smoking Prevention and Tobacco Control Act of 2009.

    Without a specific modified-risk claim pre-authorized by the FDA, a product’s label or advertising can’t state or imply it carries lower risk of disease or harm than another commercially marketed tobacco product. That’s pretty straightforward. But what’s next is not: you can’t even say the product “or its smoke contains a reduced level of a substance or presents a reduced exposure of a substance” or that the product “does not contain or is free of a substance” even when those statements are empirically true.

    Based on this language, a company could not repeat facts from published research. It could not share the grudging admission from the CDC’s website that “E-cigarette aerosol generally contains fewer toxic chemicals than the deadly mix of 7,000 chemicals in smoke from regular cigarettes.”

    This seemingly outrageous restriction on factual speech should be understood in historical context. The Act initially only covered cigarettes, cigarette tobacco, roll-your-own tobacco and traditional smokeless tobacco. With the language about advertising and communications, its authors were thinking about “light” cigarettes and similarly implied health claims that were misleading or taken out of context—not novel nicotine products that might be truly and even massively less risky. The FDA was empowered to issue regulations deeming other tobacco products to be covered by the Act, adding e-cigarettes in 2016.

    The Risk/Benefit Calculation

    Now, let’s look at the larger underwater part of that iceberg: the less visible factors that block companies from taking action.

    Shareholders. Legacy tobacco companies like to focus publicly on their novel nicotine products and the transition away from combustibles. But there’s no denying that traditional tobacco products, especially cigarettes, are where the money is. Shareholders expect companies to act conservatively when it comes to their primary source of income. And some of the profits from combustibles support the massive R&D costs of transitioning to less dangerous products. However desirable the transition to the future world of reduced consumer harm and reduced litigation risk … as one person told me, it’s a good ESG (environmental, social and governance) story, but the incentives aren’t there.

    Litigation risk. Despite the 1998 Master Settlement Agreement and FDA regulation, multinational tobacco companies remain in near-constant litigation on the cigarette front. Today’s tobacco industry is stuck with the legacy of decades of bad behavior; every action is scrutinized for intent to addict and harm fresh generations of users. So, an attempt to partner with a physician for public education conjures up images of 1930s Lucky Strike ads with smiling white-coated pitchmen. And as one insider explained, it becomes a cost to the business if it gets interpreted in court as evidence of further bad acting.

    Cost. Section 911 of the Tobacco Control Act does allow the option of seeking authorization through the modified-risk tobacco product (MRTP) pathway to make a modified-risk claim. In 2019, Swedish Match was first to earn this status, allowing claims of lower risk of mouth cancer and five other ills if used instead of cigarettes to appear on eight General Snus products.

    Unlike Europe, which takes a category approach to regulation, the U.S. regulates products one by one, even for very similar products with low youth use, such as vaping liquids. One person estimated that the cost of research to support an MRTP claim would be equivalent to what their company spent to support that product’s PMTA for marketing authorization: millions of dollars for claims that may not even be relevant or understandable to the average smoker.

    Regulator pushback. Especially in the current regulatory environment of low trust, confusing guidance, pending legal cases and thousands of products in regulatory limbo, few companies want to risk further antagonizing the FDA. When I raised hypotheticals of education efforts that could be undertaken by nicotine product makers, I heard stories of wonderful might-have-been campaigns nixed by lawyers. A collaboration between the industry and respected researchers and their university, based on extensive focus group testing with smokers? Add a catchy slogan and creative messaging plus incentives and prizes to encourage smokers to try reduced-risk products and to stay off cigarettes? The FDA is lukewarm on the plan. Big Tobacco dollars that could have supported a huge smoking cessation effort go unspent.

    The Right Audience and the Best Messenger

    A final concern among industry insiders is a frank understanding of their own lack of credibility. Does it make sense to spend money on messages that won’t be believed? They point to research showing that government agencies and health professionals are the most trusted sources of information.

    It’s noteworthy that recent research suggests that government agencies are less trusted by groups that disproportionately suffer from smoking, such as racial/ethnic minorities and lower income persons. And the FDA’s actions speak loudly: When smokers see their favorite vaping products removed from websites or store shelves while very low-nicotine cigarettes are authorized, what message does that send to consumers?

    The industry’s best hope for correcting nicotine misperceptions likely comes from indirect public education, through health professionals and consumer advocacy organizations. But industry folks might also consider how to educate regulators, who may not know many or even any smokers, about the realities of their lives and needs.

    Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Associates. She spent 15 years on the faculty of Harvard Medical School.
  • Unintended Consequences

    Unintended Consequences

    Photo: Manatee County Sheriff’s Office

    The number of crimes committed at specialty retail outlets has grown dramatically over the past few years.

    By Timothy S. Donahue

    Every year, hundreds if not thousands of cannabis dispensaries, vape shops and tobacco outlets are robbed or burglarized in the U.S. On July 10, in Lincoln, Nebraska, between 2 a.m. and 5 a.m., the police department responded to alarms at two vape shops where officers found shattered storefront glass at both locations. The thieves targeted CBD (cannabidiol) and Delta-8 THC (tetrahydrocannabinol) products. The pair of break-ins happened two days after another similar burglary, totaling three in as many days. The businesses lost tens of thousands of dollars in merchandise.

    Timothy Goodman, a manager at the Lincoln Vapor location, said that break-in was just the latest in a string of six incidents in approximately the last two years, according to news reports. Goodman, who has worked at Lincoln Vapor for nearly four years, said it’s his understanding that every break-in can be linked back to the same group.

    The burglars stole $2,000–$3,000 worth of merchandise in May 2021 and have lifted around $16,000 in products from the business through the last year and a half, according to Goodman. Most products were hardware and cannabis products, such as CBD and Delta-8 THC. “It’s frustrating beyond belief,” he said. “I wake up most nights in the middle of the night and check the cameras to make sure nobody got in.”

    The rise in vape shop crimes may be an unintended consequence of recent regulatory actions, such as tax increases, flavor bans and raising the age to purchase vaping and tobacco products to 21, according to many industry experts. Richard Marianos, a senior law enforcement consultant who has served more than 27 years at the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and who is now a consultant and adjunct lecturer at Georgetown University, says crime is often an unintended and overlooked consequence of regulatory constraints on the marketplace that encourage the growth of black markets.

    Marianos said that taxes and flavor bans bring prohibition, and prohibition brings crime. “These regulatory actions mean a dramatic increase in street sales to kids, and that is what we have seen all over the United States,” said Marianos. “If you have any form of tobacco harm reduction in your state, just throw that completely out the window [if you are going to implement flavor bans and raise taxes exorbitantly] because it forces young adults and people who can’t afford these products into a growing black market. In terms of law enforcement, the issue is that there has been 150 percent increase in smash-and-grabs because of the difficulty of purchasing these products.”

    Sam Salaymeh, president and CEO of AMV Holdings, parent to a chain of 113 Kure CBD & Vape shops across the U.S., said that his stores have seen a major increase in crime over the past two years. During Covid-19 lockdowns in 2020 through early 2021, AMV stores had over 20 burglaries combined. “There is a myriad of stories that come with these break-ins, but the main theme is criminals are trying to get to high-value items that are small in size—and that would be the CBD/cannabis products … etc.,” explains Salaymeh. “This is happening more and more across the country.”

    During a one-hour period on Dec. 20, five separate retail locations—three vape shops and two tobacco/vape outlets—suffered a string of robberies by three men wearing masks that crossed the Southeast region of Los Angeles County. A shop owner said the criminals pretended to be customers when one pulled a gun and demanded money while two others snatched merchandise from the store’s shelves, according to news reports.

    “We now have organized crews that go out and hit multiple stores like convenience stores, gas stations, vape shops in a single night or a weekend … they don’t go for cash registers; they want the tobacco products because they can sell it on the street cheaper than what it’s being sold for with these high taxes and these prohibitions,” says Marianos. “They’re making a fortune in the black market the same way the dope dealers are selling cocaine and heroin because the taxes on vaping and tobacco products are going through the roof.”

    Phoito: Lexington Police Department

    Crimes of Convenience

    In 2020, there were 102,677 robbery incidents and 102,677 offenses reported in the U.S. by 9,991 law enforcement agencies that submitted National Incident-Based Reporting System (NIBRS) data. Nearly 25 percent of those incidents were committed at convenience stores (13,721), gas stations (7,006) and specialty stores, where vape shops are lumped into (5,372) combined. If criminals are looking for quick cash, then robbing convenience stores or small specialty retail shops is one of the best ways to do it, according to the FBI.

    John Cavanaugh, owner of California-based Vaping Industries, says that thieves have broken into his stores numerous times. Typically, thieves try to take what’s immediately available. “They broke in after hours … broke the glass, popped open the register, grabbed the cash, broke into my office, got the petty cash and then rolled out,” he said. “I think we are starting to see more robberies than burglaries lately, and I think that it’s an easier target to hit a vape shop or a smoke shop with guns because the layout is small, there’s only typically one or two employees and—especially with cannabis dispensaries—there’s a lot of cash on hand.”

    The terms “burglary” and “robbery” are not interchangeable. They have meaningful differences. Burglary involves a person illegally entering a building to commit a crime while inside. Robbery is typically when someone takes something of value directly from another person using force or fear. There is a far greater chance that someone committing a robbery will do so armed compared to burglaries, which typically occur after hours. Convenience stores accounted for nearly 13 percent of all violent crimes suffered in 2020, and gas stations accounted for about 12 percent.

    Across North America, crimes involving vapor, tobacco or cannabis shops are getting more violent. On Dec. 3, in Calgary, Canada, officials said a “number of people” entered Jerry’s Smoke and Vape just after 6:30 p.m. According to a police report, one of the suspects pointed a gun at the clerk, and the bandits made off with cash and merchandise.

    On Sept. 12, in British Columbia, a suspect entered a vape shop alone armed with a shotgun. After threatening an employee, the suspect took an undisclosed amount of cash and product before escaping on foot. Over the weekend of May 29 to June 1, 2020, thieves burglarized several cannabis dispensaries, distribution centers and cultivation in Los Angeles, Oakland, San Francisco and other cities, stealing legal commercial cannabis products and cash. On Sept. 11, 2021, in Calgary, Canada, three masked men entered a dispensary armed, held off staff and got away with a quantity of cannabis products.

    Cavanaugh said robberies are more common at cannabis dispensaries than vape shops because cannabis dispensaries have a lot of cash on hand, especially in the U.S. where very few banks will work with marijuana businesses. There are also numerous illegal cannabis dispensaries, which perpetrators know are less likely to notify law enforcement.

    “Before all of this started happening over the last few years, I didn’t really believe in upping my security. Now, I have to make sure that there are panic buttons, that my staff are properly trained for when somebody comes in with guns blazing,” he says. “They need to know to just give it all up. Give them the cash and whatever they want. It’s OK. It isn’t worth your life. I’m also now spending extra money for high-end security cameras and security systems. It’s frustrating.”

    Photo: UK Vapers

    Crime Prevention

    According to Marianos, there are several reasons why thieves target convenience stores and gas stations and now vape shops and dispensaries: operating hours and low numbers of staff on site, and these types of stores have smaller layouts, so it’s easier to find the expensive/high demand products and there is the potential for large amounts of cash on-site.

    “You don’t want it to make product accessible where somebody can just take a trash can, throw it through the window and get into your shop and take all your stuff,” says Marianos. “More cameras, limiting the amount of people that are coming in like they do at jewelry stores—these businesses need a similar model that retailers with high-end products have. In some higher crime areas, you may even have to hire a security guard.”

    Vandalism, from smash-and-grab types of crimes, has occurred so often at AMV stores in recent years that Salaymeh says he has a toolkit in his garage ready to go at a moment’s notice with everything needed to board up a store. He says he involuntarily became an expert at it. Salaymeh says that while it is rare for AMV stores to alter operating hours, it is a tactic they have used in the past. He says that having at least two staff members at all times in some locations, installing security cameras and other security measures are the primary tools store owners have in their arsenal to help deter crime.

    “Security cameras help us at least get the story behind what happened and potentially pictures of the thieves. We also try to limit the access potential thieves have to valuable product … and we’ve tried to keep the lights on after hours so that people can actually see that these products aren’t lying around or in display cases,” he says. “We leave the register drawer open so that people, when they walk up, they see there’s no cash.”

    Another unintended consequence of overzealous taxation and regulation is the impact it has on local law enforcement, according to Marianos. He says enacting some of these rules are, in effect, giving police more work to do in terms of harassment violations that have no teeth instead of fighting real crime. “Instead of being able to work on what they should be working on—to serve and protect—are we going to be calling the police because someone is vaping a flavor?” he asks. “What is law enforcement going to do with all this nonsense? What are they going to charge the guy with? What is the crime? Do you know what I mean? It becomes an hour and a half just sitting around trying to figure out what we’re going to do here.”

    During his interview with Vapor Voice, Salaymeh’s phone rang. It was the security firm ADT. One of the AMV stores had an alarm going off. He said it happens multiple times a week. There is insurance available for specialty shops, but both Cavanaugh and Salaymeh say it is expensive. The deductible is often higher than the amount of damage suffered during a crime. Both say they rarely, if ever, claim any damages with their insurance companies.

    Another overlooked result of rising crimes in these specialty sectors is the impact on the economy and the lives of employees. Cavanaugh said that crime has forced him to shutter two stores, and he now struggles to keep the doors open in his remaining location. Increases in crime, overregulation and misinformation concerning the health and safety of vaping, and the causes (illegal THC vaping products) of e-cigarette or vaping use-associated lung injury have been too much to bear. “We are doing our best to deal with the reality of today’s vaping industry,” Cavanaugh said. “I want to keep my doors open, and people depend on us; that’s important.”

    Salaymeh says he had to close some stores during the Covid-19 pandemic, some of which were temporary. The closures weren’t all crime-related, he explains, but most of them were. There was a period when stores were not allowed to be open, so burglaries were happening, and stores couldn’t sell anything to try to recover losses. “We’re trying to keep people employed. The height of the pandemic was a very, very, very difficult time for our company and many companies like us. The primary victims of these senseless crimes are the people who don’t have a job to go back to because I shut down 18 stores during that time,” he says. “Think about that.” 

    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.

  • Tobacco and Vapor News Around the World

    [display-map id=’81605′]

    Click on a country to read about the latest tobacco and vapor developments there.

  • Tipping the Scales

    Tipping the Scales

    Tipping papers serve both functional and aesthetic purposes. Not only do they help ensure the integrity of the rod-filter construction and play a role in cigarette ventilation, but they also provide useful real estate for decorations. Using sophisticated printing and embossing technologies, manufacturers can appeal to senses of sight and touch. For this article, Tobacco Reporter interviewed two prominent industry suppliers about their innovations relating to tipping papers.

    What you see is what you feel—the growing interest in embossed tipping papers

    It is always interesting when opportunities are identified and exploited within business sectors, such as the traditional tobacco products market, that are, overall, less than vibrant. It seems to indicate that somebody, a team perhaps, or even a whole company, has been thinking outside the box—or, in one case at least, thinking big inside the box.

    Toward the end of last year, the Tann Group told Tobacco Reporter that for the past five years it had been enjoying a “tremendous” increase in interest for embossed tipping papers—an increase that had required it to make major investments in machinery and personnel to keep up with demand. And it seems that, for at least three reasons, this increase in interest is likely to be maintained. One is the vital feedback loop that is powered by consumer demand and that is clearly working hard in this case. Another is that while the increase in demand has been widely spread, it has not gone global—yet. And yet another is that, working within the letter and spirit of even strict regulations, cigarette manufacturers can use some embossed tipping papers to help maintain the attractiveness of their products even when and where those regulations are being imposed so as to reduce product appeal.

    But more of that later. Firstly, it is necessary to explain for those not already familiar with embossing as it applies to tipping paper, something about the types of embossing that are available for such applications, which comprise macro-technology, micro-technology and nanotechnology. Macro-embossing delivers a haptic effect, one that doesn’t require any special surface treatments of the tipping paper, such as printing or coatings, and that is experienced by a smoker through her fingers and lips because the bosses produced by this process, which are in the submillimeter range, are large enough for them to be detected by touch. By contrast, in the case of both micro-embossing and nano-embossing, the surface deformations produced are respectively within the micrometer and nanometer ranges, which are too small to be detected by touch but which interact with visible light and in this way provide some spectacular visual effects.

    In the case of micro-embossing, the structures produced influence the reflection of visible light, so this technology is used only on tipping papers that have metallized surfaces, such as those produced by metallic hot foil stamping, and not on plain paper. Without micro-embossing, the light reflected by stamped hot foil items, such as lines and logos, would be clear and shiny as it would be when reflected by polished metallic surfaces. But with micro-embossing, the light reflection becomes diffuse and scattered as it is on matte metallic surfaces, and this gives the hot foil designs a satiny appearance.

    The nano-embossed structures, meanwhile, cause the light that strikes them to be diffracted in such a way as to produce an interference effect—to be split into the spectrum of colors and thereby to deliver rainbow visuals, holographic impressions and the “tilted image” effects that are strongly dependent on the angle at which they are viewed. Nano-embossing, which requires the tipping paper to have a full-surface color, produces its strongest effects the darker that the background color is.

    Of the three types of embossed tipping paper on offer, the Tann Group says it is the macro-embossed one that is currently most in demand because it communicates with consumers on both a haptic and a visual level, something the company describes as a “what you see is what you feel” concept. But it is the case that embossed tipping papers, whether they employ macro-embossing, micro-embossing or nano-embossing, are used mainly on premium brands, partly because of the haptic and visual upgrades they provide but also simply because of the higher prices that such tipping papers command.

    It follows, then, that embossed tipping papers, whether macro-embossed, micro-embossed or nano-embossed, are particularly popular in those places where premium brands are most in demand, including duty-free outlets. Currently, demand for embossed tipping paper is mainly coming from the countries of the CIS and Asia, including China and South-East Asia, but it is expected that the trend will move to parts of Europe and Central and Latin America.

    Of course, due to stricter regulations that will govern tobacco products in the future, including those imposed through the EU’s second Tobacco Products Directive, it will become more and more difficult in certain regions to apply to tipping papers special features, such as special inks, aromas/flavors and metallic elements. However, embossing technologies—and especially macro-embossing—provide potential options to maintain the appeal of tipping papers while complying with such regulations, because no extra chemical treatment of the tipping paper or application of special inks is required. With the help of purely mechanical converting of tipping papers, there will still be opportunities for effective design upgrades that do not come into conflict with regulatory or sensory/toxicological restrictions.

    Given the importance of maintaining product appeal while complying with regulatory requirements, it is worth mentioning, too, that the embossing techniques described here can be applied also to printed paper inner liners, which is the first point of interaction, contact and, therefore, communication that the consumer has with a brand after opening a pack of cigarettes.

    Examples of off-the-shelf macro-embossed, micro-embossed and nano-embossed tipping papers are available from the Tann Group, which also offers a design service as part of development projects in which customers get to see and feel the finished product prior to a market launch. —George Gay

    Into the Void: The Fine Art of Cigarette Ventilation

    Thinking recently about the perforation of cigarette tipping paper, I was reminded that Leonardo da Vinci is credited with once having said that among the great things that are found among us, the existence of nothing is the greatest. I’m sure you can see where this is leading. The perforation of tipping paper allows for the controlled dilution of tobacco smoke, so, given that in many parts of the world, controlling the deliveries of tobacco smoke constituents is the subject of government regulation, it is no overstatement to say that perforating technology plays a vital role in cigarette manufacture. And so here is a case where a vital role is played by perforations—holes if you like, and what are holes if not nothing?

    Of course, this introduction is somewhat misleading because, in the case of perforations, the nothingness “created” is defined by the material in which they are made—the tipping paper, though it is still the case that some such papers are not perforated.

    But in the main they are. Axel Nather, head of sales and marketing at Micro Laser Technology (MLT), told Tobacco Reporter in an email exchange early this year that a few manufacturing processes still used electrostatic perforation, which worked well where only very low levels of ventilation were required. However, he said, as government regulations and end users demanded cigarettes with increasingly lower deliveries, laser perforation was ultimately the solution. Laser perforation could be used to produce very stable low-ventilation, medium-ventilation and high-ventilation levels, and ventilation level adjustment was very simple, requiring only changing the hole sizes, track numbers and hole quantities.

    With MLT systems, the operator can instigate these adjustments, and, in the case of online equipment, additional parameters can also be set, so, for example, thicker cardboards can be perforated or cut.

    The use here of the word “cut” needs some explanation as does the reference to “online” equipment. When it started in business 20 years ago, MLT developed and supplied offline laser perforation machinery, but during the past 10 years, it has also been offering and supplying online equipment. This means the company has three main groups of tobacco industry customers comprising cigarette manufacturers of all sizes, paper converters and machine builders that integrate MLT’s laser equipment into their production lines.

    Offline machinery, which comprises stand-alone machinery, is almost always supplied directly to customers. On the other hand, online equipment can, as stated above, be taken up by manufacturers when MLT’s equipment is fitted to OEM cigarette making machinery, and it can be retrofitted to existing manufacturing lines either by MLT or by specialist rebuilders. And finally, there are laboratory systems, which, Nather said, could be delivered with many technically exciting elements.

    Finally, that is, in relation to perforation machinery and equipment. The tobacco industry also uses MLT’s systems for laser cutting and laser scribing, mainly in the production of cigarette packaging, where cardboard and foils are cut and scribed. But MLT’s laser perforating and cutting systems have come into their own with the rise of heat-not-burn (HnB) products. Mostly, HnB products are made with relatively thick materials, such as cardboard, said Nather, so for this reason, MLT had developed laser systems that could generate extremely short pulses of very high powered lasers. This allowed the creation of very small, clean holes, and it also meant that many thousands of “cardboard sticks” could be perforated per minute. And if the speed was still not sufficient, two lasers could be used simultaneously to double the speed.

    All this adds up to what Nather described as a pleasing and increasing level of project inquiries and sales, despite the fact that in 2020 the coronavirus pandemic had had a significant impact on the entire tobacco industry, with projects often being delayed. Nather mentioned in particular steadily increasing inquiries in the area of online perforation and HnB products. And he said MLT’s service department was currently very busy because, in part, it now maintained older laser systems produced by other suppliers and refurbished their laser sources.

    One of the reasons that Nather gave for the increasing level of interest was the innovative nature of the tobacco industry, especially in the area of new product developments, for which MLT’s laser systems were often needed. “This is, of course, very gratifying; development projects are always a great pleasure when exciting products are created,” he said. “As a medium-sized company, we are very flexible and can react relatively quickly.”

    The one challenge Nather mentioned concerned the effects of the coronavirus pandemic, and I asked him what difficulties MLT had faced and what steps it had been able to take to ameliorate those difficulties. Some tobacco industry projects had been postponed and others had taken longer than normally would have been the case, he said, especially during 2020 and early 2021. In addition, travel had been difficult, and, in some cases, it had not been possible to enter some countries, such as the U.S., for a relatively long time.

    In response, MLT had created the circumstances whereby systems could be put into operation virtually, often by helping customers through webcam-based remote maintenance. Interestingly, Nather added that while MLT was glad traveling had become easier again, it would continue to use or even expand the possibilities offered by online maintenance and commissioning. —George Gay

     

     

     

  • The Chosen Few

    The Chosen Few

    Amanda Wheeler (Photo: Malcolm Griffiths)

    The FDA is getting rid of the little companies that created the vaping industry while using the big companies to take the industry to new heights of scientific overkill.

    By George Gay

    Amanda Wheeler is angry.

    I know this because I listened to her presentation on day two of the Global Tobacco and Nicotine Forum (GTNF), which was held in London in September 2021.

    I know, also, that she has every right to be angry—very angry. But despite the provocation she has suffered, her anger was not immoderate or discourteous. It was a controlled, calmly articulated anger—the sort that, if it had been aimed at me, would have had me checking where the door was. Indeed, I think I checked anyway—you can never be too careful.

    Who is Wheeler? She is the founder and owner of the U.S.-based e-liquid manufacturer and retail store JVapes and president of the American Vapor Manufacturers’ Association.

    Who is she angry with? I think it would be fair to say she is angry with a lot of people and organizations, but mainly she is angry with the U.S. Food and Drug Administration, some politicians, large swathes of the U.S. media, “scientists” who put their names to the findings of flawed research into vaping and people who use their wealth and influence to spread misleading stories about vaping, sometimes based on flawed research.

    Why is she angry? Well, the shenanigans and pettifoggery the above organizations and individuals have been getting up to has resulted in almost the entire U.S. vaping industry being faced with an existential threat. And just in case you have been on an interplanetary mission for the past 10 years, let me explain why this is, to say the very least, disappointing. Vaping comprises a harm reduction tool that actually works—that, because it mimics reasonably closely all the enjoyable and satisfying aspects of tobacco smoking but at a tiny fraction of the risk, provides people who want to quit smoking with an exit route that leads to a significantly improved quality of life. To put things in perspective, I am told, even by those opposed to vaping, that in the U.S., more than 400,000 people die of smoking-related diseases each year.

    Undermining an Obvious Solution

    And yet, outside the vaping industry and the village of smokers and vapers, vaping generally goes down like a lead balloon in the U.S. Why? Well, a cynic such as me can think of a whole raft of reasons, none of which reflect well on the intellects or ethics of those opposing vaping. But it’s the inconsistency I simply cannot understand. Why would politicians charge the FDA with reducing the problems caused by tobacco smoking, but then, when a solution—vaping—dropped into its lap, undermine that solution wholesale? It makes no sense. Why, when given the current circumstances, you have to assume politicians wanted smoking—and the flow of money it draws in—to continue, did they ask the FDA to intervene in the first place? After all, they didn’t, as far as I know, ask the FDA to intervene in the case of alcohol, even though the U.S. comes fourth on the worldwide league table of populations who get drunk the most.

    “Oh, but what about the problem of vaping among young people?” will come the anguished cry from some politicians, the FDA and an army of other organizations. Well, let’s examine the facts. I am told that about 11 percent of U.S. high school students recently reported using a vape once in the previous 30 days while 3 percent of U.S. high schoolers reported vaping nicotine daily. Also recently, about 20 percent of 10th graders and about 34 percent of 12th graders reported using alcohol in the previous 30-day period while about 9 percent of 10th graders and 20 percent of 12th graders reported being drunk in the past 30 days. By the way, for the sake of our interplanetary travelers, I should include the reminder that it is not possible to become drunk by vaping nicotine.

    Perhaps the answer to these inconsistencies lies in tradition or tradition’s running mate, inertia. In Australia, which comes top of the worldwide league in respect of the number of times people report getting drunk during any one year and in respect of seeking emergency medical treatment because of alcohol poisoning, you can buy alcohol at drive-through bottle shops. But you must have a prescription to buy nicotine-based vaping products, and you can buy them only from pharmacies or through the Personal Importation Scheme. Come on, you know it makes sense.

    A Flawed Process, Not Flawed Products

    In can be illuminating to discover what some individuals and organizations think of as making sense. In a piece on Open Access Government on Dec. 13 titled, “Tobacco control and prevention efforts in the U.S.,” the director of the FDA’s Center for Tobacco Products (CTP), Mitch Zeller, was quoted as saying, in part, “After receiving millions of premarket applications [premarket tobacco product applications—PMTAs] for e-cigarette products last year, the agency has recently issued marketing denials [marketing denial orders—MDOs] for over one million flavored ENDS [electronic nicotine-delivery systems].” And later, he was quoted as saying, “… R.J. Reynolds Vapor Company [RJRVC] … received marketing authorization in October 2021 for an ENDS device and tobacco-flavored e-liquid pods after FDA determined ….” This, a more or less one-in-a-million approval rate, is what the FDA seems to see as a success.

    OK, it would be easy to accept the FDA’s glee at having blocked a million products if these products had been flawed, but, on any reasonable judgment, this seems not to be the case. The million products seem to have fallen foul of a flawed process, one in which the goalposts might have been moved after applications were submitted. I would direct anybody interested in what went on to a piece in Filter by Alex Norcia, “FDA Memos Reveal its ‘Fatal Flaw’ Rejection Plan for Flavored Vapes” (see https://filtermag.org/fda-memos-flavored-vapes). As Norcia makes clear, the situation is complex, but some things seem reasonably clear, at least to the cynic in me. The FDA seems to have found an expedient way of getting itself out of a trap created by a pincer movement in which, on one side, anti-vaping organizations, using the courts, had forced onto the FDA a totally unrealistic deadline for approving or denying millions of vaping product marketing applications while, on the other side, baying politicians had picked up the scent of a populist crusade—one opposed to vaping flavors.

    Simply put, the vaping scene in the U.S. seems to be chaotic. The regulatory environment in which the vaping industry operates should and could be effective but simple. After all, it concerns a consumer product, not something to blast you into interplanetary space. But this environment has instead been rendered enormously complex and chaotic. And, as a consequence, the industry has been rendered at one and the same time both chaotic and, product-wise, moribund, an almost miraculous misachievement.

    Playing Catch-Up

    The odd thing is that things could be worse. At present, what is happening in the U.S. amounts to a phony war. While the existential threat exists, within the chaos and complexity, life goes on, in part covered by a legal fudge. Vaping product owners and vaping shops are still selling some of their products, and consumers are still able to access some of their favorite brands. This is because some products, especially tobacco-flavored and menthol-flavored ones, while not having been approved, have not been issued with MDOs, even though the deadline for PMTA decisions has passed. In addition, some MDOs are the subject of court challenges, some products that have been the subject of MDOs have been left on the market, presumably because their owners figure it is going to take time for the FDA to catch up with them, and some brand owners have switched their e-liquid formulations from tobacco-derived nicotine to synthetic nicotine, which does not come under the authority of the FDA.

    Not yet, it doesn’t. At his FDA commissioner nomination hearing on Dec. 14, Robert Califf reportedly said there were in synthetic nicotine two enantiomers of nicotine, one of which did not occur in nature and whose properties were not known. He then went on to say that because of this, it would be necessary to close this loophole, which I take to mean he thought it was time for the FDA to take authority over synthetic nicotine. There are at least three problems with this as far as I can see. Firstly, synthetic nicotine does not comprise a loophole. It has been around long enough that the FDA must have been aware of it and have chosen not to include it when it performed its nontobacco-into-tobacco deeming sorcery.

    Secondly, Califf was apparently saying synthetic nicotine and tobacco-derived nicotine were different, so they had to be treated the same, which is a non sequitur. Thirdly, it seems as though, in saying what he did, Califf has created a false and ultimately unhelpful dichotomy. I am told by people who know about such things that the important issue is not about the difference between tobacco-derived nicotine and synthetic nicotine but between nicotine that complies with U.S. and European pharmacopeias and nicotine that doesn’t comply. I believe that in some cases, synthetic nicotine outperforms tobacco-derived nicotine in this regard.

    Favoring the Big Guys

    There is one other notable thing about this fatally shambolic situation, and that concerns the wedge that is being driven between the major tobacco manufacturers and the smaller vaping companies. During a panel session at the GTNF mentioned at the start of this piece, somebody asked how long the U.S. public should be patient with the FDA while it got its vaping act together. In response, another participant seemed to defend the FDA, in part by saying that even given most products fell foul of the agency’s PMTA process, the public would still have the choice of two products. Both of these products were owned by major tobacco companies—one was an oral product and one was IQOS.

    I cannot help feeling that though the PMTA process favors the major tobacco manufacturers and is clearly helping them in their competition against the smaller companies, the majors need to look at and be seen to look at the interests of the smoking and vaping public, which are clearly not being served by the FDA. Like Wheeler, they need to state publicly that what is going on is counterproductive. As somebody once said in relation to another matter, if you economize on the foundations of a building and spend the money saved taking it higher, sooner or later, the whole edifice is going to come tumbling down. And this is what the FDA seems to be about. It is de facto getting rid of the little companies that formed the foundations of the vaping industry while using the big companies to take the industry to new heights of scientific extremism and overkill.

    Just how dangerous such a strategy can be has been demonstrated by the fact that one of the two “products of choice,” IQOS, has been banned from the U.S. market over a patent dispute. Does anybody think it’s okay to reduce consumer choice to one oral product—and, of course, let’s not forget the RJRVC product—no matter how good it might be? We’re talking more than 400,000 lives a year, remember.

    To my way of thinking, the major manufacturers need to join Wheeler and become constructively angry.

    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.
  • Eye of the Tiger

    Eye of the Tiger

    Photo: byrdyak

    Turning Point Brands is embracing next-generation tobacco and alternative products by taking calculated risks.

    By Timothy S. Donahue

    It’s hard to argue the success of Turning Point Brands (TPB). In business since 1988, during the past decade, the company has been turning the typical tobacco business model on its head. It is involved in almost all aspects of the industry, generating nearly $450 million in sales every year. From its iconic brands like Zig-Zag to its more recent investments in the growing legal cannabis industry, TPB is turning heads.

    Headquartered in Louisville, Kentucky, USA, TPB’s business includes three operating segments. Its main line of revenue comes from its “smoking” segment, which includes the rights to the Zig-Zag brand in the U.S. and Canada, according to Scott R. Grossman, TPB’s vice president of corporate development. Zig-Zag is one of the oldest, most recognized “other tobacco products” (OTP) and cannabis accessory brands. “Founded over 150 years ago, Zig-Zag holds the No. 1 share of both rolling papers and wraps in North America, and its products can be found in more than 200,000 retail outlets,” says Grossman. “Given that Zig-Zag generates roughly 40 percent of TPB’s revenue and a majority of our operating income, the brand and its growth initiatives are a major focus for us.”

    TPB’s second segment is “smokeless,” which is predominantly the Stoker’s brand, a leading player in the moist snuff tobacco and chewing tobacco markets. The company also owns the Beech-Nut brand and a diverse collection of other chewing tobacco products. Another compelling segment of the TPB operation is its new generation of products (NewGen), which covers the company’s electronic nicotine-delivery system (ENDS) and cannabis brands.

    NewGen includes an assortment of brands serving multiple industry segments, such as TPB’s business-to-business (Vapor Beast) and business-to-consumer (International Vapor Group) distribution platforms and its new product engine, Nu-X Ventures. The company has online platforms under brand names such as VaporFi, South Beach Smoke and DirectVapor. TPB also owns the e-liquid brand Solace and within its NewGen segment includes recent minority investments in the emerging cannabinoid space, including brands such as Old Pal, Dosist, Docklight and Wild Hemp.

    TPB was one of the first traditional tobacco companies to publicly announce its foray into the legal cannabis market. That decision came under the leadership of TPB’s former president and CEO, Larry Wexler, who retired from the company and was succeeded by Yavor Efremov on Jan. 11. “Larry took the company public in 2016 as an OTP business, and over the next five years, he successfully drove significant initiatives to drive value, including the investment in new talent to drive TPB forward,” says Grossman. “We’ve been strategically focused on introducing new products to serve both B2B and B2C customers across on-premise retail and online channels.”

    Yavor Efremov

    Bump in the Road

    Being a business with major assets in ENDS comes with challenges. TPB was one of the first major companies to receive a marketing denial order (MDO) from the U.S. Food and Drug Administration after the agency’s Sept. 9, 2021, deadline to decide on premarket tobacco product applications (PMTAs). Convinced that the FDA’s decision was unjustified, TPB immediately filed a legal challenge. Before the lawsuit made its way through the courts, the FDA rescinded the MDO it issued to TPB. The term “Fatal Flaw” was used by the FDA for PMTA submissions that lacked certain studies. The term has been at the center of nearly all lawsuits filed against the FDA for its handling of the PMTA process.

    “The Fatal Flaw standard is obviously one that departs from the pre-September 2020 guidance. In fact, it’s in direct conflict with that guidance. It’s helpful that [our MDO] was rescinded and that the agency admitted it had not reviewed certain [TPB] studies,” explains Paul Blair, TPB’s vice president of government affairs, adding that TPB made the decision to file suit because there was information that the regulatory agency overlooked in its review process. TPB wasn’t unique in that respect; however, the agency didn’t look at specific study data for several businesses.

    “[The rescission] is an important recognition that our denial was not related to nitpicking over data. The science we submitted about transitioning combustible cigarette consumers to our products in particular … It was an oversight. And that’s helpful not only as we try to navigate the process moving forward but also because it doesn’t seem it was an attack on the body of our application generally,” explains Blair. “We maintain that we provided data that is sufficient for the agency to authorize the marketing of our PMTAs. It’s fair to say, though, there’s not a publicly announced standard for the approval process, whether it’s for open system products, closed system products, flavors and, honestly, even tobacco and traditional flavored products.”

    That’s what Blair believes the FDA is doing now; the agency is probably reviewing its communications plan on how to reassess the PMTA process and come to some conclusions on deciding on a standard for authorizing products. Traditionally, the FDA would engage in good faith conversations with businesses trying to get products approved and offer some clarity on what information the agency needs. According to critics, the FDA’s Fatal Flaw analysis for ENDS products proved this isn’t the case anymore.

    Paul Blair

    Embracing Change

    Unlike most traditional tobacco companies, TPB isn’t shy about its cannabis investments. The company’s management team and its board have embraced legalization, according to Grossman. Currently, 37 U.S. states have legalized medical cannabis and 18 have approved it for recreational use. During the past few years, the company has invested in several cannabis operations. In 2021, TPB completed an $8 million strategic investment in Old Pal Holding Co., a cannabis lifestyle brand, and an $8.7 million strategic investment in Docklight Brands, a consumer products company led by its anchor brands Marley Natural and Marley CBD. In 2020, TPB entered into a long-term distribution and profit-sharing arrangement with Wild Hempettes, the Texas-based manufacturer of Wild Hemp Hempettes brand smokable CBD, and made a $15 million strategic investment in the global cannabinoid company Dosist.

    Grossman says that while every investment needs to be able to stand on its own, TPB’s strategy is focused on finding highly synergistic companies that strengthen the current TPB platform. Old Pal is a good example of how its strategy is being deployed—Old Pal sells roll-your-own (RYO) cannabis products with rolling papers inside the packaging. “Zig-Zag has historically been mainly focused on the convenience store channel, so this investment enables TPB to further accelerate growth in under-indexed stores such as dispensaries and head shops while supporting the growth of Old Pal,” says Grossman.

    In August, TPB made its first move into the international market by increasing its stake in ReCreation Marketing, a Canadian distribution company with ties to Canada’s recreational cannabis culture. In December, ReCreation Marketing rebranded as Turning Point Brands Canada. “TPB Canada has a number of proprietary branded products in its portfolio, and we are exploring strategies to leverage that proven model and its portfolio to increase distribution within the U.S.,” says Grossman. “We are one of a select group of established companies—especially public companies—that are actively looking to deploy capital in the cannabinoid space. Historically, we’ve been predominately focused on brands given our expertise, but we’re exploring many verticals within the cannabinoid sector. Our pipeline is very healthy, but at the same time, we have to remain highly disciplined with how we spend our time and capital.”

    It’s not just vaping and cannabis products in TPB’s future. In July, the company acquired certain cigar assets of Unitabac. The acquisition was for a portfolio of cigarillo products and all related intellectual property, including cigarillo non-tip, homogenized tobacco leaf, rolled leaf and natural leaf cigarillo products. “The cigar business is a $2.5 billion wholesale business in the United States. We’ve historically participated in that market, but we didn’t have the scale necessary to be really competitive. The Unitabac acquisition allows us to further extend into the cigar market,” says Grossman. “You’ll see a number of initiatives with that asset rolling out natural leaf products and other cigar assets, both under the Unitabac portfolio of brands as well as extending it to Zig-Zag.”

    Scott Grossman

    Facing Uncertainty

    The FDA will soon have a new leader (Biden’s appointee, Robert Califf, had yet to be confirmed at press time). The FDA’s Center for Tobacco Products (CTP) will also have a new leader; its current director, Mitch Zeller, plans to retire in April. Blair says that the individuals in those positions will have a significant role to play in determining how the agency and CTP will work with stakeholders and communicate policies about how those regulations will go into effect. The FDA, he says, doesn’t have any previous experience regulating vaping products, so there is going to be a lot of action, reaction and learning along the way.

    “It’s not as if Congress explicitly wrote how the approval or denial process might look. In fact, they didn’t write the details,” says Blair. “At least [the FDA is] thinking about the process, and they’re thinking about the consequences. But there is this opportunity beyond vapor product PMTAs in 2022 for a future generation of products to have some certainty because at the end of this, whether it’s because of litigation, because it’s further issued guidance, because it’s approvals or denials, there will be a pathway for companies and a better understanding of how the process works.”

    Blair says that overcoming the challenges of getting a PMTA approved will be stepping stones toward determining how the company approaches the future regulation of other products, such as cannabis. He says there is a real opportunity for TPB to play a critical role in the future of cannabis regulation and policy. “I think our action is going to be guided by our business’ experience as a regulated tobacco business. There are other tobacco businesses that have cannabis interests or investments, but there aren’t many that are willing to publicly engage in the way that ours is as an advocate for legalization, as an advocate for appropriate regulations. There needs to be a balance of consumer protection with entrepreneurship and opportunities in the investment space.”

    Grossman says the future of TPB is to align itself with the growth of the cannabinoid industry and possibly make more direct cannabis investments outside its current portfolio. “We are concentrated on trying to learn and execute on a variety of cannabinoid initiatives,” he says. “Although we’ve historically focused on brands, we are deeply embedded in the sector and are actively studying many verticals across value-added products and services, brands and distribution. We believe the U.S. cannabis market will exceed $50 billion over the next five to 10 years, which we clearly think will benefit TPB over the long term.”

    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.
  • The Ties That Bind

    The Ties That Bind

    Photos: HB Fuller and Baumer hhs

    Despite challenging times, optimism prevails among manufacturers of adhesives and adhesive application equipment.

    By Stefanie Rossel

    Tobacco industry suppliers have gotten used to annual statistics revealing declining cigarette consumption. News about additional restrictions is unlikely to shock them. Covid-19, however, took challenges to a new level, including for suppliers to tobacco adhesives.

    “A prolonged period of high demand and tight supply is resulting in the highest inflation of raw material costs this industry has seen in living memory,” says Selda Akbasli, global business manager for rolled paper and tips at H.B. Fuller in the U.S. “Most forecasts indicate that costs will continue to increase through at least the end of the second quarter of 2022.”

    Selda Akbasli

    Logistics also remain an issue, with global demand for containers remaining high and rates likely to further increase in 2022. “The logistics industry continues to be disrupted by Covid-19 and capacity shortages. Container availability and air capacity remain tight; waiting times for vessels outside of ports remain lengthy, and warehousing capacity continues to be a bottleneck,” says Akbasli. “Congestion at both ocean and rail terminals and container freight stations, namely in the U.S., persists. In Greater China, power outages and blackouts are impacting manufacturing outputs; however, demand for shipping container space is still high in the region. Our goal is to keep our customers informed as we monitor this dynamic and essential situation for our business.”

    According to Akbasli, 2021 was a year like no other for manufacturers, with the supply chain crisis delaying goods and creating raw material shortages. “What it really highlighted is the importance of a robust and secure supply chain,” she says. “At H.B. Fuller, we are proud of how our teams in sourcing, manufacturing and logistics worked together with our global and regional supplier partners to ensure minimal disruption for our customers. Our range of adhesives with global formulations really proved their worth in providing manufacturing and sourcing flexibility.”

    For 2022, the company will focus on people’s safety, sustainable product innovation and security of supply. To this end, H.B. Fuller is working with responsible global vendors who have strong partnerships within their supply chains networks, according to Akbasli.

    Baumer has increased the performance of its products and solutions to ensure maximum reliability.

    Fit for the Future

    Judging from market forecasts, Akbasli is confident that the value of the global tobacco business will continue to increase in the next years. “This industry is constantly evolving, and our customers are always open for opportunities to improve their product performance and overall manufacturing efficiencies,” she says. “We believe the changes we made over the past years, including our organization realignment and our approach to doing business differently during the pandemic, will serve as a competitive advantage in the years ahead.”

    Tobacco remains an important segment for H.B. Fuller. The company, which had a fiscal net revenue of $2.8 billion in 2020, develops adhesive products for many markets across the world, from packaging to solar panel assembly, electronics to automotive, disposable hygiene to woodworking.

    Floriano Erario

    Floriano Erario is business development manager of tobacco packaging at Baumer hhs, a manufacturer of glue application and quality control systems. The company is headquartered in Germany and present in more than 90 countries through an international network. Erario is equally optimistic. “Although the decline in cigarette users worldwide is a fairly consolidated fact, our activity of designing and manufacturing glue systems for various types of projects is in continuous development, and we continue to assist our customers day after day constantly,” he says.

    Baumer remains focused on innovation for the tobacco sector. By creating a tobacco competence center, which was opened in October 2018, Baumer brought its expertise for the cigarette market to Milan, Italy. “The Italian team, assisted by the headquarters in Germany, has a very broad portfolio of solutions for the traditional—or commonly called high-risk—cigarette business,” he says. “These solutions are by now consolidated and range from systems for filter makers, combiners or tubes. We are strongly active in the packer machine to finish with the production of cases for cigarette packets and the end-of-line case packer. We also design and customize dedicated systems and dedicated solutions for our customers every day.”

    H.B. Fuller’s focus, meanwhile, is to create a global portfolio of innovative adhesives and systems that significantly reduce costs, improve efficiency and make products more sustainable. Recently, the company introduced Swifttherm 6200, a hot melt for all filter types. According to H.B. Fuller, Swifttherm 6200 delivers a superior bond strength, both during production and storage, increasing productivity while reducing the share of rejects. With a long “open time” and short setting time, it can be used for conventional and new-generation products, reducing complexity. According to H.B. Fuller, customers can reduce the number of filter hot melts to just one adhesive.

    The company has also launched a solution for bonding untreated filmic carton board, such as Transmet, laminated and metallized boards. Ipacoll 2948 is a water-based adhesive.

    With the Ipacoll 2600 series, the company has developed a range of high-performance tipping adhesives that allow customers to simplify their adhesive needs across their entire manufacturing network, Akbasli says.

    Catering to a Highly Regulated Market

    Regulatory compliance remains among the most important requirements. “The tobacco industry is one of the more highly regulated markets in which H.B. Fuller operates,” says Akbasli. “We have specialized industry expertise and know-how to keep products compliant with manufacturing requisites and regulation that, as you can imagine, are completely different in each market and each region,” she says.

    “To navigate the complex world of regulatory matters, we have dedicated regional regulatory teams within our regulatory global function that work directly with industry associations, governmental agencies and our own technical and sales units to make sure we are engineering the right products for today and the future. The specific adhesive performance requirements can vary from customer to customer, but in general they require a consistent adhesive performance that enables their production to run seamlessly without any adhesive-related downtime. That consistent performance includes clean application through the adhesive equipment and profile-optimized adhesive setting for the range of machine speeds and substrates, secure adhesion both during production and in the hands of the consumer.”

    Sustainability has become another driver in the tobacco industry. “We have seen a rise in demand for greener products as regulations around the handling of chemicals have become tighter, especially in Europe,” she says. “Around the world, natural-based articles are in high demand, and it’s a trend set to continue apace. The global tobacco market changed dramatically over the last ten years, and we expect this pace of change to continue. Adhesives are a key enabler for our customers to produce more sustainable products, whether they are natural/bio-based, compostable or recyclable.”

    H.B. Fuller has multiple projects involving top scientists designing and engineering technologies that contribute to the circular economy and help customers meet their own sustainability goals. Projects range from formulating adhesives using bio-sourced raw materials to developing new, natural and responsible sourced adhesive raw materials. “We already have an advanced solution that enables our tobacco customers to significantly reduce the carbon footprint of their production facilities,” says Akbasli. “It requires them to work in a slightly different way, but the customers partnering with H.B. Fuller are excited to see what they can achieve in 2022 and beyond.”

    H.B. Fuller aims to create a global portfolio of adhesives and systems that reduce costs, improve efficiency and make products more sustainable.

    Dedicated Solutions for NGPs

    Next-generation products (NGPs), too, are high on the agenda of adhesives and adhesive application manufacturers. “Baumer hhs has been active in the New Generation Project (low-risk cigarette) market since its inception,” explains Erario. The company has also been exploring opportunities beyond tobacco. “We also have ready-made solutions for the new—even if it’s not really ‘new’—cannabis market or even pre-roll hemp. Our knowledge in terms of contact and noncontact glue application, the knowledge of world players will help our consolidated customers and new ones in this new business.”

    For the new generations of cigarettes and the packages that contain them, Baumer is drawing on its know-how of the traditional cigarette market. “We have developed dedicated solutions and at the same time increased the performance of our products and solutions to ensure maximum reliability for our customers’ machines,” says Erario. “Today, this is recognized by having systems on the market that guarantee flexibility, sturdiness and ease of use, our customers say.”

    H.B. Fuller says it has a market-proven range to produce consumables for all NGPs, regardless of brand. The key differences in the production of heat sticks for heated-tobacco devices involve the design of the stick, the filter, the materials used to manufacture the stick and the mode of operation, explains Akbasli.

    “The filters are designed differently using new materials, and they have a more complex construction,” she says. “With this comes new and additional issues related to adhesive performance requirements. Higher grammage papers used are stiffer in nature, the nonwrap acetate filter material is harder to bond and the smaller length used presents process challenges. All this combined requires the use of an adhesive with higher wet tack and a stronger setting bond.

    “Overall, the heat stick and filter consist of more parts versus a conventional cigarette. Many of these parts have a reduced level of elasticity when compared to conventional cigarettes, and this means they are harder to form into the desired shape for the stick during production. This has been a challenge for suppliers and NGP producers to overcome through extensive collaboration that required the design of new machines, materials and adhesives. And lastly, the mode of operation for these products is different. They are only heated and not burned, posing different challenges for the adhesive to remain functional whilst the cigarette stick is being used.” 

    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.
  • Greening the Golden Leaf

    Greening the Golden Leaf

    Photo: Tobacco Reporter archive

    Independent leaf merchants are working to improve the sustainability of tobacco cultivation.

    By Stefanie Rossel

    With only eight more years to go until most of the United Nations (U.N.) Sustainable Development Goals (SDGs) are to be achieved, sustainability is becoming ever more critical in the tobacco sector.

    “In recent years, we have seen sustainability grow in importance to a point where it is addressed in almost all key internal and external engagements,” notes Mat Wilde, head of group sustainability at Contraf-Nicotex-Tobacco (CNT), a Germany-based company involved in the worldwide growing, sourcing, developing, processing, extracting and producing of leaf tobacco, nicotine and natural ingredients, among other agriculturally derived products.

    Set up in 2015 by the U.N. General Assembly, the SDGs comprise 17 goals designed to be a “blueprint to achieve a better and more sustainable future for all.” Goals include the elimination of poverty and hunger, quality education, health and well-being, gender equality, clean water and sanitation as well as the reduction of inequality, responsible consumption and climate action.

    While the leading international tobacco manufacturers in 2016 launched the Sustainable Tobacco Program (STP), an initiative that operates in more than 52 countries and gathers data on more than 180 suppliers of tobacco across 5 million smallholders, independent leaf merchants have also intensified their endeavors to support tobacco growers in their work toward more sustainable production.

    “I have always supported the growers,” says Rick Smith, founder of Wilson, North Carolina, USA-based Independent Leaf Tobacco Co. “They must be made whole for the industry to thrive. I have stepped up my efforts recently, certainly on types in short supply.”

    CNT works directly with its stakeholders on its sustainability efforts and supports its farmers in implementing best practices. “At the core of our approach with our farmers is our training program, where we aim to train growers on both the ‘why’ and the ‘how’ of sustainability topics,” says Wilde. “Understanding the context in each local operation, the root cause of prioritized issues and ensuring farmer financial sustainability is embedded within our programs. All are vital in working with our farmers to meet our common goals. Integrating key stakeholders, including farmers, farmer organizations, community, nongovernmental organizations and experts, within our projects and programs increases the impact and level of success.”

    Rick Smith

    Creating Awareness

    In a world characterized by declining smoking rates, sustainability includes ensuring financial viability for tobacco growers. For this reason, Norton Leaf Tobacco (NLT) of Zimbabwe educates its farmers on the need for diversification. “The government of Zimbabwe has introduced initiatives such as pfumvudza, a farming approach designed to maximize efficiency of labor and input resources,” explains NLT General Manager Alice Mukome Chiwanza. “NLT has field staff trained in the practice that ensures its farmers are able to increase both hectarage and yield of grains. Thus our officers are now training farmers to employ this method to encourage food security at [the] household level while assisting with the growing of the tobacco crop.”

    While NewCo Global Tobacco Trade and Service does not interact directly with farmers (it buys from partners and other leaf merchants), sustainability plays a key role in all of the German company’s activities. In September 2021, the company established NewCo Pro Services and Trade to handle the group’s diversification efforts and nontobacco activities.

    “This company’s main focus is to provide a proactive approach to global, social and environmental challenges as well as partner with entrepreneurs that have innovative solutions for a better future,” says Jose Maria Costa, senior executive advisor with NewCo Tobacco Services. “Through NewCo Pro Services and Trade, we are committed to doing our best efforts to make the United Nations Sustainable Development Goals a reality. As such, we are in the process to market Sydney 905 water filters globally. These filters have proved to be one of the most efficient ways to get safe water regardless of water source. By providing access to safe water, we eliminate the need to use charcoal, which in many parts of the world is used to boil the unsafe water.”

    NewCo has also started replacing the plastic bags that are still used in the tobacco industry for tobacco samples with more environmentally friendly alternatives. “Most of the plastic bags that are used today for storing and shipping tobacco samples are not biodegradable and therefore they are not environmentally friendly. After several months of research and testing, we have placed our first order for the new bags, which are made out of potato starch and are 100 percent compostable and food-certified. Our plan is to contact all our suppliers, vendors and customers and offer them the possibility to make the same change NewCo has made and contribute to a world that is more sustainable.”

    Jose Maria Costa

    New EU Anti-Deforestation Law

    Worldwide, regulatory pressure on tobacco and tobacco products continues to increase, also in terms of sustainability issues. On Nov. 17, 2021, the European Commission announced a plan to ban the sale of agricultural products raised on deforested and degraded lands. The move is an attempt to ensure forests around the world remain intact and continue to absorb carbon dioxide as they grow. According to the U.N., the world has lost 420 million hectares of forest in the past 30 years—an area larger than the EU. During the recent U.N. Climate Change Conference, more than 100 states pledged to end deforestation and land degradation by 2030. For the time being, the European Commission’s list targets soy, beef, palm oil, coffee, cocoa and wood; while tobacco is not part of the commodities mentioned, the draft leaves room for future amendments.

    In a 2017 report on the environmental impact of tobacco, the World Health Organization expressed concern about the impact that leaf cultivation has had on forests since the mid-1970s. The health body estimates that 11.4 million tons of wood are required annually for tobacco curing. After processing, additional wood is needed for the production of cigarette and rolling papers as well as for packaging. As tobacco requires lots of nutrients, with soils being leached after two years to three years, land extension leads to further forest depletion.

    Smith notes that regulation should strike a balance. “Any laws restricting free trade affect us all and are usually detrimental to the people they are intended to help,” he says.

    “The tobacco industry needs to act responsibly to ensure that sustainability is at the center of all its activities,” Costa says. “From the farmers to the cigarette manufacturers, the entire value chain needs to protect all natural resources, including the forest.”

    Newco has been marketing Sydney 905 water, which allow users to get safe water regardless of source. (Photo: NewCo)

    Comprehensive Measures

    NLT is a member of the Sustainable Afforestation Association (SAA), a Zimbabwean nonprofit organization funded by tobacco merchants that was established in 2013 (also see “Taking Root“). “NLT has been a member since we started operations in 2018,” says Chiwanza.

    The SAA aims to retain and grow existing indigenous commercial forests. One of the ways in which it has sought to do this is by entering into joint ventures with farmers in tobacco growing areas to set up eucalyptus plantations. Eucalyptus not only grows quickly but also provides good firewood.

    “The bulk of Zimbabwe’s tobacco is grown by small-scale farmers who use wood-fired barns to cure their tobacco,” Chiwanza says. NLT also holds field days and workshops, encouraging farmers to grow trees and offering advice on best practices. SAA’s activities should help Zimbabwe remain compliant with anti-deforestation laws, such as the one pending in the EU.

    Fighting deforestation has been a priority at CNT for years, Wilde emphasizes, primarily for flue-cured tobacco in origins that use fuel wood but also for other tobacco types—with deforestation linked to curing fuel, barn construction material and land clearance. “Addressing deforestation has been a focus prior to external regulation, with necessity of ensuring continuity of the industry in some locations being a key driver for change, along with meeting communities’ expectations of the business and ensuring our ‘social license to operate.’ Having a robust traceability system in place, connecting tobacco to its growing source, farmers and the activities carried out on farm is key for transparency and meeting increasing supply chain legislation—both for human rights and the environment.”

    The company has identified high-risk origins within its supply chain and implemented systems aimed at mitigating deforestation. “The EU draft law on supply chain deforestation highlights the priority of this topic and reinforces the urgency of addressing these issues in high-risk origins, both as a company and as an industry,” says Wilde.

    CNT’s reforestation efforts comprise education and awareness programs for its farmers, community and stakeholders. “Training farmers on legal requirements, conservation and reforestation practices, and listening to our stakeholders on localized issues helps to address deforestation and reforestation,” Wilde points out. “Training is supported by farmer monitoring by Extension staff, the results of which are analyzed to feed back into response projects and training cycles. We run various reforestation and carbon projects within our origins. Tailoring reforestation and conservation response programs to the local context and working with expert partners in addressing the local hurdles to success is core in our sustainability strategy.”

    Spying Opportunity: Norton Has Great Expectations of Zimbabwe’s Tobacco Transformation Plan

    In September 2021, Zimbabwe’s government approved the tobacco value chain transformation plan, which aims to transform the sector, currently valued at $1.2 billion, into a $5 billion industry by 2025. Launched by the Tobacco Industry and Marketing Board (TIMB), the initiative aims to turn the economy around through agriculture, boosting national income and foreign exchange to the levels from before Zimbabwe’s land reform program, which turned the industry from one dominated by large-scale commercial tobacco plantations to one characterized by smallholder production.

    The plan calls for an increase of annual tobacco production from 200 million kg to 300 million kg, the exploration of alternative crops in anticipation of lower smoking rates and an increase in value addition and beneficiation from 1 percent of the tobacco crop to 30 percent.

    Alice Mukome Chiwanza

    Farmers have welcomed the initiative. “I believe this to be a great idea,” says Alice Mukome Chiwanza, general manager of Norton Leaf Tobacco (NLT), a local tobacco merchant. “Under the TIMB, Zimbabwe only exports at the very least semi-processed tobacco. Further beneficiation can be understood to mean [anything from] increasing the local production of regular—combustible—cigarettes to producing vaping devices. This will do wonders for the tobacco industry as it will mean employment, investments in the form of infrastructure, such as processing plants, and greater revenue as we will be exporting end products as opposed to raw materials that still need further processing.”

    According to Chiwanza, this would also present a welcome opportunity for NLT to grow its sales to supply products, such as cut rag, to local cigarette manufacturers while eliminating shipping costs that have been a large deterrent in exporting. “It may also create the option of partnerships allowing companies such as ours to venture into new technology and therefore [new] markets. The ministry’s plans also include localization of tobacco financing, which should significantly reduce borrowing costs for companies such as NLT. Being a wholly Zimbabwean company, NLT is poised to grab any plans encouraging increased local involvement in the tobacco industry.” – S. R.

    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.