The European Commission is preparing a sweeping reform of the Tobacco Excise Tax Directive (TED), targeting a sharp increase in taxes on traditional cigarettes and rolling tobacco, with more modest hikes planned for alternative products like heated tobacco and e-cigarettes, according to an internal working document seen by Euractiv.
Key Highlights from the Draft Proposal:
Cigarette Tax: Proposed increase of 139%, from €90 to €215 per 1,000 units.
Rolling Tobacco: Tax hike of 258%, from €60/kg to €215/kg, aligning its burden with cigarettes.
Cigars & Cigarillos: Massive proposed increase of 1,090%, to €143/1,000 units or per kg.
Shisha/Waterpipe Tobacco: Proposed at €107/kg.
Nicotine Pouches: Suggested tax of €143/kg.
E-Cigarettes: Tax based on nicotine strength:
>15mg/ml: €0.36/ml
≤15mg/ml: €0.12/ml
Heated Tobacco:
Unit-based: €108/1,000 units
Weight-based: €155/kg
Roughly 50% lower tax burden compared to cigarettes
Policy Context & Challenges:
A 15-country coalition, led by France and the Netherlands, is urging stronger EU-wide tobacco controls, including taxation on emerging nicotine products.
The Commission says the current rules are “no longer fit for purpose.”
However, changes to the TED require unanimous support from all EU member states — a high bar amid diverging national interests.
Italy, Greece, and Romania have objected to treating alternative products (like heated tobacco) the same as combustible cigarettes, citing harm reduction arguments
Dr. Bina Modi, chairwoman of Modi Enterprises-KK Modi Group and chair and managing director of Godfrey Phillips India Ltd. and Indofil Industries Ltd., is a trailblazing international business executive and the first woman to lead a tobacco company in India. Dr. Modi was named to the World Economic Forum’s (WEF) Women of the Decade in Business and Leadership in 2018, and the WEF awarded her the prestigious Achiever’s Award in 2019. Named by famed business author Prem Ahluwalia as one of India’s Most Powerful Women, Dr. Modi has been further awarded and recognized as a continental business leader by numerous organizations, including the Indo-American Chambers, AsiaOne—which showcased Dr. Modi as on of Asia’s Greatest Leaders—and the Women’s Economic Forum.
Dr. Modi agreed to sit down with Tobacco Reporter; the following conversation is lightly edited for clarity and fit.
Let’s begin with the current landscape of the global cigarette industry. What lies ahead for combustibles in an age of transformation? Could you start by providing us with an overview of the current global tobacco market and the position of traditional cigarettes within it?
The global tobacco market remains a substantial economic sector, demonstrating consistent growth. Despite the narrative around declining cigarette consumption, the global cigarette market remains robust at around usd1.1 trillion in 2024 and is projected to reach usd1.38 trillion by 2033, exhibiting a steady growth rate of 1.9% over the next decade. This trajectory clearly indicates that combustible cigarettes continue to be the backbone of the tobacco industry, with substantial consumer loyalty and market penetration that newer products have yet to achieve. The tobacco products market encompasses various categories, including cigarettes, cigars, and other smoking and smokeless products, with combustible tobacco being a fundamental product type. Geographically, Asia-Pacific emerged as the largest region in the tobacco products market in 2024, followed by North America. Notably, countries like China and India stand out as some of the largest consumers of cigarettes on a global scale. This regional concentration highlights the importance of understanding diverse consumption patterns across the world. In essence, traditional cigarettes continue to represent a substantial portion of a large and expanding global tobacco market, with Asia-Pacific playing a particularly dominant role in consumption.
That’s interesting. How do you see the impact of heated-tobacco products and vape on traditional combustibles? Many industry observers suggest these alternatives might eventually replace cigarettes.
In India, the Prohibition of Electronic Cigarettes Act, 2019 was passed by the Indian Parliament and came into effect in September 2019. It bans the production, manufacture, import, export, transport, sale, distribution, storage, and advertisement of e-cigarettes. It covers, e-cigarettes (also called vapes, vaping devices, or ENDS (electronic nicotine-delivery systems)) and heat-not-burn products (devices that heat tobacco without burning it).
While data from Europe and North America shows that innovative alternatives are growing up to 20% to 25% faster in market uptake, our focus has been on reinventing the cigarette experience. By refining blend quality, diversifying flavor profiles, and optimizing packaging design, we have ensured that our traditional brands maintain a consumer preference share well above 70% in many regions. This balanced approach—leveraging established distribution channels alongside controlled innovation—cements the future of combustibles even as the market transforms.
Regional differences seem to play a significant role in tobacco consumption patterns. Could you elaborate on how these regional variations might affect the future of combustibles?
Absolutely. Asia-Pacific, excluding Australia, continues to be the powerhouse of the global commercial cigarette market. Countries like China, India, Indonesia, and Japan remain among the largest consumers of cigarettes globally. Cultural factors, social acceptance, and longstanding traditions associated with smoking in these regions create a stable consumer base. In North America, while there’s greater adoption of alternatives, the cigarette market remains substantial. Different regions are at different stages of the tobacco consumption evolution, which actually ensures the longevity of combustibles on a global scale. For instance, in emerging markets across Asia and Africa, we’re seeing continued growth in traditional cigarette consumption as disposable incomes rise.
With growing health consciousness among consumers worldwide, how are cigarette companies innovating to maintain their market positions?
Innovation is indeed key to our continued success. Low delivery products currently hold the largest market share globally, indicating consumer preference for products perceived to be less harmful. At Godfrey Phillips, we’ve invested significantly in product refinement—optimizing tobacco blends, enhancing filtration technology, and improving the overall smoking experience while adhering to regulatory requirements.
We’re also seeing innovation in packaging, marketing strategies adapted to local regulations, and diversification of distribution channels. While tobacco shops remain dominant globally, accounting for approximately 38% of sales, we’re witnessing rapid growth in online retail channels in regions where it’s permitted. This omnichannel approach helps maintain consumer engagement with combustible products.
What would you say to industry stakeholders who are concerned about shifting investments away from combustibles toward alternative products?
In this context, our own view at Godfrey Phillips India is that combustibles will continue to be a core business. We certainly recognize the rise of new products. Philip Morris and other multinationals have invested heavily in HnB (heat-not-burn) and vaping—for example, PMI launched IQOS in Japan and Europe, but these products are not yet available in India due to regulations. For now, we see them as complementary categories for future consideration, not immediate threats. We are partnering with PMI to distribute Marlboro in India, and if the regulatory landscape ever changes, we would be open to responsibly participating in reduced-risk products. Meanwhile, our immediate focus is on enhancing the appeal of our cigarette portfolio through innovation and quality. For example, our flagship Four Square brand has introduced new variants (like the clove-infused Four Square Crush), and Stellar, our slim cigarette line, continues to gain consumers as India’s first modern slim cigarette. These innovations keep us competitive even as the market evolves.
Globally, we’re seeing more women breaking glass ceilings across industries. Before we discuss the tobacco industry specifically, what are your observations about women in leadership globally?
Women’s leadership has evolved significantly across sectors. Today, approximately 24% of C-suite positions globally are held by women, up from just 17% a decade ago. Women-led companies have demonstrated superior financial performance, with studies showing 25% higher profitability in companies with gender-diverse leadership. In industries ranging from technology to finance, healthcare to consumer goods, women are not just participating but leading transformative changes. Leaders like Emma Walmsley at GSK, Jane Fraser at Citigroup, and Mary Barra at General Motors are redefining leadership paradigms in traditionally male-dominated industries.
What’s particularly encouraging is that beyond individual success stories, we’re seeing systemic changes in how organizations approach diversity, with more structured pathways for women to advance to leadership positions.
That’s a great overview. Now, focusing specifically on the tobacco industry, which has traditionally been male dominated, what progress do you see for women leaders?
The tobacco industry has indeed been traditionally male dominated, but we’re witnessing meaningful change. Currently, women represent approximately 15% of executive leadership positions in major global tobacco companies, up from less than 5% two decades ago. Several remarkable women have paved the way. Susan Cameron’s leadership as CEO of Reynolds American transformed that company before its acquisition by BAT. Alison Cooper served as CEO of Imperial Brands for nine years, steering the company through significant market challenges. In Japan, Eddy Pirard has increased female executive representation at JTI substantially.
At Philip Morris International, Jacek Olczak has committed to achieving at least 40% female representation in management by 2025. These are not just token appointments—women are increasingly driving critical business decisions, innovation initiatives, and organizational transformations across the industry.
As one of the few women leading a major cigarette company, could you share your personal journey? What challenges did you face in rising to your current position?
My journey hasn’t been without its challenges. I began my entrepreneurial career by founding Bina Fashions, which expanded globally, followed by establishing the Ego Specialty Restaurant Chain, Dessange Salon, and Beacon Travels. These diverse entrepreneurial experiences gave me a unique perspective on building and scaling businesses across sectors. When I assumed the role of CMD (chairperson and managing director) of Godfrey Phillips in November 2019, I faced the triple challenge of being a woman in a male-dominated industry, managing a complex transition of leadership, and, soon after, navigating a global pandemic.
Throughout my career, I’ve encountered skepticism about my understanding of the tobacco business, faced unconscious bias in industry forums, and had to work twice as hard to establish credibility. However, these challenges strengthened my resolve and sharpened my business acumen.
I’ve always believed that competence speaks louder than gender. My approach has been to lead with knowledge, decisiveness, and a collaborative style that brings out the best in our teams. Being a woman leader in this industry has actually been an advantage in many ways—it’s allowed me to bring fresh perspectives and inclusive leadership practices that have contributed to our company’s success.
Under your leadership, Godfrey Phillips has shown remarkable performance. Could you share some specific achievements and how they reflect your leadership approach?
I’m proud to share that since I took over as chairperson and managing director in late 2019, we’ve achieved consistent growth despite unprecedented global challenges. In fiscal year 2024, Godfrey Phillips recorded a gross revenue of over inr53 billion (usd620.4 million), marking a significant increase compared to the previous fiscal year.
This growth hasn’t come by chance but through strategic initiatives. We’ve optimized our product portfolio, particularly strengthening our position in the premium segment with brands like Marlboro, which we manufacture and distribute in India. We’ve improved operational efficiencies across our manufacturing facilities, resulting in a 13% increase in production output in FY24 over FY20, while maintaining stringent quality standards.
Our market share in India has grown by approximately 4.4 percentage points over the last four years, outpacing industry growth. We’ve also expanded our international footprint, with exports increasing by 125% over the past four years.
Beyond financial metrics, I’m equally proud of our organizational transformation. We’ve worked on increasing our female representation across all levels of the organization, implemented comprehensive sustainability initiatives that have resulted in increased use of renewable energy by over 30% year-over-year in FY24, and significantly enhanced our CSR programs, which now impact over 250,000 lives annually.
Your achievements are indeed impressive. Looking at the broader industry, what advice would you give to young women aspiring to leadership in the tobacco sector?
My advice would be multifaceted. First, develop deep industry knowledge—understand not just your specific role but the entire value chain from agriculture to consumer insights. The tobacco industry is complex, highly regulated, and constantly evolving—technical expertise is non-negotiable.
Second, build resilience. This industry faces unique challenges and public scrutiny. The ability to maintain focus, make difficult decisions, and lead with conviction during challenging times is essential.
Third, embrace innovation. The industry is transforming, and those who can lead change rather than merely respond to it will define its future. At Godfrey Phillips, we’ve created innovation incubators that have yielded several breakthrough initiatives, including our digital trade engagement platform that connects with over 650,000 retailers.
Fourth, cultivate authentic leadership. Your unique perspective as a woman is valuable—don’t try to lead like someone else. I’ve found that authentic leadership builds stronger teams and more sustainable results.
Finally, find allies and mentors, both women and men, who support your growth. I’ve been fortunate to have mentors who believed in my capabilities, including my late husband, Mr. K.K. Modi, whose vision for Modi Enterprises continues to inspire me.
The future is bright for women in this industry, and I’m committed to ensuring that Godfrey Phillips remains at the forefront of gender-inclusive leadership.
Thank you, Dr. Modi, for these profound insights. Your journey and leadership at Godfrey Phillips are truly inspiring, and your balanced perspective on both the future of combustibles and women’s leadership in the industry has been enlightening for all of us.
Thank you for this opportunity. I firmly believe that both our industry and the cause of women’s leadership have bright futures ahead. At Godfrey Phillips, we remain committed to excellence in our products, sustainability in our practices, and inclusivity in our leadership as we navigate the transformations ahead.
Health officials in Bangladesh said the country is unlikely to meet its smoking reduction goal of 40% by 2030, as suggested by the World Health Organization. According to the Bangladesh Medical University (BMU), smoking in the country declined 13% between 2009 and 2022, only a third of its ultimate goal.
M Mostafa Zaman, executive editor of BMU Journal, said overall tobacco use dropped from 54% to 47% over that time, but that 22% of the population still smokes cigarettes and 31% use smokeless tobacco. Between 2017 and 2022, the use of e-cigarettes increased from 3.6% to 14.6%.
Shafiun Nahin Shimul, a professor at the Institute of Health Economics at Dhaka University, however, said the data set being used is extremely limited, making it difficult to draw firm conclusions from either the figures or the study’s methodology. He said that while the analysis suggests that tobacco consumption has fallen, the National Board of Revenue statistics indicate cigarette sales are on the rise as the use of bidi (a kind of cheap cigarette) has decreased compared to cigarettes.
Qnovia has raised $16 million in Series B funding. The financing was led by Blue Ledge Capital, Evolution VC Partners, Vice Ventures and Gaingels.
“This Series B financing marks a meaningful milestone for Qnovia as it provides validation for our RespiRx proprietary platform, our progress in the regulatory process and the potential for our inhaled drug delivery platform to improve patient outcomes. We are grateful for the partnership with our investors, who are committed to our vision of advancing the development of inhaled therapeutics for areas of high unmet need, starting with our focus on bringing innovation to medicines to support smoking cessation,” said Brian Quigley, CEO of Qnovia.
“Our recent infusion of capital will advance QN-01 beyond our Phase 1 clinical trial in the U.S. and support an MAA submission to the MHRA in 2026. We believe that the data we have generated for QN-01, which includes our positive first in-human clinical data and our nonclinical findings, significantly derisks our clinical development plan and accelerates commercial validation to support our MAA submission for an expedited path to revenue generation in the U.K. Overall, this financing brings us one step closer to our vision of transforming the treatment paradigm for smoking cessation for a population who has not had access to any new treatment options in several decades.”
Since its inception, Qnovia has raised $50 million to advance its proprietary inhaled drug delivery platform. Qnovia will use the proceeds from the recent financing to support the clinical, regulatory and commercial development of its RespiRx Nicotine Inhaler (QN-01) in the U.K. QN-01 has demonstrated clinical proof-of-concept in a first-in-human, Phase 1 study and received U.S. Food and Drug Administration clearance of its Investigational New Drug application. In addition, the company will use the Series B funds to evaluate the feasibility of additional therapeutic indications in their pipeline.
“We are impressed by Qnovia’s agility and speed in navigating the complex regulatory framework for the development of novel smoking cessation therapies,” said Andy Roche, founder and managing partner at Blue Ledge Capital. “We are confident that their groundbreaking platform will revolutionize smoking cessation as well as drug delivery broadly as a result of its dose-to-dose consistency and favorable pharmacokinetic profile. We are honored to share that journey with the Qnovia team.”
Smoking rates in Spain have dropped to a record low, reports Euro Weekly News.
In 2024, 25.84 percent of the population smoked, down from 33.1 percent in 2022. Health advocates credit successful government initiatives, including higher taxes on tobacco products, stronger restrictions on tobacco advertising, the expansion of smoke-free zones to include public outdoor areas, and increased funding for smoking cessation services.
Despite these recent declines, tobacco remains a major public health issue in Spain. The Spanish Ministry of Health attributes nearly 50,000 deaths annually to smoking-related illnesses, accounting for nearly 15 percent of all deaths in the country.
Meanwhile, the decline in cigarette smoking has been accompanied by a surge vaping. The number of e-cigarette users has doubled in the past four years, with 19 percent of Spaniards having tried them. Over half of e-cigarette users are opting for nicotine-free versions.
In response to this shift, the Spanish government is introducing new regulations to curb e-cigarette usage, including banning e-cigarettes in indoor public spaces, restricting flavored e-liquids, and limiting them to tobacco flavors. It is also considering plain packaging for e-cigarette products, and discussing the introduction of taxes on e-liquids to mirror tobacco taxes.
With its Omni tool, BAT has released a dynamic, science-based guide to tobacco harm reduction.
By Stefanie Rossel
The concept of tobacco harm reduction (THR) dates back to at least 1976, when Michael Russell made his famous statement that people smoke for the nicotine but die from the tar and suggested that altering the ratio of tar to nicotine could be the way to safer smoking. Almost 50 years on, there is an extensive array of less hazardous alternatives to combustible cigarettes, but misconceptions about nicotine and reduced-risk products (RRPs) continue to be so pervasive that the R Street Institute last year even published a list with the 10 most common misperceptions, arguing that over the past decade, an overwhelming onslaught of misinformation from academics, media outlets and public health agencies had created confusion and significantly slowed THR activities.
BAT has set out to overcome these misunderstandings with a new tool. At its first-ever Transformation Forum, which took place in London in September, the company introduced Omni, an evidence-based, accessible and dynamic knowledge resource that shows how science and innovation can converge to achieve a smokeless world.
Under its “A Better Tomorrow” strategy, the company aims to migrate adult smokers who would otherwise continue to smoke from cigarettes to smokeless products and to ultimately consign cigarettes to the dustbin of history. On its transformation journey, however, the company has faced several challenges, including the rejection of THR by key regulatory bodies and nongovernmental organizations, markets that prevent the sale of RRPs, onerous regulatory frameworks that hinder innovation, skepticism toward industry research as well as the already-mentioned misperceptions about nicotine and the relative risks of combustion-free products.
James Murphy
Omni, BAT states on its website, is intended to be a compendium of information that underpins the company’s corporate and scientific strategy and offers insights into the work being done at BAT to achieve a world without cigarettes. “The world’s first-of-its-kind resource, Omni explains why THR should be a prominent component of the public health strategy on tobacco,” says James Murphy, director of research and science at BAT. “It draws from hundreds of independent scientific studies, BAT’s own research into its smokeless innovations, and examples of THR in action globally. Beyond that, Omni serves as a dynamic platform for thoughtful, constructive conversations with stakeholders rooted in evidence, where open dialogue around THR is not just welcomed but encouraged.”
Omni differs from BAT’s Science website, which focuses on the innovations driving the company’s business, Murphy points out. The Science website “serves as a hub for publishing data and peer-reviewed research on our smokeless products such as Vuse, VELO and Glo. The website also provides insights into our global research and development network, which comprises 1,750 R&D specialists across eight different sites worldwide. The emphasis here is on showcasing the science behind our products rather than facilitating discussions on THR policy,” says Murphy.
Engaging All Stakeholders
Kingsley Wheaton
Omni is targeted at scientists, public health authorities, regulators, policymakers and investors, and it aims to spur a dialogue across the wider scientific and regulatory ecosystem related to tobacco and nicotine products. Across nine chapters, it addresses the big questions that the company and the tobacco industry in general are confronted with, among them classics such as what exactly tobacco harm reduction means, whether smokeless products are a gateway to cigarette smoking or what the role of flavors in smokeless tobacco and THR is.
“We believe that open and constructive dialogue with a broad range of stakeholders is crucial for accelerating the decline in global smoking rates,” says Kingsley Wheaton, BAT’s chief corporate officer. “It is incumbent on regulators, scientists and policymakers to review the scientific and real-world evidence on THR and engage in dialogue on how to encourage smokers to switch completely to smokeless alternatives with a reduced-risk profile. Unfortunately, there are few spaces where these groups can review such evidence and reach common ground on THR science to drive progress.”
According to Wheaton, Omni demonstrates that the evidence in support of THR is growing daily. “Sweden, which is on the brink of becoming smoke-free, has the lowest adult smoking rates and lung cancer deaths in Europe, which has attributed to the availability, affordability and increased use of smokeless tobacco and nicotine products,” he says. “Yet there is still significant debate on whether THR strategies should be used to reach global smoke-free targets, and more countries are restricting the sale of smokeless alternatives. Our hope is that Omni becomes the platform to engage these stakeholders so that we can create whole-of-society solutions and build smarter regulation that allows THR to flourish.”
BAT plans to make Omni, which is also available as a PDF download, a fully online, dynamic resource in the coming months. “With THR research rapidly evolving, we want Omni to reflect the latest evidence in support of THR,” says Wheaton. “A team of scientists will regularly update Omni by assessing and collating new academic research, including BAT’s latest peer-reviewed evidence. Omni will both push out information and pull in insights, but the ultimate goal is to create a platform for dialogue. That’s why we are inviting anyone who shares our belief that a smokeless world is possible—and even those who don’t agree with us—to interrogate the evidence and join us on our journey to ‘A Better Tomorrow.’”
Major Milestone
BAT will be introducing new tools and technology-enabled platforms to facilitate the interrogation of the latest science and real-world experience of tobacco harm reduction, Wheaton says. “For example, it gives us the opportunity to develop a tech-driven Omni tool to give stakeholders in the THR policy debate more access to our evidence-based answers to the big questions facing our sector and society.”
“Omni is not a broadcast channel for BAT to talk about tobacco harm reduction,” he stresses. “Our ambition is for Omni to be a platform for a necessary conversation with stakeholders rooted in evidence—a manifesto for change and a call to action, backed by high-quality science and real-world evidence.”
Omni, Murphy explains, is the result of a major scientific effort, involving over 60 contributors and writers. “It covers products that involve around 9,800 global patents and cites more than 600 pieces of external evidence. This comprehensive compendium reflects over a decade of research—both our own and independent studies—into THR, and we have included the very best of published industry science for assessing the risk profile of smokeless products. We’re incredibly proud of this achievement, and as we’ve said, this is just the beginning.”
“The launch of Omni marks a major milestone in our transformation toward a smokeless world, and we’re excited about the progress it represents for both us and the industry. By 2030, we aim to have 50 million adult consumers of our smokeless products, and by 2035, for smokeless products to make up at least 50 percent of our global revenue,” says Wheaton. “The ultimate goal we are working toward is a fully smokeless business, hopefully in a fully smokeless world. We believe Omni will be instrumental in achieving this vision, and we’re eager for the next chapter.”
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.
Belarus’ role in the illicit cigarette trade is under scrutiny.
Contributed
For years, Belarus has been under scrutiny for its alleged distribution of illegal counterfeit cigarettes, a practice that is now under severe pressure in the current political landscape. This pressure casts a shadow of uncertainty over the industry’s future.
A cornerstone of the Belarus national budget, the tobacco industry contributed BYR2.5 billion ($76.45 million) in 2023. However, the industry is now facing alarming trends, as highlighted by Belarus President Alexander Lukashenko during a governmental meeting in August 2024.
The reasons for the existing challenges might be different, Lukashenko vaguely said, emphasizing that despite that, “It is necessary to develop measures to preserve production and export volumes to the maximum extent possible.”
The Belarusian tobacco industry has been shrouded in secrecy for over a decade. In 2015, the last time official information was revealed, Belarusian authorities set the quota of cigarette consumption on the domestic market at 30 billion pieces. At that time, local analysts indicated that the figure had nothing to do with reality.
Research by KPMG showed that the actual consumption of cigarettes in Belarus is close to 18 billion pieces. Around 13 billion cigarettes are exported, of which 8.6 billion end up in Russia and 4.3 billion in the EU.
Woes about the flow of cheap cigarettes, often smuggled, from Belarus have become common in recent years not only in the European Union but also in Russia.
In 2020, the Russian association Anticounterfeit calculated that Belarus’ domestic consumption was around 17 billion cigarettes and that production nearly three times exceeded the country’s demand. In a letter to the Russian Ministry of Justice, Anticounterfeit claimed that cheap cigarette production was put on an industrial scale in Belarus. The nameplate capacity of the Belarusian tobacco factories was estimated at 67 billion pieces, meaning export potential was tremendous.
In 2023, Belarus accounted for 84.5 percent of illegal cigarettes sold on the Russian market, estimated the Russian National Scientific Competence Center for Combating Illegal Circulation of Industrial Products. In total, illegal—counterfeit and smuggled—cigarettes represented 15.6 percent of sales on the Russian market. This illicit trade cost the Russian budget around RUB130 billion ($1.35 billion) of lost income in 2023, the analysts calculated.
Belarussian tobacco consumption is estimated to be close to 18 million pieces per year.
Shut Borders
During the past few years, the flow of illegal cigarettes from Belarus to the European Union has subsided, as in the context of political tensions, the Baltic countries and Poland tightened border controls.
As estimated by KPMG, the volume of smuggled cigarettes from Belarus to the EU dropped by 500 million in 2023 and by almost 2 billion pieces over the past three years. The analysts also cite the tighter control and closure of a number of checkpoints on the border for the decline. The place of Belarusian cigarettes is being taken by suppliers from other countries, primarily Turkiye and Algeria.
Counterfeit supplies from Belarus to European countries decreased from 2.1 billion to 1.5 billion cigarettes over the year.
However, Belarus remains the absolute leader in the supply of illegal “white” cigarettes, which mean those smuggled and sold under their own brands to European countries.
In this category, Belarus holds a staggering 43 percent share in total deliveries to Europe. A year earlier, this figure was around 52 percent, KPMG calculated.
The most popular western destination for tobacco smuggling from Belarus is Poland. Last year, 0.74 billion illegal Belarusian cigarettes entered the country, which is almost 17 percent less than in 2022 and almost half as much as in 2020. The supply of illicit cigarettes from Belarus to Lithuania fell by 15.2 percent to 0.39 billion pieces and from Belarus to Latvia fell by 27.35 percent to 0.16 billion pieces.
Russia has declared war on counterfeit cigarettes from Belarus.
Unraveling Tobacco War?
However, the main blow comes from the Russian market, where authorities also tightened the screws on illegal sales. Observers believe that problems in Russia were the key reason for Lukashenko’s concerns during the recent government meeting.
“The meeting is definitely not happening out of nowhere. But we need to call things by their proper names. We are not talking about problems with exports but with smuggling. Legal exports have been virtually nonexistent for a long time,” Nick & Mike, a local analytical Telegram channel reported.
“Strengthening controls on the western border, where Belarusian state counterfeit goods are seized in industrial quantities, including from tanks with resin, is nothing compared to what the eastern neighbor is doing. Russia has tacitly declared a ‘tobacco war’ and has been striking at illegal businesses,” the analyst claimed, referring to the intensified efforts by Russian authorities to curb illegal tobacco traffic from Belarus.
For years, Russian authorities have been turning a blind eye to illegal cigarette imports from Belarus, but this era seems to be coming to its end, a source in the tobacco industry who wished to remain anonymous told Tobacco Reporter.
“I would not call it a war, though. This is primarily about bringing the domestic market in order. Everybody knew that a situation where Russia loses over $1 billion in tax revenues every year to cigarette smuggling from Belarus would not last forever. The country could afford it during the rich times, but now every penny counts,” the source added.
In April 2024, Russia listed tobacco products among the goods of strategic importance. Andrey Mayorov, deputy head of the main directorate for customs control at the Russian Federal Customs Service, revealed that this move helped the authorities tighten their control of illegal tobacco traffic. One of the first consequences of the step, he added, was a hike in the number of criminal cases opened against tobacco smugglers.
More legal changes are on the way to turn down illegal cigarette imports to Russia from Belarus.
An agreement on indirect taxes between Russia and Belarus scheduled to gradually come into force through 2027 is expected to fully protect the Russian market from gray imports of cigarettes from Belarus, assumed Alexei Sazanov, deputy finance minister of Russia.
“The problem of gray imports stems from a significant difference between tax rates in the countries: Russian excise rates on tobacco products are significantly higher than in Belarus. This means that Belarusian tobacco manufacturers, producing cigarettes in their country, simply supply part of the goods to the Russian market, de facto paying taxes at Belarusian rates,” Sazanov explained.
The reform is stretched in time not to provoke “social and economic tensions in Belarus,” the deputy minister added.
Change of Players
The Belarusian tobacco industry is also going through a profound transformation, with Western companies gradually reducing their presence in the country.
In September 2024, Japan Tobacco International and its British subsidiary Gallaher Group terminated licensing agreements with the Tabak-Invest factory, suspending production of the brands Winston, Camel, Sobranie and Monte-Carlo.
JTI’s Minsk office confirmed that the agreement originally concluded in 2008 is no longer in force, declining to provide additional details.
In December 2023, Tabak-Invest and several of its co-owners were subjected to U.S. sanctions. The restrictions prohibited U.S. citizens and businesses from any deals with sanctioned parties.
In the meantime, JTI continues doing business in Russia. In March 2022, the company announced a suspension of investments in its four factories and marketing activity in the country. However, in November 2023, the company announced it would continue operations, complying with international and Russian regulations.
JTI may switch to importing its brands from Russia to Belarus, writes Belmarket, a local business news outlet. Alternatively, the company could sign a new license agreement with a Belarusian tobacco factory that is not subjected to Western sanctions. This could be newcomers Sentoni PRO and Alidi-West, Belmarket’s analysts speculated.
Alidi-West is a Russian company that distributes Kent cigarettes. It kicked off sales in Belarus in July 2024. Sentoni PRO is another firm registered to sell cigarettes in the country this year.
According to the Belarusian Ministry of Taxes and Duties, Sentoni PRO will produce Kent, Pall Mall, Rothmans, Vogue and Lucky Strike brands.
These players may also launch production at the capacities previously run by Western firms.
BAT in Belarus held a contract manufacturing agreement with the Grodno tobacco factory Neman. After Neman was subjected to the U.S. sanctions in 2021, the contract was canceled, and a part of BAT’s production was transferred to Tabak-Invest.
Around the same time, sanctions were also imposed against another Minsk factory, Inter Tobacco, which forced Philip Morris to withdraw from the license production.
In September 2023, BAT announced a deal to sell its business in Russia and Belarus to a consortium of Russian investors and local management, BAT Russia. Upon completion of the “business transfer,” the new structure became known as the ITMS Group of Companies. BAT left the business to its management along with the rights to the trademarks.
The gradual withdrawal of foreign business from Belarus could add pressure to the tobacco industry, which is braced for a hard time ahead.
With the launch of its Sixhill heated-tobacco brand, Firstunion is offering smokers in the Middle East a less risky alternative to smoking.
By Stefanie Rossel
The Middle East is one of the last growth markets for combustible cigarettes. Tobacco has been deeply rooted in the culture since the 1600s, and regional smoking rates are among the highest in the world. With a male smoking prevalence of 57.6 percent in 2022, Jordan tops the list, followed by 49.1 percent in Egypt and 42.9 percent in Lebanon, according a report published by THR.net.
Smoking is generally a male habit in the region. While cigarettes dominate the Middle Eastern tobacco market, other popular products include shisha, also known as waterpipe or hookah, and dokha, a powdered tobacco that comes in different varieties and strengths and is often mixed with spices, herbs and other substances.
While the World Health Organization projects smoking rates in the Middle East to decrease from 33.3 percent in 2020 to 31 percent in 2025, this is the smallest anticipated decline among all WHO regions. Embracing tobacco harm reduction (THR) could accelerate the decline of smoking prevalence. Demand for e-cigarettes in the region has been growing in recent years, with some places adopting heated-tobacco products (HTPs) and nicotine pouches as well.
“Increasing awareness of the health risks associated with smoking is driving demand for alternatives like HTPs and e-cigarettes, which are perceived as less harmful,” confirms Wayne Wu, senior director of business development (HTP BU) at Firstunion—Sixhill. “Younger demographics, particularly in countries such as the United Arab Emirates (UAE) and Saudi Arabia, are increasingly turning to e-cigarettes and heated-tobacco products as they become more conscious of lifestyle choices and trends.”
While vape products are still banned in a few countries, including Iran, Omar and Qatar, most Middle Eastern states now permit the sale of e-cigarettes. Legislation differs by nation, with many countries regulating e-cigarettes using the European Union Tobacco Product Directive as a blueprint. However, several states, including Jordan, Bahrain, Saudi Arabia and the UAE, tax vapes and heated-tobacco products at a rate of 100 percent or more in an attempt to curb the spread of electronic smoking devices, particularly among children, and to address the disparities in taxes between traditional cigarettes and smoking alternatives.
According to Wu, the evolution of the regulatory environment reflects ongoing efforts to improve product quality and advertising standards. “Additionally, some countries have established specific regulations for e-cigarettes and HTPs, defining product specifications, advertising and sales standards to foster more orderly market development,” he says.
High-Potential Markets
Founded in 2004 and headquartered in Shenzhen, China, Firstunion was a pioneer in the field of electronic atomization. The company offers a vast range of electronic nicotine-delivery system (ENDS) technologies, heated-tobacco solutions and atomizing equipment. In the Middle East, Firstunion launched its proprietary heated-tobacco brand, Sixhill, which it distributes through extensive partnerships in countries such as Saudi Arabia, Egypt, Bahrain and Iraq. “Firstunion focuses on the research, design and production of heated-tobacco products,” Wu explains. “We collaborate closely with major international HTP manufacturers, with our products marketed globally. We aim to provide premium, technology-driven and competitive products to our THP [tobacco-heating products] customers throughout the Middle East. We look forward to building deeper, stronger strategic collaborations with more clients across the region.”
According to Wu, the Middle East markets that offer the highest potential for innovative HTP technology are the UAE, Saudi Arabia and Egypt. The UAE is one of the most open and affluent countries in the region, and since e-cigarettes and HTPs were legalized in 2019, demand for these products has steadily increased. “Young consumers and expatriates in the UAE show a high acceptance of HTP products, especially among middle-[income] and high-income groups focused on health and quality of life,” says Wu.
“The UAE’s positive stance toward technological innovation makes it easier for new products and technologies to enter the market and potentially expand to other Middle Eastern countries. Furthermore, the UAE’s well-structured regulatory system allows compliant international brands to enter the market, which benefits the long-term growth of companies.”
Saudi Arabia, the largest economy in the Middle East, has gradually relaxed regulations on smoking alternatives. Since 2019, the kingdom has permitted the sale of HTP products, fueling demand. “With Saudi Arabia’s economic transformation and a rising young population, especially under the Vision 2030 initiative, there is an increasing demand among young people for modern lifestyles and innovative technology,” says Wu. “Saudi Arabia’s substantial market size, combined with a strong consumer preference for international brands and high-tech products, offers significant growth opportunities for companies with innovative heated-tobacco technology.”
Egypt, with its large population, is a crucial market too. Although HTP regulations are still evolving, the market holds immense potential, according to Wu. “There is a large number of smokers in Egypt, and demand for traditional cigarette alternatives, such as HTP products, is rising, particularly among young people and the middle class,” he says. “Given the market’s high price sensitivity, companies that can provide cost-effective, innovative technology will hold a competitive advantage in Egypt. Additionally, Egypt can serve as a gateway to the broader North African market.”
Rise of Local Brands
Regarding THR, Wu describes several trends in the Middle East, including the rise of local and international brands. “Leading international tobacco companies are actively expanding into the Middle East market, offering products that cater to local smokers seeking healthier and trendier options,” he says. “There also is an emergence of local brands: With a growing focus on health, many new tobacco brands have recently emerged across various Middle Eastern countries. These companies provide consumers with more health-conscious vaporized products and offer a more comprehensive, diverse service experience for local customers.” Firstunion collaborates with some of these brands, he adds.
HTPs and e-cigarette products are now widely available in physical stores, such as supermarkets and convenience stores, as well as through online channels, making it easier for consumers to purchase these products, according to Wu. “Major global and local retail chains are increasing their offerings of heated tobacco and e-cigarette products,” he says.
In recent years, the vaping industry in the region has diversified. “Besides traditional tobacco, products such as e-cigarettes, nicotine pouches, herbal cigarettes and heated tobacco have flooded the market, offering richer flavors and more advanced technology,” says Wu. “While smokers now have a broader range of differentiated choices, market competition has also intensified. Among these options, HTPs are increasingly favored by consumers.”
Currently, Firstunion is promoting three heating technologies in the Middle East: Atine, which works with resistance heating; Insheat, which heats with induction; and Breelight, which is powered by infrared heating. Soon, the company plans to introduce its latest technology in the region: Alkaid technology. Launched this year and recognized with a “Best HnB innovation Award” at the 2024 Alternative Awards, Alkaid leverages the high-speed propagation of light to directly deliver energy to the tobacco, bypassing spatial constraints (see sidebar).
Complex Environment
Despite increasing demand, HTPs face several challenges in the region. “There is significant variation in tobacco product regulations across Middle Eastern countries, which increases complexity for manufacturers,” says Wu. “Regulations may change quickly due to public health campaigns or international agreements, making it challenging for manufacturers to remain compliant.”
He also names cultural sensitivity, with views on smoking and e-cigarettes differing widely due to cultural and religious beliefs across the region. “Many consumers still favor traditional tobacco products such as shisha and cigarettes, which may hinder the adoption of e-cigarettes and heated-tobacco products,” says Wu.
In addition, increasing concerns about health risks associated with e-cigarettes and HTPs could lead to stricter scrutiny and more stringent regulations, whereas misunderstandings about the safety and risks of HTPs may foster a negative public image, influencing regulatory actions. Strict advertising regulations could limit how manufacturers promote their products, affecting brand visibility and consumer awareness. Certain countries in the region may impose import restrictions or tariffs on e-cigarettes and HTPs, impacting pricing and supply.
“Overall, HTP and e-cigarette manufacturers in the Middle East must operate within a complex landscape of regulations, cultural attitudes, competition and market dynamics,” Wu stresses. “Addressing these challenges effectively is essential for successful market entry and ensuring sustainable growth in the region.”
Firstunion has made significant strides in the Middle East, focusing on establishing a strong market presence through partnerships, product innovation and strategic marketing, Wu says. “Our future plans include expanding our distribution network, customizing products for local markets, ensuring regulatory compliance and enhancing brand visibility to capitalize on the growing demand for e-cigarettes and heated-tobacco products in the region.”
As Middle Eastern consumers increasingly prioritize sustainability, the company plans to integrate eco-friendly practices into its production and packaging processes. “This commitment to sustainability enhances our appeal to environmentally conscious consumers,” says Wu.
The Power of Light
Firstunion’s Alkaid heated-tobacco technology works with light. The emitted wavelength of Alkaid technology ranges from 200 nm to 1 mm, enabling energy transfer in a noncontact heating process through a vacuum, significantly reducing the limitations of traditional heat conduction.
Alkaid’s light heating technology provides a continuous spectrum similar to sunlight, including ultraviolet, visible light, short-wave and mid-wave to long-wave infrared. The different wavelengths allow for varying penetration depths, achieving uniform and thorough heating of the entire tobacco segment, greatly enhancing nicotine and smoke release.
In this mode, the temperature of the tobacco remains below traditional heating levels, effectively avoiding pyrolysis temperatures, which significantly reduces the release of harmful substances.
Alkaid uses fully automated assembly line production, ensuring stable performance and a long lifespan, with tested cycles exceeding 10,000 times. Its outer casing is made from a material with high electromagnetic wave transparency, and the heating element can reach peak temperatures up to 2,000 degrees Celsius, effectively transferring energy through radiant heat. According to Firstunion, this excites nicotine and flavor compounds within the medium, delivering a rich and refined flavor with a higher nicotine conversion efficiency.—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.
With its new Pure-F sorter, Koerber Technologies removes undesired materials from tobacco at the earliest possible point.
By Stefanie Rossel
It’s annoying but unavoidable: Nontobacco-related materials (NTRMs) can find their way into tobacco at any production stage, from harvesting to processing through packing, shipping, warehousing and even beyond. The range of things found in freshly harvested tobacco during the sorting process is nothing short of amazing, including civilization waste such as plastic bags or sweets wrappers, but also organic remainders such as bird feathers, insect cocoons, grass or cobwebs and even cadavers of small animals. Sand, pebbles and small rocks may also be found. This is sometimes added to by metal objects such as nuts, bolts or bearing balls from harvesting and processing machinery failure, and more frequently by packing materials such as shrink wraps, metal staples, strings or cardboard.
If not removed, the unwanted objects may have a detrimental effect on threshers and slicers. What’s worse, if not removed at a very early stage in the production process, the problem will multiply as once the NTRMs move through the thresher, they will be cut into 10 pieces or even more. The tinier the particles are, the harder and more complex it is to remove them during the following production stages, requiring, of course, even more sorting equipment.
That’s where Koerber’s new Hauni Pure-F sorter comes in: “Sorting early in the process, before threshing, can replace sorters in the downstream process,” says Ralf Kohlhardt, head of technical sales primary at Koerber. “These are the main reasons why sorting before threshing is so effective: There is a much lower amount of NTRMs. The NTRMs are bigger and hence easier to detect. In addition, it avoids that one NTRM will become 10 or more. And also hand pickers, which are standard in green-leaf threshing (GLT) processing, aren’t required anymore.”
The Hauni Pure-F, which Koerber claims is the only green leaf sorter on the market, is the successor of the Hauni Aerosort, which was already capable of processing whole leaves. Based on the proven Hauni Aerosort design, the Hauni Pure-F is sorting the leaves in an upstream flow, which is what allows it to process all kinds of whole leaves, hand-cut as well as machine-harvested. The machine features an optimized monolayer for detection because it transports the leaves pneumatically at a speed of 20 meters to 23 meters per second. “When the leaves enter the upstream airflow, they will be separated due to the air velocity,” Kohlhardt points out. “This avoids blockages and allows proper sorting.”
A heavy particle separator sorts out heavy objects such as tobacco pads or larger pieces of metal. The leaves and remaining NTRMs then travel upward in the sorter to pass the centerpiece of the Hauni Pure-F, its vision unit. The unit, featuring new processing software and hardware developed by the Fraunhofer Institute of Optronics, System Technologies and Image Exploitation (IOSB) and equipped with three state-of-the-art channel cameras, LED lights, static background and a new evaluating processor unit, detects nontobacco particles with unprecedented efficiency, the company says. In a next step, these particles are removed by air, and the NTRM-free tobacco leaves can enter the threshing process. The Hauni Pure-F sorter has been developed for strips and whole leaf in the GLT or primary and has a capacity of up to 12 tons per hour.
Opting for Camera Technology
With other suppliers such as Tomra or Key gradually withdrawing from the tobacco market, Koerber remains one of the few providers of advanced sorting equipment in this field. During the last four years, the company has continuously revised its portfolio of sorting equipment, which it now markets under the Pure brand family.
Among manufacturers of sorting equipment, the technology chosen for the actual detection process of unwanted particles has always been a bit of a holy war. The reason for this is another vital issue in the early stages of production: Certain parts of the tobacco plant itself, such as woody stalks, roots, seed capsules or moldy leaves, are just as little wanted in the final product as NTRMs, as they would negatively impact its quality. The problematic plant remainders are a category in themselves, referred to as nondesired tobacco products, and they pose a particular challenge to optical sorting systems as even perfectly good tobacco displays natural color variations even within the same leaf. Proponents of laser-based sorting systems argue that their systems also examine structural and biological differences while camera-only systems are limited to merely scanning color differences, which reportedly makes it difficult to sort out nondesired tobacco products.
Koerber has decided on purpose to use camera technology-based vision units. “Besides to the technical abilities, it is the very reliable technology which isn’t subject of any wear and tear,” says Kohlhardt. “The same applies for the LED light.”
Camera technology is also significantly less costly: Unlike laser technology, which may bring about annual maintenance costs of $30,000 during its years of operation, camera-based vision units are maintenance-free and extremely long-lasting. Koerber’s latest vision unit, benefiting from the company’s more than 20 years of experience in the field of sorting, takes these advantages even further: It is equipped with newly designed encapsulated housing inclusive of a double sealing. Integrated air-conditioning via a water-air heat exchanger makes it also suitable for warm, ambient conditions. Furthermore, it features actively cooled LED lighting. With a newly designed static background, the vision unit comes without any rotating parts, preventing the unit from scratches on the background surface and requiring no cleaning.
“What is most important about the inside of the vision unit is that it is clean, dark—i.e., there’s no reflection—and cool,” Kohlhardt explains. “Being heat [resistant] and dust resistant, the Pure design is most reliable and failure-free.”
Sixteen Million Shades
Being able to detect and process 16 million colors, the new Pure vision unit also distinguishes small color differences in the visible color range as well as in the near infrared range, which makes it possible to distinguish moldy leaves from good product, he adds. “Tobacco reflects infrared light very well. Advanced technologies and new developments contribute to the highest sorting efficiency, including much more efficient LED lighting, much higher resolution of the camera, i.e., pixel size, and a completely new and high-advanced sorting algorithm supported by Fraunhofer IOSB.”
To customers who use previous Koerber sorter models, such as the tobacco sorter Hauni TS8 or the Hauni Aerosort, Koerber offers to upgrade them with its new Pure vision unit.
Outstanding efficiency is also a key feature of Koerber’s other Pure sorter models. Its Hauni Pure 1400 T&B and 2100 T&B optical belt sorters are the only ones on the market with integrated second sorting, which means they have an in-built rerun. “Not only does this increase the sorting efficiency, but it also mainly reduces the false reject rate drastically,” Kohlhardt relates. “There isn’t almost any tobacco in the reject waste. According to the defined cross industry test (CIT) procedure, the false reject rate is reduced from approximately 2 percent without rerun to 0.2 percent with integrated rerun. Some factories have hand pickers or even a separate sorter to sort the false reject. This isn’t needed anymore with Koerber’s new technology.”
A world in which 100 percent sorting efficiency can be achieved is not completely out of reach, he says. “We are on the way. With our detection unit, we see almost all NTRMs. With CIT test results above 90 percent with the Pure, we prove that we are close already.”
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.
The South Brazilian tobacco crop for 2024/2025 will cover 309,982 hectares, marking a 9.08 percent increase from the previous crop, reports Kohltrade, citing the Brazilian tobacco growers’ association, Afubra.
Paraná state recorded the largest growth at 13.63 percent, with 83,981 hectares planted. Santa Catarina follows with 11.78 percent, with 94,212 hectares planted and in Rio Grande do Sul, 131,789 hectares were planted, reflecting a 4.6 percent rise.
More than 138,020 families will be involved in in this year’s tobacco crop, 3.57 more than in the previous season.
“We are emerging from two very profitable harvests for many tobacco growers, leading to high profitability,” said Afubra President Marcílio Drescher. “As a result, more land is being dedicated to tobacco cultivation, with families returning to this crop. However, these developments are concerning. An increase in cultivated area during a period of stable weather could lead to higher production levels, which may negatively impact producers’ income.”
In terms of production volume, the initial estimate indicates a boost of 37.08 percent, leading to a total production of 696,435 tons in southern Brazil. This includes 630,539 tons of Virginia tobacco (36.52 percent), 54,624 tons of Burley tobacco (44.07 percent), and 11,272 tons of Common tobacco (36.45 percent).
Representatives from grower organizations and tobacco companies are currently calculating the production costs for the 2024/2025 harvest. Price negotiations are expected to commence once this assessment is completed.
