Blog - Tobacco Reporter

Mapping Milestones

Three years into its five-year strategy, Imperial Brands reports progress on multiple fronts.

By George Gay

The U.K. government looks set to ban outright the sale of disposable vapes largely on the grounds that these products, which can be bought with a relatively modest outlay, are said to appeal to those under the age of 18. Currently, arguments are raging around this issue, but no matter on what side of the fence you sit, it cannot be denied that there is something less than coherent about the reasoning behind the proposed ban because it is already illegal in the U.K. to sell vapes to those under 18. The legal position in respect of disposable vapes and the underaged will not change because of the ban, though it will in respect of the rest of the population, so the argument that the proposal is aimed at protecting the underaged does not stand up to scrutiny.

It is odd, too, that another, more reasoned argument against disposable vapes—that their disposal, whether careless or authorized, is too environmentally damaging—seems to be of only secondary concern to the government. But it is of concern, and some industry players are taking steps to address at least some of the issues raised.

In its 2023 annual report, Imperial Brands said that it had launched its Blu Bar disposable vape brand in 11 European markets, so I took the opportunity of asking it for its views on these products. “We have long called for action to prevent the deliberate marketing of vaping products to young people,” Imperial said in an emailed reply. “It is important, however, that new restrictions do not compromise the ability of vaping products to transition adult smokers away from combustible cigarettes.

“Disposable vapes are currently used by more than half of adult vapers in the U.K., and a ban threatens to undermine the country’s significant progress to reduce smoking. There’s also a risk it will fuel the illegal trade of unregulated products, already a sizeable problem for enforcement authorities.

“We recognize the sustainability challenges associated with disposable products. We have been working hard to address this in our portfolio and have just launched a new version of Blu Bar (Blu Bar 1000) in the U.K. (other European markets to follow) with a removable battery.”

The use of a removable battery is presumably an important step in disposable vape design because it makes the dismantling of used products in qualified waste disposal facilities safer and more efficient, and therefore more likely to happen. It doesn’t, I guess, address the important question of the number of batteries being used and disposed of across the country, but then this can be partially addressed by increasing the number of puffs that products deliver. In any case, apparently, at Imperial, this is not the end of the story. “Expect to see more innovation—all built on our consumer insights—from us later this year,” Imperial added.

The reference to consumer insights harks back three years to the launch of Imperial’s five-year strategy to transform itself into what it describes as a consumer-led challenger business. As part of this strategy, it set up in 2021 a Global Consumer Office, and it now has two Sense Hubs at which it interacts with consumers to understand their expectations. “We are placing the consumer at the center of our decision-making by building our capabilities in consumer insights, portfolio and brand management, innovation, and through our portfolio of next-generation products (NGPs),” Imperial said.

This is all well and good, but I had to admit that I was less than certain what was meant by a “challenger business” and what you had to do to qualify as such a business. “We are the smallest of the global businesses in our industry, and that means to succeed over the long term, we need to be a strong challenger,” Imperial said. “Being a challenger is about having the best understanding of our consumers and their choices. It is about having simple and efficient operations that enable us to be agile. It’s about building a culture where our people can perform their best work.

“To give an example: We have had a disciplined, challenger approach to NGP market entry. We have launched products only in markets where the category (vaping, heated tobacco and/or modern oral) is a big proportion of overall nicotine consumption—and where we have strong existing routes to market.”

The reference to a disciplined approach to NGP is not just managerial speak. In fact, as part of its five-year strategy, Imperial put in place the means not only to revive its combustible business but to reboot its NGP business completely. In its 2023 report, it describes how, during fiscal years 2021 and 2022, it first refocused the business by withdrawing from several markets, such as the heated-tobacco market in Japan, which it decided did not fit its challenger criteria. Presumably, withdrawing from Japan’s heated-tobacco market must have taken considerable thought and discipline.

Having refocused, it then began a test-and-learn process introducing new products in pilot markets, closely studying reaction from consumers and customers, before scaling up.

Which brings us to the 2023 financial year. “For our potentially reduced-harm business, this has been an important year, with product innovation and targeted market launches translating into accelerated revenue growth,” Imperial says in its report. “Following the introduction of new propositions in vape, heated tobacco and oral nicotine, we now have credible offerings in all three major categories. And consumers can now buy our NGP in more than 20 European markets as well as the United States.

“This operational acceleration has translated into revenue growth of 26.4 percent globally, and 40.4 percent in Europe, where we have been focusing our investment.”

Not everything has gone to plan, however. The U.S. Food and Drug Administration on Feb. 5 issued marketing denial orders to Imperial subsidiary Fontem U.S. for four Blu disposable and one Myblu brand of e-cigarettes, which means that these products may not be marketed or distributed in the U.S. While this and a previous failed attempt to get Imperial Brands through the FDA’s premarket tobacco product application (PMTA) process has been costly and is no doubt frustrating, it is not altogether surprising. The Fontem application joins those of many other companies that have come to grief against the gates of the FDA. “After reviewing the company’s PMTAs, FDA determined that the applications lacked sufficient evidence to demonstrate that permitting marketing of the products would be appropriate for the protection of the public health, which is the standard legally required by the 2009 Family Smoking Prevention and Tobacco Control Act,” the agency said in announcing its decision. It might have added, “No pasaran!”

The list of Imperial’s main NGP markets seems to support the company’s claim to have launched products only in markets where vaping, heated tobacco and/or modern oral is a big proportion of overall nicotine consumption and where it already had strong existing routes to market. Its main vapor product markets are, in alphabetical order, Belgium, the Canaries, the Czech Republic, France, Germany, Greece, Ireland, Italy, Portugal, Spain, the U.K. and the U.S. In heated tobacco, they are Bulgaria, the Czech Republic, Greece, Hungary, Italy, Poland and Portugal. And in modern oral, they are Austria, Denmark, Estonia, Iceland, Norway and Sweden.

Of course, while these lists look reasonably impressive following a major reboot, on the global stage, Imperial is smaller than its three main rivals, so it has developed a partnership approach to innovation. “This is exemplified by our three new innovation centers,” Imperial says in its report. “Our Sense Hubs in Liverpool and Hamburg bring together our own development teams with third-party partners and our consumers. Our Shenzhen site enables us to get closer to our supply chain partners.

“Our new way of working has halved the time from initial concept to market launch and increased our capacity to work simultaneously on multiple projects. This is particularly important because of the need for us to take a multi-category approach, reflecting the way different markets are evolving different NGP preferences because of local culture and regulatory environments.”

Although much progress has been made, these are early days yet in respect of the NGP side of the business, as Imperial readily admits. For instance, while its 2023 report included tobacco (cigarettes, RYO, cigars and snus) volumes, it gives no NGP volumes. When asked about this, Imperial said that NGP volumes had not been large enough to justify reporting. “But as the success of the reboot grows, this is something we’re keeping under review,” it said. “We do report on NGP revenue by region.”

Fair enough. One thing that did seem odd to me, admittedly not someone trained in management of any kind, was that in its 2023 report, Imperial announced a £1.1 billion ($1.39 billion) share buyback scheme for 2024, up from a £1 billion scheme in 2023. Why, I wanted to know, was the money not invested in the business—perhaps in the company’s nascent NGP products?

The answer was that Imperial was already delivering on its four priorities for the use of capital, namely: invest behind new strategy to support sustainable growth; maintain a strong and efficient balance sheet; a progressive dividend policy growing annually, taking into account underlying business performance; and surplus capital returns to shareholders.

“We remain fully committed to investing in the business,” the company wrote. “It is the priority for capital, and we have been stepping up investment in NGP rollouts. But our NGP plan is targeted behind specific markets and products based on the market data and consumer insight.”

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.

April 1, 2024

Confidence and Confidentiality

McKinney Specialty Labs has the expertise to generate trustworthy data and the discretion to share it only with authorized users.

By Taco Tuinstra

If you want to quickly grasp the difference between vaping and smoking, peek into the e-cigarette testing laboratory at McKinney Specialty Labs in Richmond, Virginia, USA. Then compare it to the smoking lab a few steps down the hall. The first room looks bright and crisp, almost like a hospital operating theater, while the second room has tubes exhausting cigarette smoke out of the lab, bringing to mind the scene from a sci-fi thriller.

If you want to obtain a more profound understanding of the complex aerosols generated by vapes and combustible cigarettes, however, you will have to analyze them scientifically—and this is what McKinney Specialty Labs excels at. Among other services, the lab offers physical testing, which includes characterizing the particle size distribution and output of aerosols; microbiological testing; toxicology testing and regulatory compliance assistance. It also tests the ignition propensity of combustible products.

To carry out such tests, the 57,000-square-foot facility is equipped with some of the industry’s most sophisticated instrumentation, including machinery that less apportioned laboratories might only dream of. Jake Hilldrup, technical director of chemistry, points out some highlights. McKinney Specialty Labs is the proud owner of a Virtrocell model 48 v2.0, for example—an instrument that exposes cells directly to aerosols. By skipping intermediate steps such as capturing the aerosol before adding it to cells, the Vitrocell mimics the conditions under which products are consumed better than conventional equipment.

Hilldrup then gestures to a collection of red devices with spikes. “The spike is a probe for electrostatic precipitation from metals,” he explains. The machine generates an electrostatic field that causes all the aerosol particles to stick to the sides of a quartz tube, allowing researchers to collect them without a pad. This is important, says Hilldrup, because many pads arrive from the supplier with background levels of metals, making it difficult to get a good baseline. “The probes ensure cleaner collection and better reproducibility,” he says. “They are very state-of-the-art tools for metal collection that other labs are not using yet.”

In yet another room, the company has set up a dissolution apparatus to analyze the performance of nicotine pouches, which have been taking the U.S. tobacco market by storm recently. The machines run artificial saliva through the system to stimulate nicotine release. Among other insights, they will reveal how the nicotine is released within a given time frame. “Hopefully, it’s not coming out all within the first five minutes,” says Hilldrup.

In addition to brand-name equipment from recognized international suppliers, McKinney Specialty Labs also features one-of-a-kind, in-house designed equipment, including a “Tripple Puff” collection system that allows researchers to test multiple electronic nicotine-delivery devices (ENDS) simultaneously. Developed by a lab technician who is a trained engineer, the Tripple Puff is “a nice timesaver,” according to Hilldrup.

Having the right equipment is key to providing clients with timely and accurate data, but according to one of the company owners, Willie McKinney, it is not the gleaming machinery park that sets McKinney Specialty Labs apart. “It’s the highly skilled employees who make the difference,” he says. After all, anybody can purchase instrumentation, but not everybody can operate it properly. “You need experts to make sure the equipment is validated and operating the way it should, so the client can trust the results—and, importantly, the regulator can trust the results,” says McKinney.

According to him, the U.S. Food and Drug Administration and its international counterparts are confident that McKinney Specialty Labs will generate data the right way. Such trust, he says, is crucial, and not every laboratory succeeds in earning it, as evidenced by a recent FDA notice advising manufacturers to be cautious with data generated by some labs. Some third-party test labs may be generating unreliable data, the agency warned. At McKinney Specialty Labs, clients need not worry about such issues, McKinney insists.

Strong Credentials

A certified minority-owned business, McKinney Specialty Labs officially launched at the start of this year, but the facility has been around for much longer, as part of a large organization offering analytical solutions for environmental projects. At one point, for various reasons, that company decided to discontinue operating the specialty lab and put the facility and its assets up for sale.

McKinney was immediately interested. “The facility had a great reputation, with impressive scientists. So, when the opportunity arose to acquire it, I just had to look into it,” he says. One factor driving McKinney’s enthusiasm was the fact that he had worked with the laboratory for many years as a client and was intimately familiar with its staff and their professionalism. A board-certified toxicologist, McKinney boasts a distinguished career in the tobacco industry. Educated at the University of North Carolina School of Public Health and the New York University Center for Environmental Medicine, he is a leading expert on lung inhalation and aerosol physics.

During his 20 years at Philip Morris, and later Altria, much of McKinney’s focus was on tobacco harm reduction. Among other projects, he worked on Accord, one of the first systems to heat rather than burn tobacco. Accord was a product before its time, but the research and development invested into Accord ultimately laid the groundwork for one of the most successful smoking technology innovations in recent history—the IQOS platform.

McKinney then worked for Juul Labs, which he describes as an extraordinarily creative and energetic business. In addition to these corporate engagements, McKinney served as an industry representative on the FDA Center for Tobacco Control’s Tobacco Product Scientific Advisory Committee, gaining valuable insights into the agency’s thinking and establishing rapport with key agency officials.

Leveraging Experience

As the FDA sought to bring order to the burgeoning ENDS market, McKinney decided to leverage his experience in the private sector and with regulators. The first electronic nicotine products that smokers actually liked and started switching to were developed by startups. These small companies lacked the internal scientists, toxicologists and experts who could help them navigate the regulatory environment.

So, in 2020, McKinney created McKinney Regulatory Science Advisors (McKinney RSA). The business comprises a consortium of individuals with rich experience in tobacco or a deep background in a relevant scientific field. “For example, one advisor is a former reviewer at the FDA,” says McKinney. “We also have a Harvard-trained behavioral scientist [who is also a frequent editorial contributor to Tobacco Reporter]—so we can help clients take their products all the way from concept to market.”

According to McKinney, the services of McKinney Specialty Labs nicely complement those of the consultancy. “We can not only help clients design their studies but also execute them; we can guide them through the entire process,” he says. “For clients who choose to leverage those synergies, it’s a one-stop shop.”

McKinney stresses that clients need not be concerned about the confidentiality of their data when the consultancy and lab work together. “Many labs generate data for multiple competitors and manage to maintain confidentiality,” he says. “McKinney RSA has served competitors while maintaining confidentiality, and so has this lab under its previous ownership. We have robust systems in place to maintain confidentiality. Plus, the only time the consulting firm is involved is when the client wants its services; the synergies are only leveraged at the client’s request.”

So far, clients appear to be comfortable entrusting their analytical work to McKinney Specialty Labs. “We are kept in business by a combination of regulation and R&D,” says McKinney. Cigarette and cigar testing is in steady demand due to regulatory requirements. On top of that, McKinney Specialty Labs has seen an uptick in interest for services related to ENDS and modern oral products. Interestingly, demand comes not only from the independent companies that drove the ENDS revolution but also from the established tobacco companies. Even though the big companies have the resources to do their own testing, they also outsource some of that work, as a spot-check on their own methods, for example.

Building on a Solid Foundation

While it’s still early days for McKinney Specialty Labs, the company says it is well on its way to realizing its initial goals. Because the facility had a great reputation already, McKinney’s first priority was to retain the talent. “We wanted to make sure that it would be a smooth transition for the employees, so the workforce was an important consideration during the negotiations: What were their needs? Could we match existing benefits?” says McKinney. The firm’s focus paid off, with nearly 100 percent of the workforce opting to continue with the new organization, according to McKinney. Other changes were on the administrative side. Because the lab previously was part of a larger organization, McKinney had to recreate some infrastructure, such as payroll systems.

Now the company is doing a “deep dive” into how it can be more efficient. “Having been a lab client, I know what it’s like from the clients’ perspective; I know the challenges and opportunities that exist within the lab, so that’s a benefit,” says McKinney.

Of course, even the best equipment, the most qualified scientists and the greatest levels of efficiency cannot guarantee success. The regulatory environment for nicotine products, says McKinney, has been “fluid” to say the least, making it extremely challenging for manufacturers to bring new products to market. “However, we pay very close attention to regulatory decisions and, importantly, why decisions are made. Then we leverage that information to decrease the probability of failure.”

Looking forward, McKinney Specialty Labs plans to keep pushing the envelope. “Tobacco is a very specific industry, but the testing of complex aerosols has other applications as well,” says McKinney. “Cannabis, for example, is an interesting market. It is not clearly regulated, and knowledge is lacking. We see that as an opportunity to raise awareness of our capabilities. The nicotine experience rolls right over. Cannabis oils are thicker than what we are used to, but we have the expertise to figure it out. We can start developing and validating methods so that when federal regulations come into place, we should be ready to go.”

Regardless of the services that the laboratory may add to its portfolio in the future, McKinney intends to offer his clients the same levels of confidence and confidentiality that his clients in the nicotine industry have become accustomed to. For each sector, he says, the company’s objective will be the same: “Our goal is to be a client-focused organization and deliver a quality product in a timely manner.”

Taco Tuinstra is Tobacco Reporter’s editorial director. Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors. On his watch, Tobacco Reporter has won several awards for editorial excellence. Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.

April 1, 2024

Breaking Through Barriers

Cuba’s cigar industry is on the road to recovery after several challenging years.

By Timothy S. Donahue

The Cuban cigar industry made huge profits last year, but it wasn’t because it produced more cigars. While the impacts of the pandemic, the weather and the scarcity of almost everything are overwhelming, the Cuban people and its tobacco industry are finding ways to endure. The cigar industry mirrors the country as a story of overcoming adversity and sowing the seeds of a hopeful new beginning.

When Hurricane Ian’s winds began to howl in September 2022, they caused significant damage in the Pinar del Rio region, Cuba’s most prominent tobacco-producing province. The storm eviscerated crops and flattened 90 percent of the tobacco curing barns and other farming infrastructure needed to grow tobacco. The destruction came on the heels of the Covid-19 pandemic, which had already brought the worst economic suffering Cuba had seen in decades.

Recovery has been slow, but Cuba has endured. While this year’s tobacco crop is the worst in the written history of the island’s tobacco crops, Cuba’s newspaper, Granma, reported earlier this year that 4,776 barns have been rebuilt, and another 620 are being completed. Luis Sanchez-Harguindey, co-president of Habanos, the state-run global distributor of Cuban cigars, said during a press conference at the 24th annual Festival del Habano that Cuban growers had also focused resources on their most efficient, volume-producing farms.

“This growth factor has also been due to the enhancement of all the supply chains and the great effort done by Tabacuba, the producers, the tobacco growers, who, after the pandemic and the hurricane, have been increasing production,” he said. “We have a better group of products [we now can produce]. And these products that we offer, of course, do not satisfy the demand for the products yet.” He explained that the combination of increased demand and lower supply has been one reason for this year’s record growth.

As the 2023–2024 growing season closed, a representative of Grupo Empresarial Tabacuba—the state-run company charged with managing the production of Cuban tobacco and cigars—told Tobacco Reporter that only two-thirds of the pre-hurricane tobacco hectarage was used for tobacco cultivation this season. Tabacuba said it reduced its targeted goals for the 2023–2024 harvest from the planned 12,905 hectares to 10,200; however, the amount of land used to grow tobacco is expected to return to pre-hurricane levels for the 2024–2025 season.

“Today, we have a great [percentage] of this infrastructure operating at 100 percent. This has been possible because we quickly had all the necessary resources to build a workforce, a specialized labor force that can rebuild everything that had been destroyed,” Sanchez-Harguindey said. “There are still some minimally damaged areas. It is mainly issues related to construction [acquiring supplies]. Tabacuba has a policy to concentrate production with tobacco growers that traditionally produce higher yields and better quality. This has been possible during the year 2023. The impact, the result of all this work, is unprecedented growth in revenues over 2022.”

Getting a Boost

Sanchez-Harguindey said that while the farms produced less tobacco in 2023, Habanos achieved a major increase in the value of its cigars due to a new pricing structure and successful promotions of exclusive brands such as Trinidad and Cohiba. “We’ve been able to compensate for that reduction in volume with value,” he said.

Habanos earned revenues of $721 million in 2023, up 31 percent compared to the previous year. Last year, the company generated $545 million in revenue, nearly 2 percent more than in 2021. “This is a year of records,” Sanchez-Harguindey said at the Festival del Habano, which took place Feb. 26—March 1.

The company’s products are available on five continents. During 2023, the markets that contributed most to Habanos’ sales volume were Spain, France, China, Germany and Switzerland. Habanos is owned 50 percent by the Cuban government and 50 percent by a consortium of Asian investors under the umbrella of companies called Allied Cigar Group, which is rumored to be majority-owned by HuaBoa, a major Chinese tobacco flavoring company. By region, Europe remains the leading market for Habanos, accounting for 56 percent of total sales value, followed by Asia (21 percent), the Americas (13 percent) and Africa and the Middle East (10 percent).

In 2023, the company launched 31 new products, including Cohiba Siglo de Oro, Cohiba Ideales, Romeo y Julieta Cupidos, Hoyo de Monterrey: Monterrey No. 4, and Bolivar New Gold Medal. With its 27 marcas and a presence in more than 130 countries, Jose Maria Lopez Inchaurbe, vice president of development for Habanos, credited the company’s success to “excellence, tradition and innovation.” A more obvious answer for the revenue jump is the boost in Cuban cigar prices globally. Habanos, said Lopez Inchaurbe, has transformed the Cuban cigar into a luxurious, high-end smoke in global markets, especially in China.

During the media portion of the festival, several reporters asked for clarification of Habanos’ revenues. Andrea Rodriguez, from the Associated Press, questioned how revenues went from 2 percent in 2022 to 30 percent this year. Lopez Inchaurbe said that there are different reasons to justify the growth. He said, “It’s a reality that after the pandemic, both the luxury market and the consumption of premium goods around the world have been increasing considerably,” and that demand has been global.

Lopez Inchaurbe said that the company also positioned its “super-premium” segment (Cohiba and Trinidad) more prominently and promoted the brands heavily in markets where luxury cigars are in greater demand. There has also been an increase in limited-edition cigar releases. “In the year 2023, we have launched 32 new products, nine of them in the premium standard category, which is the permanent portfolio of Havana, and 22 of them are in the concept of specialties,” he explained.

In 2022, Habanos announced a new “global pricing standard,” which massively increased the prices of Cuban cigars worldwide. The company has already announced at least two additional price increases for 2024. The price increases have significantly impacted the costs of Cuban cigars. Five years ago, the Cohiba Siglo IV, the flagship of the Cohiba brand, cost less than $60 a stick. Today, the cigar costs nearly $400 a stick in most markets. However, not all markets are treated equally.

Store shelves in Cuba were not heavily stocked during Tobacco Reporter’s visit. Finding large-ring-gauge cigars or anything with a Cohiba or Trinidad label was also difficult. Many local cigar shops in Havana said that they had not received shipments in more than a year, and some La Casa del Habanos (LCDH) locations said that it had been at least nine months since they had a cigar delivery. For the festival, however, every shop seemed to have received shipments of varying vitolas and marcas. Many shops had the new Romeo y Julieta Cupidos, 20 for $1,600, and boxes of the new Cohiba Siglo de Oro, priced at $4,500 for 18 sticks ($250 each).

An interesting, unusual occurrence was the introduction of a new POS system for payments during the festival. This system now allows Americans to purchase Cuban cigars (for consumption while on the island) with their U.S.-based credit cards, which has long been impossible. However, it is unclear whether this is a coincidence or if it was a permanent addition to the Cuban payment system. Tobacco Reporter was told that the new payment system is currently being used in only two of the LCDH stores in Cuba; however, it is expected to expand to all LCDH locations.

The Featured Event

In the past, registration for the Habanos Festival opened months before the event. However, last year, registration opened a mere 40 days before the event, and this year, Habanos gave attendees only 27 days to register. Overall, this year’s festival was better than most. The entertainment was spectacular, and the cigars were the best in the world.

Habanos celebrated several milestones this year, including the company’s 30th anniversary, the 50th anniversary of the Quai d’Orsay brand and the 55th anniversary of the Trinidad brand. Featuring an estimated 2,200 attendees and more than 200 journalists, the festival is where Habanos showcases its assets and previews a number of its major releases every year. The festival features multiple seminars, epic dinner events centered on various brands, and a trade show with over 200 exhibitors.

Traditionally, Tuesdays are reserved for trips to Pinar del Rio, Cuba’s legendary tobacco-growing region. While many media attendees visited the famed Vegas Robaina farm, Tobacco Reporter visited a smaller farm in San Juan y Martinez, often called the “Mecca of tobacco.” The fields looked exceptionally healthy, with broad, green leaves. The curing barns had been freshly painted, and the workers seemed vibrant and plentiful. The barns were in the process of being filled.

This year, attendees were also allowed to roll a cigar alongside professional rollers at one of five factories. It marked the first time the festival hosted its master rolling class in the same buildings where Habanos cigars are produced. Daymi Difurniao Rodriguez, communications and marketing specialist for Habanos, said that the venue change was to allow more attendees to learn firsthand about the “Totally by Hand” production process of a Habano.

“I wanted the press to make their own Habano so they could understand the details and intricacies involved in creating the Habanos, the world’s finest cigars,” said Difurniao Rodriguez.

The torcedor (cigar roller) who taught the El Laguito class was quality specialist Ana Isel Mederos Cano. She is also a nominee for the Habano Woman of the Year award in the production category for the festival. She has been at El Laguito for 25 years, 11 of them as a roller and the past 14 in her current position. “I love that I have been given this opportunity to teach the art of cigar rolling to the representatives of media from around the world,” she said.

Visitors had the opportunity to visit the La Corona, Partagas, H. Upmann and Carlos Balino factories. El Laguito was for media only. La Corona has about 750 employees, 300 of whom are dedicated rollers. The rollers produce brands such as Hoyo de Monterrey, Montecristo, Cuaba, Diplomaticos and San Cristobal de la Habana.

The H. Upmann factory produces H. Upmann, Montecristo, and Romeo y Julieta and several sizes of Cohiba. Partagas is one of Havana’s iconic factories, and Carlos Balino is the former El Rey del Mundo factory. The legendary El Laguito is home to Habanos’ premier marcas, Cohiba and Trinidad.

As in previous years, the Gala Dinner takes place during the final night of the Habanos Festival. It includes the presentation of the prestigious Habanos Awards and the auction of several elaborate humidors. The proceeds from the auction are donated to the Cuban Public Healthcare System.

This year’s auction included seven humidors, one for each of the company’s six global brands: Cohiba, H. Upmann, Hoyo de Monterrey, Montecristo, Partagas and Romeo y Julieta. Additionally, one humidor was dedicated to the 55th anniversary of the Trinidad brand. Eight lots were sold for a combined €17.8 million ($19.3 million), setting a record for the auction.

The headliner for the festival’s gala dinner was none other than the Village People. As the crowd swayed to hits such as “YMCA” and “Macho Man,” the challenges of growing and selling cigars, and surviving in the country, could be forgotten for a while.

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.

April 1, 2024

Shisha Ban Overturned

Kenya’s ban on shisha is unlawful, a Mombasa court ruled, reports The Star.

In overturning the measure, Shanzu Law Courts Senior Principal Magistrate Joe Mkutu noted that Kenya’s health cabinet secretary had failed to submit the regulations to Parliament for approval as stipulated in a 2018 High Court directive.

As a result of the ruling, the magistrate ordered the immediate release of 48 individuals arrested and charged for selling and smoking shisha in January 2024.

Since December 2023, the National Authority for the Campaign Against Alcohol and Drug Abuse arrested more than 60 people in separate club raids in Nairobi and Mombasa.

The operations have also resulted in the confiscation of a substantial quantity of shisha paraphernalia, including shisha bongs and charcoal pipes.

Shisha smoking was outlawed in 2017. The ban covered the use, import, manufacture, sale, promotion and distribution of the product based on health concerns.

March 31, 2024

PTC Disputes Tax Underpayment Charge

Pakistan Tobacco Co. (PTC) is disputing allegations that legitimate tobacco companies are shortchanging the country’s tax collector, reports the Associated Press of Pakistan.

Earlier this year, an Islamabad-based think tank presented figures showing that Pakistan’s national exchequer collected PKR567 billion ($20.4 billion) less from the tobacco industry than it was entitled to.

“It is important to note that this figure is incorrect, misleading and detached from ground realities,” PTC wrote in a press release. “The only loss incurred to the government of Pakistan by the tobacco industry is because of tax evasion of illicit manufacturers as the legitimate industry pays all applicable duties and taxes.”

Contrary to the report’s suggestion, the legitimate tobacco industry has significantly contributed to the national exchequer, paying PKR148 billion in fiscal year 2021-2022 and PKR173 billion in 2022-2023, according to PTC.

The company highlighted that the government recently recognized PTC as one of Pakistan’s top tax-paying entities. It emphasized importance of a level playing field for the legitimate sector, which is currently undermined by the illicit sector.

March 31, 2024

Job Ads Suggest IQOS Debut in Austin

The resolution of an IP dispute with BAT has removed a major hurdle to selling the product in the U.S.

Philip Morris International is preparing to launch its IQOS heated-tobacco device in Austin, Texas, USA, reports U.S. News. The city will be a testing ground for PMI’s re-entry into the United States after the company resolved an intellectual property dispute with British American Tobacco that had prompted the International Trade Commission to ban imports of IQOS in the United States.

PMI previously announced that it planned to launch IQOS in four cities in two U.S. states beginning with one city in the second quarter before a larger rollout in 2025. The company did not, however, release details.

According to U.S. News, LinkedIn job advertisements suggest that PMI is planning to launch the product in Austin. The advertisements were posted this month and include positions such as field sales representatives, territory managers and retail sales advisors.

The U.S. would be a significant market for IQOS. Euromonitor estimates that total U.S. nicotine sales excluding nicotine-replacement therapies were $143.6 billion in 2022. Cigarettes accounted for the majority of sales, but Euromonitor predicts that their value will drop by 30 percent by 2027 and the value of smoking alternatives such as e-cigarettes and nicotine pouches, will increase by 36 percent in the same period.

Investors are waiting to see if PMI can create a heated-tobacco market in the U.S., where vaping is dominant.

According to Brett Cooper, managing partner and analyst at equity research firm Consumer Edge, Texas offers an interesting trial market due to broad demographics. He noted that diverse cities like Austin, Houston and Dallas provide access to a wide range of consumer groups.

U.S. Centers for Disease Control and Prevention data shows that tobacco taxes in Texas are relatively low, with the excise tax rate on a pack of cigarettes standing at $1.41 in September 2023.

In January, Texas introduced new e-cigarette laws, banning products that resemble food or that include symbols or celebrities targeted at minors or that depict cartoon-like fictional characters.

PMI believes IQOS can capture a 10 percent share of the U.S. tobacco and heated-tobacco unit volume by 2030.

March 29, 2024

Tobacco Stakeholders Debate Forestry in Brazil

Stakeholders highlighted tobacco industry initiatives to preserve Brazil’s native forests and achieve energy self-sufficiency at the Expoagro Afubra 2024 fair in Rio Pardo, Rio Grande do Sul, Brazil, on March 22.

SindiTabaco technical advisor Fernanda Viana Bender presented a number of projects designed to promote forest sustainability in tobacco farming in partnership with the Federal University of Santa Maria (UFSM).

The program aims to cultivate trees to meet tobacco farmers’ fuel requirements while preserving native forests. At 22 demonstration units in Rio Grande do Sul, the UFSM research team, led by Jorge Antonio de Farias, is testing the management of fast-growing trees.

While the programs provide stakeholders with valuable knowledge, Bender says there is still much to learn. “We need to develop a way of thinking that forest production is a tobacco farmer’s business,” she was quoted as saying on SindiTabaco’s website. “Without wood, there is no tobacco curing. However, beyond the demand by the sector, farmers could also get organized to diversify with forest production, thus earning extra income,” she argued.

Farias identified a number of challenges to achieving those goals. “As the farmers possess small farms, land availability is one of the problems that make it difficult to plant trees, and the same holds true for the transport logistics of the production,” he observed.

“At the same time, we witness a sector extremely concerned with the supply of wood of legal origin while the farmers strongly demand wood. The solution goes through the creation of cooperatives or associations capable of articulating this market, and the tobacco sector could be a protagonist in this process. The forest component should become an integral part, when it comes to establishing a rural property, as an alternative source of income,” said Farias.

March 28, 2024

Zimbabwe: Auction Prices Hit Record High

Tobacco prices on Zimbabwe’s auction floors hit a record high of $5.05 per kilogram, the highest price in 10 years. The previous high was $4.99 per kilogram.

The increase comes primarily from “freed-funded” tobacco, which is grown by individual farmers and accounts for 7 percent of the total crop, according to The Herald.

The remainder of the tobacco crop is funded under contract schemes that are mainly sponsored by foreign companies.

Auction prices have increased 26 percent year-over-year while contract prices have increased 13 percent, according to the Tobacco Industry and Marketing Board. The auction floor price increase has reignited calls for an increase in local financing for tobacco growing.

“The continued reliance on contract farming after two decades suggests there might be deeper issues with the model itself,” said Tobias Musara, a Harare-based development economist. “Ideally, a few seasons of participation should equip the farmers for self-sufficiency. This dependence on contract financing needs to be addressed to ensure long-term benefits for our local farmers.”

Contract farming began around 2004, a few years after the government confiscated commercial farms and distributed the land among smallholder growers.

March 28, 2024

KT&G Appoints Bang as President and CEO

KT&G Corp. appointed Kyung-man Bang as its president, CEO and representative director.

Despite opposition from some shareholders, Bang was elected president with overwhelming support during KT&G’s annual meeting on March 28, according to the company. The election of CEO and outside director was conducted jointly through combined cumulative voting as per shareholder request, with the aim of protecting minority shareholder rights.

“I am deeply grateful to the shareholders for entrusting me with the honorable opportunity to serve the company as CEO, and to the employees for their tireless work and dedication across both domestic and international business arenas,” said Bang.

“We are committed to achieving our vision of becoming a global top-tier company by taking a leap forward and leveraging our three core business areas—overseas combustibles, next-generation products and health-functional food—as the cornerstone for growth. We will also put our best effort to enhance corporate value and to establish a strong foundation of trust with stakeholders by sharing our profits with various stakeholders.”

Furthermore, Bang introduced his “T-O-P strategy,” a new business approach designed to help KT&G achieve its vision of becoming a top player. According to Bang, “T-O-P” stands for “trust,” “origin” and “professionalism.”

It aims to demonstrate KT&G’s commitment to enhancing stakeholders’ trust with proactive engagement, establishing an undisputed “origin” with a first-mover approach and securing global expertise and professionalism through performance and growth.

Bang encouraged employees to build upon KT&G’s legacy of persevering through numerous crises and to aspire to new heights of success by taking on new and daring challenges.

Since joining Korea Tobacco and Ginseng (KT&G’s predecessor) in 1998, Kyung-man Bang has held various management positions at the company, including roles such as managing director of brand management, executive managing director of global headquarters, executive managing director of strategy and planning headquarters, and chief business officer.

As managing director of brand management, Bang helped KT&G solidify its leadership position in the domestic market by launching ESSE Change, which has become a leading brand. Moreover, during his tenure as executive managing director of global headquarters, Bang expanded KT&G’s overseas market presence to more than 100 countries and delivered an unprecedented KRW1 trillion in overseas sales by developing tailored brand portfolios for each market and accelerating market expansion efforts.

As chief operating officer, Bang has played a pivotal role in executing the company’s mid-term to long-term growth strategy that focuses on three core business areas. He has made significant contributions to expanding the direct business model for the company’s overseas combustibles business, driving rapid growth in the next-generation product business, and establishing localized value chains for overseas health-functional food business.

During the annual meeting, shareholders also approved the appointment of Dong-hwan Shon and Sang-wook Kwak as outside directors, with Kwak also serving as an audit committee member. “We are fully dedicated to driving the company’s growth and enhancing shareholder value, with the newly formed board of directors leading the change at the forefront,” the company wrote in a press release.

March 28, 2024

22nd Century Reports Quarterly Results

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22nd Century Group reported net revenues of $7.4 million for the quarter that ended Dec. 21, 2023, down from net revenues of $10 million in the comparable 2022 quarter. Gross loss for the fourth quarter was $7.8 million compared with a gross loss of $100,000 in the prior-year period. The loss included a one-time charge of $7.9 million for certain inventory write-down adjustments.

During the quarter, 22nd Century exited its hemp/cannabis operations to fully focus on tobacco harm reduction and contract manufacturing activities. The company substantially reduced operating costs through efficiency initiatives and the hemp/cannabis business sale. It also began new initiatives to increase sales, improve gross margin and increase operating profit in 2024. Moreover, the company started developing new customer engagement strategies to drive additional sales growth for its VLN low-nicotine cigarettes, which have been authorized by the U.S. Food and Drug Administration.

“Our turnaround is progressing rapidly after restructuring a significant portion of the business over the last 120 days as part of our mandate to produce stronger future financial results,” said 22nd Century chairman and CEO Larry Firestone in a statement. “Most importantly, cash use has declined rapidly, from a peak run rate of approximately $15 million a quarter last year to less than $4 million projected in the first quarter of 2024, with continued sequential improvement expected in each quarter throughout 2024 as we move further from prior-period cash obligations.”

Firestone said the company now has two primary areas of focus that both directly pertain to its tobacco market assets. “In the short-term, we will evaluate and profitably grow our contract manufacturing business to cover our operating expenses and mission-critical initiatives around 22nd Century’s very low-nicotine content cigarette technology,” he said. “We will also invest in and grow the VLN brand through sales, customer awareness and capitalizing on a positive regulatory and social environment. With success in these efforts, we believe that 22nd Century can break even by the first quarter 2025.”

March 28, 2024