Pax Labs, a supplier of premium cannabis vaporizer technology, has appointed Michael Murphy as its president and CEO.
Prior to joining Pax, Murphy was a managing director at AlixPartners and served as the local market leader for both the San Francisco Bay Area and Hong Kong practices. While at AlixPartners, Murphy led engagements both as a consultant and in management roles at companies including Nextwave Wireless, PacketVideo, as well as Diamond Foods and Home Depot’s Asia division.
“As the industry emerges from some tough months, I am excited about the opportunity Pax has to be the leading company in cannabis vaporization technology,” commented Murphy.
“Pax is already the recognized leader in providing premium products that prioritize transparency and customer safety. The brand is strong and the recently launched Era Pro is a testament to Pax’s legacy of producing the industry’s highest quality devices and commitment in continuing to provide customers with best-in-class technology.”
Swedish Match reported sales of SEK14.74 billion ($1.53 billion) in 2019, up 14 percent over its 2018 sales. Fourth quarter sales increased 19 percent to SEK3.93 billion.
Operating profit was down 8 percent to SEK1.1 billion for the fourth quarter but was up 10 percent to SEK5.31 billion for the full year. Operating profit from product segments was up 22 percent to SEK1.53 billion for the fourth quarter and up 18 percent to SEK5.83 billion for the full year.
“In many respects, 2019 will stand out as a transformational year for Swedish Match—a year in which we not only delivered record sales and operating profit from product segments, but also where the company, aligned with our vision, established itself as the clear market leader for nicotine pouches in the United States and began offering nicotine pouches to markets outside of our core Scandinavian and U.S. markets,” said Lars Dahlgren, CEO of Swedish Match.
“The group’s outstanding financial performance in 2019 further reflects our commitment to our vision as the snus and moist snuff product segment accounted for essentially all of our growth in sales and operating profit from product segments in local currencies.”
In related news, Swedish Match announced it will increase production capacity for its tobacco-free nicotine pouch product, ZYN.
Swedish Match began rolling out ZYN across the U.S. last year, and the company recently decided to expand its U.S. plant. “Given the market success of ZYN, we have recently decided to once again expand capacity,” the company said in a statement. “The fourth phase, which is planned to be completed in 2022, will involve building expansion as well as processing and packaging lines that will increase annualized installed capacity to more than 200 million cans.”
The Trump administration wants to remove the Center for Tobacco Products (CTP) from the U.S. Food and Drug Administration’s (FDA) authority.
In his 2021 budget proposal, released on Monday, President Donald Trump envisions the CTP as a stand-alone agency with a Senate-approved director.
The budget proposal states that making the CTP its own agency would allow the FDA to “focus on its traditional mission of ensuring the safety of the nation’s food and medical products supply” while “a new agency with the singular mission on tobacco and its impact on public health would have greater capacity to respond strategically to the growing complexity of new tobacco products.”
Public health advocates reacted strongly against the proposal, saying it would roll back any forward motion the FDA has had in terms of regulating tobacco products. Creating “a new stand-alone agency to handle tobacco regulation is the wrong idea at the wrong time,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids.
Public health advocates already feel that Trump’s recently enacted flavor ban is too weak because it allows for single-use disposable flavored products to remain on the market, which they believe youth will gravitate toward in the absence of other flavored products. The ban removes flavored pod products with the exception of tobacco and menthol flavors from the market.
Some fear that having a Senate-approved director of this new agency would politicize the regulation of the industry—it could “greatly politicize its management and activities,” said Eric N. Lindblom, senior scholar at the O’Neill Institute for National and Global Health Law at Georgetown Law and a former director of the FDA CTP’s Office of Policy.
The FDA was granted oversight of tobacco in 2009 under the Obama administration. The CTP was then created within the FDA to regulate the industry. The CTP would remain under the Department of Health and Human Services under the new budget proposal.
The price of Australian cigarettes will rise by 12.5 percent this year, bringing the average pack to almost AUD50 ($34.26).
Beginning in September, a 25-pack of Marlboro Golds will cost AUD48.50, one of the highest prices in the world for a pack of cigarettes. The cheapest pack will be about AUD29.
This will be the eighth consecutive price increase as a part of the government’s attempt to reduce tobacco use.
Critics say the price increase will stimulate the black market and punish those who are addicted to nicotine. A pack-a-day smoker will spend more than AUD10,000 a year on average following the hike. RYO smokers will see a similar increase in the price of loose tobacco.
The Australian Bureau of Statistics shows that the number of adults who smoke daily has remained stagnant despite the price increases—the rate dropped 0.7 percent between 2014–2015 and between 2017–2018.
Black market tobacco sales increased last year; officials seized more than 300 tons of contraband in 2019.
Contrary to its claim, a recent critique does not debunk the statements made by Public Health England (PHE) and the Royal College of Physicians (RCP) that vaping is at least 95 percent less risky than smoking, according to Clive Bates, director of Counterfactual Consulting.
Writing on his blog, Bates examined the authors’ propositions and found them wanting.
“Not a single word of their paper addresses the supposed foundation of their critique—that PHE/RCP are wrong, and the risks of vaping are likely to exceed 5 percent of those of smoking,” Bates wrote.
While the paper contains several baseless assertions that are irrelevant to the “at least 95 percent lower” relative risk claim (gateway effects, smoking cessation efficacy and secondhand aerosol exposure), it says nothing about the relative magnitude of smoking and vaping risks, according to Bates.
“No analysis, no data, no evidence—nothing that discusses relative risk and why PHE/RCP are supposedly wrong. Niente. Nada. Rien. Nichts. Nothing,” he wrote.
Imperial Tobacco plans to close its Petone factory in New Zealand, citing falling demand, reports the NZ Herald.
“Globally consumer demand for our product has declined, so the proposal to close our Petone cigarette factory is necessary for the future of our business,” said Kirsten Daggar-Nickson, head of corporate and legal affairs for Imperial Brands.
“In markets like New Zealand, that future is next generation products. So we’re transitioning our business, product line and distribution channels to offer these products to smokers that want to transition to a healthier alternative, and we successfully launched an electronic cigarette MyBlu in the New Zealand market last year.”
The factory closure puts 122 jobs at risk. Imperial Tobacco has entered a consultation process with its employees.
As part of various roles within the tobacco industry, Abrie du Plessis spent almost two decades tracking the development of the FCTC, from its early beginnings in 1995 until his retirement after COP5 in 2012. In his current role as an independent trade law consultant, Du Plessis still follows FCTC developments with interest.
Have we seen (yet another) post-truth COP in Delhi?
By Abrie du Plessis
Just after COP7 concluded in Delhi, Oxford Dictionaries declared “post-truth” as its 2016 international word of the year, reflecting what it called a “highly charged” political 12 months. “Post-truth” is defined as an adjective relating to circumstances in which objective facts are less influential in shaping public opinion than emotional appeals. Its use dates to around 1992, but its 2016 selection follows the Brexit vote in June and the recently concluded U.S. presidential election.
While reflecting on what happened at COP7 it struck me that from the time of COP4 in Uruguay, FCTC COPs started to acquire features reminiscent of the post-truth approach. In fact, they seem to have taken the concept further, in that they prioritize emotional appeals over facts to shape not only public opinion but also the official positions of governments and of the international community. The recent COPs also took the step of isolating themselves from outside stakeholders and from opposing viewpoints. In doing so, they effectively reinforced the post-truth approach.
I may of course be challenged to state on exactly what basis I characterize the last few COPs as post-truth events, so please consider just a selection of the views currently being promoted as part of the COP process:
At a time when the tobacco industry is wholly excluded from policymaking, it is more than ever portrayed as a major obstacle to tobacco control.
Despite the fact that the World Trade Organization has recently demonstrated that its rules can strike a balance between health and trade, those rules are constantly attacked as being unfit for purpose.
With the globalization of the tobacco industry now largely behind us, the risk of tobacco multinationals entering new markets are presented as a constant an imminent threat.
The FCTC is no longer portrayed for what is—namely a (mostly) finite framework of tobacco control measures to be taken at the national level—but as an ongoing (and global) campaign against the tobacco industry and its employees.
The FCTC process is buying into the post-truth dogma of viewing globalization and multinational companies as amongst the major ills to have befallen mankind.
Governments that want to implement FCTC measures in a manner that takes into account their national circumstances (which is their right) are being portrayed as obstacles to FCTC progress.
The expressly nonbinding FCTC guidelines are portrayed as binding, with an imminent threat of action against sovereign FCTC parties.
On the substantive side, the list goes on and on: Tobacco advertising and promotion, largely a thing of the past, is presented as more of a problem than ever; long-standing product features are misrepresented as being novel; effectively banning tobacco products is being disguised as an attempt to reduce addictiveness; etc.
In the case of the Protocol to Eliminate Illicit Trade in Tobacco Products, the call is that the tobacco industry, which is best placed to contribute in an appropriate manner to the development of open track-and-trace standards, should be denied participation.
To this should be added that the main supporters of the COP from the side of civil society, together with a small number of FCTC parties, certainly appear to have bought into the post-truth culture. They do not tolerate any views other than their own. They are dogmatic and prone to resort to name-calling whenever they encounter any form of debate. They do not tolerate any views other than their own. They have expanded their post-truth treatment of opposing viewpoints to way beyond their original target, the tobacco industry, by characterizing all attempts by other stakeholders to raise them as the efforts of “tobacco industry affiliates” (akin to the “Remoaners” in Brexit-speak).
All of this raises the question as to why the FCTC process appears to have little choice but to move forward from its original point of departure to this new approach and, more importantly, why moving on to what one would have expected, which is an objective truth-based world, is not an option.
The most logical explanation appears to be that moving on to a simple fact-based approach is for two reasons unappealing to the FCTC process: The first is that doing so vaguely reminds us of the fondly forgotten Campaign to Remain, an approach which many saw as lacking in energy, drive and above all, in emotion. In our current campaign-driven world an objective, nonemotional approach is clearly inadequate.
But there is an even more important consideration, and herein lies the crux of the matter: Approaching the FCTC in an objective, fact-based manner will reveal that very soon the vast majority of countries will have implemented, in some shape or form, each and every one of the tobacco-control measures proposed by the convention. This raises the specter of the FCTC becoming largely redundant, as it will then have served its stated purpose. This consideration, more than any other, makes adopting a constantly evolving approach an absolute necessity for the FCTC.
The main tools used to move into this next phase are innovation, isolation and institutionalization. The innovation point is apparent from the earlier description of the current FCTC world view. Put mildly, it involves an innovative and evolving reinterpretation of the facts to support a common purpose.
Isolation from opposing viewpoints is the second important element of cultivating post-truth world views, and the COP process has certainly acquired a reputation for being exclusionary and nontransparent. It is ironic that it uses one of its most prominent post-truths, which is that any visibility of its workings will unduly benefit the tobacco industry, to drive this culture of nontransparency.
Institutionalization is the last leg, in that institutions by their very nature are driven to innovate in order to safeguard their continued existence. If the FCTC Secretariat succeeds in turning itself into a global tobacco control agency, then ever more radical and costly programs, proposed and adopted in isolation from real-world considerations, may become the norm.
In conclusion, I wonder whether some members of the tobacco control movement, when reading these comments, will at least see the irony, and will appreciate being recognized as pioneers of the post-truth era. I would not put any money on it, except maybe my post-demonetization stash of Indian Rupee banknotes.
What happened at COP7?
The final decisions taken at the seventh Conference of the Parties (COP7) were not yet available as Tobacco Reporter went to press, but, from the draft reports published on the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) website, the following picture has emerged:
Most FCTC parties were of the view that COP7 was going to be different from earlier COPs in that the focus was shifting away from developing instruments, such as FCTC guidelines, toward FCTC implementation. Many parties, however, expressed the view that COP6 had created too many separate work streams and felt that there could be a benefit in bringing most of them into a clearer and more focused future work plan. What follows is a short summary of the main debates and their provisional outcomes.
The COP spent significant time discussing the slow pace of ratification of the Protocol to Eliminate Illicit Trade in Tobacco Products. The protocol currently has 24 parties, with 40 parties required for it to enter into force. It was decided that the draft agenda and relevant preparations for the first Meeting of the Parties (MOP) shall be agreed at a preparatory meeting where each WHO region shall be represented by up to two parties that have ratified the protocol. The COP appears to be foreseeing a very active role for the MOP, the secretariat of the protocol and the existing panel of experts in its eventual implementation.
Extensive discussions on Article 5.3 (protection from the vested interests of the tobacco industry) have become the norm at COPs, and this event was no exception. What was new was whether this article provides a basis for excluding government representatives from parties’ delegations. In the end the secretariat appears not have pursued its initial request for formal powers to do so. A large number of journalists were given badges to attend the COP, but in the end they were, like the public, excluded after the end of day one. This caused significant debate, with some journalists protesting heavily.
On Articles 9 and 10 of the convention, the COP adopted draft texts to be added to the nonbinding guidelines on the regulation of the contents of tobacco products and on tobacco product disclosures. These texts include a broad provision on regulating tobacco product features and disclosure of information relating to product features. The COP, however, deferred discussions on reducing the addictiveness of tobacco products to a later stage, with a majority of the parties taking the view that the adoption of texts was premature.
On electronic nicotine and non-nicotine delivery systems (ENDS/ENNDS) the COP by and large accepted the report submitted to it by the WHO, and it also kept the earlier outcomes from COP6 in place. It appears likely that the WHO will keep monitoring these products and will submit a further report to COP8.
On Article 17 and 18 (economically sustainable alternatives to tobacco growing), many parties raised the issue of a lack of financial resources to address this area. A novel proposal was that parties not currently growing tobacco should be encouraged not to introduce tobacco growing.
On Article 19 (liability) the COP adopted the report of the expert group, including the “toolkit,” as a mechanism of assistance for those parties that may require assistance in their implementation of Article 19. The COP now appears to have concluded the work of the expert group on liability.
There was little support for the proposal that the COP should include further work on the settlement of disputes in its work plan. The main reasons were the lack of real disputes and the already low formal acceptance level of the existing FCTC mechanism.
As at previous COPs, there were extensive discussions on whether the existing World Trade Organization dispensation provides an adequate mechanism to balance health and trade concerns. The COP considered the latest developments in this area, but no significant actions were proposed.
Parties were divided on the exact nature and purpose of the proposed implementation review committee. Some felt that it was inappropriate or even illegal for them to be overseen by such a subsidiary body, while others felt that the functioning of such a body could be to provide implementation assistance instead of oversight.
Funding of the FCTC process is always high up on the agenda, with the main concerns being that many parties are in arrears with their voluntary assessed contributions, and that around half of the FCTC budget relies on extra budgetary contributions. The COP was in favor of changing the voluntary assessed contributions to assessed contributions and to incentivize parties that are in arrears to meet their obligations. It is expected that the September 2015 inclusion of tobacco control in the sustainable development goals may over time make some funding earmarked for development available for FCTC related activities.
Most FCTC parties did not want the discussion on the hosting agreement between the FCTC Secretariat and the WHO to develop into a discussion on greater autonomy for the FCTC Secretariat. They were instead in favor of even closer cooperation between the FCTC and WHO secretariats.
The exact details of the work plan adopted by the COP and the allocation of responsibilities to working groups, expert groups, the FCTC Secretariat and the WHO will only be clear once the final decisions become available. As at past COPs, the availability of funding played a significant role in the debate on the allocation of the various parts of the work plan.
It was decided that the next COP will take place in Geneva at the end of 2018. This is the first time an FCTC COP will take place in Geneva since COP1 in 2006. It is expected that COP8 will be followed by the first MOP to the protocol. —AdP
U.S. tobacco is generally regarded as the world’s best. The U.S. Tobacco Cooperative wants to ensure it also gets credit as such.
TR Staff Report
Founded in 1946, the U.S. Tobacco Cooperative (USTC)—a grower-owner cooperative comprising more than 750 member growers throughout North Carolina, South Carolina, Virginia, Georgia and Florida—has spent the past 70 years securing its status as a key player in the tobacco industry. And for the past several years, the Raleigh, North Carolina-based organization has undergone a series of significant transitions designed to help highlight U.S. flue-cured tobacco as the most sustainable and compliant tobacco crop in the world.
From officially changing its name in 2008 and renovating its headquarters building in 2015 to purchasing several new marketing centers in recent years, breaking ground on a new green storage facility in July and consistently hiring top talent, USTC has reinvented itself as a company and is changing the way the world views the U.S. flue-cured tobacco supplier and its members’ crops.
While USTC has made significant strides toward changing the industry’s perception of the company itself, its latest focus is on educating industry stakeholders on the intrinsic value of tobacco grown on U.S. soil versus crops grown outside the United States.
Stuart Thompson
“There are many benefits to the U.S. crop,” says USTC CEO Stuart Thompson. “Child labor here is virtually nonexistent. There is no deforestation. There is no problem with tobacco replacing food crops. Our growers abide by good agricultural practices. These are the largest commercial tobacco farms in the world. They are highly efficient, and our growers are precision farmers. We have a core group of very loyal growers who bring us the absolute very best tobacco that they have, and they do that every year. These growers have proven that, despite challenging weather conditions, they can produce year in and year out. We know the U.S. crop is the key ingredient in virtually all premium blends. It’s sustainable, it’s socially responsible, and it’s secure. Our hope is to highlight that to the global markets so that people will rely more on U.S. flue-cured tobacco.”
Although some in the industry are aware that the U.S. flue-cured crop is the highest-quality tobacco available today, according to Thompson, U.S.-grown leaf has not received sufficient recognition for its intrinsic value. So USTC has set its sights on promoting the benefits of U.S. flue-cured tobacco—benefits that are passed down from the grower level to the leaf suppliers to the manufacturers and, ultimately, to the consumers who purchase the products. U.S. growers self-finance, a burden borne by suppliers in many other origins along with the associated bad debts. The U.S crop is dollar-based, eliminating currency risk. Because of the sophistication of the U.S. grower base, suppliers do not have to maintain large agronomy teams to assist growers. All of these costs are borne by the U.S. growers and included in their green price.
USTC is not content to simply say that U.S. tobacco is the best; the company is backing its claim with data.
“You have to look at the United States and the resources that are here—in terms of water, land, food sufficiency and environmental protection—and then compare that to tobacco crops grown in lesser-developed countries, where there is population pressure, climate change, food shortages, and where water is becoming a critical issue,” says Jim Schneeberger, USTC’s vice president of business development. “In other countries, the questions are already being asked: ‘Why are our natural resources, like water, being used to grow tobacco rather than food?’ Overall, with our climate and environment in the U.S., we’re not sacrificing food crops to produce tobacco—and in many cases, tobacco complements other rotation crops. It’s very difficult when you have people struggling to produce food and they are being told, ‘Don’t grow your crop on the riverbank because it will cause erosion.’ For them, it’s not a choice. They have to grow that crop to survive.”
“I think something that we pass over is just the consistency and the size of the commercial farming operations,” says Thompson. “The grower base here in the U.S. is made up of precision farmers, and they are excellent at solving problems that happen in the field. At North Carolina State University, we have the pre-eminent tobacco research facilities in the world, which is an important resource for the tobacco industry.”
Because of the sophisticated techniques used to produce this crop, buyers who source their premium tobacco from U.S. farmers can rest assured that they will ultimately end up with their requirement each season.
”What this means is that the U.S. growers will produce the styles that are in demand year in and year out with what they need,” says Thompson. “So for manufacturers that are focused on having their consumers having a consistent experience, they need to think about sourcing tobacco from origins that are going to be consistent year in and year out. That’s why I think the U.S. crop is really key and that our customers would be wise to look to the U.S. to source more of their core grades.”
According to Schneeberger, this consistency is particularly important for manufacturers of premium brands with loyal followings that can’t afford to deviate from the high-quality blends their consumers are familiar with.
“The fact that we don’t have a lot of the issues that affect the lesser-developed countries is part of the intrinsic value of the tobacco in this market,” he says. “Manufacturers don’t have to worry about their brand’s quality being jeopardized or their brand integrity being put at risk because of the compliant production model here in the U.S. So we are really assisting the manufacturers secure their brand integrity by guaranteeing the integrity of our U.S. flue-cured crop.”
Although it’s simple to state that U.S. flue-cured tobacco is the best in the world, it’s imperative for leaf suppliers like USTC to substantiate such a claim with actual data gathered from the farms where the flue-cured crop is grown. USTC has taken several steps to prove their growers’ crop is top quality, the most significant of which is initiating independent third-party audits for 100 percent of its grower base.
“Many of our growers have multiple contracts that require high standards,” says Thompson. “We felt we needed to jump to the forefront in promoting the sustainability of the U.S. crop. So we took the position that we’d do 100 percent independent audits of all of our growers. And as far as we know, no other major leaf supplier in the U.S. is doing this. Several companies conduct 100 percent audits, but no one else does 100 percent independent audits.”
“It’s expensive for us, and it’s time-consuming for our growers to conduct those audits,” says Thompson. “We’ve also launched our own audit platform, where our own leaf department is doing assessments on every farm visit as well. We just don’t think the U.S. crop has been getting the credit for its sustainability and social responsibility that it deserves, and we want to highlight that. Whether buyers decide to purchase from us or not, we want them to recognize just how good the U.S. crop is.”
Earlier this year, USTC broke ground for an expansion of its operations in Timberlake, North Carolina.
Social responsibility and sustainability may be the key focus of the new goals USTC has set forth, but for USTC, the focus on social responsibility and sustainability doesn’t stop at the grower level—it also spills over into the production process.
Earlier this summer, the company broke ground on a brand-new, $13 million green storage center in Timberlake, North Carolina, which will complement its current leaf processing facility.
“We continue to make investments with the goal of reducing our green conversion costs,” says Thompson. “We’re adding 150,000 square feet of green storage at that site, so the total facility will be just under 600,000 square feet. By investing in this new green storage facility, which will be up and running for the 2017 season, USTC is further reducing operating costs on a significant scale.
“With this addition, we’ll be able to store 10 million pounds at the plant, so if we need to make changes to the blends to meet a customer’s needs, we can do that right there. It will generate significant savings and process improvement.”
Perhaps the most notable aspect of USTC that sets the company apart from other leaf suppliers is their unparalleled investment in their growers. In the past five years, USTC has returned more than $42 million in patronage dividends to its members.
“People like our story, and they like our patronage,” says Thompson. “They like the idea that we work for growers. They like the idea that we send profits home. It’s very compelling. We look to maximize our profits and we look to maximize the amount that we can send back to our growers. That formula seems to be working well.
Whether they are investing in their growers by returning profits in the form of patronage dividends or purchasing new facilities to reduce operating costs, USTC is well-positioned to succeed in their goal of promoting U.S. flue-cured tobacco to those within the global tobacco industry.
“What we’d like people to do is to really think about us as the premium supplier in the U.S. Our larger customers consistently tell us that we score the highest in quality,” says Thompson. “Because we actually do what we say we’re going to do. We’re very transparent. We’re the real deal. If somebody wants the best U.S. leaf, which also happens to be the best in the world; if they want to get it from someone who is deeply committed to social responsibility; if they want to do business with someone that is financially sound; if they want to do business with somebody that is only interested in integrity—we’re the best match.”
It’s time for critics to recognize the tobacco industry as a partner, rather than an adversary, in the fight against illicit trade.
By George Gay
A few years back I was told off for having suggested that the price people pay for cigarettes should be aligned in direct relationship with their incomes; so the more a person earned the more she should pay for her cigarettes. The general drift of the complaint was how dare I suggest that a person who had studied diligently and worked hard so as to land a well-paying job should be penalized for such enterprise.
I tried to explain that my suggestion was aimed not at penalizing the better-paid person but at helping her by pushing the price of cigarettes to the point where she could no longer afford them, stopped smoking and enjoyed all of the health advantages that quitting offered. I was merely raising the bar of government strategy so that it encompassed too the better off.
At this point the person who had been telling me off looked at me as if I were mad and changed the subject.
What does this true story indicate? To me it suggests that there is at least one person who doesn’t buy into the idea that the primary reason why governments raise cigarette taxes is to improve public health. And I get the feeling that he isn’t alone.
So it’s about the money, about government revenues? In part. For instance, in July, a smoker in the U.S. state of Pennsylvania raised a question that should be asked often and loudly but rarely is: Why should smokers pay a disproportionately high level of taxation? Writing on www.pennlive.com, Nancy Eshelman said that she had smoked for more than 50 years and, during that time, “dropped a lot of money into the state coffer.”
“I don’t mind paying tax on my cigarettes,” she wrote. “But why should I, and other smokers, provide nearly two-fifths of the new revenue that will balance the state’s new budget?”
Making choices
But there’s more to tax increases than money and health. For one thing, they have to do with the fact that, in the minds of some people, there can be no redemption for tobacco sinners. And they have to do with the fact that some people make their choices not on the basis of what they like the most but on what they dislike the most.
This way of choosing was evidenced by the Brexit vote and by reaction to the U.S. presidential campaigns. And it is evident in the vapor debate—it’s better to stick with smoking than allow tobacco manufacturers to take the moral high ground with their newfangled vapor devices.
And in respect of the illegal trade in tobacco products, there seems to be a theme running through the narrative suggesting that some in the anti-tobacco field would sooner that this trade carried on if the alternative required working with tobacco manufacturers.
In September, a brand security consultant said the World Health Organization (WHO) would rather focus on easy targets, such as licit tobacco companies, than on the illegal trade in tobacco products, according to a story by Connor D. Wolf published on InsideSources. Former U.S. federal agent Thomas Lesnak warned that the WHO’s political agendas and secret meetings had resulted in an echo chamber of dangerous policies. “No one really wants to talk about what the facts are, what the real numbers are,” Lesnak said. “It’s easy to say I’m against the big tobacco companies. Politically it’s smart. There’s no downside to it except you’re ignoring what’s really going on out there.”
Also in September, a report by the Australian Institute for Progress (AIP) said that the November meeting of the Conference of the Parties (COP) to the WHO’s Framework Convention on Tobacco Control (FCTC) would lack the transparency and dialogue that underpin United Nations values. The report was launched by the former Australian government minister Gary Johns.
The seventh FCTC COP, which was set to be held in Delhi, India, on Nov. 7–12, just after this magazine’s November issue was due to be published, was refusing entry to relevant stakeholders or media to discuss new developments that could save lives around the world, the AIP said in a story issued through PR Newswire. “The WHO FCTC is a closed shop which uses exclusion to silence debate,” Johns was quoted as saying.
Perhaps this is part of the reason why, according to a Taxpayers Protection Alliance (TPA) report in October, numerous countries have opted not to pay their obligations to the WHO FCTC. “As of July 15th, 142 of the 180 FCTC member countries, nearly 80 percent, had outstanding obligations,” the TPA said. “The FCTC has faced criticism for banning journalists at its meetings, malpractice, stifling debate, lacking transparency and being profligate with public money.”
And perhaps the criticisms are starting to get through. Also in October, though before the TPA report came out, Vera Luiza da Costa e Silva, head of the Secretariat of the FCTC, wrote in a Huffington Post blog that some sessions of the international tobacco control meeting due to be staged in India would be held in public. But da Costa e Silva said that the parties to the Delhi meeting could not sit at the negotiating table with the people who had caused the global disaster of tobacco use because the tobacco industry had lied.
Startling inefficiency
So no redemption for the tobacco sinners, which seems to mean that the future looks bleak because, as is suggested above, the FCTC, working on its own, is stuck inside an echo chamber—and one of startling inefficiency.
In September, Philip Morris International expressed concern that, four years after its adoption, an international protocol aimed at eliminating the illegal trade in tobacco products had not entered into force. The Protocol to Eliminate Illicit Trade in Tobacco Products, developed under the FCTC, was adopted in November 2012. The protocol, PMI pointed out, must be ratified by 40 FCTC signatories to enter into force, but, after almost four years, only 20 signatories, 19 countries and the EU, had ratified it.
“PMI has been a supporter of the anti-illicit trade protocol since its adoption in 2012,” said Alvise Giustiniani, head of PMI’s anti-illicit trade department. “The WHO’s protocol paves the way for solutions that have already been proven effective in the EU—such as tracking and tracing, and due diligence procedures—to be implemented as common practice around the world. We believe the protocol is a significant step forward towards creating a global solution for the problem of the illegal and unregulated tobacco trade. It is concerning that, four years after its adoption, the protocol has not entered into force. As the protocol presents a promising framework to fight the tobacco black market around the world, this is a missed opportunity.”
But, in fact, even the EU has not covered itself in glory recently in respect of the illegal trade in tobacco products. For a number of years it has had in place anti-illegal trade agreements between the four major multinational tobacco manufacturers, the EU Commission and member states aimed at cracking down on the illegal trade in cigarettes. The agreements have required the four companies to secure their supply chains through marketing and tracking-and-tracing systems, and to make two types of payment to the European Commission and the member states of the EU. These payments consisted of annual fixed sums payable from 2004 up to 2030, ranging from $200 million to $1 billion, and “seizure payments” equivalent to 100 percent of the evaded taxes for seizures of genuine (not counterfeit), diverted products above quantities of 50,000 cigarettes in one haul, rising to 500 percent if total annual seizures exceed 150 million to 450 million cigarettes.
However, the commission decided in July not to extend the 12-year agreement with PMI, the oldest agreement and the first to come up for renewal, saying that it would instead focus on provisions of its new Tobacco Products Directive and WHO protocols to continue the battle against the illegal tobacco trade. That, I take it, is the WHO protocol that is still reverberating around the echo chamber.
The commission decision seems to have been irrational. A commission report assessing the agreement with PMI in February concluded that the deal had “effectively met its objective of reducing the prevalence of PMI contraband” but questioned its “continued relevance,” according to a story on www.euobserver.com. During the period of the agreement, the volume of genuine PMI cigarettes seized by EU member states between 2006 and 2014 was said to have declined by about 85 percent. And PMI was said to have used the agreement “on multiple occasions” to give anti-fraud authorities in the EU “information of direct investigative value.”
But the report said, “It can also be argued that PMI’s incentives in this type of assistance to enforcement might as well be independent from the existence of the PMI agreement.” The report said also that while the deal might have worked well in the past, the “market and legislative framework has changed significantly since the entry into force of the agreement” in 2004, with many of the rules in the agreement now part of EU law and some parts of the deal contradicting international obligations. But the clincher, I imagine, was the report’s acknowledgment of criticism that the agreement allowed a cozy relationship between companies and the EU.
What strikes you here is that the agreement clearly worked and that it could probably have been made to continue to work, with agreed changes to cover the new market and legislative framework—but anything rather than work with a tobacco company, to stay in a relationship with a tobacco company that could be conceived of as cozy but in reality was probably a working relationship.
The agreement certainly worked. Margarete Hofmann, policy director of the EU’s anti-fraud office OLAF, sent a briefing paper to political advisers in the European Parliament on March 7 stating that the existing agreements with the four major tobacco companies were the “best instruments” to combat cigarette smuggling at the international level. According to a story by Quentin Aries and James Panichi for www.politico.eu, documents accessed by Politico revealed that Hofmann had warned that a failure to renew the deal with PMI would hurt law enforcement agencies’ short-term anti-smuggling capability.
But the “cozy” relationship was the issue. An Irish member of the European Parliament, Nessa Childers, in an opinion piece in The Parliament Magazine, said that the “infamous” PMI agreement should be confined to the dustbin of public policy history. “We have empowered the industry to self-police cigarette smuggling without independent verification,” she said. “Therefore, it will come as no surprise that the vast majority of seizures are declared as counterfeit. If they were not, then the industry would owe the exchequer duty on the smuggling of their own wares.”
What Childers implied, however, was at odds with the commission’s view. The commission had previously said in answer to a parliamentary question that there had been no evidence of incorrect reporting by tobacco manufacturers in relation to the provenance of cigarettes seized within the EU. “It is important to note that there has been no evidence of incorrect reporting by the manufacturers,” the commission said as part of its answer. “One particular member state has verified 123 assessments made by manufacturers and not found any error.”
In the past, we in the tobacco industry did and said a lot of things that were indefensible, and I still think—and sometimes point out—that there are issues that we still get wrong and don’t act on quickly enough to put right. But in respect of the illegal trade, it is about time that the WHO and the EU came down from their self-righteous high horses and started to recognize that it is the tobacco industry that can be the most effective partner in combatting the illegal trade in tobacco.
Will organic tobacco be able to break out of its niche?
By George Gay
In writing about organic tobacco two years ago, I tried to imagine why a consumer might buy cigarettes made of such tobacco, given that they would presumably be more expensive than would the general run of cigarettes. I speculated, without much conviction, that there might be a taste factor, or at least a perceived taste factor. A more likely reason, I thought, was that smokers who were generally well-informed, altruistic and better-off financially might make the decision to switch to organic cigarettes on the basis that encouraging the production of organic crops rather than conventionally grown crops was good for the environment.
And then there was the health argument. Some people, we are told, either consciously or unconsciously, equate organic with health even in regard to tobacco. Most smokers, I think, would probably assume that the danger they face comes mainly from inhaling smoke produced by burning tobacco, whether that tobacco is organic or not, but, two years ago, I suggested that even some better-informed smokers might believe that, since organic cigarettes have fewer additives than do traditional cigarettes, and, since, as anti-tobacco activists tell us, the additives support the addictive nature of cigarettes, organic cigarettes would allow you to break your habit sooner and to reap the health rewards that earlier quitting promises to deliver.
I have to say that I wasn’t particularly convinced by this argument, but, taking a look at the internet the other day, I saw that this line of thought is more common than I had imagined. You can read testimonials by people who say that they have used organic tobacco to wean themselves off smoking. And perhaps they have.
In the middle of September, a story by Sara Chodosh on the Popular Science website, www.popsci.com, claimed that “[n]icotine needs you just like you need it.” “That sweet release of dopamine only happens if you really believe in it,” she wrote. “A new study in Frontiers in Psychiatry found that only smokers who thought that their cigarettes contained nicotine got the satisfaction of smoking. Anyone who was told they weren’t getting nicotine—even if it was a normal cigarette—was left unsatisfied.”
Is it, I wonder, such a big jump to say that people who smoke organic cigarettes believing them to be less addictive than traditional cigarettes are able to quit more easily than if they had stuck to traditional cigarettes?
If we accept for a minute that this is true, then we come up against the question of whether tobacco manufacturers should convert as many of their products as quickly as they can to organic tobacco. And at this point there are a couple of things to consider. One is whether quitting is easier with organic products because the way in which the nicotine is delivered is less addictive; the other is whether quitting is easier only because smokers—or that would surely have to be, some smokers—believe that that is so. In the first case, it would seem that the ethical approach for manufacturers, at least in so far as their customers are concerned, would be to go full out for conversion.
Don’t says so
But things become more difficult in the second instance because of the fact that, in some jurisdictions at least, it would not be possible to tell smokers that the tobacco they were smoking was organic. And in this case, providing smokers with organic products would be as pointless as winking at a girl in the dark.
Is this important? I think so. I have heard of one instance where a manufacturer gave up on an organic tobacco production project because it was not allowed—along with other manufacturers, of course—to mention in one of its major markets that the tobacco included in its cigarettes was organic.
Is this perhaps a case of unintended consequences? I often look at outcomes that are declared as unintended consequences and wonder whether there wasn’t more intention about them than meets the eye. But in this case, it might be that what has happened wasn’t foreseen. In not allowing a tobacco manufacturer to get across the organic tobacco messages, the rule makers might have ensured inadvertently that some smokers will take longer to quit their habit than they otherwise would have done. And at the very least they will have ensured that some tobacco will be grown conventionally rather than organically, with the environmental consequences that implies.
Incentives will be vital in determining whether organic tobacco will thrive or remain a marginal product.
The people I consulted on this issue had widely differing views. In one camp were those who, like Rainer Busch, shareholder and general director of NewCo, thought that organic tobacco had little future because, on an increasing number of markets, manufacturers would not be able to inform consumers about the tobacco’s provenance, starting in those more affluent markets where smokers were more likely to buy into the organic message. Others, such as John Wallace, principal of Leaf Only, thought that organic tobacco had a good future, partly because, come what may, the major manufacturers would want to make mention in their social responsibility reports of their conversion to such growing methods.
As usual, the reality probably lies somewhere between these two poles. In markets where manufacturers have been able to establish a brand as organic and where they still have an opportunity to do so, the momentum of those brands will probably carry them forward for a number of years, even if sometime in the future it is no longer possible to declare their organic credentials on or inside packs. American Spirit, owned by Santa Fe Natural Tobacco Company in the U.S. and by Japan Tobacco (JT) elsewhere, is an obvious example of such a brand.
But would manufacturers feel they ought to grow organic tobacco just to bolster their social responsibility reports, unless the cost of production fell significantly? Possibly not, but, on the other hand, since the move is in any case at least toward the use of pesticide-residue free (PRF) tobacco, perhaps this momentum will eventually propel them toward organic.
Momentum
In any case, there are sure signs that the production of organic tobacco is increasing, albeit steadily. Frederick de Cramer, business coordinator at Sunel, said that the production of organic Izmir, the only organic oriental tobacco grown in Turkey, would this year reach about 2,500 tons packed weight, of which Sunel would account for about 1,800 tons. Sunel produced 30–40 tons in 2012 and about 300 tons in 2013. In 2014 and 2015, with two other dealers involved in organic oriental in Turkey, volumes reached 1,500 tons and 2,000 tons respectively. This year, only two dealers were involved in organic oriental production in Turkey, but de Cramer is confident that production will lift above 3,000 tons within three years.
He probably has every reason to be confident. Having paid $5 billion for the non-U.S. rights to American Spirit, JT is likely to be aggressive in its marketing of this brand, which, on the U.S. market, under Santa Fe, seems to grow, steadily, year on year.
And if production of organic oriental is increasing, it seems logical that production of flue-cured and burley must be increasing too. Certainly, Wallace said demand for organic tobacco had been increasing year-on-year in line with the gravitation of consumers toward natural products of all types. And he said he believed that demand would continue to grow. Certainly, some U.S. farmers were being asked to grow more organic tobacco each year.
Wallace makes a good point. In North Carolina, for instance, organic farming of all types is increasing and organic tobacco farming is at the top of the league. According to the U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service’s (NASS) 2015 Certified Organic Production Report, which took in all known USDA-certified organic farms across North Carolina, last year the state’s 203 USDA certified-organic farms sold $82.4 million in organically produced commodities, including $56.6 million in crops sales and $25.8 million in sales of livestock, poultry and their products. “The top three commodities in certified organic sales were tobacco at $29.3 million, chicken eggs at $21.2 million, followed by sweet potatoes bringing in $10 million,” said Dee Webb, a North Carolina state statistician. “Organic farming continues to grow in North Carolina. We now rank 16th in the nation in total value of certified organic agricultural products sold from 203 certified organic farms.”
The 203 certified organic farms comprised 28,727 acres of land. Eighty-three percent, or 23,719 acres, is cropland, and 5,008 acres are in pasture or rangeland. And the future looks bright. An additional 3,074 acres are transitioning to organic production on certified farms. And of the 203 operators, 33 percent have been farming fewer than 10 years, and 44 percent have grown or raised certified organic products for fewer than five years. Eighty-six farms plan to increase production during the next five years and 75 farms expect to maintain production.
In an organic tobacco program, sunflowers serve as a trap crop for beneficial insects.
Keeping up
But even so, the question arises as to whether the supply of organic tobacco can keep pace with demand. De Cramer certainly thinks so, at least in respect of organic oriental, partly because of the approximate 20 percent higher income that growers can expect to earn by growing organically. This increased income has the advantage, too, of making it easier to convert the best farmers to this type of production. And in the U.S., according to Rick Smith, of Independent Leaf Tobacco Company, growers can expect to earn for organic tobacco about twice the per-pound price that they could for nonorganic tobacco.
The difference between the price premiums seems easily explained. While growers in the U.S. tend to be independent, so that some of the additional costs of growing organic tobacco would be borne by them, in Turkey the additional costs involved in organic tobacco production tend to be borne by the dealer overseeing the production. De Cramer explained that half of the farmers that grow tobacco in Turkey do not own their own land, so to ensure they keep their land on a long-term basis and thereby retain organic certification for it, a dealer such as Sunel has to support farmers in respect of land rent. The pesticides used in organic production are far more expensive than are traditional ones, he said, and the difference is absorbed by the company. Also, an independent certification company has to be employed to assess and check each plot of land and each farmer’s practices, in addition to the checks made by Sunel; and the extra costs involved in this certification process, those of residue sampling checks, and those of transportation and storage checks, are again borne by Sunel.
So farmers can be persuaded, but is there enough suitable land? Again the answer seems to be yes. Although it takes three years to certify land for organic production, the currently-modest increase in demand for organic tobacco means that this is not a huge problem. Anyway, as Smith pointed out, most large operations in the U.S. have land certified for other crops, and that it is those operations that will have to grow more organic tobacco, both flue-cured and burley. And they would do so if the price were right. In Turkey, of course, the availability of land is more fraught and forward planning is needed.
So the farmers can be persuaded and the land can be found, but who will buy this organic tobacco? The major manufacturers or their subsidiaries are the ones who are mostly using it or who are showing an interest, but most companies will have an eye on the situation. While organic tobacco at present makes up a tiny proportion of overall tobacco production, it garners a lot of attention because it is novel and initially difficult to produce, and because it sells for prices above those of nonorganic tobacco. No doubt many manufacturers are looking to see where organic tobacco might fit into their portfolios, initially in respect of cigarettes, though surely the argument for using it in smokeless tobacco must be even stronger.
