Tag: Italy2023

Poised for Growth

Antonella Giannini (left) and Alberto Monzon
(Photos: Montrade)
Montrade is expanding its portfolio and manufacturing facilities.
By Stefanie Rossel
There are clear signs that Montrade is continuing its remarkable growth: In the corner of the tobacco equipment manufacturer’s bright conference room, there are samples of tiles, wall coverings and other construction materials. The Bologna-based company is about to build new premises. About 200 meters from its current 4,000-square-meter site, it will construct an additional 7,000-square-meter shop floor, which is supposed to be finalized by the beginning of next year.
“It will become our main company building with offices,” explains Alberto Monzoni, Montrade’s managing director. Together with his wife, Antonella Giannini, who serves as the company’s sales director, he founded Montrade in 2004. “The assembly workshop in the new building will have a bigger dimension because we’re growing also in terms of our portfolio as we are adding new machine models, and it will be fully dedicated to the assembly of our machines,” says Monzoni.
The current site, built in 2010 when the company had outgrown its original rented offices, will in the future accommodate a warehouse and tooling capacity. It already hosts the company’s spare parts manufacturing center, which is equipped with a CNC machine and will become a preferred sub-supplier for Montrade machinery after the expansion. The building is also home to a startup company, with a team dedicated to the development of special sensors, mainly for the inline quality control of filters that Montrade installs in its machines or sells as part of retrofit kits for its equipment. “The team will get more space with the option to increase capability. Inline control is important as high speed requires high quality.”
Monzoni says it’s essential that Montrade, which exclusively supplies the tobacco industry, enlarges its footprint. “Multinational companies have become an essential part of our customer base, and they require a certain capacity.”
With 120 employees, the company presently manufactures about 30 lines per year. Montrade offers a wide range of equipment ranging from filter-making to packaging for combustible cigarettes and heated-tobacco products (HTPs). “It’s vital for us to meet the new market requirement of flexibility,” says Giannini. “Due to the increasing amount of products, the complexity of the tobacco industry is intensifying. Montrade covers everything from roll-your-own [RYO]/make-your-own [MYO] to packing lines, always with a view to sustainability.”
Environmentally friendly filter solutions, Giannini and Monzoni believe, will be the next big thing in the industry. Discarded cigarette filters, 98 percent of which presently consist of cellulose acetate (CA), a bio-based polymer that takes years to disintegrate, are the world’s most littered items. They pollute the environment with microplastics. In July 2021, the European Union banned plastic items such as plates, cutlery, straws or cotton bud sticks but exempted cigarette filters. Instead, tobacco manufacturers will be required to cover the costs of consumer awareness-raising campaigns and extended producer responsibility schemes starting in December. There are rumors, though, that the EU might ban CA filters in the future. Giannini considers it more likely that the EU will raise taxes on polluting items instead. The tobacco industry is taking the issue seriously by developing paper filters, a trend that Montrade has seen reflected in the demand for corresponding machinery.
Efficient Paper Crimping
One of Montrade’s bestsellers is a new version of a paper crimper that was originally developed in 2010. Paper is crimped with a pair of rollers that penetrate the paper band without cutting the fibers. The goal of the process is to get the maximum volume so that when the rod is made, the filter doesn’t have any holes; it should look as much as possible like a filter made from CA.
Driven by customer requests, Montrade recently redesigned the crimping head of its machine to enable the manufacture of paper filters with similar properties to CA filters. “With our new technology, we have achieved excellent results,” Monzoni says. “We save 15 [percent] to 20 percent of paper compared to traditional crimpers, which means that we create a very homogeneous and stable filter with no variation in pressure drop and superb quality. Not only does this reduce cost; there is also an advantage for taste. The retention of paper is much higher than that of CA, which means that tar and nicotine will be reduced. If you use less paper, you will get less of the typical taste of a paper filter. For better machinability in the downstream process, we have increased the hardness.”
Importantly, Montrade’s machine works at the same speed as filter makers for acetate tow, splicing automatically and never reducing the speed of production, according to Giannini.
As an alternative to the paper crimper, the company offers the standalone crimping module as a retrofit package. Within 15 minutes, it turns a conventional CA filter maker into a paper filter maker. “If CA filters get banned, it doesn’t make sense economically to waste so many machines and replace them with new ones as the rod forming basically does the same job no matter whether there’s CA tow or crimped paper at the backend,” says Giannini. “The crimping module breathes new life into the existing rod forming, just giving it a new material feeding. We are getting a lot of positive response from our customers; you can see that this is the direction they will go. Many brands are making trials and have set up smoking panels with this new material.”
While demand for paper filter makers is increasing, Monzoni emphasizes that the trend is still at an early stage. “Paper filters are currently used for brand variants that appeal to consumers with a more ecological orientation,” he says. “The big brands are not ready yet. One [company] is prepared to start with one brand; others are still studying the subject.”
The situation is different in the smaller RYO/MYO category, which has become a forerunner in paper filter tips. “Sustainable filters are common, and the consumer likes them,” says Giannini. “In cigarettes, we’re still a bit behind. But the few brands with sustainable filters presently available are growing.”
Sustainable Solutions
Montrade’s portfolio reflects the tobacco industry’s current transformation that not only involves reduced-risk products but also non-nicotine offerings. For the rapidly growing cannabis market, Montrade is developing several products, including a cone-making machine.
The company is also exploring the potential of paper beyond common solid filter plug production. In partnership with a big tobacco firm, the machinery manufacturer has created a new packaging line capable of producing soft packs without plastic film. The humidity in the pack is preserved through an innovative seaming technology that reduced both cost and environmental impact.
Furthermore, the company uses the crimped paper to manufacture a hollow tube that is equivalent to hollow acetate filters. “Turning crimped paper into a hollow tube filter has long been the dream of filter designers,” notes Giannini. “Our customer wanted to change from CA filters to paper to have a full sustainable portfolio of paper filters. We have made it possible by offering paper tubes and hard paper filters. Our hollow paper tubes have a wall thickness of 0.6 mm to 1.5 mm, and they are very similar to CA filter tubes.” Montrade also has a machine that allows it to produce charcoal paper filters, which are also known as Dalmatians.
Used in combustible cigarettes, hollow filters make elegant mouthpieces. In HTPs, they are highly functional, serving as either a flow restrictor or an expansion chamber and playing a fundamental role in aerosol cooling and accelerating. “The performance of HTPs is driven by tubes,” Giannini says.
Drawing from its experience with crimped paper filter rod manufacture, Montrade has developed a rod-forming machine for the tobacco element in HTP consumables. The cast leaf that is used in the sticks presents a challenge in processing, says Monzoni. “It’s fragile and tends to be sticky, so it needs to be treated in a special way,” he says. The underlying concept of our rod maker, however, works for all bobbins or webs—you just need to adapt the technology to treat different materials.”
More design possibilities for HTPs arise with Montrade’s coaxial flexible platform, which represents a new way of making filters. “Instead of a single process, our machine has two garnitures and is capable of making one filter or tube inside of the other,” says Giannini. “It’s highly performing and super flexible, allowing for a continuous process or a combination of individual filter segments inside and a wrapping with a continuous material, such as paper or CA, outside, in one go.”
Customers’ biggest investments these days are in HTPs, according to Giannini. “There is still a lot to be discovered on the production side of HTPs. Coaxial technology is one opportunity to open the scenario to different production designs. HTPs are the future. We strongly believe that they will make up the majority of nicotine consumption in the future.”
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

April 1, 2023
Designing the Future
An exclusive tour of PMI’s state-of-the-art heated-tobacco units plant in Bologna
By Stefanie Rossel

Photos: PMI
A traditional cigarette factory gone sci-fi—that’s the impression Philip Morris International’s manufacturing site in Crespellano, near Bologna, is likely to leave on new visitors. Philip Morris Manufacturing and Technology Bologna (PMMTB), which is the company’s first factory dedicated exclusively to mass producing reduced-risk products (RRPs), provides a glimpse into the future of nicotine-delivery systems manufacturing. Presently, the facility focuses on consumables for the company’s IQOS heated-tobacco product (HTP).
From the outside, the elongated structure with its glass facade and fountains framing the entrance, which was built in only 33 months and began production in 2016, could double as a modern congress facility. Measuring 110,000 square meters, the building hosts production, logistics, quality control and administration facilities, however. It has also been designed as an agreeable place to work. In addition to offices and a conference center, the building features a kitchen with a free-flow restaurant, modern changing rooms and a gym.
To visitors, the site may seem more like a pharmaceutical facility than a traditional factory. To prevent contamination, no one is allowed to enter the shop floor without protective gear. A visitor center showcases the product ingredients and details the specifications of various IQOS consumables. Heets, the consumables of IQOS Original, comprise a tobacco plug, a hollow acetate tube, a polymer-film filter and a cellulose-acetate mouthpiece filter. In addition, there are outer papers and mouth-end papers.
The tobacco part, visible at the end of each Heets, is made from fine tobacco powder mixed with fibers, such as cotton, glycerin and guar gum, and then cast into a sheet and rolled onto bobbins. The tobacco rods are manufactured by crimping the tobacco cast leaf in a patented process, which enables the heating blade to be inserted into the consumables.
Terea Sticks, the consumables for IQOS Iluma, use Smartcore Induction System technology. Iluma, which does not need to be cleaned, is an induction heated device, hence the Terea sticks are equipped with a metal heating element, a thin solid metal thread that is coated with stainless steel and heats the tobacco from within. While with 4.5 cm it is as long as a Heets stick, the Terea consumable contains a fifth component: a front plug at the end of the stick behind the tobacco element to prevent contamination of the device. According to a PMMTB employee, the most challenging part in the production process is to put the metal stick into the center of the tobacco rod and allow eleven holes of filtration in the right place.
Share the Learnings
The highly automated shop floor comprises a series of halls that are arranged on both sides of a long corridor aptly called “the spine.” Among other things, they house the primary with the cast sheet production and the secondary with the filter-making division. The latter is divided into so-called cells, production lines that each comprise a crimper for turning the leaf sheets into the sticks’ tobacco elements, a filter combiner that assembles the consumables’ components and a packer. A web of buffer systems below the hall ceiling supplies individual cells with filter segments.
Each part of the secondary has been designed to respond quickly to changing consumer needs and allow for future expansion. For instance, several of the cells that used to be dedicated to making Heets are currently being converted to manufacture Terea sticks, which Crespellano started producing in 2021. The cells’ new configuration reduces the space required for each production line from 1,200 square meters to 900 square meters. As it gained experience, PMMTB has been able to carry out such conversions quicker. While it took the company more than a year to refurbish the first line, it completed the fourth in four months.
With more than 1,700 employees, the Crespellano site exports its products to about 40 countries where IQOS is presently marketed. In terms of value, the factory exports exceed Italy’s exports of olive oil and parmigiano cheese. To date, PMI has invested more than €1 billion ($1.06 billion) in PMMTB, which has become the company’s center of excellence for staff training, prototyping and large-scale production of smoke-free tobacco products.
The plant is the largest factory in Italy to be built from scratch in 20 years and has made PMI one of the largest investors in the country. It is also the biggest facility dedicated to smoke-free products within PMI. PMMTB establishes the manufacturing processes for PMI’s HTP products worldwide. The learnings gathered in Bologna are then exported to PMI’s 38 manufacturing affiliates in 28 countries. Over the past five years, PMI has transformed several of its combustible cigarette factories into heat stick production facilities, including in Aspropyrgos in Greece, where it invested €300 million, Otopeni (Romania, €490 million) and Yangsan (South Korea, €420 million). Today, the company has seven smoke-free product manufacturing plants.
In addition to the consumables manufacturing facility, the Crespellano site also houses PMI’s new Center for Industrial Excellence, which was inaugurated in the autumn of 2021 and is the largest within the company for industrialization, process innovation, engineering and sustainability. The center is part of a plan to invest approximately €600 million in smoke-free products in Italy over three years. The project is anticipated to create 8,000 direct and indirect jobs.
The most recent addition to PMMTB has been the Institute for Manufacturing Competences (IMC), which opened in 2022. The company’s aims are to create a skills development center for continuous training and technology transfer, with a focus on manufacturing digital, sustainability, talent development and managerial competences. PMI wants the IMC to benefit not only employees but also suppliers and other stakeholders. The academy, which also finances scholarships, carries out applied research projects with the University of Bologna, the Polytech of Bari and various competence centers.
In designing PMMTB, PMI paid considerable attention to its ecological footprint. The facility purchases 100 percent certified renewable electricity and features a photovoltaic system, avoiding emissions of about 2,000 tons of carbon dioxide per year. Between 2017 and 2020, the site reduced its emissions by 17.1 percent. Those of its supply chain declined by 56 percent from 2012 to 2020. Built in accordance with sustainability standards, the IMC is completely self-sufficient in energy.

Longtime Player in Italy
Italy is an important market for PMI. Statista expects tobacco products revenue to reach $24.73 billion in 2023. The market is expected to expand at a compound annual growth rate of 0.57 percent between 2023 and 2027. While cigarettes still account for the lion’s share of the domestic market, sales of novel products are growing quickly. In 2021, Italy was the world’s third-largest market for HTPs, with 9 billion sticks sold, behind Japan (45 billion) and Russia (21.7 billion), according to Euromonitor. By February 2023, about 2 million Italian smokers had completely switched to IQOS and stopped smoking, according to PMI.
PMI has been in Italy for more than half a century. In 1963, the company set up Intertaba in Zola Predosa—a 10 minutes’ drive from Crespellano—to supply filters under license of the Italian tobacco monopoly ETI. In 2020, Intertaba became a reference point for the development of new technologies. In 2013, PMI finalized a high-tech filter production facility at the site, which then became the company’s Center of Excellence in Manufacturing and Technology for innovative filters and smoke-free products. With 20 standalone prototyping lines, Intertaba works as a vertical startup by developing new products from concept proof through technology verification. In 2020, the U.S. Food and Drug Administration authorized the marketing of the IQOS tobacco-heating system as a modified-risk tobacco product.
Opened in Rome in 2001, Philip Morris Italia is responsible for the sale and marketing of PMI brands in Italy. In 2020 and 2022, PMI established digital information service centers in Taranto and Marcianise, respectively.
Pipeline of Innovations
To date, PMI has invested more than $10 billion in its transition to smoke-free products. The company employs more than 980 people in R&D and has evolved into the EU’s 45th-largest patent filer. At the 2023 CAGNY Conference, Chief Financial Officer Emmanuel Babeau said PMI was on track to become a majority smoke-free company by 2025. Last year’s acquisition of Swedish Match provided a substantial boost to reaching this target. The smoke-free net revenues of the two companies combined amounted to about $12 billion in 2022, accounting for more than a third of total net revenues.
PMI’s smoke-free business has been profitable for several years. The Swedish Match deal provided the company not only with a strong position in Scandinavia but has also given PMI a rapidly growing modern oral nicotine brand, Zyn. Swedish Match’s nicotine pouch led the U.S. retail category with 75.7 percent in the fourth quarter of 2022.
IQOS continues to grow too. PMI’s shipments of heated-tobacco units grew 14.9 percent in 2022. In the fourth quarter of 2022, 24.9 million smokers worldwide used IQOS. Seventy percent of them had completely converted to the new product. In the fourth quarter of 2022, HTPs accounted for 8.8 percent of the EU market, up from 6.4 percent during the same period in 2021. Ninety percent of HTP users in Europe use IQOS. In Japan, growth of IQOS consumable sales has been driven by Iluma. In the fourth quarter of 2022, PMI’s HTPs had a market share of 24.5 percent.
The company has set ambitious targets for its smoke-free business. By 2025, PMI wants to have a user base of more than 40 million smokers who have switched to one of its smoke-free products and stopped smoking.
The company aims to have its smoke-free products available in 100 markets. More than $1 billion in net revenues is supposed to be generated by the company’s “beyond nicotine” business, which focuses on wellness and healthcare products.
To achieve these goals, PMI is expanding its RRP portfolio. On Jan. 30, 2022, the company turned its 2020 cooperation deal with KT&G into a 15-year contract. The agreement gives PMI exclusive access to KT&G’s smoke-free brands and innovation pipeline. In return, KT&G benefits from PMI’s global commercial infrastructure and experience in commercializing smoke-free products. As a result of the collaboration, KT&G’s Lil HTP, which is considered complementary to PMI’s smoke-free products, is present in 31 countries in Central America, Europe and Central Asia.
PMI aims to provide smokers in low-income and middle-income countries (LMICs) with less hazardous alternatives. About 80 percent of the world’s smokers live in LMICs and often have limited access to affordable RRPs. In November 2022, PMI launched a new HTP device—Bonds by IQOS. Based on IQOS Original’s blade heating technology, the product is marketed as “simple, convenient and affordable without compromising on a reduced-risk profile,” making it a relevant proposition for consumers in LMICs, according to Babeau. The product has shown promise during pilot launches in the Philippines. Further commercialization is anticipated during this year.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

April 1, 2023
An Italian Flavor

Photos: TTI
From its new subsidiary in Umbria, TTI can supply its global customers more efficiently and cost-effectively.
By Stefanie Rossel
The tree-covered rolling hills of central Italy’s Umbria region provide the backdrop for the European subsidiary of U.S.-headquartered flavor house TTI. Here, in the plain at the foot of the hill of Assisi, a charming medieval town halfway between Florence and Rome, the company has set up a state-of-the-art production facility and warehouse.
Establishing the new flavor factory has been a long journey, relates Jeremy Davis, TTI’s sales marketing manager, who leads the project and is the sister of TTI CEO George Cassels-Smith. The family business specializes in flavors with aroma chemicals, many of which have complex profiles to generate unique taste experiences. It develops high-quality flavors for shisha, cigars, snus, cigarettes, modern oral pouches, e-liquids and cannabinoids. Casings are also part of its portfolio.
“We tried to put a warehouse in Dubai many years ago, but due to some high-rise fires in the city, the government wouldn’t allow chemical storage in free trade zones any longer. TTI then thought of Turkiye, but at that time, Trump and Erdogan were on difficult terms,” says Davis, referring to the former U.S. president and the current Turkish one. “Just as we were about to sign a contract for an existing factory, Erdogan wouldn’t allow Americans into Turkiye.”
Europe turned out to be a good option. “We opted for Italy because the tobacco industry has always had a strong presence here, and [we opted] for Assisi because there are other tobacco entities right here,” Davis said. Universal’s affiliate Deltafina subsidiary, for instance, is located in neighboring Bastia Umbra. “Logically, maybe Milan would have made more sense because it’s a center of chemical manufacturing, but George wanted to be close to the tobacco industry.”
What was supposed to start with a warehouse quickly evolved into a full manufacturing facility, according to Davis. Built during the Covid pandemic and opened about a year ago, the 6,000 square-meter facility currently manufactures about 100 flavors for tobacco products using 700 different raw materials. New flavors and raw materials are being added weekly. The facility that produces such a multitude of flavors is surprisingly sparse: A corner of the spacious shop floor hosts two huge, shiny 18,000-liter casing tanks. They are complemented by two 200-liter tanks to mix smaller volumes.
On the wall opposite that corner is the warehousing space. Quality control is rigorous: All incoming raw materials must pass an internal check before being used to manufacture flavors. The finished flavors undergo a similarly strict quality assessment procedure before delivery to the customer. Traceability of both raw material and finished product is a basic procedure for TTI. Flavors are validated at both the Italian facility and TTI’s U.S. facility.

Faster and Less Costly Delivery
The Italian factory features a “plug and play” concept throughout the production department and the laboratory. It also includes space to construct a clean room for the manufacture of e-liquids, which is scheduled to start by 2024. TTI intends for the Italian factory to eventually produce exactly the same portfolio as its U.S. mother plant, where the company creates novel aromas in a newly developed R&D center.
The goal of replicating its U.S. process abroad is to lower transport cost and facilitate the logistics process. Many of TTI’s clients are based in Europe and the Middle East whereas many suppliers of raw materials are in Europe. This means that producing in the U.S. requires a lot of shipping across the Atlantic.
“When we started to produce flavors for these markets in the U.S., transport was already expensive and took a long time,” Davis says. “Now with the changed situation due to the Covid pandemic and Russia’s invasion of Ukraine, it is much more expensive and takes even longer. It’s very burdensome to our customers to be paying all of that and waiting the times they have to today. We just want to make it easier for them and more cost-effective.” TTI’s production for Europe and the Middle East, which is currently carried out at both the U.S. and the European sites, is planned to be eventually shifted largely to Assisi.
TTI caters to many players but, like other flavor manufacturers, doesn’t always know in which end products their flavors are used. When the company is dealing with customers who are looking for a specific flavor profile, TTI conducts panel testing to find that profile. “Customers pretty much tell you what they want,” says David. “Different customers have different requirements.”
The appropriate flavor profile also depends on the region and cultures in which the end product will be consumed. “Shisha in the Middle East is more traditional flavors, but they’re growing into what we call fusion flavors,” says Davis. “In Europe, fruits are big. Minty flavors are sought after but restricted in an increasing number of markets.”
Davis observes increasing demand for TTI products in Europe from the growing modern oral nicotine category. “Geographically, we are growing a lot in the Middle East and Africa. We focus on Asia; we have a successful Chinese sales office, but we’re presently putting more work into south [Asia] and Southeast Asia.”
A Company with Tradition
The Cassels-Smith family has a long history in the tobacco industry. It started more than 150 years ago with exports of U.S. tobacco leaf under the name Gieski and Neiman. In 1975, Davis’ father left the company to set up the flavor house TTI. Unlike many competitors who make aromas for other industries, TTI has always dedicated its service exclusively to the tobacco industry. Recently, the company expanded with the creation of eLiquiTech, which specializes in e-liquid. In late 2020, eLiquiTech introduced SyNic, a high-purity (typically 99.9 percent) synthetic nicotine (S-nicotine) that is neither obtained from tobacco nor derived from a synthetic racemic mixture.
At the time when the Assisi site was built, TTI ventured into cannabinoids by establishing Emerald Green Technology. This subsidiary creates fresh terpene blends, tinctures and edibles as well as casings and distinctive flavors for hemp, hemp shisha, cannabis cigarettes, oral CBD and THC pouches. The company plans to transfer its expertise to TTI Assisi to cater to the cannabis market that is expected to develop in Europe. Germany’s government, for instance, recently announced that it would legalize cannabis during the current legislative period.
“Typically, we find trends start in the U.S., move to Europe, and then they go beyond Europe,” says Davis. “We are seeing growth of interest in cannabis here, so I think the EU will be going down the same road as the U.S.”
Davis is excited about the outlook for the tobacco industry. “It has its challenges, but we are working hard to find other avenues within the industry, such as working with synthetic nicotine to develop safer products, e-liquids, CBD and hemp. There are opportunities out there where there’s growth in the industry—it is just evolving.”
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

April 1, 2023
Shaping Tomorrow
The future envisioned by BAT will partially be created at the company’s new innovation hub in Trieste.
By Stefanie Rossel

Photo: BAT
As its corporate slogan suggests, BAT is working to create a future in which its products offer consumers pleasure at a lower risk than that presented by the cigarettes from its legacy business. Part of that “Better Tomorrow” will be created in the northernmost part of the high Adriatic in Italy, where the company is currently building a new innovation hub.
Located in Bagnoli della Rosandra, part of Trieste’s free port terminal, the innovation hub spans 20,000 square meters and involves an investment of €500 million ($608.63 million) over five years. For BAT, the Trieste manufacturing plant is the first hub within the group that will focus on the production of reduced-risk products,*† including Velo nicotine pouches, Vuse vapor cigarettes and Neo sticks, the consumables for the company’s Glo heated-tobacco product (HTP).
In addition to hosting a new manufacturing site, the Trieste factory will house a digital boutique, an innovation lab and a center of excellence for digital transformation and digital marketing. These aim to develop innovative projects relating to marketing, focusing on the personalization of the client experience—the increasingly direct relationship with the consumer, with the task of providing new services and marketing techniques, using advanced software and creating partnerships with international players and innovative startups.
The project emphasizes BAT’s commitment to both its transformation strategy and Italy. “As consumer preferences and technology evolve rapidly, we rely heavily on our growing global network of advanced manufacturing hubs, innovation super centers and world-class R&D facilities,” said BAT Chief Growth Officer Kingsley Wheaton when announcing the establishment of the hub. By 2025, the company aims to generate £5 billion ($5.92 billion) in annual revenue from its new category products. By 2030, it anticipates having 50 million consumers using its noncombustible products. In February, the number of consumers using BAT’s noncombustible products stood at 22.5 million.
Swift Realization
Andrea di Paolo
To find the perfect location for its hub, BAT commissioned a consultancy to study the options, taking into account considerations such as innovation, technology, research and logistics. Trieste emerged as an attractive choice, according to BAT Trieste Vice President Andrea Di Paolo.
“It is the most important commercial port in Italy, with a trade volume of 62 million tons, and well connected with Europe and Italy,” he says. “Trieste also boasts the highest number of researchers of any European city; there are a lot of startup incubators in the area. Besides, there are the University of Trieste and other education and research centers of excellence. It’s the right place where a multinational company can set up an innovation hub because it enables us to work with local universities and research institutions.”
BAT’s project is progressing at remarkable speed. After announcing the investment in September 2021, construction started in January 2022. In June 2022, the company celebrated the halfway mark, with construction 50 percent completed, and in December 2022, the facility started producing Velo modern oral products. The plant is expected to be fully operational in May 2023, and the official opening will take place one month later. “It’s a super-fast project,” says Di Paolo. “In less than one year, we managed to build the factory and start production.”
The Trieste innovation hub will create 600 jobs directly and 2,100 jobs indirectly over the next five years, and the factory will host 12 production lines. Production will be exported to European countries and elsewhere. Up to four lines will produce Velo, helping BAT cater to a rapidly growing market. Nicotine pouches accounted for an estimated $2.38 billion, or 0.3 percent of the global retail market, in 2021. Toward the end of 2022, that value had increased to $5.86 billion, according to Market Reports World. The nicotine pouch market is forecast to expand at a compound annual growth rate of 31 percent until 2028. In 2021, Velo volumes grew by 328 percent compared to the previous year, according to Euromonitor International. Global volume sales amounted to 1.32 billion units in 2021.
Digital Offensive
In the second phase of its hub development, scheduled to be completed by 2025, BAT plans to install six manufacturing lines for new category products, such as HTPs and e-cigarettes. “However, the plan can change rapidly in the next few months depending on demand of products and the capacity we have in Europe,” Di Paolo says. The future aim of BAT is to expand the site beyond this.
In addition to the innovation hub, the Trieste factory will also house BAT’s new digital boutique, an innovation center of excellence for digital transformation and digital marketing. It is the company’s third digital boutique in the world, having already established such sites in the United States (Silicon Valley) and China.
The center will provide digital services—some of them based on artificial intelligence—for BAT’s European markets. “Consumers are increasingly connected and live in an ever-evolving digital ecosystem,” explains Di Paolo. “The objective of the digital boutique is to anticipate new consumer trends and turn them into memorable moments for our target audience in the new categories.”

Carbon Neutral
In line with BAT’s ambition to make its operations carbon neutral by 2030 and achieve “net-zero” greenhouse gas emissions across its value chain by 2050, sustainability has been a major factor in the design of the innovation hub. According to Di Paolo, the site will be carbon neutral from day one, using renewable energy sources and achieving high levels of energy efficiency through intelligent heat recovery, among other technologies.
“The facility has been equipped with high-efficiency photovoltaic solar panels that produce over 1,200 megawatt hours (MWh) of electricity per year,” says Di Paolo. “In addition, a wind tree has been installed to make use of the fact that Trieste is a windy place. It generates the electricity for electric vehicle charging outside the factory.”
Furthermore, an autonomous biomass-fueled power plant will produce over 1,900 MWh of heat. It will be supplemented by a 100 percent renewable electricity supply. The factory also features a strict water management system, which reduces water consumption by dry cooling and harvests rainwater. To minimize the environmental impact of logistics associated with product distribution, BAT is cooperating with the Trieste port authority to determine the optimal routes for shipping.
“Even at this early stage, the Trieste Innovation Hub is an example to follow for BAT’s other factories,” says Di Paolo.
*Based on the weight of evidence and assuming a complete switch from cigarette smoking. BAT states that these products are not risk-free and are addictive.
† BAT notes that the products it sells in the U.S., including Vuse, Velo, Grizzly, Kodiak and Camel Snus, are subject to regulation by the Food and Drug Administration and that the company will make no reduced-risk claims relating to these products without agency clearance.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

April 1, 2023