A Smoke-Free Future in the Making?

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Things are stirring at the multinationals as they’re gearing up to lead consumers into an era where smoke-free next-generation products will (perhaps) replace combustibles for good. But is it a realistic goal? Tobacco Asia picks the minds of some of the main players.

By Thomas Schmid

“Our future is being built on smoke-free alternatives that we believe are a much better choice than smoking cigarettes, and it is our vision that these products will one day replace combustible cigarettes,” says a statement from Philip Morris International website. “Smokers around the world are looking for less harmful, yet satisfying, alternatives to smoking. We aim to give them that choice and are working on a range of smoke-free products to meet different consumer preferences.” It is a bold statement. Yet it is exactly what PMI has already begun to realize with products like its ingenious iQOS heat-not-burn device.

ALSO: Will Asia-Pacific Miss Out on Smoke-Free?

“We know it’s an ambitious vision, but we’ve made a commitment to our employees and our shareholders [and] we are convinced it is the right thing to do,” Joe Oliver, head of corporate communications for Philip Morris Asia, told Tobacco Asia.”Our success in the cigarette business gives us the resources to pursue this vision and we see it as a long-term blueprint for success.”

Numbers increasing, not decreasing

Declining cigarette sales in certain markets like Europe and North America notwithstanding, the global number of smokers is actually increasing. The World Health Organization estimates that by 2025 there will be over one billion smokers worldwide, of which some 60% will be located in Asia. With so many people enjoying a puff, it just makes sense that these consumers should have access to less harmful alternatives, effectively giving them the choice to switch if they so desire. And under this aspect, PMI’s vision doesn’t appear that far-fetched after all.

“Where we have been able to launch smoke-free products in Asia so far – like in Japan and more recently in South Korea – we’ve seen smokers switch quickly and in large numbers,” said Oliver. “It is increasingly clear [to us] that smoke-free products can complement traditional tobacco control policy and that they can also make a significant impact on reducing smoking rates.”

Step by step is key

But a few important steps are required to turn this common sense approach into reality. Firstly, less harmful alternatives to combustible cigarettes need to be invented and made widely available. That is already happening.

Secondly, these alternatives should be appealing to smokers in terms of taste delivery and sensory experience. Only this can lead consumers, who would otherwise continue using conventional cigarettes, to switch to these alternatives. And switch for good, because a significant public health benefit can only materialize when and if they choose to switch from combustibles to less harmful products in droves.

Thirdly, retail prices for alternative products ought to be attractive enough to also entice lower income segments among consumers to eventually switch instead of alternatives being affordable only for the well-to-do.

Lastly, national regulators at large need to recognize the benefits alternative smoking products may offer in terms of reducing the prevalence of smoking-related diseases and then take this into account when they’re formulating or adjusting their legislation. After all, studies have shown that smoke-free devices like heat-not-burn or vaping products reduce potentially harmful chemicals by a staggering 90-95% when compared with conventional combustible cigarettes.

iQOS well accepted in Japan

As is clearly obvious, consumer acceptance of these products doesn’t seem to be a problem at all, at least as far as PMI and its iQOS are concerned. “Just taking into consideration our most commercially advanced smoke-free product, the iQOS, there are [as of October 2017] 3.7 million users worldwide, with around 8,000 smokers making the switch every day,” Oliver claimed, adding that the device has so far been introduced to 31 countries worldwide. In Japan, the company’s most advanced market so far, iQOS was launched in Nagoya in November 2014 and since April 2016 has become available nationwide.

Meanwhile, sales of HeatSticks (the refill tobacco cartouches that are branded HEETS elsewhere) by September 2017 had captured a nearly 12% share of the country’s entire cigarette market, with sales figures reportedly continuing to grow steadily. This, according to Oliver, goes to show that smoke-free products can indeed make a significant impact in reducing conventional smoking rates.

Korea: another iQOS success story

Developments in South Korea are similarly impressive, if not even more so. IQOS and HEETS were launched in the capital, Seoul, on June 5 this year and were initially only available in two dedicated iQOS stores. Both of them were literally swamped by customers on launch day and beyond. Encouraged by that positive consumer response, Philip Morris Korea Inc. already announced in the middle of July that it would gradually expand availability of iQOS nationwide, starting with Busan, Ulsan, Daegu, and Gyeonggi. Since then, expansion has been nothing short of remarkable, with some 21,000 outlets now reportedly stocking iQOS and HEETS in Seoul alone, including convenience store chains like Ministop, 7-Eleven, and With Me.

“In Korea, we’ve seen an exceptional early performance of iQOS, and HEETS have now captured 2.5% of the entire cigarette market - and this is despite a still relatively limited distribution focusing on Seoul and a handful of other major cities,” disclosed Oliver. He also attributed this phenomenal launch success to high iQOS awareness among Korean consumers to begin with. “Before iQOS was even launched in Korea, its awareness had reached around 20%. We believe this is now over 50% among adult smokers nationally. This is impressive, especially as we are only four months on from launch,” he said.  Another measure of the early success of iQOS in Korea is the high level of full or predominant conversion, which PMI said had reached 83% in September, well above the 70-80% range generally observed in the more established iQOS launch markets.

A multi-pronged strategy

But the company is not solely relying on iQOS to spearhead its vision towards a smoke-free future.

“To address the different preferences of adult smokers, our smoke-free portfolio includes four product types,” said Oliver. “Two of them heat tobacco rather than burning it - iQOS is just one of them, while the other has yet to be launched. And we have two nicotine-delivering products that do not contain tobacco, and which are based on different technologies. When it comes to our smoke-free products, how we sell them, and how our customers use them, we are constantly learning and evolving to improve the overall consumer experience,” he concluded.

JTI: reinforcing efforts Based on science

Meanwhile, Geneva-based JTI (Japan Tobacco International) believes that consumers should have a wide choice of smoke-free tobacco and nicotine products, including those that offer scientifically proven harm reduction.

“This might ultimately lead to a world where fewer will choose to continue smoking [conventional] cigarettes,” said Dr. Ian Jones, JTI’s reduced-risk vice president. He added that JTI continues to reinforce its efforts to develop a wide variety of consumer-acceptable reduced-risk products (RRPs) and conduct robust scientific investigations of such products. “Our aim is to provide consumers with a wide range of pleasurable next-generation products that have the potential to reduce the health risks associated with smoking. This includes commercializing tobacco vapor products such as our Ploom Tech, as well as our Logic range of e-cigarettes.”

Tugging on the same rope

While this stance reverberates with a somewhat less strong resolve than that of PMI when it comes to pursuing a smoke-free future, it does show that the gears nevertheless have started moving at JTI as well. Or in other words: unlike PMI, JTI may presently not be forcefully pushing for a gradual phasing-out of combustibles, but nevertheless is actively researching and indeed offering reduced-risk devices that work towards a smoke-free future.

“We believe that [RRPs] offer real benefits to consumers and society,” said Jones. “It is therefore in everyone’s interest that we continue to create consumer-satisfying products with demonstrable harm reduction potential. We can see that existing smokers are increasingly using next-generation products. [It is] a continuous trend, albeit at a different pace depending on the country.”

Different technology, same end results

Besides a variety of snus products as well as its Logic range of e-cigarettes, which is presently available in nine countries and comprises Logic Power (a cig-a-like device), Logic Pro (a closed-tank system), and Logic LQD (an open-tank alternative), JTI also bases its reduced-risk strategy on its Ploom tobacco vapor products.

“Ploom Tech, our latest tobacco vapor product, is [currently] available in Japan, Switzerland, and the US,” Jones pointed out. Ploom Tech uses groundbreaking technology that is different from PMI’s iQOS. Instead of heating a tobacco stick directly to around 300°C as the iQOS does in order to generate an inhalable tobacco vapor, Ploom Tech instead heats a liquid, which produces a vapor that then passes through a capsule containing granulated tobacco, picking up flavor and aroma in the process. In doing so, the tobacco is heated to only around 30°C. The end results, of course, are principally the same as with iQOS: no smoke generation, no smoke smell, no ash, and, most importantly, a tremendous reduction in harmful chemicals that would otherwise find their way into a smoker’s body. According to Jones, recent studies have shown that Ploom Tech achieves a 99% average reduction in levels of measured constituents compared to cigarette smoke.

An inevitable part of evolution

Like PMI’s Joe Oliver, Ian Jones confirmed that next generation products “are part of the tobacco industry’s continuing evolution and represent an important next step also for our company.” And as a manufacturer, JTI finds itself in the position to make the choice for consumers easier. “We do this by giving clear and easy-to-understand information as well as access to scientific research data and findings through our science website.” In this context, the company is continuing its r&d efforts and apparently already is working on new devices that are going to supplement – and improve on – Ploom Tech. “But due to commercial confidentiality reasons, we are not able to provide information on products in the pipeline,” Jones said.

BAT: the quest for safer alternatives

Likewise occupying a seat on the merry bandwagon trundling towards a future potentially bereft of combustibles is British American Tobacco (BAT).

“We have long been on a quest to offer consumers safer alternatives to cigarettes,” stated Annie Brown, head of communications, next-generation products from BAT’s London head of office.

“We know today that many adults, despite the known risks, continue to smoke and we believe they will for many years to come. However, the advent of [smoke-free] technology developments has meant we can also now offer other products as an alternative to traditional cigarettes, with significant harm reduction potential… We believe [that] with great next-generation products, smokers will make the transition themselves and that’s why we are focusing on developing and delivering vapor and tobacco heating products to smokers globally.”

A journey into the future

She said that BAT is already present in 16 markets with next-generation products (NGP) today and were the largest vapor company in the world, market leader in vapor in the US, UK, and Poland, and that three quarters of tobacco heating product consumers in Tokyo already use BAT’s dedicated brand, glo.

“We’ve been on this journey for some time and we’re wholly committed to offering smokers a range of products in tobacco and beyond,” asserted Brown, adding that the company had invested US$2.5 billion in the last six years on the development and commercialization of NGPs. “Our role is to provide a range of inspiring, innovative products that ensure that the complex needs and choices of all types of consumers can be met.” However, she also cautioned that this category of smoke-free products destined to replace combustibles was still in the emerging stage and that consumers would ultimately decide what the future will look like. “Our role is to ensure they have access to the best NGPs so a transition is an easier option for smokers.”

Two products, same goal

As far as heated tobacco devices available from BAT are concerned, these options currently include the already mentioned glo, as well as a hybrid device called iFuse, which was BAT’s very first tobacco heating product and was launched in Romania in 2015, where it is exclusively available to this day. This electronic device heats a nicotine-containing liquid into an inhalable vapor, which then passes through a tobacco section, releasing tobacco flavor. iFuse therefore works pretty much after the same principle as JTI’s Ploom Tech. On the other hand, glo is more reminiscent of PMI’s IQOS, i.e. it directly heats (rather than burns) tobacco, creating a vapor with a taste similar to that of a conventional cigarette, albeit with – according to BAT – around 90% less toxicants.

glo’ing success in Japan and Korea

glo was launched in the Japanese city of Sendai in November 2016, but since also has become available in Tokyo, Miyagi, and Osaka. It has also been introduced in Canada (Vancouver), Switzerland, and Russia, while in August 2017 it was launched in South Korea. Consumers in both Japan and Korea appear to have accepted glo very well. After all, in a press release on October 25, BAT announced: “…glo, our tobacco heating product, which has continued its excellent growth in Japan, already achieving a national share in a leading convenience chain of more than 1.8% in only the second week of the national rollout, with share in Sendai now at 10.4%. In South Korea, share in handlers in Seoul has reached 3.5% after nine weeks [of launch].” Meanwhile, the company’s range of Vype (available in the US under the name Vuse) vaporizers is currently sold in 12 countries and territories around the globe. And just to mention it, the company is also marketing snus.

Product diversification crucially important

It is exactly this strategic product diversification that, in Brown’s opinion, will be crucial in helping conventional tobacco users decide whether they want to make the switch to less harmful products – and by extension this will also determine if the high goal of a smoke-free future is attainable at all.

“Different consumers will want different things from their device or product; in fact, some may even have different devices or experiences for different occasions or depending on where they are or who they are with,” said Brown. “As such, it is extremely important to have a range of NGPs on offer for smokers. This is why we have a multi-category approach with tobacco heating, vapor and snus products.” So, is the smoke-free era just around the corner? Not yet. But we are well on our way.

IQOS in Japan

PMI’s iQOS has enjoyed phenomenal success in Japan and its sales performance and other key data are impressive:

• Introduced in Nagoya in November 2014; since April 2016 available nationwide.

• September 2017: National market share of HeatSticks (HEETS) reached 11.9% of the cigarette market and continues to grow steadily

• Available through eight flagship stores, several major convenience store chains, selected tobacco stores, and a dedicated age-restricted website

• October 2017: Well over 1 million Japanese adult smokers have switched to iQOS

• More than 80% of users use iQOS fully or predominantly (i.e. representing at least 70% of their daily tobacco consumption)

• More than 120 local authorities have confirmed that iQOS can now be used in outdoor places where conventional smoking is banned

• Around 20,000 non-smoking locations (including restaurants, bars, offices, etc.) have granted exemptions for iQOS use