Cigarette Filters: Staying Relevant in Today’s Market

by

by Patrick Meredith, Innovations & Commercial Development Director, Essentra

According to World’s Top Exports, the global sales from tobacco cigarettes exports totaled US$21.2 billion in 2017. The largest exporter last year was Germany, exporting US$3.1 billion worth of cigarettes, equating to 14.5% of global exports. This was followed by Poland (US$2.9 billion), Netherlands (US$1.6 billion), and South Korea (US$1.1 billion).

However, despite still leading the field, both Germany and the Netherlands, for example, export much less than they were five years ago. Compared to the amounts exported in 2013, last year the Netherlands exported 46.6% less and Germany 14.6% less. On the other hand, South Korea and Poland steadily grew their exports over the past five years. In fact, South Korea saw the world’s largest growth, exporting 114.4% more in 2017 than it did in 2013.

The increases and decreases of exports around the world are easily explained by a combination of factors, including technology, innovation, consumption, and regulation. Though the overall global consumption of tobacco is decreasing, certain parts of the industry are growing. New innovations such as e-cigarettes and tobacco heated products (THPs) see large growth, and more novel and specialist variations of traditional products at least remain steady. As these products gain traction in an overall declining sector, it is important for manufacturers and suppliers to adapt, focusing on producing, importing and exporting those products to maintain relevance.

Like any other sector, the best way to stay relevant is to continue to innovate, utilizing the latest and newest technologies. The markets that are doing this particularly well are Japan and South Korea, developing new and novel products to cater to their demanding markets. As Japanese and South Korean customers are notably forward thinking and demand the highest quality standards, companies often use them as a test market for their newest innovations. By launching products in these markets where audiences have higher expectations, approvals provide companies the reassurance that the products can work elsewhere and be exported. For example, IQOS and Glo – the proprietary tobacco heating systems created by Phillip Morris International (PMI) and British American Tobacco (BAT), respectively – were both launched in Japan before being exported and sold to other countries around the world. Similarly, innovations such as capsule filters and tube segment filters were introduced in Japan before being cascaded elsewhere.

In addition to staying up to date with consumer tastes, it is imperative that companies comply with the ever-changing regulation in all the markets it manufactures in and exports its products to. Both regulations in the country of origin and country of sale can heavily impact the quantity of product that can be moved around the world. Regulation such as the upcoming EU TPD led to an increase in the amount of some products, including more specialist products such as capsules, being exported to the European Union in recent years, ahead of the restrictions being implemented. Furthermore, for some countries where stricter laws that affect consumers have been implemented – such as smoking bans and increased taxes – increases in exports were encouraged. For example, with the decreasing levels of tobacco consumption in the Philippines, the National Tobacco Administration (NTA) focused its efforts in producing tobacco for export, aiming to increase the country’s exports by 5%  in both volume and value.

Essentra, leading global supplier of filters and scientific services, saw the effects of technology, innovation, regulation, and consumption on its exports first hand. Supplying products and services to over 300 customers in 90 locations from its 7 manufacturing operations, Essentra relies on the majority of its products being exported. Exports from its facilities in Indonesia and Thailand grew immensely in recent years due to their growing capabilities following investment in research and development. With particular expertise in the production of specialty filters, the two Asian sites export a large amount of its filters, particularly those that incorporate either a flavor capsules or a hollow acetate tube (or even both), to other countries in Asia, as well as Europe, the Middle East, Africa, US, and Latin America.

In order to operate its global distribution successfully, Essentra ensures that it always keeps up to date with local laws on importing and exporting. Adhering to regulation is the most important factor to keep in mind when shipping products from country to country, and even more so in a highly controlled industry such as tobacco. In addition to this, certain products will need to be shipped in controlled environments to ensure that the products reach the cigarette manufacturer in perfect condition. Filters incorporating flavor capsules are one such product and monitoring the environment throughout the shipping cycle is an important control factor within the supply chain.

In an industry where global consumer consumption is decreasing and regulation in certain markets is increasing, manufacturers and suppliers must continue to innovate and export their products. Companies must target each market specifically, with the best products and services that match the local consumer’s demands, importing products from other countries if needed. As new technologies are continuously being developed around the world, it will be interesting to see what new products and services are produced, and how the global market will trade and follow trends going forwards.