Heat-Not-Burn: Back to Tobacco

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Heat-not-burn devices have matured into a great way for enjoying tobacco, settling somewhere between vaping and combustibles. Chinese companies, in particular, are displaying innovativeness and zest when it comes to the motto “back to tobacco”.

By Thomas Schmid

When the first e-cigarettes spread on a commercial scale in the early 2000s, the foremost premise was to provide smokers with an alternative to conventional cigarettes whose combustion releases a plethora of harmful chemicals. Vaping, as the practice of electronic smoking, became later known, also was touted as helping smokers to quit and was presumed to be safer because no actual tobacco was burned. Both claims were of course never conclusively confirmed – nor disproven – through independent clinical studies.

However, one issue that existed from the beginning was that many of smokers who were looking either for a quitting aid or a “healthier” substitute for cigarettes sooner or later found out that inhaling e-liquid vapor just wasn’t the same thing as enjoying a regular cigarette. It just didn’t taste and feel right. The result in many cases was that smokers who had switched to vaping eventually went back to more satisfying combustibles.

A new way of enjoying real tobacco

But soon a completely new way that supposedly diminished the negative health impact of combustible tobacco emerged: heat-not-burn or HNB for short. “How,” r&d departments had brainstormed, “can consumers still enjoy tobacco while simultaneously minimizing the associated risks and without having to resort to less satisfying vaping?” The answer was as simple as it was ingenious. If instead of being burned, tobacco is merely heated to a temperature well below the combustion point, its volatile components turn into a vapor that can then be inhaled, while at the same time leaving behind substances like tar in the tobacco.

A wave envelops the world

While it was mostly Chinese companies that had pioneered the new technology and tirelessly kept working on improving it, the big multinationals had simultaneously developed their very own HNB devices. Of particular note is PMI, with the roll-out a few years ago of its sophisticated IQOS device which created tremendous media buzz. IQOS was snapped up like hotcakes by consumers when it was launched in South Korea and Japan a few years ago, but in the meantime, it has also gathered an ever-increasing fan community in Europe, North America, and the Middle East. The enormously positive response even prompted PMI to announce plans to eventually phase out conventional tobacco products altogether and to solely concentrate on HNB. If successful, this move could completely transform the global tobacco industry as we know it.

While vaping attempted to get consumers off conventional tobacco, HNB effectively went back to tobacco, but now in a way that supposedly carries fewer health risks (although no conclusive, uncontestable studies exist yet). In that sense, HNB is settling somewhere between vaping and combustibles. And it is especially Chinese companies manufacturing HNB devices that are advancing the technology even further, constantly coming up with new ideas on how to improve on earlier models.

IUOC Concept creates sensation

Among the most innovative of the Chinese firms dedicated HNB is Shenzhen Yukan Technology. Founded only in early 2017, the company at that year’s InterTabac show in Germany showcased its prototype of a sensational HNB product that was able to use any regular cigarette in its heating chamber. “That was our model IUOC 1.0, and it attracted tremendous interest at the show,” recalls the company’s founder and c.e.o., Guo Hongli, adding that IUOC stands for “I Use Ordinary Cigarette.”

An improved version of the introductory model, IUOC 2.0, was officially launched in 2018, again at InterTabac. “The difference between the two models is that while the battery charge of IUOC 1.0 lasts for only about 16 cigarettes, IUOC 2.0 is capable of handling a full standard pack of 20 sticks,” Guo explains. ” IUOC 2.0 also weighs 30% less than its predecessor and delivers amazingly enhanced aerosol smoothness.”

Freedom of choice is the motto

The idea behind IUOC is of course nothing short of visionary. While other HNB devices almost invariably require their heating chambers to be loaded with a particular type of tobacco-filled cartridge, the patented technology of an IUOC gadget allows consumers to simply insert a conventional cigarette stick of their choice. “That gives consumers the freedom to continue enjoying the taste and aroma of their preferred cigarette brand, whereas in other HNB devices they are basically forced to exclusively use customized cartridges whose contained tobacco blend they may or may not really like,” Guo elaborates.

But there is also another reason that underpins the IUOC concept, according to Guo. “Conventional cigarettes can be freely purchased in virtually every corner of the world and territorial availability is not limited like so often in the case of HNB cartridges. For example, IQOS’ proprietary Heets cartridges are currently not yet legally available in China.” Guo adds that utilizing regular cigarettes - and thus smartly out-maneuvering China’s restrictions on tobacco cartridges - has led to phenomenal domestic sales of IUOC devices in the country.

“In fact, 80% of our sales turnover is presently generated within China, while exports only account for the remaining 20%,” he claims. “And we are in the process of developing some exciting projects in collaboration with China Tobacco, leading us to strongly expect that IUOC is set to become the dominant HNB brand in China in the near future.” But on the other hand Guo also readily admits that his company is not yet ready for some other important markets. “The US market, for instance, is still too tough for us legally, and in terms of marketing we are too weak to enter the EU market just yet.”

Filter removal no longer necessary

Yukan Technology has in the meantime also solved an initial issue regarding filtered cigarettes – and which had irked some IUOC users. In the early IUOC models, the cigarette filter had to be first manually removed before the remaining stick could be inserted into the device’s heating chamber. “As of January 2019 this is no longer necessary,” says Guo. “We have modified our devices in a way that effectively negates the need for cigarette filter removal. Users can now simply insert the whole cigarette without having to fiddle around with it.” Furthermore, the company is currently developing the next IUOC version, which according to Guo “is going to weigh less [than the IUOC 2.0], making for even easier handling.”

One of the earliest trailblazers

Where Yukan Technology has embarked on a wholly novel approach to HNB, other Chinese companies have opted to build on already existing products. One of these is Shenzhen Coeus Technology, represented by its marketing director, Mark Xie. Founded in 2008, the firm was one of the earliest trailblazers of the nascent HNB sector and originally developed devices primarily used to extract vapors from loose-leaf dried herbs and cut tobacco stuffed into a drum-like heating chamber.

But then, in 2017, the company launched its first entirely tobacco-specific model, LTBE. In the summer of 2018, Coeus subsequently rolled out the follow-up C1 and ARCH models. “Each of these models is endowed with its very own product-specific attributes designed to appeal to a variety of consumers,” Xie explains. The C1 is a pen-type HNB device with an attractive wooden casing. Its low retail price makes it an ideal choice for cost-conscious users, but its battery needs to be recharged quite frequently. LTBE and ARCH are more complex and larger models and have a longer battery life. In addition, the LTBE is equipped with a replaceable heating component. Xie also divulges that a further improvement for LTBE has been officially introduced in February 2019. “Its heating element is reminiscent of that used in [PMI’s] IQOS,” he says. “The new LTBE is our most advanced HNB device yet.”

Banking on branded cartridges

Where the HNB models offered by competitor Yukan can be loaded with any conventional cigarette, Coeus relies on third-party tobacco cartridges such as PMI’s Heets, for example. This somehow limits the devices’ availability in markets where such branded cartridges may not be readily obtainable. But Xie insists that “if customers request that our devices are compatible with different cartridge formats – or even to be loaded with conventional cigarettes – we can easily customize the equipment.” “In any case,” Xie adds, “we are paying close attention to regional and global developments in the HNB field arena and will adjust forthcoming equipment designs as needed.”

With regards to its main markets, Coeus is still pretty much focused on Asia. While the C1 is particularly popular in Southeast Asia, Japan is the company’s main turf for LTBE and ARCH. Exports account for 80% of the firm’s total annual production, while 20% are sold within China. The notable exceptions are the Hong Kong and Macau special administrative regions. “Because of legalization issues regarding HNB devices [in those territories] we are not as active there as we would hope to be,” Xie says.

“Born in Japan”

Like many other Chinese firms in the HNB business, Shenzhen-based jouz Limited is still a very young, having been founded only in 2017, according to its general manager, Jason Zhang. The company rolled out its first HNB device, the jouz 20, in June 2018 in Tokyo. “Although it is essentially a Chinese product, you could say that Japan was the actual birthplace of jouz,” Zhang said. Since then, the company has supplemented the jouz 20 with a further model, the jouz 12. Both of them feature a stylishly attractive, sleek, pen-type design that is easy to handle and store. The main difference between the two models is the strength of their respective rechargeable batteries. “Our jouz 12 can consume up to 12 heated tobacco units on a full charge, while the jouz 20 is good for 20 units,” explains Zhang. In that sense, the jouz 12 – although having been launched later than the jouz 20 – has been specifically designed for lighter users.

Both models have also undergone a series of technical modifications since their inaugural launch, in order to further improve functionality and ease of use. “At jouz we are committed to providing the best taste and flavor experience [to users], as well as exemplary customer service. We therefore have improved the heating curve and algorithm [of the devices] to ensure more consistent heating and optimal taste delivery,” Zhang elaborates. And just like Coeus, jouz banks on using branded tobacco cartridges instead of lose tobacco or conventional cigarettes. “Whether it’s ‘Heets’, ‘Heatsticks’ or ‘lil’ cartridges, they are all compatible with our devices.”

A conscious marketing decision

Zhang says the decision to launch jouz in Japan as its initial overseas market was a very conscious one for the company. “Given the high adoption rate of HNB products in Japan, there is huge market potential, particularly for high-quality HNB devices that allow for extended, continuous usage because of their strong batteries, a feature that is very important to Japanese consumers. Hence, we had Japanese consumers in mind when we designed the jouz pen.” After an enormously positive reception in Japan, the brand subsequently was also introduced in Russia in October 2018 – and under rather similar marketing considerations. “We selected Russia as [our] second market as the country likewise is a very promising up-and-coming territory for HNB,” Zhang says. “Furthermore, it was a fantastic opportunity for us because unlike in some other places competition [in Russia] is still limited.”

E-Commerce plays increasingly important role

Although the company works with local distributors in both countries, online sales have also become an increasingly important sales channel. For instance, in Japan, jouz devices are available from e-commerce platforms such as Amazon and Rakuten, as well as through the company’s own website, jouz.com. In Russia, the products can be purchased online via AliExpress, Yandex, and, again, jouz.com. “But we are also present in selected e-cigarette and specialist tobacco retail outlets across Moscow and St. Petersburg,” Zhang adds. That jouz has been well adopted by a wide range of users is testified by favorable consumer feedback in Japan. “Customer comments have been very encouraging and we were indeed already awarded a ‘Best Seller’ label within the HNB category both by Amazon and Rakuten. Our customers value the product design and quality, but also our localized customer service and the 12-month warranty.”

On the back of these thoroughly positive developments, jouz hopes to enter further markets in the medium to long term. “We are currently looking for the right distribution partners in new markets,” says Zhang. He also assures that the devices’ functionalities will not remain static. “We have a vertical line extension in the pipeline, with more color choices, materials and finish, including Bluetooth functionality to allow for customizable temperature profiles.”