1 of 10
MDR - Christian Adi Njoto Njoo.
2 of 10
BMJ - Omar Rahmanadi.
3 of 10
KT&G - Bang Kyung Man.
4 of 10
Mane - Fabrice Taulane.
5 of 10
Messe Dortmund - Sabine Loos.
6 of 10
22nd Century - Michael Zercher.
7 of 10
ITGA - Dr. Antonio Abrunhosa.
8 of 10
JEB - Jay Barker.
9 of 10
Nicobrand - Mark McQuillan.
10 of 10
Essentra - Hugo Azinheira.
Posing 3 specific questions to 10 companies yielded some rather intriguing answers. Here is the first installment of a three-part series in our Tobacco Asia newsletter.
The tobacco sector, including manufacturers and suppliers of anything from cured leaf to paper and packaging, has always been an industry in constant flux. Changing laws and regulations, consumer trends, supply bottlenecks due to natural disasters or economic developments, and even the restless anti-tobacco lobby – they all exert influence, sometimes on a global level.
For this inaugural issue of our “executive forum”, Tobacco Asia carefully handpicked top executives from all relevant industry sectors and from around the globe, ensuring a representative spread. By drawing on their years of experience, we first wanted to know from the panelists what developments they thought changed the industry most in the past and during the pandemic and what lies in the future.
Over the past decade, what were the most significant developments in the global tobacco industry and in your business sector in particular?
Christian Adi Njoto Njoo, president
PT Mangli Djaya Raya, (East Jawa, Indonesia)
(Tobacco merchant)
“The acceleration of takeovers of smaller, often family-owned companies by larger corporations, including the big multinationals, characterized the past decade. It led to more markets reaching maturity, too. For us, an independent leaf merchant, it meant a gradual erosion of our customer base, despite the fact that individual order volumes grew bigger on average. But it also meant that in order to supply the multinationals, we had to adjust our operational practices to become compliant with their ethics and terms of conduct. To achieve that, we were faced with increased overheads but on the other hand also became a more responsible supplier in the process.”
Omar Rahmanadi, c.e.o.
PT Bukit Muria Jaya (BMJ), (West Jawa, Indonesia)
(Specialty paper manufacturer)
“In my opinion, the incredibly fast adoption of e-cigarettes and, subsequently, heat-not-burn prod-ucts all over the world was the main hallmark of the past decade. According to Euromonitor, this new electronic smoking generated US$2.1 billion in 2016. By 2020, it had skyrocketed to US$7.53 billion. And data by ResearchAndMarkets suggests that this year the market will be worth a staggering US$10.63 billion. But then the decade was also marked by increasingly stricter regulations against combustible cigarettes, as well as the emerging advocacy from one of the leading multinationals [PMI] for a “smokeless future.” These developments required from us, a specialty paper company, to intensify our innovation to support HNB products and with sustainability in mind.”
Fabrice Taulane, global manager – tobacco unit
MANE SA, (Vouvry, Switzerland)
(Flavor manufacturer)
“At MANE we think that the most significant development in the tobacco business occurred in two specific domains: firstly, the market entry of reduced-risk products [RRPs] such as electronic cigarettes, for instance, which led the tobacco market on to a completely new way of “smoking.” Secondly, there was the innovation of flavored capsules embedded in [combustible] cigarette filters. As far as MANE is concerned, we spearheaded the new technology of encapsulation for over 10 years, successfully registering a patent for flavored capsules. That invention is of course the result of MANE’s more than 150 years of experience extending across five family generations. Our key point for future growth is that we strongly believe in research and development. It enables us to respond quickly to constantly changing needs and has made us into the industry leader that we are today.”
Bang Kyung Man, executive vice president /c.o.o. / chief of strategy at headquarters
KT&G Corporation, (Seoul, Korea)
“The most significant development was the emergence and expansion of the HNB market. As a major global tobacco company, KT&G launched its own HNB products almost five years ago, with end consumer demand having increased dramatically since then. At KT&G we had detected that trend quite early on and thanks to our rigorous technology and product research were able to launch our first HNB product, lil SOLID 1.0, domestically in 2017. In the year following, KT&G released its exclusive, differentiated HNB platform, lil HYBRID. Despite fierce competition in South Korea’s HNB market, KT&G’s lil brand has successfully strengthened its presence, reaching 39% domestic market share as of the second quarter 0f 2021. In the meanwhile, lil is also being marketed in 10 foreign markets through a global collaboration agreement between KT&G and PMI.”
Sabine Loos, managing director
Westfalenhallen Unternehmensgruppe (Messe Dortmund), (Dortmund, Germany)
Trade fair organizer (InterTabac & InterSupply)
“One of the central developments of the past decade was the enormous product variety expansion globally. The decade also saw the appearance of numerous new players. In addition, we also could observe various trends that changed consumer behavior in the long term, and which will continue to play important roles in the future. For instance, there was the debut of a broad spectrum of next-generation products such as electronic cigarettes and hookahs, closed and open vaping systems, and heat-not-burn devices. The alternative product sector – including CBD products as well as nicotine pads and lozenges – likewise contributed to that astonishing product assortment expansion. However, we ought not to forget one thing over all those trends: the manufacturers of [conventional] cigarettes, cigars, pipes, and smoking accessories have always been on the industry forefront, convincing through their enormous innovation drives when it came to new products. Since 1978, this rich product variety is consistently reflected at InterTabac, the exhibition helping all participants gain an overview of the global tobacco industry’s diverse developments. In line with its declared objective of creating better product information access and improved purchasing opportunities, InterTabac has matured into the world’s leading tobacco industry-specific platform. And with InterSupply having experienced a particularly rapid expansion over the past seven years, we have added yet another building brick to our long success story. Mutually complementing, InterTabac and InterSupply are covering the industry’s entire value chain.”
Michael Zercher, president & c.o.o.
22nd Century Group, Inc., (Buffalo, New York, US)
(Agricultural biotechnology company)
“The most significant and encouraging change has been the embrace of tobacco harm reduction policies by regulators and the industry alike. This started many years ago, when 22nd Century created the world’s first very-low-nicotine-content tobacco plant, which prompted public health researchers and policy makers to think about how this new plant with non-addictive levels of nico-tine could lead to the end of smoking. Alternatives to cigarettes – including vaping, heated tobacco, and modern oral tobacco products – have become the other side of the coin, so to speak, making tobacco harm reduction not only feasible but profitable for the industry.
While the UK has the current lead in encouraging smokers to switch to e-cigarettes, New Zealand is catching up fast, taking even bigger steps to make the entire country smoke-free by 2025. Yet the world’s biggest commitment to tobacco harm reduction came from the United States’ FDA when it announced a plan in 2017 to require that all cigarettes sold domestically must impart non-addictive levels of nicotine while also allowing new, less toxic nicotine products to come to market with science-backed “modified risk” claims.
In pursuit of that plan, FDA authorized the sale of 22nd Century’s reduced nicotine con-tent cigarettes, Swedish Match’s snus products, and PMI’s IQOS, with more authorizations to be expected. All of this demonstrate the viability of harm reduction and show us the future of the global tobacco industry – the end of cigarette addiction and the wide-spread availability of suitably regulated alternatives.”
Dr. António Abrunhosa, c.e.o.
International Tobacco Growers’ Association (ITGA), (Castelo Branco, Portugal)
(Growers’ organization)
“The emergence of alternatives to cigarettes and other traditional tobacco products are among the most significant industry developments in many decades. The recent growth of heated to-bacco, vaping, and modern oral nicotine products is reshaping the long-established status quo [of combustibles] and creates new realities for the entire supply chain. Nevertheless, [conventional] cigarettes will remain the most important tobacco product well into the foreseeable future. Other important developments happened in the regulatory domain, for example the spread of plain packaging laws, but also increasing restrictions on flavors for traditional and emerging products, and, most recently, sustainability initiatives. From tobacco growers’ perspective, some of the key developments includes the rising legislative pressure that came with the implementation of the FCTC, the stagnation of raw tobacco prices, and milestone political events in crucial tobacco growing countries, such as the land reform in Zimbabwe. Ultimately, all of the mentioned factors affect growers and the crop on which the entire sector relies; alas, often in a negative way.”
Jay Barker, president
JEB International Tobacco Company Inc., (Danville, Virginia, US)
(Grower, merchant, and manufacturer)
“Our industry has undergone quite a few significant changes over the past decade. By being verti-cally integrated, these changes have affected our company in various ways. At the farm level we have seen tremendous production costs increases across the board. This obviously puts pressure on the supply chain from the ground up, as these costs must be absorbed somewhere through the process. On a positive tune, the implementation of good agricultural practices (GAP) has created a more sustainable product that is more competitive globally and can survive in the long term. For the leaf dealer side of our business the biggest challenge has been consolidation of manufacturers worldwide. This has resulted in fewer customers and more competition, triggering a rock bottom pricing ‘race’ and affecting margins immensely. At JEB we have found the best way to succeed in this climate and to rise above the rest is to offer superior products and superior customer service. As a manufacturer, our retail products have been under constant scrutiny by regulatory agencies over the past decade. We had to spend vast amounts on legal fees and regulatory filings, not to mention maintaining a fully-staffed compliance department just to keep up.“
Mark McQuillan, managing director
Nicobrand Ltd., (Coleraine, Northern Ireland)
(Nicotine manufacturer)
“Our business has been manufacturing highly-purified nicotine active pharmaceutical ingredients (APIs) for over 30 years. In the past 10-15 years, we have witnessed an increasing demand for these existing nicotine products, as well as new and more elaborate nicotine formulations. Our customer base has expanded in this same timeframe beyond the pharmaceutical sector to encompass what has become known as the next generation products (NGP) category. Rapid innovation has hastened the development of new products such as electronic nicotine delivery systems (ENDS) as well as modern oral products, for example nicotine pouches. To that end, Nicobrand has pivoted to develop and produce a much wider range of nicotine-containing intermediates and formulations capable of supporting these emerging product categories. Nicobrand’s well-established pharmaceutical compliance background has enabled us to broaden our portfolio to supply new nicotine products of the highest quality to help build and grow consumer confidence.”
Hugo Azinheira , global innovation & marketing director
Essentra Pte. Ltd., (Singapore)
(Filter manufacturer)
“The emergence of e-cigarettes in 2011/2012 and heated tobacco products such as [PMI’s] IQOS in 2014, as well as their rapidly increasing popularity, probably were the most significant developments in the past decade. Their advent also further accelerated the decline in combustible cigarettes sales volumes. Yet for Essentra in particular, this development provided new opportunities for filter designs specifically within these next-generation product segments. More recently, there also has been increasing health consciousness among consumers of combustibles. For instance, there was a quite clear shift towards slimmer [cigarette] formats, which are perceived as being ‘healthier’ than king-size products. In addition, consumer preferences shifted to filters with carbon components.”