Big Tobacco’s second?coming

2014-06-29 15:00

Some of the world’s most powerful companies won’t let cancer-wary consumers get in their way. Dewald van Rensburg traces the rise of the e-cigarette

After Japan Tobacco International’s acquisition of ­­ e-cigarette manufacturer Zandera this month, virtually all the world’s leading tobacco companies own their own e-cigarette brands.

The tobacco industry is hardly dead, but its long-term future is bleak as governments increasingly restrict smoking in public and succeed in making tobacco less socially acceptable.

Cigarette-sale volumes, currently about 1?trillion a year, are dropping in most of the world outside China.

Supporters of e-cigarettes already predict exponential growth and the eventual displacement of normal cigarettes.

That day is probably still a long way off, with estimates from research company Euromonitor putting the value of the global ­ e-cigarette market in 2014 at $7?billion (R74?billion) compared with tobacco’s $800?billion.

The same company however, estimated 2013’s e-cigarette sales at $3?billion, indicating more than 100% growth.

After there had been an anarchic proliferation of small independent e-cigarette makers in recent years, the tobacco industry is making moves to take control of the sector and revive some other “next-generation” products that combine e-cigarette technology with old-fashioned tobacco-and-paper cigarettes.

The full-scale entry of Big Tobacco will probably lead to rapid concentration of the market and a new competitive dynamic.

Tobacco companies have far larger budgets for marketing and research.

One strategic difference between them and the small e-cigarette companies is that at least some of them would prefer the devices to be regulated in a way that creates barriers to entry.

This came to the fore in the EU this year, where a US lobby group for small e-cigarette manufacturers, the Tobacco Vapor Electronic Cigarette Association, fought to get the devices classified as tobacco products rather than medical ones.

Had it gone the other way, clinical trials would have become necessary for every product – something only the richest manufacturers could afford, went the argument. The richest companies are now the tobacco companies.

All of the world’s major tobacco companies have already either bought or developed their own e-cigarette subsidiaries – and legal battles around patents on particular designs and components are already emerging in the US.

The e-cigarette and other next-generation smoking devices have, however, been invented and reinvented several times, and patent offices are full of dead end devices claiming to make smoking safer.

Over the years, there have been three basic types of artificial cigarettes.

The first involves no tobacco or nicotine, but cigarette-like devices dispensing flavoured air meant to wean smokers off the oral habit.

The second is an e-cigarette that simulates smoking and provides nicotine without the carcinogens that usually come along with it.

The technology that major players in the tobacco industry seem keenest to revive, however, is “heat-not-burn” cigarettes – a compromise that keeps actual tobacco and paper cigarettes in the picture.

The basic idea is a cylinder into which you stick your cigarette, which then heats it to below the point of combustion.

This releases tobacco fumes, but hypothetically cuts out some of the worst carcinogens.

Like e-cigarettes, it has been “invented” several times and, in the late 1980s, was catastrophically commercialised as the Premier by ­RJ Reynolds, one of the major US tobacco firms. RJ Reynolds was sued because there was little proof of the reduced-harm claims the company made at the time.

Something like today’s e-cigarette was conceived in 1965 by American Herbert Gilbert.

The device involved a detachable “flavour cartridge” filled with sponge soaked with flavoured liquid.

Behind that would be a battery-powered heating element and behind that a mouthpiece for sucking air through the flavour sponge and heater into the mouth.

There were several other versions that didn’t use heat, including a South African patent for “artificial cigarettes, cigars and the like” filed by Samuel Zwarenstein of Highlands North, Johannesburg, in 1979.

The man claiming to have invented the current generation of e-cigarettes is Hon Lik, a Chinese pharmacist who, in 2004, patented the “flameless electronic atomising cigarette”.

Hon’s design now belongs to the world’s fourth-largest international tobacco company, Imperial Tobacco, through its e-cigarette subsidiary, Fontem Holdings.

Philip Morris International (PMI) and its parent company, Altria (the owner of Marlboro), have widely publicised their annual research budget of more than R1?billion.

The money is being spent on three next-generation products. One is a heat-not-burn cigarette holder dubbed Platform One.

The second is, like the Premier, a cigarette heater using carbonaceous fuel.

The third is apparently a new e-cigarette.

Philip Morris’ Swiss research division has been conducting clinical trials on what it calls the tobacco heating system 2.1 and 2.2 in Japan, the US, Poland and the UK since 2012.

The studies, for which no results are yet public, compare the efficacy of the tobacco heating system to nicotine gum and snus (tobacco pouches placed in the mouth) as a tool for reducing real cigarette smoking.

PMI’s research has also strayed further from the traditional ideas for smoking devices.

In 2008 it filed a patent for a “smart” e-cigarette that connects to the internet and can be programmed to control the amount users are allowed to smoke.

In 2007 Altria’s vice-president for “sensory and analytical sciences”, Dr Gerd Kobal, patented a “virtual reality smoking system”, which is exactly what it sounds like.

The evolution of electronic cigarettes over the years

Who owns the big brands?

Lorillard (Kent)

Lorillard, the US’s third-largest cigarette company, is well on its way to dominating the e-cigarette market in that country.

It bought Blu e-Cigs for $135?million (R1.4?billion) in 2012 and then bought Skycig. It now reportedly controls half of the American e-cigarette market.

Imperial Tobacco (Gauloises, Rizla, Drum)

UK-based Imperial owns Fontem Ventures, which owns Ruyan Investments, the company where Chinese pharmacist Hon Lik worked when he

invented what he claims to be the first modern e-cigarette.

Altria, Philip Morris (Marlboro)

The owner of Marlboro is putting a claimed $650?million into research around three next-generation smoking products code-named Platform One, Two and Three. The third one is an e-cigarette and the first two are “heat-not-burn” devices for tobacco. In the meantime, it has bought US e-cigarette maker MarkTen.

British American Tobacco (Dunhill, Peter Stuyvesant)

British American Tobacco has launched its own e-cigarette brand called Vype, which follows its acquisition in 2012 of British start-up CN Creative and its Intellicig brand of e-cigarettes.

Japan Tobacco & RJ Reynolds (Winston, Camel, Pall Mall, Benson & Hedges)

Japan Tobacco International this month bought Zandera, which makes e-cigarettes under the brand name E-Lites for the UK market.

RJ Reynolds, which markets the Japan Tobacco brands in the US, has created Vuse, its own brand of self-developed e-cigarettes that hit the market last year

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