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Why the Tobacco Industry is Investing in Smoke-Free Products

Jul 26, 2021 6:31 AM 6 min read

The Marlboro Man says he has a new mantra: “Quit Smoking.”

As one of the largest multinationals on the planet and the owner of brands like Marlboro and Chesterfield, Philip Morris International (PMI) is the very definition of "Big Tobacco".

But PMI is more than just a cigarette manufacturer. It owns Fertin Pharma A/S, a maker of nicotine chewing gum - something used by smokers to help them quit. It has created the Foundation for a Smoke-Free World, a research body that says it studies new and novel ways of smoking cessation. And PMI has struck a $1.45bn deal to buy UK-based Vectura Group...a healthcare company that makes asthma drugs.

However, PMI’s most important “unconventional” venture so far involves its smoke-free vertical. The goal, it says, is “to replace cigarettes with smoke-free products” entirely.

What are Smoke-Free Products?

The basic idea is to heat tobacco instead of burning it. Smoke-free products supposedly include fewer harmful chemicals and they use heat-processed tobacco leaves. Also known as "beyond-nicotine" and "heat-not-burn" products, they come in many forms including with electric heating elements, as sticks or plugs, or designed in the same shape and size of regular cigarettes.

FYI: Smoke-free products are not the same as e-cigarettes. The former use actual tobacco leaves while vaping involves heating liquids that contain nicotine.


Are Smoke-Free Products Less Dangerous?

There’s no definitive answer. But since they still contain tobacco and carcinogenic elements, even if they are less dangerous than cigarettes, they are still deadly.

Let’s look at one smoke-free product - PMI’s IQOS, which has been authorised for sale in nearly three dozen countries. The UK Committee on Toxicity found that people using these heat-not-burn products are exposed to 50-90% fewer “harmful and potentially harmful” compounds vis-a-vis conventional cigarettes. In Japan, 70% of IQOS users reportedly switched from conventional cigarettes to using IQOS alone (2016).

But this evidence is still superficial and the products are still very recent to paint a wholesome picture. More research is needed on the medium- and long-term effects of beyond-nicotine products and there is insufficient scientific evidence to prove that they help smokers quit for good.

The WHO has urged consumers and governments to not trust claims from cigarette firms about these products. “The tobacco industry has a long history of systemic, aggressive, sustained and well-resourced opposition to tobacco control measures,” it has said. “There is no difference between cigarettes and heated tobacco products except that in terms of exposure: the exposure is less and the smoke is not visible.”

But hold on… PMI says smoke-free products can help smokers quit. And PMI says it wants a smoke-free future. Why would a cigarette-making behemoth want people to stop smoking?


Necessity is the Mother of Reinvention

At the outset, tobacco firms’ eagerness for a lucrative smoke-free future seems genuine. PMI, for instance, generates three-quarters of its revenue from combustibles but the majority of its investments go into beyond-nicotine products.

The prospect of a tobacco company owning a quit-smoking Foundation or funding drugs for respiratory diseases sounds unsettling, even nauseating. Indeed, PMI’s healthcare adventurism has raised many eyebrows. But, seen with its foray into smoke-free verticals, these developments are symptomatic of a larger trend in the tobacco industry: Big Tobacco is facing an existential crisis. It needs to reinvent and diversify to stay afloat.

A tobacco-free world may not be knocking, but it’s what countries know they have to strive for. Smoking rates have reduced across many developed countries in the past three decades. In the rest of the world, progress has been mixed, with virtually none in some countries while in others population growth has outpaced quitting trends.

But it might be safe to argue that cigarette sales have only one way to go in the long run: down. Widespread public awareness and government regulation could hasten this. The latter - which includes marketing restrictions, advertising bans and effective and hefty taxation - is particularly effective.

FYI: Over 6 million lives are lost each year due to first- or second-hand tobacco use. Throughout the 20th century, a staggering 100 million deaths were on account of tobacco use. Smoking remains the single biggest cause of preventable death globally.


Survival of the Malleable

Faced with this reality, cigarette firms understand the need to diversify in the near-term or devolve into oblivion. It’s similar to what oil companies and petrostates are doing. Reliance Industries, which owns the world’s largest oil refiner, is investing huge sums of money in green energy. Saudi Aramco, under the aegis of Riyadh, is venturing into chemicals, renewables and new technologies.

To be fair, PMI’s repositioning as a smoke-free manufacturer was a long time coming. It began actively looking at ways of delivering nicotine without using many harmful chemicals in the mid-2000s. As of this year, smoke-free products account for a quarter of PMI's $28bn net sales. By 2025, the company aims to generate half of its sales from smoke-free products alone.


A Smoke-Free India?

The Union Government's approach to new-age quit-smoking techniques has been something quintessentially Indian: to outright ban them. E-cigarettes were initially restricted as an unapproved drug before judicial challenges to this move elicited an ordinance that provided for a blanket ban on vaping and vaping products.

FYI: There are 267 milion tobacco users in India. ITC dominates 77% of India's cigarette market. But the tobacco market is dominated by the cottage-based bidi-rolling industry: bidis outsell cigarettes in an 8:1 ratio.

Smokeless tobacco products are not outright banned by any law but that doesn't mean they are explicitly discussed in official policy yet given that they are a recent development. As such, they operate in a regulatory grey area.

But should heat-not-burn products be banned? Proponents of these products say they may be harmful, but they are less harmful than cigarettes. And they can help some smokers quit. But let’s look at this logically: let’s say smoke-free products are just tobacco items in a different guise, and that they’re as harmful as cigarettes - should they be banned then? India allows the sale of cigarettes, which are objectively harmful; then why single out new-age products?

The other side of the house contends that by being marketed as “safe” alternatives, these products can encourage young people to take up tobacco and succumb to nicotine addiction. In this way, they could work as gateway drugs.

But is India’s antipathy against these alternatives groundless? Well, there can be no smoke without fire. The country has made positive strides in tobacco control in this century. In 2000, 33.8% of men and 5.7% of women smoked. A decade later, these numbers had fallen to 23.5% of men and 2.5% of women. So any regulatory hesitance about legalising untested new-age tobacco products is understandable. Nobody wants this trend to reverse.


A Smoke-Free Future?

“Big” groupings of big companies tend to do ominous things. Big Tech likes to bend antitrust rules and is plagued with accusations of not doing enough to curb misinformation and abuse on its platforms. Big Oil has enabled the climate crisis and continues to blunt efforts towards climate action.

But Big Tobacco is unique in its impact and its image. Its products are overwhelmingly bad - nobody denies that, not even these companies. But tobacco’s usage is still widespread and its outright ban too economically and practically untenable to write a eulogy for Big Tobacco. Ergo its anxiety to reinvent its business model and rebuild its image.

But it may be pertinent to refrain from praising these companies for mending their ways - or for saying that they will. After all, their products literally kill people. They spent decades trying to obfuscate evidence about the harmful effects of smoking. And even now, with their smoke-free pivot, the intention is hardly the public good. As PMI’s CEO said:

Converting the world’s smokers is an extremely positive and lucrative business for us.


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