Tobacco Companies Innovate for a Smoke-Free Future

CHICAGO — Whether it’s “Moving Beyond Smoking,” “Building a Better Tomorrow” or “Delivering a Smoke-Free Future,” tobacco companies are making their message clear: They’re weaning smokers and themselves off of cigarettes.

Innovation in tobacco products is slow to come to market due to the lengthy process of submitting premarket tobacco product applications (PMTAs) with the U.S. Food and Drug Administration (FDA). And even when a company submits a PMTA, the FDA sometimes needs years to review it. (It’s expected to finish reviewing all major vapor companies’ applications by June 2023, according to its latest update, three years after applications were due.)

Regardless, tobacco manufacturers are working on pipelines of innovation, focusing less on combustible cigarettes—which remain, by far, the largest segment of the tobacco/nicotine market—to produce more nicotine pouches, vapor devices and other yet-to-be invented products to which they anticipate consumers shifting.

While not all consumers will switch, many are looking for other options as tobacco remains the leading preventable cause of disease and death in the United States, leading to more than 480,000 deaths each year, according to the FDA.

CSP spoke to the leading cigarette and alternative-tobacco manufacturers to find out the latest from their transition plans.  

Philip Morris International (PMI) is aiming to be a majority smoke-free company by 2025—and it’s already on its way to that goal. The New York-based maker of market-leading Marlboro cigarettes said for the first half of 2022, smoke-free products accounted for more than 30% of its total net revenues.

“PMI is in the midst of a profound corporate transformation with the ultimate objective of becoming a smoke-free company, driven by science and technology, and we are making rapid progress,” said Sam Dashiell, senior specialist for U.S. communications for PMI. “We are fully committed to this transformation, and our investment is unmatched in the industry. Since 2008, PMI has centrally invested over $9 billion to research, develop and commercialize a portfolio of smoke-free products.”

Part of those investments included the September 2021 acquisition of Vejle, Denmark-based Fertin Pharma, a developer and manufacturer of pharmaceutical products based on oral and intra-oral delivery systems. The cigarette maker also took a majority stake in Vectura Group PLC, a Chippenham, U.K.-based provider of inhaled drug delivery solutions, and in May made an offer to acquire Swedish Match AB, Richmond, Va. The still-standing offer would include Swedish Match’s operations that make smoke-free products, like modern oral nicotine (MON) pouch Zyn, as well as cigars, matches and lighters.

There’s no going back now, Dashiell said.

“As part of our smoke-free journey, PMI is excited to enter the United States in a meaningful way,” he said. “In 2023, PMI hopes to resume the distribution of our [modified-risk tobacco product IQOS] in the U.S. and hold a substantial U.S. operational platform, which would help us unlock the significant opportunity across other smoke-free categories over the coming years.”

PMI sells more than 130 brands of cigarettes, with Marlboro leading its portfolio. Its smoke-free products include its heated tobacco system IQOS, which Altria Group Distributing Co., Richmond, Va., is under license to sell in the United States; however, the companies were ordered to remove IQOS from U.S. shelves in September 2021 after the U.S. International Trade Commission ruled it infringed on two patents held by rival R.J. Reynolds.

Why would the market leader in cigarettes in the U.S. want to transition smokers to other products? It’s a question Altria CEO Billy Gifford said he gets a lot.

“We know that cigarettes are dangerous and addictive,” Gifford said in a speech to the Richmond Association for Business Economics on April 6. “And we know that the No. 1 expectation that society has for us as a company is to reduce the harm associated with cigarettes. So for those adult smokers who can’t or won’t quit, it makes sense that we focus our resources on Moving Beyond Smoking.”

There are three factors that he said can lead to real progress in advancing harm reduction:

• A federal framework that governs all tobacco products.
• Increasing adult smoker willingness and interest to try alternative products.
• More smoke-free products that smokers like.

The company already has a diversified portfolio, with investments in everything from alcohol manufacturer AB InBev, cannabis company Cronos and e-cigarette leader Juul Labs. It also partnered with PMI to secure a modified-risk tobacco product claim for heat-not-burn product IQOS and has a pending premarket tobacco product application for its modern oral nicotine pouch, On.  

The pace at which harm reduction will advance in the United States will be largely set by regulatory and legislative policies, Gifford said, adding the company’s regulatory and legislative skills will be invaluable in the future.

“No company can introduce a new tobacco product into the marketplace—or communicate claims—without first securing FDA authorization,” he said.

But that doesn’t mean Altria isn’t working on new products.

“We’re trying to do as much [research and development] as possible,” said Jennifer Kelly, senior manager of communications at Altria. “Of course, we’re trying to innovate. And I think that’s really what moving beyond smoking is—it’s innovation toward smoke-free products. I can’t speak to any of them right now, but there’s a pipeline going down.”

Altria doesn’t expect everyone to quit smoking cigarettes, though, she said. Ten years down the road, the company aims to have a diversified portfolio that would still include some combustibles. But there is a desire for alternative products from customers, Kelly said, noting that about 20 million people have expressed interest in new products that are smoke free.

“For our sustainability as a company, we think it’s important to have a good variety and portfolio of products,” she said.

Retailers will be key in helping this transition.

“It will be important for retailers to understand the behavioral shift of the [adult tobacco consumer] as they explore new products from trial to adoption,” she said. “Category managers will need to proactively merchandise the right assortment of products from traditional cigarettes to other tobacco/nicotine SKUs based on evolving purchasing trends. An ongoing dialogue between suppliers and retailers is necessary to fully understand the evolving landscape and the adult tobacco consumer to maximize merchandising space.”

When E-Alternative Solutions (EAS) speaks of “A World Beyond,” it doesn’t just mean tobacco or nicotine. It encompasses beyond smoking, but also beyond other current product types, Mike Sullivan, director of trade marketing with the Jacksonville, Fla.-based company said.

“We’re always looking for innovative products. We’re working on something right now that’s innovative as well that we’re looking to launch at NACS,” Sullivan said.

At the NACS Show, EAS showed its new Mojo Balanced Energy Pouches, energy and performance pouches that have 50 milligrams of coffee-derived caffeine and feature a proprietary blend of functional ingredients like ginseng root, yerba mate and B vitamins.

Regulation and potential bans the tobacco category faces could open significant space on c-store’s back bars, Sullivan said.

“So [retailers] are looking for those innovative products that would go in there that is outside the tobacco industry,” he said.

EAS doesn’t sell combustible products, like its sister company Swisher International. Its brands include Forth CBD and Leap Vapor.

Chris Howard, senior vice president, general counsel and chief compliance officer with EAS, spoke to the effect tobacco giants could have on the industry if they switch to more alternative products: “They’re raising the profile of alternatives, and so naturally as they raise the profile, companies like ours can capitalize on that with competing products. But has it happened yet? I don’t think so.”

Whether it’s through cannabidiol (CBD) products or educating retailers and consumers on what cigarette alternatives are available, British American Tobacco (BAT) and its wholly owned subsidiary Reynolds American Inc. are working on what they call “Building a Better Tomorrow.” The companies, which under their subsidiaries sell Newport and Camel cigarettes, among others, proved successful in new product innovation when in October 2021 electronic-cigarette device Vuse Solo became the first vapor product to receive a marketing-granted order from the FDA.

While the company will continue to sell cigarettes, it has a varied portfolio and is highlighting potentially less-harmful products.

It is critical retailers begin talking to their customers about potentially less harmful products such as vapor, modern oral nicotine and snus, Leila Medeiros, senior vice president of new categories at Winston, Salem, N.C.-based R.J. Reynolds Vapor Co., told CSP in July. The backbar will continue to evolve, she said, with industry innovation and regulatory response.

“The key is that each convenience store is unique, and ultimately you need to meet your adult consumers where they are in their nicotine journey. And your backbar should reflect the needs of those consumers,” Medeiros said.

Reynolds is committed to exploring additional measures to highlight those alternative products, she said.

“Some of those innovations include digital displays both in and outside retail locations. Digital signage provides a dynamic way to showcase brand content to engage, inform and connect consumers with brand platforms,” Medeiros said.

Retailers interested in tobacco harm reduction can follow these strategies, she said:

• Stock potentially less-harmful nicotine products.
• Ensure those products are merchandised in a highly visible location.
• Learn about these products and actively recommend alternatives to cigarettes to adult nicotine customers.

“While the convenience channel is all about speed of service, adult nicotine consumers are much more likely to try a product if it is recommended to them by an educated sales clerk,” she said. “At Reynolds we are committed to providing you [with] the necessary programs and tools regarding our products so that you can have an educated retail sales team.”