Blog 24.02.21

Can Big Tobacco become Nice Nicotine?

Will reduced-harm nicotine products take Big Tobacco to a lung-friendly promised land? Picture: BAT

Can the sins of the past be forgiven as a new generation leads the tobacco industry into a reduced-harm, lung-friendly future?  Should we speed up the industry’s rehabilitation by marking its shares ESG-friendly?

These are slightly more difficult questions that this one posted on Reddit:

“I just swallowed an oral tobacco pouch, am I going to die?”

The answers (no) were predictably Reddit wry.  But the problem of assessing risk from the products of a reformed tobacco industry, combined with the entrenched positions of some public health campaigners, makes the ESG question harder to answer.

A lot has happened in the tobacco industry over the past decade.  Here’s a quick catchup.

  • As with caffeine and sugar, it seems a lot of people love the effect of nicotine.  
  • Nicotine is addictive but not necessarily harmful. (Some argue it could be beneficial).
  • 80% of the world’s tobacco users are now in medium- to low-income countries (i.e., poor people).  
  • The generation now running tobacco companies were brought up in an anti-smoking era.  They understand ESG issues and are, we hope, a little less cynical than their predecessors.
  • Tobacco bosses have committed to shift the industry away from combustibles (cigarettes etc) to nicotine products that are much less harmful than smoking.  
  • These include vaping or e-cigarettes (inhaling nicotine-laden vapour), heat-not-burn (inhaling fumes from warmed tobacco) and oral tobacco/nicotine (modern chewing baccy).
  • Attitudes among public health authorities to the reduced-harm products differ markedly. The UK, for example, was early to endorse vaping as a way to give up smoking.  But e-cigarettes are banned in some countries (e.g. Brazil, India and South Korea) and highly regulated in others (e.g. USA where regulations differ by state and there are tight restrictions on promotion).
  • The World Health Organisation (WHO) remains adamantly against smoking and all alternatives. “E-cigarettes do not contain tobacco but are harmful to health and are not safe”.
  •  Health campaigners remain sceptical of reduced-harm claims and the motives of companies selling nicotine delivery systems.  Their opponents say reduced-harm is the best way to cut the risks to public health posed by tobacco smoking.

Rosy future?

Given that governments earn a lot from nicotine taxes and there are millions of people who choose to use the drug, it seems likely that the nicotine-delivery industry will be around for a long time to come.

So, should we continue to beat Big Tobacco with ever bigger sticks?   Or should we support the industry’s transition strategy, designed to take users to a lung-friendly promised land?  And does this mean we can stock up with the shares of British American Tobacco (BAT) and its cohort without feeling guilty?

Listen to Clive Bates, the high-profile former director of the anti-tobacco campaign group Action On Smoking and Health (ASH): “The dominant tobacco control faction is engaged in a war-on-drugs mission and not, as often assumed, a public health crusade. It is trying to forge a path toward a nicotine-free society with little concern for the collateral damage inflicted to health on the way to meeting its goal.”

Bates supports less-harm products like vaping. He wants to promote better public health and help nicotine users understand the relative risks of their choices. By default, he endorses the reduced-harm strategy of his former opponents.   

Modern oral

His argument has become more credible – especially in low- and middle-income countries – with growing market acceptance of what the tobacco industry calls “modern oral” products. These are little bags (like a small tea bag) of nicotine-infused fibres that you stick under your lip. They have evolved from chewing tobacco, loved by spitting cowboys, and a Swedish oral snuff called Snus.  The “modern” descriptor is used because the products don’t contain tobacco.  

Modern Oral is much, much cheaper than heated tobacco and vaping, which is good news for Big Tobacco’s transition narrative.  Both those methods demand an electronic contraption to heat the product, and then regular refills using relatively expensive pods.  You’re not going to find ready buyers for an iPhone-like device in slums of Nairobi or Lahore where people buy single cigarettes.

Modern Oral brings the price point down and the bags lend themselves to the same unofficial distribution system of single cigarette sales on street corners.  With Modern Oral in its portfolio, Big Tobacco has a much better transition story to tell because it can cater for the nicotine needs of rich and poor while improving public health.    

The focus then moves to transition financing.  Cigarette sales provide the cash to promote reduced-harm products and to persuade users to shift.  How long will it take to replace the smoking habits of the Kenyans and Pakistanis with Modern Oral?  And will the change be quick enough to supplant cigarette revenues?

Perils of persuasion

Some insight into Big Tobacco’s challenge came last week in revelations by the Bureau of Investigative Journalists about BAT’s reported £1 billion ($1.3 billion) social media campaigns in Kenya, Pakistan, Sweden and elsewhere to promote reduced-harm products.

According to the Guardian: “By 2023, the company expects to be targeting 500 million nicotine consumers with £100bn a year to spend. Products other than cigarettes are driving much of that growth.”

BAT’s social media campaign is classic: cool influencers extoll the merits of the products on platforms such as TikTok and Instagram.  This is an appropriately modern way to communicate the attributes of a Modern Oral. But anti-smoking campaigners are outraged that the messages could easily reach children.

Nicotine companies want to avoid social media blunders, having seen Juul, the once successful US vaping company, rise and crash on its effective but irresponsible marketing which flew too close to the child barrier.

A lung-friendly future?

If Big Tobacco succeeds in becoming Nice Nicotine, it seems churlish to continue treating the industry as a sinner.  There would be very little difference between Nice Nicotine and all those lovely companies that make candy, chocolate, fizzy drinks, coffee, energy drinks, ice-cream and for that matter, marmalade.

Nobody tut-tuts at the sight of long lines at Starbucks as caffeine users queue for their fix. Why should we judge those who love a hit of Modern Oral?

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Author:
Peter Knight

Chairman and co-founder

Clients:
IKEA, A Global packaging company, A leading global food company




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