Not all cigarette butts are trash.
At a Philip Morris International (PMI) lab on a Swiss lake, senior vice-president of research Bertrand Bonvin insists the butts of the Marlboro maker’s next-generation tobacco products be burned after testing, lest the proprietary technology in them sneak out.
Despite the growing popularity of e-cigarettes, Bonvin and his peers at the biggest tobacco companies are still looking for their holy grail – a product that will hook nicotine-craving smokers like conventional cigarettes, without the health perils. Such an item could reignite stocks in the $760 billion (R7.6 trillion) industry, which have stagnated over the past 12 months amid falling sales and increased smoking restrictions.
“The problem with cigarettes is how nicotine is delivered, and all the by-products of burning tobacco,” Bonvin said. “There is space for e-cigarettes, but there are concerns about quality and lack of regulation.”
Battery-powered e-cigarettes deliver vapourised nicotine and light up when puffed; a process called “vaping.” The newer devices that Bonvin is working on are the result of years of research and show how far tobacco technology has come since previous attempts at so-called “harm-reduction” devices flopped.
PMI, the largest publicly traded tobacco company, is putting tobacco in its new product to satisfy smokers’ cravings for the taste of a conventional cigarette like the Marlboro man cowboy smoked.
The device Bonvin puffs in the lab looks like a hollowed-out fountain pen. A custom-built cigarette is inserted and its tobacco is heated to generate a smoking aerosol. The temperature is “significantly below” what is generated by a traditional cigarette, which burns tobacco, according to PMI.
While that lessens the health risk, Bonvin says the device still “needs to mimic as closely as possible a cigarette, both in taste, nicotine delivery and behavioural experience”.
Competitors are taking other routes. British American Tobacco (BAT), Europe’s biggest player, is using an aerosol technology found in asthma inhalers. Both companies say their products are not intended to help smokers quit; rather, to deliver a safer, more satisfying experience than the current crop of e-cigarettes.
”While many smokers try e-cigarettes they don’t necessarily stick with them,” says Paul Triniman, the chief executive of Kind Consumer, which has licensed its product to Nicoventures, a unit of BAT. “E-cigarettes are not particularly effective at delivering nicotine.”
And they have not given tobacco stocks a jolt. After rising fourfold from 2002 to 2012, the MSCI world tobacco index has risen about 0.6 percent in the past year, versus a 16 percent gain for the MSCI world index.
While global sales will approach $2bn this year and top $10bn by 2017, according to Wells Fargo, Exane BNP Paribas analyst James Bushnell says their unregulated status has allowed dealers to buy them cheaply from China and resell to create a chaotic market.
He says e-cigarettes are the “biggest potential threat and opportunity the industry has had for a long time”.
While it is too early to say which next-generation device will win, Berenberg Bank analyst Erik Bloomquist says: “I don’t think the incumbents will be unseated.” – Gabi Thesing from Frankfurt for Bloomberg