Tobacco companies still have some work to do to meet commitments in offering reduced risk alternatives – though since even a small shift by a big tobacco company could still be much bigger than total commitment from an independent, that hardly leaves vaping companies a clear field.
Only a few tobacco companies have even made a strategic shift to focus on reduced risk alternatives, with several disincentivised to do so because of restrictions in their national markets, according to the latest Tobacco Transformation Index (TTI).
Even in cases where tobacco companies have started to make inroads into reduced risk products as alternatives to conventional cigarette sales, these are frequently focused away from the vaping category.
This is demonstrated by Swedish Match, which was the clear winner in this year’s TTI, a project of the Foundation for a Smoke-Free World (FSFW) which seeks to rank major tobacco companies on their shift toward reduced-risk products (RRPs).
Although the rankings themselves barely varied from the previous edition of the Index in 2020, there were positive signs for the reduced-risk sector across the Index as a whole, with ten companies’ overall scores rising while only five declined.
Still, though, “high-risk products made up around 95% of retail sales volume across the 15 largest tobacco companies in 2021”, the Index’s compilers said, but that global figure conceals substantial regional variations.
The most progressive companies in terms of RRPs are nearly all European- or American-based, while the lowest-ranking are all from Asia and Africa.
Where R&D goes
In the overall scores, Swedish Match headed the list, followed closely by Philip Morris International (PMI), Altria and British American Tobacco (BAT). The companies scoring well here will most likely be doing so through either heated tobacco or vaping products – though the overall percentages cover both areas.
A mid-ranking group was then led by Imperial Brands and Japan Tobacco Group, with Korea’s KT&G and the US company Swisher appearing slightly lower down. Again a contribution from both vaping and heated tobacco will have been key for almost all of these.
They were followed by India’s ITC, China National Tobacco (CNTC), Vietnam National Tobacco, Tobacco Authority of Thailand, Egypt’s Eastern Co, Indonesia’s Gudang Garam and another Indonesian firm, Djarum.
“Only Swedish Match sells a greater volume of reduced-risk products (RRPs) than substantially more harmful combustibles, due in most part to the popularity of its snus in Sweden and non-tobacco nicotine pouches in the US,” the TTI’s compilers observed, although a further four companies “directed the majority of capital and R&D investments toward RRPs”.
The Index is based on 35 factors, most of them quantitative metrics which account for about 75% of a company’s overall score; some changes were made to methodology for this second edition, which covers 2019-2021.
It does not solely represent activity in reduced-risk markets – companies that do well in selling combustibles in effect have their score penalised for that. The Index is about change within individual companies, not about change in the market as a whole – so a company with a large share of the vaping market would still be regarded as being dominated by combustibles if it also had a large share of that market.
What This Means: The overall rankings of the Index, with their strong geographical bias, should come as little surprise – and nor should Swedish Match’s position, given its lack of involvement in high-risk combustible products. What a business does not do is also important for a project that comes from a public-health perspective.
It’s also noteworthy that despite little change in the overall rankings, the scores for Imperial Brands, Japan Tobacco and Swedish Match itself declined slightly compared with 2020 while they increased for many manufacturers closer to the bottom of the list.
That may well, of course, reflect methodological changes rather than the businesses themselves – but it certainly provides something to watch out for in future editions of the Index.
Beneath the headline figures, meanwhile, there are some significant changes in the rankings for specific areas such as strategy (where KT&G and Japan Tobacco did markedly better than in 2020) and product sales (with Altria and Swisher among the biggest gainers).
– Barnaby Page ECigIntelligence staff