The changing landscape of the tobacco market: are we going to face the historic disappearance of cigarettes?

In recent years, the tobacco industry has undergone significant change. This shift has been impacted by several factors, including changes in consumer perception of the dangers of smoking, the ability of tobacco companies to adopt innovative technology, and consumers' propensity for change. Additionally, the rise of government regulation has forced tobacco corporations to alter their strategies.

According to British American Tobacco (BAT), regarding harm associated with conventional cigarettes, the company with a new strategy „Better Tomorrow“ is dedicated to development and commercialization of alternative tobacco and nicotine products that do not burn tobacco to deliver nicotine to the consumer.

From the perspective of Marcin Mielcarz, general manager of the British American Tobacco Baltics, this change can also be seen strongly within the company – about 95 % of the time the conversation revolves around heated tobacco products (HTPs).

Referring to the „Better Tomorrow“ strategy, Mielcarz suggested it might sound „like a buzzword that could mean everything and nothing.“ „However, it’s in my head, the more I work, the better I work, fewer people will smoke, and more people will use tobacco heated products (HTP),“ he added.

There is still no consensus on the health effects of the new generation of tobacco products, but a two-year study by the US Food and Drug Administration found that heated tobacco products release fewer harmful substances compared to conventional cigarettes. This has been confirmed by studies carried out by tobacco companies, which found that the aerosol emitted by heated tobacco products contains 90–95% less harmful substances.

Speaking about the situation in the Baltic market, Mielcarz pointed out that Lithuania is witnessing one of the biggest changes in consumer preferences. According „Euromonitor International“ market research report, consumers in Lithuania are incredibly open to innovations. Therefore, while volume sales of cigarettes, cigars, cigarillos, and smoking tobacco declined in 2022, sales of heated tobacco and e-vapour products are booming.

„Overall Baltic countries are open for new categories, but I must say that Lithuania is very unique,“ Mielcarz claimed. „In Lithuania, I think, it's a combination of being conscious about harm reduction and being open to novelties a little bit like a new tech thing.“

In addition to these causes, there are many strong competitors in the tobacco market in Lithuania that offer alternatives to factory made cigarettes (FMC). Together, these companies provide a large category of HTP. Thus, this aspect, along with the consumers' openness, results in a unique Lithuanian case, Mielcarz said.

Although modern tobacco products are exceedingly popular in Lithuania, as in other EU markets, cigarettes still dominate. According to the State Tax Inspectorate (STI), cigarettes account for 81 % of total tobacco excise duty revenue.

Tobacco companies lately adapt to a changing regulatory landscape to maintain and expand their customer base amid declining social acceptability of tobacco use and declining cigarette consumption.

A less harmful alternative to combustible tobacco, which could provide nicotine and emit less tar or CO, was proposed in 1988. The existing evidence indicates that smokers who switch completely from combustible cigarettes (CC) to HTPs may reduce their exposure to some harmful and potentially harmful constituents (HPHC).

Since 2014, when a heated tobacco device from a major tobacco company was launched in Italy, Japan and Sweden, the market has seen a proliferation of similar devices from other tobacco manufacturers, including electronic cigarettes.

Tobacco producers are investing increasingly in new technologies, which, like any fresh innovation, present additional difficulties. For example, the complexity of HTP product design presents new challenges for testing protocols as the products are not single entities but comprise multiple, integrated components.

„We know how to make a cigarette, we have been doing it for 120 years. But now we enter a completely different territory and to be honest we are not Samsung, Apple, Huawei, or any others,“ Mielcarz pointed out. According to him, BAT is still in process of learning as it needs to consider how to design a product that has as few side-effects as possible for the consumer. The Covid-19 pandemic has also contributed to a reduction in the supply of important components of the device.

Another barrier posed by the introduction of new technologies into the tobacco industry is that it takes more time for the consumer to first have the confidence to learn how to use the new gadget and then be prepared to pay the extra money to purchase it, Mielcarz added. BAT's and other tobacco companies' responsibility should be to ensure that customers do not have to go through a hundred pages of instructions to figure out how to use the new product.

Mielcarz said all the BAT’s products were marketed towards adults trying to wean themselves off traditional cigarettes.

„For us, it is a completely unfamiliar environment, we are not perfect. We are learning about this particular market,“ Mielcarz said. „We came to Lithuania with the Glo Hyper device as a first edition. Now we brought the Glo X2 and Glo X2 AIR. I am not saying that every time we are revolutionizing this device. However, it is a small step in the right direction.“ 

Mielcarz said all the BAT’s products were marketed towards adults trying to wean themselves off traditional cigarettes. It is noted that one in five combustible tobacco devices in Lithuania is Glo.

Regarding the future of the tobacco market, Mielcarz said that cigarettes might soon run out. „In the ideal world, in 10 years there will be no traditional cigarettes on the market. Of course, 10 years is wishful thinking, it will not happen. However, one day there will be no cigarettes, zero. This is my ambition. It is in BAT's strategy for a „Better Tomorrow“.“

Lithuania recently imposed additional restrictions on certain tobacco products. Starting from 23 October this year, shops will no longer be able to sell heated tobacco products with added flavour or taste. Also, from autumn, producers of heating tobacco will be required to put informative labels and warnings on the packaging of their products, highlighting the potential health risks.

Concerning restrictions, Mielcarz pointed out that it is not the most effective strategy towards reducing the number of smokers. „In my opinion, the best way to reduce smoking is to educate ideally in an ideal world. Educate each smoker that they have an alternative. It is good to have restrictions on FMC. Nevertheless, I know that they are not working,“ he added.

The general manager of the BAT Baltics said another problem is the way the government puts traditional cigarettes and other tobacco products into one category. This results in new restrictions that make it impossible for tobacco companies to educate their consumers. According to the World Health Organization (WHO), people’s perception of products is largely influenced by what they are told about them and whether their subsequent use experience conflicts with the frame they were provided.

In addition, he believes that banning certain aspects of HTP will lead some users to try to obtain them illegally. Therefore, a dialogue between the government and the tobacco industry is crucial, Mielcarz said.

„In an ideal world I imagine a room with industrial representatives, the people who take calls in the shape of law and perhaps even retailers. Then, if needed, we would have one, two days or even three days of honest conversation on how we want to shape the nicotine industry“.

„It would be beneficial for everybody: for consumers who will be educated about alternatives to smoking, for the state budget because if we are wise, then the excise from legal products will go up, and of course for us – tobacco companies,“ he added.