Entries from February 2008 ↓

With more and more US States requiring fire-safe cigarettes using LIP paper + Canada and in future Australia, South Africa and the EU. Can the supply side keep up?

We think not.

Multinationals have proprietary LIP processes but Independents are depending on suppliers many of whom have no capacity to supply.

Seems like that is the question being asked lately but more importantly the questions that folks really should be asking are “What does consolidation in the tobacco industry mean to you?” As a retailer how do you think the consolidation of the cigarette/smokeless/cigar manufacturers will affect your business? If your a wholesaler what are your thoughts? Manufacturers what are your thoughts? What happens if your a manufacturer left out of the consolidation? To all, how do you plan on dealing with consolidation that seems so evident? Who do you think buys who? What leverage do you have as a retailer? Folks are talking about this but what are your thoughts?

In the EU and some other cigarette markets, like Brazil and Saudi Arabia, there is a tar limit of 10mgms (1mg of nicotine and 10mgms of CO.)

Recently the EU announced it plans to introduce regulations to make fire-safe cigarettes mandatory. What are the consequences?

For a start two things tend to happen when low ignition propensity (LIP) paper as it’s called is added to a cigarette - the tar goes up and so does the CO. By how much? Well depends on the brand, but tar can go up 1mgm and CO by as much as 15%.

While it’s not too hard to readjust the tar level, bringing down the CO is not so easy.

In other markets, like Canada, this has not been a problem as there’s no tar ceiling and the increases have been ignored. In the EU because of 10:1:10, this is not possible.

Is this acceptable?

Are there other options?

Do you have a comment?

Announced recently - Chairman, Peter Byrom of Molins PLC is leaving.

Mr. Byrom has overseen quite a tumultuous time at Molins. A renaissance a few years ago culminated in the acquisition of Sasib which was only recently given away (sold.) The cost has been quite staggering but so was the lost opportunity.

Acquiring a packaging company (like Sasib) to complement the existing Molins tobacco business made sense assuming the product lines could offer a total customer solution.

It seems Mr. Byrom was not up to the task. We wish Dick Hunter better luck. 

We are quite familiar with the argument by now - that smoking lower tar cigarettes is not better because smokers engage in compensatory smoking. In other words they take larger / more frequent puffs in an effort to maintain their nicotine level.

Conventional wisdom - by now, unfortunately yes - but is it true?

I think not - although I must admit I can’t prove it - anymore than anybody else can prove the contrary.

At first pass it appears quite reasonable that smokers switching to lower tar cigarettes compensate for their loss.

Whether this is permanent or not is unclear - and unknown - so far as I’m aware.

But what about new smokers who only smoked lighter cigarettes - do they compensate - seems unlikely doesn’t it?

And here’s another thing - tar levels have dropped over the last 30 years - a full flavor is no longer 25+mgms but more normally 15mgms these days. In the EU it’s 10mgms -quite a drop when you think about it.

Even if WHO & CDC think light cigarettes make no sense, governments and consumers seem not to agree.

Moreover this pragmatic approach, acknowledges the practical limitations in eliminating smoking and keeps tax revenues.

Can you go lower? Yes but there are limits; consumers still demand a little taste.

If you agree or disagree post a comment.