As global cigarette maker British American Tobacco (BAT) moves towards reducing the health effect of its business, group chair Luc Jobin says there is a need for clear policies that will encourage the 1.1-billion adult smokers around the world to switch to scientifically substantiated, reduced-risk alternatives.
The group, whose brands include Dunhill, Peter Stuyvesant, Rothmans, Pall Mall, Benson & Hedges and Kent, has over the years introduced a range of less risky vapour products under the brand Vuse and modern oral products under Velo.
Last week, Jobin called on regulators and policymakers “to implement harm-reduction policies that would provide adult consumers with access to less risky alternatives to smoking”.
Countries such as Canada, the UK and several EU member states have such policies, but the market in SA is still in its infancy and underregulated.
Having generated about R2.54bn in revenue from vaping products in 2018 and with an average annual growth of 21.2% over the 2013-2018 period, the market for noncombustibles is projected to grow further.
Non-combustible products accounted for 12% of BAT’s revenue in 2021, up from just 4% in 2017. In some focus markets, such as Japan, Sweden and the UK, about 40% of revenue now comes from these alternatives.
In February, BAT reported a 7% increase in full-year adjusted revenue to £25.7bn (R531bn), boosted by the continuously increasing sales of e-cigarettes and oral nicotine in 2021.
CEO Jack Bowles lauded the group's transformation journey that was characterised by a 4.8-million increase in consumers of their non-combustible products to 18.3-million.
The multimillion-rand e-cigarette industry, catalogued by the National Treasury as battery-powered devices that do not burn or use tobacco but rather vaporise e-liquid solutions that a user inhales, faces mixed backing in SA.
As the growth and appetite for risk reduced products increases, the sector in SA faces new headwinds as the government plans to tax non-combustible tobacco products from 2023.
This comes as the World Health Organization (WHO) — of which SA is a signatory to its Framework Convention on Tobacco Control (FCTC) — has advised governments to take a precautionary approach in regulating these products.
Finance minister Enoch Godongwana in the budget speech flagged the government’s plans to introduce a new tax on vaping products of at least R2.90 per millilitre.
In its discussion paper, the Treasury acknowledges that there is uncertainty about the actual health-related risks of e-cigarettes, even though they are advertised as a safer option than traditional tobacco smoking.
The liberal think-tank, Free Market Foundation, has raised concerns about the plans to regulate e-cigarette and vaping products, saying the move could push more people towards traditional cigarettes and the illicit market.
The vape tax proposal was met with fierce opposition, but the Vapour Products Association of SA (VPASA) reported last week it had participated in a joint workshop on the proposed taxation of electronic cigarettes.
It warned in a statement that it was starting to become apparent that the January 1 implementation may be overly ambitious given the amount of consultation that is still needed.
“SA should adopt vaping as part of our national tobacco harm reduction strategy, and as a revolutionary scientific breakthrough to reduce smoking rates in the country,” said VPASA CEO Asanda Gcoyi.
Jobin also bemoaned the unintended consequences of a de facto sales ban, as witnessed first-hand in SA where the market simply turned to illicit traders to fulfil consumer demand. This resulted in a large fall in tax collections that fund public services.
In BAT’s annual report, the chair said completely stopping the sale of traditional harmful cigarettes is a very clear, yet complex, issue.
“I am often asked ‘why don’t you just stop selling cigarettes?’” said Jobin.
“To my mind, this is a very clear, yet complex, issue,” he said, highlighting the sizeable contribution of combustible value streams to drive portfolio transformation.
Cigarettes remained its biggest seller in 2021, but sales were 3.2% lower than the previous year.
BAT SA maintained it was open to engagements with regulators, the government and other policymakers on mutually significant issues, particularly on encouraging consumers to go for risk-reduced options.
“As a responsible company, we can contribute — through information, ideas and practical steps — to helping regulators address the key issues surrounding our products and our industry,” BAT SA said.
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