Big Tobacco and Heat not Burn – friend or foe?

Right now the big tobacco companies are major players in the Heat not Burn market. Apart from loose-leaf vaporisers like the PAX series, all the products that are set to go global this year are produced by cigarette manufacturers. At first glance that makes sense; after all they already sell tobacco products, and HnB is a logical addition to their range.


Not everyone’s convinced that the tobacco companies are really committed to HnB, though. After all it may be a tobacco product, but these players already have a tobacco product on the market – cigarettes. HnB is a competitor, and the way the technology’s looking right now it could become a very successful one. What has some people worried is the situation with electronic cigarettes. These are also a competitor to actual cigarettes, and the tobacco companies don’t like them at all. A common claim from anti-vaping zealots is that e-cigarettes are all a Big Tobacco plot to addict generations of children to evil bubblegum-flavoured cigarettes, but this is pretty obvious nonsense. The tobacco industry only owns a handful of e-cig brands, and when it comes to the high end of the market – where the most rapid growth is – they don’t have any presence at all.

Why cigarette makers hate vaping…

In fact some tobacco companies are actively trying to sabotage vaping. RJ Reynolds wrote to the American Food and Drug Administration last year asking them to ban all “open system” e-cigarettes. Open system devices are the refillable type with replaceable heating coils and interchangeable parts; RJR want them off the market, and while they claim it’s for safety reasons it isn’t hard to see that they want to clear the way for their own closed system products. If someone’s going to use an e-cig RJ Reynolds want it to be one of theirs, and the fact is their products just aren’t that attractive. So they resort to sneakier tactics to eliminate the competition.

Given that history it isn’t hard to see why some people worry that companies like RJR might also be secretly hostile to HnB. It’s certainly possible, but it doesn’t seem so likely. The reason is because of the business model the tobacco companies use. They want customers to make regular – ideally, daily – small purchases of their products. That’s what smokers do, after all; they buy a pack of cigarettes every day. It gives a steady income stream that’s easy to predict. Unfortunately for Big Tobacco this model doesn’t work so well with e-cigs. They’ve certainly tried; they all sell e-cigs designed to generate steady revenue, through sales of either disposable e-cigs or prefilled cartridges. The problem from their point of view is that vapers might start off with a product like that, but they probably won’t use it for very long. Instead they’ll upgrade to an open system device and start buying from a range of smaller companies.

A business the size of RJR or Philip Morris has enormous resources. If they wanted to, they could design and market some really excellent high-end vaping gear. Look at what a small mod maker can do with a five-figure research budget.; now imagine what sort of mod Philip Morris could design. But they aren’t designing mods, because they don’t want to. It just isn’t the way they work. Yes, they could come up with a great device, but it would be a one-off sale. People would buy it, then use it with DIY liquid or something from a small company. The tobacco industry wants to lock you into buying from them. That’s why they come up with devices like the Vype Pen, which uses proprietary cartridges.

…but not HnB

With Heat not Burn it’s a bit different. Open system devices like the PAX 2 are excellent, and you can vape any pipe tobacco in them. Closed systems like PMI’s iQOS aren’t noticeably inferior though. In fact they have some real advantages. They’re simpler to use, for example. You don’t need to mess about with loose tobacco; just slip another HeatStick into the end and away you go. That simplicity is a big deal when it comes to getting smokers to try it.

Another plus point for HnB, from the tobacco company’s point of view at least, is that they can share branding with their existing products. That’s tricky with e-cigs, because you’ll never create an e-liquid that really tastes like a Marlboro. You can get a lot closer with HnB though, because it’s filled with real tobacco. Japan Tobacco have gone down this route with their new pod-based Ploom TECH system; the pods for it are branded as Mevius, a popular brand in Japan. Early versions of PMI’s iQOS have used Marlboro-branded HeatSticks. Smokers are creatures of habit; while vapers might switch between flavours three or four times a day smokers tend to have a favourite brand, and with HnB the cigarette companies can give them a product with a familiar name, logo and of course taste.

Tobacco companies have a pretty bad reputation, and they’ve done a lot to earn it – they covered up evidence about the harms of smoking for decades, for example. They’re not actually evil, though. If they can sell a product that won’t kill half their customers they’ll be more than happy to do it. Their objection to e-cigarettes isn’t that people won’t buy cigarettes any more – it’s that people won’t buy tobacco company products any more. Their approach to HnB, based on proprietary systems that should guarantee regular sales from loyal customers, is clearly aimed at making safer products available without losing business. There’s no obvious reason why it shouldn’t be successful, either. Early attempts certainly didn’t do so well, but the latest products are a lot better. The success of vaping could be a big help as well; while tobacco companies see it as a problem it’s also made the idea of alternatives to smoking more common and acceptable. Millions of smokers have switched to e-cigs. Potentially, millions more could switch to HnB, and the smart thing for the tobacco companies to do is to make sure that even if they switch products they don’t switch brands.

 

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