Public health gains from investment in non-combustible alternatives

Public health will reap benefits from busines investments in harm reduction or non-combustible alternatives (NCAs) to cigarettes, according to a UK-based fund manager.

“I think there’s a lot of upside from industry investment in harm reduction, if we can move the discourse beyond that ‘Big Tobacco’ mental model and refocus the conversation on a more open-minded conversation and look at what consumers want,” Jonathan Fell, founder of U.K.-based Ash Park, said.

Ash Park manages the Ash Park Global Consumer Franchise funds.  Fell manages long-term, high-quality investments in the fast-moving consumer goods industry. Prior to 2013, Fell was team head of the consumer equity research group at Deutsche Bank in London, where he covered the tobacco and beverages sectors, following earlier spells at Morgan Stanley and Merrill Lynch.

Innovative NCAs, such as e-cigarettes, heated tobacco products (HTPs) and Swedish snus are considered part of THR, a strategy that aims to mitigate the impact of smoking on public health.

One example of HTP is IQOS developed by Philip Morris International. Heated tobacco products or HTPs, heats tobacco without burning it to release a flavorful aerosol, not smoke. HTPs eliminate the process of combustion, which has been found to cause the production of thousands of harmful chemicals in smoke.

The heated tobacco device and the tobacco sticks called HEETS were made available since last year for adults 21 years old and above in the pilot area of Metro Manila. The online store IQOS.com now also covers delivery in key areas in the Visayas Region including Cebu City, Consolacion, Cordova, Lapu-Lapu City, Liloan, Mactan Airport, Mandaue City, Minglanilla, Naga and Talisay in Cebu; and Dumangas, Iloilo City, Leganes, Oton, Pavia, San Miguel and Santa Barbara in Iloilo.

“You can see that the market is putting a much higher valuation on companies that are making that transition away from combustible products.  And of course, the companies and their executives notice that too and it’s reflected in the incentive plans of a couple of them,” said Fell.

Prof. David Sweanor, advisory committee chair of the University of Ottawa Centre for Health Law and Policy in Canada, said technology has shaped the tobacco industry, as more consumers are switching to innovative nicotine products that are considered less harmful than combustible cigarettes.

“We see a tremendous number of consumers (who) are very willing to move to these products, if the products are available, (and) they have decent information.  And the global market for cigarettes is approaching a trillion US dollars a year with over a billion users,” said Prof. Sweanor.

Prof. Sweanor has been actively involved in tobacco and health policy issues since the beginning of the 1980s and has worked globally, and with numerous groups, including the International Union Against Cancer, World Health Organization, World Bank and the Pan American Health Organization and played a key role in achieving many global precedents in tobacco policy. He now focuses much of his tobacco and nicotine related efforts on risk reduction strategies.

“I think we need to be studying the industry, we need to be looking at the new players, we need to understand this is a very dynamic situation.  And we need to try to shape that through intelligent regulation, through having an intelligent discourse to look at how did we transform other industries, like what’s going on with the automotive industry now, moving with the internal combustion engines? “ he said.

“What happened to move from unsanitary to sanitary food, from snake oil to science-based pharmaceutical products?  How did we transform all these other industries?  What are the lessons in that for us?  And what can we do by understanding how this industry operates, but also understanding who’s the industry?  What’s the difference between companies that are selling tobacco products and companies that are selling alternative products?  What’s the difference between cigarettes and non-combustible tobacco products?  What are the divisions between the different companies?“ Prof. Sweanor said.

Prof. Sweanor however, noted that there remains a lot of misconception about non-combustible alternative.

“Much of mainstream tobacco control thought that vaping was a plot by Big Tobacco, these new evil geniuses, and it had to be attacked.  And the best thing we could do, would be to attack these alternative products.  You’re not recognizing what they were doing was really protecting the cigarette market, which is where these companies made massively higher profit margins on a sustainable basis.  So, it was a failure to grasp the reality of what’s going on,” he said.

Prof. Sweanor said the easiest way to incentivize the companies to transform and do more, is to stop banning the alternatives.

“There’s tremendous potential in all of these markets, you know, and anybody who thinks that new technology cannot be acceptable in low and middle income countries needs to understand what happened with smartphones.  I mean, just take away the bans, give an incentive for people to move in this direction,” he said.

“So, the innovation is going to happen.  It’s a question of do we try to turn that to the advantage of public health?  Do we have sensible regulatory regimes that help us reduce cigarette smoking more rapidly?“ said Prof. Sweanor.

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