Why are Big Tobacco making their own NRT options?

In recent times, there has been more manufacturers of vaping products as well as other “harm reduction” options for people as safer and smoke free alternatives to tobacco, but still useable as a way for getting their Nicotine fix.

What you may, or may not have noticed, is that some of these manufacturers producing these harm reduction products are actually the same manufacturers as some of the biggest selling tobacco brands across the globe.

In this article, I’m going to look at the possible reasons why these “Big Tobacco” companies are producing and promoting these smoke free alternatives, and whether or not there is a hidden incentive that might not be so obvious as to why they continue to create and push these harm reduction options.

Nicotine and Tobacco Research’s report on this subject

At the tail end of January 2023, Nicotine and Tobacco Research released a report which looked into the subject of whether or not these Big Tobacco companies have some sort of incentive to create and promote “harm reduction” products, and for the basis of this article, I’m going to look and annotate this report and give my views on it.

The background of this report was to study and investigate the motives that these large tobacco companies who have been showing an active interest as well as having an active input into creating their own Vaping products, Heated Tobacco products and also Oral Nicotine Delivery products.

The study wants to look at whether or not market competition as well as latest trends in popularity of Vaping products and other harm reduction methods has turned their hand to wanting to promote their own versions of these products.

They do admit that this report primarily focus on the behaviours of cigarette companies within the USA, but I think it’s still relevant to report on this as it applies quite largely to across the globe as well.

They examine the competition both pre and post 2012, analysing the growth of Nicotine Vaping products (NVPs) and how much this has impacted the sale of tobacco products, and they also look at what the future could hold for these companies.

Competition in the pre-2006 period

They start off by looking at the cigarette industry pre 2006, where it stood as essentially a stand alone industry down to the sheer lack of close substitutes for cigarettes. Looking back at the history of vaping, it wasn’t until around 2006 that the first E-Cigarette was launched in the USA so there was next to no competition or alternatives for people other than continuing to smoke.

Down to this, prices could be raised as and how they pleased, but this could be characterized as “anti-competitive” however, the market was dominated by the “Big Tobacco” firms who took the reigns and power with their pricing structure which in turn maximized their profits.

Altria owned over 50% of the market share at this point, with BAT & Imperial added into this mix resulting in them collectively owning up to 90% in total by 2004, so the big companies really did rule over it. Remember these tobacco companies, as they’re going to be mentioned a lot further into this article.

The below table is an example of how high cigarette sales were up to the point of E-Cigarettes being introduced. You can view the table and the whole article about this on the CDC Website

Diversity in the market begins to show between 2006 and 2012

Firms held their power all the way up to 2006, but it was at this point some diversity began to show in the market, with the introduction of E-Cigarettes as well as more companies adapting to make their own brand of smokeless tobacco products, something that was beginning to gain popularity and saw cigarette sale records begin to dip down slightly.

It was at this point that Cigarette manufacturing companies began to see an opportunity to cash in on, with some of the big names acquiring total ownership of pre existing smokeless tobacco brands.

Altria acquired the US Smokeless Tobacco Co. in 2009, and introduced brand extensions to their famous brands of cigarettes such as Malboro Snus. With the acquisition of pre existing companies that had become popular, and had a solid loyal customer base, the smokeless tobacco industry began to get dominated by Big Tobacco companies.

And it was at this point, Big Tobacco companies began aggressively marketing their smokeless tobacco products as a way for smokers to satisfy their Nicotine cravings, without needing to interrupt their day. This was around the time smoking bans were introduced in workplaces and public places etc.

Post 2012 and the sudden rise for Nicotine Vaping Products

Post 2012 is where there was arguably the biggest shift in popularity, as between 2013-2018, the sales of almost all tobacco products drastically fell, and the sales of Nicotine Vaping Products showed rapid sales growth in the USA.

It was around 2017 that saw a “fourth generation” of vaping product released, with each one prior improving on it’s predecessor for the way it delivered Nicotine to the user, and Vaping had really taken off in popularity amongst users in the USA, in turn, knocking down smoke prevalence quite significantly.

The popularity of Nicotine Vaping Products was down to a lot of reasons, with the primary ones being the easy access to buy these products, such as online, as well as the ever growing number of options available when it came down to devices as well as flavours for vape juice that was used in these devices.

And studies also showed that E-Cigarettes as well as smokeless tobacco formed a very close substitute for Cigarettes, so it came as no surprise that sales and demand for these went up, and the sales of cigarettes declined over the years to come.

Big Tobacco companies copy their previous moves by acquiring existing Vaping brands

Production of Vaping devices as well as production of E-Liquid was not something which was a struggle to break in to, as most vaping devices are manufactured in China, and available to be designed with a simple contact to the manufacturer from a company, and E-Liquid is not a hard thing to create either, it’s that easy people can create their own liquid from the comfort of their own home with ease (obviously not to the same standard as what it would be being made in a factory with all of the correct equipment)

By 2016, there were multiple E-Cigarette brands which had been started up by independent firms, and marketed online and had a buzz around the brand that had been created, effectively making it a “known” brand across the Vaping industry.

And it wasn’t long before Big Tobacco companies copied their own moves from the previous smokeless tobacco company acquisitions and started making moves to buy established E-Cigarette companies.

Lorillard acquired Blu, JTI acquired Logic, and Reynolds introduced their own brand onto the market, Vuse. Vuse was bought in with aggressive marketing, and heavy price discounts compared to its competitors. I remember when they first came on to the market over here in the UK, and the marketing was everywhere you went. By the end of 2014, Vuse ruled the roost and in mid 2015, it held a massive 36% of the market share.

Along comes JUUL

You must have expected this part of the article coming up surely?! What article would this be about Big Tobacco being behind a brand of Vaping products without mentioning JUUL.

JUUL was founded and created and marketed by an independent company called PAX Labs in 2015, and it knocked Vuse off its perch by the end of 2017 as the leading brand of Nicotine Vaping Product in the USA.

It grew from being accountable for 9% of retail sales for NVPs in June 2017, to a massive 77% by December 2018. Absolutely staggering figures to read. And it was the introduction of JUUL and the growth of this brand that saw retail share of conventional cigarette brands fall from 78% to 25% in the space of just 10 months, crazy!

This obviously caused a huge stir and the brand was a hugely desired acquisition by many different Big Tobacco firms, but it was ultimately Altria (formerly Philip Morris Companies) that won the bid, and saw them take a 35% stake of the company for a whopping $12.8 billion.

However, by then, the popularity of JUUL had started to slowly decline, as it saw competitors follow their device design and creating their own versions of “Pod Mods” like what the JUUL was. MyBlu, VUSE Alto and VYPE to name a few. And in turn, this was essential the birth of “Disposable” vaping devices which are hugely popular worldwide in todays market.

The biggest selling Oral Nicotine products on today’s market are owned by Big Tobacco companies

Oral Nicotine Pouches have started gaining in popularity in the UK as well as globally for the last few years, with a lot of brands out there on the market today, but the two stand out brands that are arguably the most well known, and biggest selling brands are both owned by Big Tobacco companies.

Nordic Spirit are a brand of Nicotine Pouches available in all major supermarkets in the UK and they are owned by Japan Tobacco International, or JTI as it’s most well known. JTI launched Nordic Spirit Nicotine Pouches in 2018, and eventually introducing it to the UK market in late 2019.

VELO Nicotine Pouches are a brand that has recently had a rebranding as it was previously known in the UK as LYFT Nicotine Pouches. VELO is owned by Nicoventures, which is a sub company of British American Tobacco (BAT for short) and Nicoventures was created purposefully to promote tobacco free alternatives for Nicotine.

This brand is huge and really well known both in Sweden and worldwide, with it being one of the market leaders for Nicotine Pouches in the UK.

Is there an incentive for Big Tobacco to continue to manufacture and promote NVPs and Oral Nicotine products?

We’re now coming to the conclusion segment of this article, and the main question of this blog is yet to be answered, and I’ll give my thoughts on it below.

In my opinion, I believe there is a certain err of incentive for these Big Tobacco companies to create and promote smoke free alternatives to their known brands of Tobacco, and the reason being; Money.

Statistics listed above have showed that cigarette and tobacco sales have took a huge dip ever since the popularity of NVPs and Oral nicotine products on the market has reached previously unseen heights, so why wouldn’t they jump on board and create and market their own versions of these? I know if I owned a Big Tobacco company, I certainly would do something similar.

Philip Morris International have pledged that they are committed to creating and helping a Smoke Free future become a reality, by promoting safer tobacco free alternatives that they have created. And other Big Tobacco brands are also promoting these things and effectively following suit.

This also could mean a good thing for the future of the Vaping industry. It’s merely speculation on my part, but with these giant names being involved, they might be able to have a say and sway decisions that are made about restrictions being implemented on alternative Nicotine products, but like I said, this is merely speculation and a little bit of wishful thinking on my part.