Next Generation Products: Imperial Tobacco

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In recent years various consumer tobacco and nicotine products have come onto the market. These have been collectively referred to as new, novel, or alternative tobacco and nicotine products and the range continues to grow. The tobacco control community uses different terms to describe these products. TobaccoTactics focuses on those in which the large transnational tobacco companies have an interest, and currently refers to them as “next generation products” (abbreviated as NGPs). There is ongoing scientific and policy debate about the role of these products in tobacco control, and whether they can help reduce the harms of tobacco.

Imperial Brands was previously known as Imperial Tobacco, and for simplicity is referred to below as Imperial.

Imperial, like other tobacco companies, has been investing in tobacco and nicotine products that, unlike cigarettes, show potential for volume growth in developed markets.1 It has used terms like “new consumer experiences”2, “consumer adjacencies”3and “potentially harm reduced products” to describe its .4Products sold by Imperial that fall into this category are snus, nicotine pouches, e-cigarettes, and heated tobacco products (HTPs).

On its website, Imperial underlined the importance of these products to the company’s future:5

“While our core business remains the manufacture and sale of high quality cigarette and other tobacco product brands for millions of adult consumers worldwide, NGPs offer us considerable growth opportunities.”

However, in 2019, Imperial issued a profit warning, and under pressure from shareholders, a leadership change followed.6 Following the appointment of new CEO Stefan Bomhard in July 2020, Imperial released a new five-year business strategy which scaled back the company’s plans to invest in NGPs in favour of traditional cigarettes.78

Snus

Imperial’s interest in NGPs began in 2005 when the company invested in a Swedish smokeless tobacco product called snus.

Although the company continues to have snus interests, the focus of its NGP investments switched to e-cigarettes in late 2012. In 2020, Imperial indicated it would stop expanding its market in snus and nicotine pouches.7 However it also now markets snus-style nicotine pouches, which do not contain tobacco leaf.

E-Cigarettes

In December 2012, Imperial set up a wholly owned Dutch subsidiary called Fontem Ventures to develop “non-tobacco consumer experiences”, notably e-cigarettes.910 In November 2017, the tobacco company also acquired UK-based nicotine liquids maker Nerudia.11

Imperial initially sold multiple e-cigarette brands, but from 2016 its NGP strategy has focused on growing the blu brand.12.

In February 2018, Imperial launched a brand extension named myblu, based on a liquid pod format, in the US, UK, France, Germany and Russia.13

Since 2020, Imperial has focused its e-cigarette business on the US, the largest market for these products, while planning to exit the least profitable markets.7

The company said that it planned to launch new liquids and another brand extension in the second half of 2018, called bluACE , an open system e-cigarette.13  However, the product appeared to have been swiftly withdrawn. According to Imperial’s previous Chief Executive Officer, Alison Cooper, the company has sent e-cigarettes to social media influencers. In an interview with The Sunday Times in April 2019, Cooper said: “You have a lot of vape influencers in the US.”14  Cooper said that Imperial had trained thousands of “brand ambassadors” to promote vaping, adding that it only uses the social media strategy to reach adult smokers.14

Heated Tobacco Products

Unlike its competitors, Imperial has shown little appetite to develop and market Heated Tobacco Products (HTPs).1516 Whereas Philip Morris International (PMI) and British American Tobacco have stressed the ‘reduced risk’ potential of HTPs,1718 Imperial has publicly challenged the HTP reduced risk claim, asserting that “there’s no difference really between those products and traditional tobacco products” and “It’s probably better described generically as ‘heat and burn’ rather than ‘heat not burn'”.16

In 2015 Imperial scientists published a study in the Environmental Analytical Chemistry journal that concluded that PMI’s IQOS released tobacco-containing side stream emissions, and recommended that HTPs should be covered by smoke-free legislation.19

Market analysts and investors have criticised Imperial for not venturing into the HTP category.20Perhaps bowing to shareholder pressure, Imperial’s chairman, announced in February 2018 that the company had “multiple formats under development”, and that it had trialled them in Europe and Japan.2122 In May 2018, the company further reported that it was “progressing optionality in heated tobacco, with second stage consumer trials planned in the next few months”.13

In April 2019 Imperial announced that it would start selling its HTP device, called Pulze, from May 6 in the city of Fukuoka in Japan.23 (PMI and Japan Tobacco products dominate the Japanese HTP market, where e-cigarettes containing nicotine are banned. For details see Heated Tobacco Products.)

Accordingly, Imperial’s public stance on the harm reduction  potential of HTPs changed, stating that heated tobacco “releases nicotine and other tobacco emissions at substantially lower levels than cigarettes”.24 It characterised Pulze as a “potentially harm reduced” alternative.25

In 2020, Imperial announced it would market its HTP in Europe, trialling it in two unspecified European countries.7
In September 2021, it began test marketing Pulze in the Czech Republic and Greece.2627 Its iD heat sticks went on sale in four flavours: “Rich Bronze, Balanced Blue, Capsule Polar, and Ice”.27

Investment in Medicinal Cannabis

Since 2018, Imperial has dabbled in medicinal cannabis. In April 2018 Imperial invested in Oxford Cannabinoid Technologies (OCT) which describes itself as managing “a wide-ranging research program that investigates the medical potential of cannabinoids across different therapeutic areas.”28 OCT is licensed by the Home Office.

Matthew Phillips, Chief Development Officer at Imperial, said: “We are pleased to be partnering with OCT. Cannabinoid products have significant potential and our investment enables Imperial to support OCT’s important research while building a deeper understanding of the medical cannabis market.”2930

In an interview in April 2019, Imperial’s then Chief Executive Officer Alison Cooper refused to disclose the amount invested in OCT but said that it was an “interesting area to look at”.14

In September 2019, a “partnership agreement” was finalised between Imperial and Canadian cannabis producer Auxly Cannabis Group.3132 As part of the deal, Imperial paid GB£85 million to acquire 19.9% stake in Auxly. Imperial will also give Auxly “worldwide licences for its vaporization technology” and access to its subsidiary Nerudia.31 Auxly has also become “an exclusive partner for Imperial’s cannabis-related business activities”.31 It is unclear whether this arrangement precludes Imperial from making further partnership deals with cannabis companies.

TobaccoTactics Resources

Relevant links

TCRG Research

For a comprehensive list of all TCRG publications, including TCRG research that evaluates the impact of public health policy, go to the Bath TCRG’s list of publications.

References

  1. Euromonitor International, Global Tobacco Key Findings Part 2: Vapour Products. August 2016
  2. M. Phillips. Quality Growth- New Consumer Experiences. Imperial Brands Investor Day, 8 June 2016
  3. O. Tant, Investing for Growth. Imperial Brands presentation. Barclays Global Consumer Staples Conference. Boston, September 2017
  4. Imperial Brands, Potentially Harm Reduced Products, undated, accessed August 2021
  5. Imperial Brands, Next Generation Products: Overview, Imperial Brands website, 2018, accessed February 2018
  6. BBC News, Imperial Brands, BBC Market Data website. 5 February 2020, accessed August 2021
  7. abcdImperial Brands, Our Transformation to Unlock Value: Capital Markets Event, 27 January 2021, accessed March 2021
  8. P. Nilsson, Imperial Brands turns focus back to cigarettes, Financial Times (behind paywall), 27 January 2021, accessed August 2021
  9. Imperial Brands, Annual Report and Accounts 2016, Delivering Against Our Strategy.
  10. A. Cooper, R. Dyrbus, Sustainable Growth; Growing Cash Returns presentation, Imperial Brands Investor Day 26 February 2013, accessed April 2017
  11. Reuters, Imperial Brands buying UK nicotine liquids maker Nerudia, 1 November 2017, accessed February 2018
  12. Fontem Ventures, blu website, undated, accessed May 2017
  13. abcImperial Brands, Interim Results for the six months ended 31 March 2018: Delivering our strategy in tobacco and NGP, Imperial Brands website, 9 May 2018, accessed May 2018
  14. abcS.Meddings Interview: Imperial Brands’ Alison Cooper sees light at the end of tobacco road ,The Sunday Times, 14 April 2019, accessed April 2019 (behind paywall)
  15. Tobacco Reporter, Imperial shuns concept of heat-not-burn products, 7 May 2015, accessed February 2018
  16. abM. Geller, Imperial shuns ‘heating products’ pushed by Big Tobacco rivals, Reuters, 6 May 2015, accessed February 2018
  17. Reuters, FDA’s tobacco stance faces test with Philip Morris iQOS device, 22 January 2018, accessed February 2018
  18. British American Tobacco, Developing less risky products, undated, accessed February 2018
  19. G. O’ Connell , P. Wilkinson, K.M. Burseg, et al. Heated tobacco products create side-stream emissions: implications for regulation. J Environ Anal Chem, 2015;2:2380-91
  20. T. Boles, Imperial Brands is expected to reassure the market with new next generation products, cityam.com, 5 November 2017, accessed February 2018
  21. Imperial Brands, AGM Update, 7 February 2018, accessed February 2018
  22. M. Williamson, Presentation at the Annual General Meeting 2018. 7 February 2018. Accessed February 2018
  23. L.Du and G.Huang, Imperial Brands jumps into Japan’s crowded heated-Tobacco Market, Bloomberg Technology, 25 April 2019, accessed May 2019
  24. Imperial Brands, 2018 Annual Report, 2018, Accessed August 2021
  25. Imperial Brands Science, Pulze: the science of heat not burn. 30 September 2020, accessed August 2021
  26. Imperial Brands, Pulze and iD heated tobacco products launched in Czech Republic, press release, 1 September 2021, accessed September 2021
  27. abImperial Brands: Market trials underway for heated tobacco products, Market Screener, 9 September 2021, accessed September 2021
  28. Oxford Cannabinoid Technologies, About Us, undated, accessed April 2019
  29. Imperial Brands, Imperial Brands Ventures Ltd announces investment in Oxford Cannaboid Technologies, Press Release 28 June 2018, accessed October 2019
  30. Tobacco giant Imperial Brands invests in medical cannabis, BBC News, 28 June 2018, accessed October 2019
  31. abcR. Harris, Tobacco companies invest in cannabis, Time Bulletin, 29 September 2019, accessed October 2019
  32. Auxly Cannabis Group, Auxly Closes C$123 Million Investment and R&D Partnership with Imperial Brands and Strengthens its Board, 25 September 2019, accessed October 2019
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