From Tobacco to Something Better Our Approach to Next Generation Products
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FROM TOBACCO TO SOMETHING BETTER OUR APPROACH TO NEXT GENERATION PRODUCTS www.imperialbrandsplc.com WELCOME Imperial Brands is a dynamic This report AN EXCITING FUTURE 03 fast moving consumer goods provides an OUR NGP TIMELINE 05 company borne out of a strong overview of tobacco heritage. our approach THE PUBLIC HEALTH OPPORTUNITY 06 to NGP and We have continually evolved THE RISK SPECTRUM 07 charts the to embrace changing market dynamics and develop new progress we’re PRODUCTS EXPLAINED: VAPOUR 09 consumer experiences. making in transitioning VAPOUR PRODUCTS TODAY 10 We are currently witnessing the biggest consumers consumer shift in our history, with millions VAPOUR RESEARCH AND DEVELOPMENT 11 of smokers around the world choosing to from tobacco switch to less harmful Next Generation to something THE EVOLVING VAPOUR DEBATE 13 Products (NGP). better. GETTING REGULATION RIGHT 14 As a result, we are increasingly focusing our attention on developing and expanding PRODUCTS EXPLAINED: our NGP portfolio. We want to reduce the SNUS AND HEATED TOBACCO 15 health impact of tobacco by encouraging CONTENTS smokers to switch to products with lower CREATING SOMETHING BETTER health risks. FOR THE WORLD’S SMOKERS 16 AN EXCITING FUTURE We have a thriving Along the way we have built our knowledge and expertise, and developed and expanding Next an enduring relationship with the original Generation Products inventor of the e-cigarette, Hon Lik. Our NGP subsidiary business Fontem (NGP) business that’s Ventures acquired Mr Hon’s global patent committed to creating portfolio for vapour technologies in 2013 and welcomed him to the business as the something better for head of our Research and Development the world’s smokers. team in China – a position he still holds to this day. vapour That means offering smokers less harmful The acquisition of the pioneering is the largest alternatives to cigarettes – a new range of blu vapour brand two years later was NGP category products that have the potential to reduce another important milestone. blu has smoking-related disease. since become the focal point of our and offers the Our focus on researching, developing and NGP portfolio and is available in an greatest commercialising products that reduce harm ever-expanding range of formats to potential for has created a strong track record in science maximise its appeal to adult smokers and NGP. and vapers. long-term sustainable In the 1950s Imperial opened its first Last year we further strengthened our scientific laboratory and played a leading NGP credentials by acquiring the Nerudia growth. role in developing new equipment and business, substantially enhancing our techniques for analysing tobacco and smoke. innovation capabilities, as well as our This paved the way for decades of research manufacturing and science expertise. into tobacco and non-tobacco products. FROM TOBACCO TO SOMETHING BETTER 03 AN EXCITING FUTURE We have never been better placed to be able to transition consumers from cigarettes to something better. Nerudia is focused on creating a right way and that consumers understand I hope you enjoy learning more compelling pipeline of innovative the benefits they can offer. We need a about our approach to NGP. products and its entrepreneurial spirit legislative framework that allows this We’ve made great progress so far is proving to be a winning addition category to flourish and gives consumers and have big plans for the future. to our own vibrant culture. the confidence to trial and ultimately I’m confident that over the next switch to these less harmful products. few years we will have established In assembling the right components for NGP as a significant part of the success, we have deliberately favoured The UK is particularly encouraging from Imperial Brands business. the vapour (EVP) opportunity as it’s by a regulatory perspective; for example, far the largest NGP category. Public Health England recently said: With the technology and scientific “Vaping poses only a small fraction insights available to us today, we have of the risks of smoking and switching never been better placed to be able to completely from smoking to vaping transition smokers from cigarettes conveys substantial health benefits over to something better. continued smoking. Based on current knowledge, stating that vaping is at least By the close of 2018 we will have 95 per cent less harmful than smoking invested more than £700 million in NGP remains a good way to communicate and we will continue to increase that the large difference in relative risk level of investment to drive innovation, unambiguously, so that more improve the smoker conversion rate and smokers are encouraged to encourage smokers to switch to less make the switch from harmful alternatives. smoking to vaping.” Governments, regulators and public health bodies have a key role to play here. Alison Cooper It’s essential that NGP are regulated the Chief Executive Imperial Brands FROM TOBACCO TO SOMETHING BETTER 04 OUR NGP TIMELINE We understand society’s Established our first R&D laboratory, paving the way concerns about the health 1950s for decades of research into understanding our products. risks of smoking and Partnered with the UK Government’s Independent Scientific Committee on recognise that we have 1970s Smoking and Health to develop a tobacco substitute called New Smoking Material. an important role to play Acquired 43.5 per cent of the shares in reducing the harm 2005 in the Swedish snus business Skruf. caused by cigarettes. Took full ownership of Skruf after Since establishing our first research 2008 acquiring the remaining shares. and development (R&D) laboratory in the early 1950s, we have invested Set up Fontem Ventures to focus substantial sums in tobacco research solely on Next Generation Products. and will continue to do so in the future. 2012 We uphold high standards, rigorously Acquisition of Hon Lik’s global patent portfolio for testing and analysing our products vapour technologies from Dragonite International Limited. to ensure we continually build our 2013 knowledge and are able to meet our standards of care for consumers. In the UK Fontem Ventures launches its first e-cigarette brand Puritane. In recent years we have increasingly 2014 focused our innovation and R&D work on Next Generation Products, Acquired blu, one of the most popular and while further enhancing our capabilities 2015 best-selling vapour brands in the world. with value creating acquisitions. Acquired the UK-based vapour innovation 2017 business Nerudia. Began trialling our own heated tobacco 2017 products in Asia and Europe. International roll-out of my blu begins, taking the latest and most 2018 advanced version of the brand into significantly more markets. Fontem Ventures acquires equity stake in Cosmic Fog 2018 Vapors, a leading innovator in high quality vapour liquids. FROM TOBACCO TO SOMETHING BETTER 05 “With careful management THE PUBLIC and proportionate regulation, harm reduction provides an opportunity to improve the HEALTH lives of millions of people.” UK Royal College of Physicians, 2017 OPPORTUNITY Cigarettes are a WHAT IS HARM REDUCTION? “The wide availability of e-cigarettes known cause of serious as an alternative to tobacco is likely, When we talk about harm reduction, we mean disease in smokers and encouraging smokers to switch to alternative products overall, to be playing a positive role in many countries have with lower health risks. supporting tobacco harm reduction.” Tobacco harm reduction is based on a well-established stated aims for future public health concept that recognises that adults choose British Medical Association, 2017 generations to be smoke- to participate in risky behaviours and focusses on modifying rather than eliminating these behaviours. free. Yet over a billion adults around the world There are many examples of this approach in public policy, including the regulation of driving. Here the risk “If the great majority of tobacco smokers still choose to smoke and to the individual and society is shaped and reduced not by eliminating cars, but through driver education and vehicle who are unwilling or unable to quit will continue to do so safety standards. would switch without delay to using well into the future. Achieving harm reduction in tobacco relies on our ability to an alternative source of nicotine with provide consumers with products that pose less risk to their NGP – particularly vapour health. Until recently, these have been few and far between lower health risks, and eventually products, which do not contain and consisted largely of licensed nicotine replacement products, stop using it, this would represent a tobacco – are seen as representing such as gums and patches, and snus, an oral tobacco product a less harmful alternative to cigarettes, that contains lower toxicants than cigarettes but which is not significant contemporary public thereby creating a huge global public widely available. health achievement.” health opportunity. Now, a whole new generation of products is available. They haven’t been Leading authorities like the US Food around long enough to generate epidemiological data, which looks at health World Health Organisation, 2016 and Drug Administration (FDA) are impacts over decades, and we agree that more research is needed into the increasingly applying harm reduction long-term effects of their use. In the case of tobacco-free vapour products, thinking and strategies to their public there’s growing consensus that the risks they pose are likely to be substantially health objectives. In the UK, several lower than the risks posed by smoking cigarettes. highly regarded public health bodies have voiced their support for vapour It’s important to view harm reduction through a spectrum of risk and this is set out products and the positive role they on the following two pages. can play in harm reduction. FROM TOBACCO TO SOMETHING BETTER 06 Tobacco products that do not THE RISK involve combustion are known to produce far fewer and much lower levels of toxicants compared to SPECTRUM conventional cigarettes.