FROM 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-, 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 – 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 -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 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 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 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.

Smoking combustible tobacco products like cigarettes is a known cause of serious disease in smokers, including lung cancer, heart OBACCO IBLE T disease and emphysema. UST MB CO N- Public health experts worldwide have concluded that it is the NO toxicants in cigarette smoke, not the nicotine, which is the cause of smoking-related diseases. For this reason many public health bodies have indicated NGP have a role to SNUS T HEATED TOBACCO O play in tobacco reduction. B A C Tobacco products that do not involve combustion are PRODUCTS C O known to produce far fewer and much lower levels F R of toxicants compared to conventional cigarettes. E E This means they have the potential to be less O C * VAPOUR harmful to health. C A PRODUCTS B Harm reduction can only be achieved if O T

the alternative product is less harmful E L than the one it is replacing and is appealing to B I consumers. Assessing alternative products T S CIGARETTES NICOTINE in this context requires them to be placed on U B REPLACEMENT a spectrum of risk relative to conventional M PRODUCTS O

combustible tobacco products, such as C cigarettes.

The risk spectrum indicates the level of toxicants that different products emit, based on current evidence, and highlights the range of non-combustible LEVEL OF TOXICANTS alternatives to cigarettes that are available to consumers.

*Including hybrid devices that combine non-combustible and e-cigarette technologies.

FROM TOBACCO TO SOMETHING BETTER 07 THE RISK SPECTRUM Our own research has shown that vapour products emit toxicants that are up to 99% lower than conventional cigarettes.

Joe Thompson Director of Product Science

LEVEL OF TOXICANTS HEATED TOBACCO SNUS VAPOUR NICOTINE REPLACEMENT

Heated tobacco* products are devices Snus is an oral tobacco product Vapour products, also known as Licensed medicinal products, that heat tobacco to release flavour and manufactured using a pasteurisation e-cigarettes, do not contain tobacco and such as nicotine replacement products, nicotine aerosol but not at a high enough process, which has a long history deliver nicotine and flavour in the form are authorised as medicines by relevant temperature to burn it. of use in Scandinavian countries, of vapour. There are also vapour products national regulators and scientific evidence particularly Sweden. that do not contain nicotine. There is over many years has demonstrated that This results in significantly lower levels growing public health consensus that these products are significantly less of toxicants, although independent Scientific data, including long-term these products offer a significantly less harmful to health than cigarettes. research is currently limited and few population studies conducted by harmful alternative to smoking. products are in the market. independent researchers, demonstrates However, they have limited appeal to that the health risks associated with Our own research has shown that smokers because they lack the sensorial Heated tobacco is a smaller NGP category, snus are considerably lower than those vapour products emit toxicants that and behavioural aspects of the smoking growing most notably in Japan. associated with cigarette smoking. are up to 99 per cent lower than experience and therefore have a poor We currently do not sell heated tobacco conventional cigarettes. In addition, success rate at replacing smoking. We have a strong and growing products but have developed our own there is emerging evidence that these snus business, with brands like Skruf Harm reduction without consumer appeal devices and these are being tested with products encourage reduced cigarette and Knox, and see considerable provides little in the way of public health consumers in Asia and Europe. consumption and cessation, even among opportunities for future growth in benefits and as a result, we do not make those smokers who do not intend to quit Hybrid devices that combine new and existing markets. or sell these products. or reject other support. non-combustible and e-cigarette technologies sit within heated tobacco Vapour is by far the largest NGP on the risk spectrum. We do not category. Our pioneering blu brand offers currently sell these products. consumers exceptional nicotine and nicotine-free vaping experiences. blu is one of the best-selling vapour brands in the world and is available in a growing number of international markets. FROM TOBACCO TO SOMETHING BETTER 08 PRODUCTS EXPLAINED

VA P O U R

These products do not contain tobacco and Fontem deliver nicotine and flavour in the form of Ventures was an aerosol, popularly referred to as ‘vapour’. the ideal partner. THE ORIGIN OF VAPOUR PRODUCTS Their business

The idea behind the e-cigarette was first conceived by Mr Hon Lik in 2001. philosophy, A long-time smoker, Mr Hon had been using nicotine patches as a means dedication to of cutting down on his cigarette consumption. However, the patches did not provide a satisfying nicotine delivery comparable to smoking and left him innovation and with a hankering for ‘real’ cigarettes. high standards, This prompted him to contemplate alternative ways of taking in nicotine through the lungs. Having had a fascination for electronics throughout his combined with a youth and with a pharmaceutical background, where he specialised in the removal of harmful substances from ingredients, Mr Hon began experimenting start-up culture, with a cylinder that contained a wire which heated a liquid containing nicotine. was exactly what Rather than burning tobacco, this very first e-cigarette vaporised the liquid, which was then inhaled. I was looking for. In 2003, after experimenting with several prototypes and test phases, Mr Hon filed his first patent on his invention. A decade later, Fontem Ventures acquired Dragonite and its global patent portfolio for vapour technologies, securing the services of Mr Hon in the process. Since then our partnership has gone from strength to strength and Mr Hon continues to lead our research and development activities in China. Hon Lik Head of Fontem Ventures China Vapour R&D

FROM TOBACCO TO SOMETHING BETTER 09 VAPOUR PRODUCTS TODAY

Vapour is the largest and most developed opportunity within the NGP space, accounting for around 80 per cent of all NGP available today and are enjoyed by 30 million consumers worldwide.

The category has experienced phenomenal my blu is a pod format and combines a growth in recent years and is now high-performance vaporiser with a simple estimated to be worth around $4 billion liquid pod system. The device takes just a year in sales. This is expected to rise 20 minutes to charge and lasts all day. to as much as $30 billion a year by 2020, blu ACE is our latest open system as more and more smokers switch. product and the most powerful device Vapour also provides consumers with in our portfolio. It comes in an all-in-one the greatest choice of devices, with a stainless steel housing, with a built-in wide range of flavours and nicotine liquid tank, and delivers more puffs strengths available. This optionality per charge than competitor products. is integral to smokers switching to Flavours are a key aspect of the vapour, giving them the ability to change vaping experience and play an their flavour experience and control important role in attracting and nicotine levels. retaining smokers. Both my blu Our vapour brand is blu, one of the and blu ACE provide consumers myblu and best-selling in the world and available with a broad portfolio of blu ACE are our in an increasing number of markets. flavours in multiple nicotine strengths. newest devices myblu and blu ACE are our newest devices and reflect our ongoing and reflect commitment to giving consumers the our ongoing best vaping experience. commitment to giving consumers the highest quality vaping experience.

FROM TOBACCO TO SOMETHING BETTER 10 VAPOUR RESEARCH AND DEVELOPMENT

In recent years we have increased investment in our global vapour research programme, regularly publishing studies in leading international peer-reviewed journals.

Imperial Brands and Fontem Ventures We conduct extensive testing on each frequently collaborate with independent product to scientifically demonstrate institutions, regulatory bodies and that it substantially reduces the risk technology leaders to conduct research of harm compared to smoking. that is highly relevant to our consumers, As part of our product assessment, health experts and international we analyse raw ingredients and policy-makers. materials to ensure they adhere Our studies are guided and shaped by to comprehensive principles of the ongoing public policy debate around design and quality, as well as vapour products and we regularly seek developing strict manufacturing advice from science experts, academics standards. To ensure our e-liquids and the public health community to are of the highest industry ensure we produce relevant studies. standard, we also employ a large This involves addressing research gaps, team of experienced toxicologists inviting third party professionals to and other specialists to conduct critique our science through the process detailed risk assessments on all of peer reviews and regularly presenting of our product ingredients and our research at international conferences. components. We also make regular Our studies submissions to governments on the We have also built partnerships and ingredients used in our products. testing models with a number of leading are guided independent laboratories to support our product assessment. We share the and shaped results of our research with national and international standards bodies to help by the ongoing develop robust testing and manufacturing standards. We see this as critical to public policy support consumer and regulatory expectations and to maximise the harm debate around reduction potential of vapour products. vapour products.

FROM TOBACCO TO SOMETHING BETTER 11 VAPOUR RESEARCH AND DEVELOPMENT

We have developed a tiered approach to product assessment, which can be employed to evaluate whether or not our products are both significantly less harmful than smoking cigarettes and are an effective alternative for smokers.

We apply innovative systems and the Fontem Ventures also conducted one of latest technologies to assess and analyse the first long-term vapour clinical studies, vaping products. We follow a three step assessing the use of the Puritane brand process that incorporates non-clinical over two years. studies, clinical studies, and population The findings of this study showed there impact assessment. were no safety concerns in smokers using In a nutshell, best Research conducted by Fontem Ventures Puritane for two years and no increase showed that blu e-cigarette vapour is over in body weight, something which is estimates show 95 per cent less toxic than smoke from a frequently reported by smokers who cigarette, contains over 99 per cent fewer choose to quit smoking. Moreover, the toxicants and carcinogens and does not use of the vaping product was associated e-cigarettes are negatively impact indoor air quality. with a reduction in conventional cigarette consumption and a reduced exposure to Encouragingly, our clinical data has cigarette smoke chemicals. shown in biomarkers we have studied that the reductions in levels of HPHCs We are very encouraged by the findings following exclusive use of blu e-cigarettes from our scientific research programme were almost indistinguishable from so far and believe it underscores the 95% reductions in smokers who stopped enormous potential of the category. less harmful smoking altogether during the same time. We are open and transparent about our Other recently published clinical research research and have dedicated websites to your health has also shown that smokers who have where our work can be seen: switched to vaping have significantly www.imperialbrandsscience.com than normal lower exposure to carcinogens and www.fontemscience.com toxicants found in cigarette smoke, with cigarettes. reductions largely indistinguishable from complete smoking cessation or the use of licensed nicotine replacement products. Public Health England www.fontemscience.com

FROM TOBACCO TO SOMETHING BETTER 12 E-cigarettes are not a THE EVOLVING gateway to smoking – in the UK, use of e-cigarettes is VAPOUR DEBATE limited almost entirely to those who are already using, or have used, tobacco. Some regulators and public health officials have expressed concerns that EVPs could act as a ‘gateway’ to tobacco use among non-smokers, or that vaping Royal College of Physicians, 2016 could ‘renormalise’ smoking.

These fears are unfounded, primarily UK Government advice to employers because the statistics to date do not encourages workplaces to adopt support the view that significant numbers pro-vaping policies that make it as of non-smokers are regularly vaping. easy and convenient as possible for In fact the opposite is true with data smokers to switch on the basis that showing that vapour products are actually there is “currently no evidence of harm acting as a gateway from or ‘roadblock’ from second hand e-cigarette vapour.” to smoking, accelerating declines in This view is shared by the UK National smoking rates. Health Service, Chartered Institute for Our own research does not show vaping Environmental Health, Cancer Research is a gateway, neither does research by UK and many others. numerous public health bodies. The UK The scientific evidence to date indicates that Royal College of Physicians described such the potential health risks associated with claims as ‘unfounded’ and Public Health vaping are highly likely to be much lower than England said: ‘there is no evidence so far continued cigarette smoking. that e-cigarettes are acting as a route to smoking for children or non-smokers.’ However, evidence from the USA and UK suggests consumer understanding of the risks of vaping Other questions have been asked about the relative to smoking is not well understood. For example, potential effects of vaping on bystanders. research by the anti-smoking group ASH suggests that Fontem Ventures’ published scientific many more adults consider vapour products to be as research shows that indoor vaping does harmful as cigarettes. not release chemicals or toxins into the This should be concerning for all stakeholders and needs air at levels that would pose any air quality urgently addressing. Governments and public health bodies issue to bystanders. This is consistent with around the world have a clear responsibility to provide accurate other studies of this type which provide and consistent messaging to ensure that smokers can make evidence for sensible regulation. well informed decisions.

FROM TOBACCO TO SOMETHING BETTER 13 As vapour GETTING products do not contain REG U L ATI O N tobacco, they should be RIGHT excluded from all existing We support proportionate evidence-based regulation and future that encourages smokers to use alternative products tobacco that have the potential for reduced harm. We believe legislation, there should be a clear distinction between tobacco and non-tobacco products. including As vapour products do not contain highest product quality standards and excise. tobacco, they should be excluded from are not marketed or presented in a way all existing and future tobacco legislation, that directly appeals to children or including excise. non-smokers. Vaping should be permitted in public Advertising should be permitted via TV, places but vapers should be courteous radio, internet, print and outdoor media. to those around them. It is unjustified to Sampling activities for adult smokers apply smoke-free environment legislation and vapers users should also be allowed to vaping products, since they are not in line with regulation for other adult tobacco products, do not contain tobacco, consumer goods, such as alcohol. do not generate side-stream emissions Vaping products are for adult smokers, and pose no known risk to bystanders and current vapers. We fully support Tobacco-based products, based on current science. and advocate for legislation prohibiting such as the emerging category of We believe it should be up to individual sales of vaping products to children and heated tobacco products, should be establishments and business owners voluntarily implement a number of youth treated in the same way as tobacco. to decide whether or not to permit vaping protection initiatives, including online In the absence of independent data and inside their premises. age-verification mechanisms and clear public health endorsement, all tobacco product labelling that states “not for sale A growing body of research shows products, new and existing should be Until clear scientific evidence is available to minors”. flavours play a critical role in attracting taxed like tobacco. Strict enforcement for all NGP categories, we urge regulators and retaining smokers into vaping. Vaping products should not be subject of existing tobacco regulatory frameworks to take a responsible approach and to Flavoured e-liquids should therefore to excise tax or incorporated into is necessary, with no labelling or draw clear distinctions between tobacco be permitted provided they meet the existing tobacco excise frameworks. marketing exemptions. and non-tobacco products.

FROM TOBACCO TO SOMETHING BETTER 14 PRODUCTS EXPLAINED HEATED SNUS

TOBACCO Snus is an oral tobacco product, which is manufactured using a pasteurisation process under strict Heated tobacco is a smaller NGP category, showing quality and regulatory controls. notable signs of growth in Asia. Heated tobacco Snus is sold in different formats, products, also referred to as heat-not-burn, heat a such as loose or pouched products, portion or rod of tobacco, releasing nicotine and other and is available in a wide variety of There tobacco emissions at substantially lower levels than tobacco and non-tobacco flavours. is a large combustible cigarettes. Snus has a long history of use in Scandinavian body of In late 2017 we began trialling our own heated tobacco products in Asia and Europe. countries, most notably Sweden. Scientific data, including long-term population studies conducted Regulatory and public health bodies continue to assess the risk profile of heated evidence that by independent bodies, demonstrates that the tobacco, with the UK Committee on Toxicity (COT) recently stating that although health risks associated with snus are considerably it was unable to assess the absolute risk ‘the exposure to compounds of concern shows snus lower than those from cigarette smoking. in using heat-not-burn tobacco products is reduced compared to that from conventional cigarette smoke’. Swedish males have the lowest rate of use provides tobacco-related mortality in the EU and the lowest Similarly, the US FDA advisory body, TPSAC (Tobacco Products Scientific Advisory rate of lung cancer, as well as the lowest male a viable Committee) has concluded that certain heated tobacco products reduce the exposure rate from smoking-related cardiovascular of the individual to harmful components but that additional studies are required to diseases and the lowest male death rate from consumer evaluate the final nature and extent of potential harm reduction. other cancers that are attributed to tobacco. Whilst heated tobacco products have the potential to reduce the exposure to alternative Independent evidence has concluded that harmful or potentially harmful chemicals, it is unclear at this stage the extent the oral use of snus does not seem to be linked to which these products presents less risk of harm or can reduce the risks of to cigarettes. to the risk for cancer of the oral cavity or lung, tobacco-related diseases. despite Sweden having the same EU average We believe that further comprehensive, peer-reviewed independent scientific for tobacco consumption. research should be conducted to review the reduced risk potential of heated There is a large body of evidence that shows tobacco products. snus use provides a viable consumer alternative In our view, unlike vapour products, heated tobacco products contain tobacco to cigarettes and we have a strong presence in and should therefore be regulated and taxed as tobacco products. this category through our snus business Skruf.

FROM TOBACCO TO SOMETHING BETTER 15 CREATING SOMETHING BETTER FOR THE WORLD’S SMOKERS

At the beginning of this report Chief That’s an ambitious but achievable This is a brand that provides more Executive Alison Cooper outlined our target and exponential growth of this than just functional delivery; it offers commitment to creating something nature requires three things: ‘something better’ – a better vaping better for the world’s smokers – providing experience than competitor brands • Excellence in innovation: developing smokers with a portfolio of products that and a better risk profile than cigarettes Each time we products that deliver the best consumer are less harmful than cigarettes. and other tobacco-based NGP. experience, and transition a In assembling the right components to As you will have read earlier in the report, • Strong brand equity: creating a brand deliver this, we’ve focused on vapour, our own research shows that blu’s vapour that truly engages the consumer. smoker to a the biggest NGP category and the one is over 95 per cent less toxic than smoke that has the greatest potential. • Omni-channel capabilities: vapour from a cigarette, contains up to 99 per cent tobacco-free blu products are sold in a broader range fewer toxicants and carcinogens and does There are currently 30 million vapers of channels than tobacco, such as not negatively impact indoor air quality. worldwide versus seven million users offering we are online and specialist vape stores. of heated tobacco products. We currently Each time we transition a smoker to a have half a million of those vaping We believe we have that winning tobacco-free blu offering we are moving moving them to consumers and we aim to increase combination with the blu franchise. them to a product that is considerably that number to eight million by 2020. less harmful. a product that is blu is a pioneering vapour brand. It’s consistently rated as one of the Historically blu’s been available in four considerably very best available and generates a real core markets – the USA, UK, Italy and emotional connection with consumers. France – where it’s been steadily building less harmful. a loyal following of consumers. We’re now substantially adding to those numbers as we expand the brand’s international profile.

FROM TOBACCO TO SOMETHING BETTER 16 CREATING SOMETHING BETTER FOR THE WORLD’S SMOKERS

The rollout to 2020 will continue at pace and along the way we’ll be blu is a pioneering continually improving the consumer experience with the game-changing vapour brand. It’s innovations being developed by our dynamic innovation arm, Nerudia. consistently rated as one We’re also using innovation to simplify our products. This reduces cost, enabling of the very best available us to scale and commercialise our operations more rapidly. and generates a real Our growth plans are bold and exciting. emotional connection Tobacco will be our core business for many years to come, generating the with consumers. funds to invest in NGP. But over time that balance will shift and you will see NGP making a material and sustainable contribution to our financial delivery, as we accelerate the transition of smokers to something better.

2020

MORE More Markets, More Consumers MARKETS 2019

> 20 2018 MARKETS 2017 > 10 > 5 MARKETS MARKETS Matthew Phillips 0.5m 1.5m 4m 8m Chief Development Officer Imperial Brands

FROM TOBACCO TO SOMETHING BETTER 17