NEXT GENERATION PRODUCTS
Next Generation Products (NGPs) offer us considerable growth opportunities and we're building on the strong foundations and capabilities we have established over recent years.
Next Generation Products (NGPs) offer smokers alternatives to combustible tobacco and are broadly divided into two categories: e-vapour products (EVPs) and heated tobacco products.
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.
We are significantly stepping up our level of NGP activity in 2018 and beyond, expanding our portfolio with new product launches in new and existing markets.
“We are significantly stepping up our level of NGP activity in 2018 and beyond, expanding our portfolio with new product launches in new and existing markets.”
Matthew Phillips, Chief Development Officer
E-vapour is by far the largest and most developed opportunity within NGP. It is estimated that sales of EVPs are currently worth around $4 billion a year and could be worth more than $30 billion by 2020.
Through our subsidiary business Fontem Ventures we continue to prioritise e-vapour, by far the largest NGP category opportunity.
E-cigarettes are the most common EVPs and we are represented in this category by blu, which has strong positions in the USA and UK – the world’s two largest e-vapour markets. blu is also sold in Italy and France and will be available in a further six markets by the end of our 2018 financial year, and in a total of 20 markets by the end of the following year.
In blu, we have one of the best e-vapour brands in the world and we continue to focus on improving the consumer experience.
There are four main EVP formats: closed systems, which use a prefilled cartridge of e-liquid; open systems, where the consumer fills the device with an e-liquid; open customisable systems which allow different components to be selected by the consumer; and pod systems, which are quick and easy-to-use devices that fill a gap between early generation closed system EVPs and high performance open system devices. Pod system devices generally feature either a closed ‘pod’ containing a pre-filled e-liquid or empty pods that can be refilled.
EVPs are fundamentally different from all tobacco-based products and devices; they do not contain tobacco leaf.
A growing number of regulators and public health bodies have concluded that EVPs are less harmful alternatives to smoking and therefore have a role to play in reducing tobacco-related disease.
In the UK, for example, Public Health England and the Royal College of Physicians have concluded that EVPs are substantially less harmful than smoking.
We are committed to making a significant contribution to the growing body of research around vaping products.
This includes assessing their safety and demonstrating the potential to reduce the risk of diseases associated with smoking when adult smokers switch to our EVPs.
As a responsible tobacco manufacturer we believe that how we fulfil our obligations to consumers is important. Our investment in furthering our scientific understanding and expertise is a key element for us to deliver quality products, now and in the future.
We set high standards to meet the ever-evolving needs of consumers and regulators, and to enable the development of new and potentially safer products.
Heated tobacco is a smaller NGP category but one that is growing, most notably in Japan. We do not sell these products but continue to monitor their development.
We have developed options in heated tobacco which can be deployed should the category start showing broader signs of significant and sustainable growth.
Unlike EVPs, heated tobacco products contain tobacco and in our view should therefore be regulated and taxed as conventional tobacco products.