NEXT GENERATION PRODUCTS
We recognise the important role we can play in helping to reduce the harm caused by combustible tobacco products.
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OVERVIEW
We are committed to meeting consumer needs for Next Generation Products (NGP) and, in doing so, we seek to make a meaningful contribution to harm reduction.
We anticipate growth across all NGP categories over the next five years and by 2025, expect NGP to have a sizeable presence, accounting for around 20 per cent of the total nicotine market.
As we seek to build a successful NGP business we will be driven by local consumer preferences, focusing investment on heated tobacco in Europe and on vapour in the US, the world's largest vape market.
Our product portfolio spans all three NGP categories: vapour, heated tobacco and oral nicotine.
VAPOUR
Vapour products are battery-powered devices that heat e-liquids to create a vapour which is inhaled by the user. E-liquids are produced in varying nicotine strengths, with nicotine-free variants also available.
A growing number of regulators and public health bodies have concluded that vapour products 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 vaping is substantially less harmful than smoking.
We are represented in the vaping category by the pioneering brand blu, which celebrated its ten-year anniversary in 2019 and has strong established positions in the USA, the UK, and France.
Vapour products fall into two broad sub-categories: closed or open systems. Closed systems include the fast-growing pod format; simple-to-use devices such as myblu which feature a pre-filled pod of e-liquid to combine power with portability. Open systems enable the user to refill the e-liquid.
Regulation and public perception of vaping, particularly in the USA, continues to evolve, reinforcing our view that the industry needs a clear regulatory framework that enforces high product standards and responsible sales and marketing.
HEATED TOBACCO
As the name implies, these products heat a portion or rod of tobacco, releasing nicotine and other tobacco emissions at substantially lower levels than cigarettes.
Heated tobacco is the largest, and fastest growing NGP category, with the majority of future growth expected to come in Europe.
In Pulze, our heated tobacco device, we have a strong product proposition that has already been extensively tested with consumers in a number of our European markets.
Sales of Pulze in Japan, along with iD heat sticks, have provided us with useful consumer feedback on the functionality of the device, the robustness of the iD stick and preferences for levels of nicotine and menthol.
We have also continued to improve our understanding of the category, enhancing our in-house production and product development capabilities.
ORAL NICOTINE PRODUCTS
Through our Skruf brand, we have a strong position in snus, an oral tobacco product with a long history of use in Scandinavia.
We have also achieved good initial growth from our new generation of modern oral products, which do not contain tobacco, in a small number of European markets.
Our experience has enabled us to gain valuable consumer insights and we will continue to focus on selected European markets with a tradition of oral nicotine consumption.
SCIENCE AND INNOVATION
NGP technology is evolving quickly and we substantially enhanced our scientific and technical capabilities in 2017 with the acquisition of the innovation business Nerudia.
Nerudia is focused on developing a pipeline of NGP innovations that will accelerate smoker conversion rates and stop smokers reverting to tobacco.
The investment built on our acquisition of the global patent portfolio for vapour technologies from the original inventor of the e-cigarette Hon Lik in 2013. Mr Hon was welcomed to our business as the head of our Research and Development team in China – a position he still holds to this day.
We are committed to making a significant contribution to the growing body of research around vaping and other 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 NGP.
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.
