Clear The Air News Tobacco Blog Rotating Header Image

June 6th, 2015:

Illicit Cigarette Trade The Tobacco Atlas

Call To Action

Governments should not heed tobacco industry threats of rising illicit trade as an excuse to postpone or avoid implementing strong tobacco control measures, but should take active measures to fight illicit trade, such as employing comprehensive track-and-trace systems.

In the past, tobacco companies countered policy proposals aimed to control tobacco use by arguing that cigarettes were not harming the health of smokers. Few people would believe those arguments today. That is why tobacco lobbyists reoriented the debate, and today the primary argument that the tobacco industry uses to oppose regulation is that new tobacco control measures will cause a massive increase in cigarette smuggling.

Because of the competing interests between profit-maximizing tobacco companies and public health and welfare concerns, arguments regarding illicit tobacco trade that tobacco companies are presenting in public discussions around new tobacco control regulations should be treated with particular caution. Studies paid for and presented by cigarette manufacturers are generally not independently-verified or peer-reviewed and, unlike academic research studies, are not replicable. Growing evidence suggests that these industry-commissioned studies overstate the illicit cigarette trade problem.

Tobacco companies are among the main stakeholders benefiting from illicit cigarette trade. Smuggling helps these companies generate higher profits by enabling them to pay tobacco taxes in jurisdictions with lower levies, or to not pay taxes at all. It has been well documented that the tobacco industry’s various business strategies to expand tobacco sales facilitated the illicit cigarette trade. Worldwide, transnational tobacco companies have been found guilty of organizing illicit tobacco trade, and have paid billions of dollars in fines and penalties in compensation.

Implementation of tracking and tracing measures, such as unique codes on every pack, would help to combat illicit trade. The Protocol to Eliminate Illicit Trade in Tobacco Products, the first Protocol to the WHO FCTC, requires parties to implement such tracking and tracing systems. “Codentify”, a track-and-trace system promoted by the tobacco industry, has many limitations, but there are other effective systems for monitoring the supply chain of tobacco products that are independent from the tobacco industry.

Exaggerated Impact: Tax Increases

image002 (1)


“This tax rise is further good news for criminals who already view the UK as a smugglers’ paradise and do not care what age their customers are.”
—Japan Tobacco International, 2010


Due to periodic cigarette tax increases, the inflation-adjusted price of cigarettes in the UK increased by 37% from 2001 to 2012. At the same time the illicit market share dropped
by over two thirds.

Exaggerated Impact: Plain Packaging

image003 (1)


“At the end of the day no one wins from plain packaging except the criminals who sell illegal cigarettes around Australia.”
—British American Tobacco Australia, 2012


No increase in availability of illicit tobacco was observed following the implementation of plain packaging in Australia.

Exaggerated Impact: Display Ban



“We believe that product display bans … foster illicit trade in tobacco products, as it is much easier to disseminate such products if they do not need to be displayed.”
—Phillip Morris International, 2010


No change in prevalence of illicit cigarettes was observed following the 2009 implementation of display bans in Ireland.

Exaggerated Impact: Pack size restrictions



“The introduction of minimum
pack sizes of 20 for cigarettes…would ban the sale of 2 in 5 cigarette packs…, thereby forcing smokers to buy… much cheaper products from illicit channels.”
—Japan Tobacco International, 2012


While in the mid-2000s more than 15% of all cigarettes smoked in Finland were sold in packs of less than 20 sticks, these packs were banned in 2008. As indicated by seizure data, there is no sign that the ban was followed by an increase in illicit cigarette trade.

Exaggerated scope

Tobacco industry estimates of illicit cigarette trade vs. estimates from two surveys using transparent and rigorous academic methods; Warsaw, Poland, September – October, 2011


Industry involvement

The tobacco industry was, and almost certainly still is, involved in cigarette smuggling.


In November 2000, the European Commission filed a civil action against Phillip Morris and RJ Reynolds, accusing the companies of being involved in smuggling cigarettes. Just after the lawsuit, the inflow of illicit cigarettes to Europe suddenly declined.

Exaggerated Urgency


In South Africa, the tobacco industry has created the false impression that illicit trade was rapidly growing, which according to the industry’s own estimates was not the case.

Industry Propaganda

Illegal cigarettes: Who’s in control?, a video created and distributed by British American Tobacco, tries again to link government regulation of the tobacco market to illicit trade and organized crime.

The UK employs thousands of well-equipped staff working to detect, investigate, and stop the illicit tobacco trade. Each year, at a cost of under GBP100 million, this strategy PREVENTS A LOSS OF GBP1 BILLION in tobacco taxes: A return on investment of 10 to 1.

“‘Illicit’ is the industry’s perfect response to controls on tobacco” -Anna Gilmore, professor of public health at the University of Bath.

EU Illicit Cigarette Trade Agreements With Tobacco Industry Have Failed

The tobacco industry’s lawyers have largely outsmarted the EU governments.

Agreements with the industry, originally intended to address the illicit cigarette trade problem in Europe, have instead primarily served the tobacco industry by effectively securing their strong political presence in Europe, thereby threatening progress in tobacco control.

In the 2000s, tobacco companies were accused of facilitating illicit cigarette trade to Europe. To address this problem, the European Union (EU) signed agreements with the four major transnational tobacco companies to deter them from further involvement in the illicit cigarette trade. Within those agreements, the companies agreed to make payments equivalent to all evaded taxes in the event of any large seizures of their genuine products. These payments were intended to serve as a penalty to the industry for failing to control their supply of cigarettes to the illegal market.

The agreements, however, have not worked as intended. Because customs officials rely on the industry to determine whether cigarettes are counterfeit (not eligible for seizure-based payments) or genuine (eligible for the payments); not surprisingly, perhaps, in most cases of large seizures, the industry has simply claimed that the seized cigarettes are counterfeit.

Despite the failure of the agreements, negotiations to explore a possible extension for one of them are currently underway. The EU must take immediate steps either to end the agreements or to ensure accurate independent verification of whether a seizure is counterfeit product.

The illicit cigarette trade is growing… Or is it?

The tobacco industry uses a little “sleight of hand” to misrepresent trends in illicit tobacco trade to serve their narrative of an existing or looming problem. In most cases, their claims articulate a half-truth at best. For example, Japan Tobacco International recently claimed that “the illegal tobacco trade in Ireland has grown” and that the trends “have shown a consistent gradual increase” from 2011 to 2013. To make their point, the company used illicit cigarette market share rather than the absolute number of illicit cigarettes smoked.
Relying on the illicit market share measure misrepresented actual trends in illicit cigarette consumption: while, according to the industry study, in absolute terms the illicit cigarette consumption in Ireland was in decline, the illicit market share increased, because legal cigarette consumption declined faster than the consumption of illicit cigarettes.

Similarly, in Guatemala there is a recent flat-to-downward trend in the absolute number of illicit cigarettes smoked, but the market share grew because overall consumption declined markedly.

In sum, we must track tobacco industry claims about illicit trade in cigarettes very closely and must counter their false narratives with an accurate portrayal of reality, particularly when they misrepresent the data to promote the idea that illicit trade is a result of successful tobacco control.


We present figures for Ireland and Guatemala to show a pattern rather than to report the precise number of legal and illegal cigarettes consumed. The Ireland figure is based on data from the European Commission (2015) and Japan Tobacco International (2014), so we caution that the data generated by the industry might not be accurate. It is important to note that the illicit cigarettes in the Ireland figure include contraband, counterfeit, illegal whites, duty free, and cross-border purchasing. The Guatemala figure uses data from Euromonitor International, which might also have some reliability issues.

Historical Revisionism of Illicit Trade Data

The Fourth Edition of The Tobacco Atlas showed a global map of illicit trade estimates produced by academic and commercial sources. While these data were the best available at the time and help us in some ways to understand the broader context, the authors of the Fifth Edition of The Tobacco Atlas also determined that many of the commercial estimates were unreliable and fluctuated without sufficient explanation from year to year.

For example, as we see in this figure for South Africa, the commercial market research firm, Euromonitor International, has substantially and retroactively revised its oft-used illicit cigarette trade estimates (as it has done for other countries, too). Accordingly, we strongly encourage researchers around the world to use rigorous, transparent and replicable methods to estimate illicit cigarette trade volumes in their home countries, like the “Gap Method” developed by American Cancer Society researcher Evan Blecher (2010), if they wish to reference specific illicit trade volumes.

The lack of reliable and consistently calculated, cross-country data for illicit trade flows generates sufficient doubt for us to exclude such data almost entirely from the Fifth Edition of The Tobacco Atlas.


Euromonitor figures are the volume of illicit cigarettes as a percent of the total cigarette market in South Africa. Credit goes to Evan Blecher for developing and updating the estimates of illicit trade volume using the gap method in South Africa.

Almost All Illicit Cigarettes Began Legally Somewhere Else

Global Illicit Trade Makeup According to Philip Morris International

Note: figures are in Billions of Sticks for 2013

The tobacco industry narrative around illicit trade issues makes it seem as if illicitly traded cigarettes materialize out of thin air or that counterfeiting gangs are responsible for making all of them.

This, however, is not the case. In the actual figures that they present to their investors, Philip Morris International (PMI) asserts that out of the claimed 3 trillion cigarettes sold outside of China in 2013, only 339 billion of those were internationally-traded illicit cigarettes, and a paltry 0.22% of the total global cigarette market (just 7 billion sticks) was made by illegal counterfeiters.


Illicit trade volumes and legal consumption are from PMI and do not include data on China’s cigarette market. There is no reliable source for similar data for China’s market. Note, too, that the Tobacco Atlas does not use these illicit trade volumes anywhere else in the publication beyond this figure and the Atlas authors do not endorse the accuracy of these estimates.

THE LONG READ: How the cigarette kings bought the vaping industry

KINGSLEY Wheaton found himself in the middle of a coup d’état. It was 1999. At 23, he had joined the cigarette manufacturer, Rothmans, who had sent him to Dubai.

When British American Tobacco (BAT) acquired Rothmans, Wheaton was relocated to West Africa, to Abidjan, the commercial capital of Ivory Coast, to promote a portfolio of brands including Craven A, Benson & Hedges and Rothmans.

Abidjan, colloquially known as the Paris of Africa, was a desirable posting, but, at the turn of the millennium, stability was ending. On Christmas Eve, President Henri Konan Bédié was overthrown. “We were locked in our houses with gunfire going on for three days,” Wheaton says. “It was quite spicy.”

Fifteen years later, Wheaton was in another potential conflict. In the intervening years, he had run the Russia office for BAT, and had become the youngest-ever board member at the world’s second-largest international tobacco firm.

At the end of 2014, BAT rewarded his hard work by putting him in charge of their ‘next-generation products’, responsible for devices that deliver nicotine without smoking. Now 41, thickset and goatee-bearded, Wheaton was charged with entering his company into a field that had the potential to destroy its traditional operations.

“Now, you’ve got to deliver, and the world awaits, and BAT wants results,” he says. “But that’s fine. That’s all part of that excitement, I suppose.”

Since the 1950s, the world’s major tobacco companies have faced one setback after another. In a study of 40,000 British doctors, that began in 1951, British epidemiologists, Richard Doll and Austin Bradford Hill, demonstrated the link between tobacco smoking and disease.

In the years that followed, Western governments introduced increasingly punitive regulatory and taxation regimes. The US banned TV advertising in 1970. Cigarette logos faded from Formula 1 cars, and health warnings on packs proliferated in size and punch.

Ireland banned smoking in pubs and restaurants. Finally, in March, 2015, the Irish and British governments followed Australia’s example and introduced plain packaging.

Tax now accounts for 80% of the price of cigarettes in the UK and adult smoking prevalence — 22% for men and 17% for women — is less than half its 1974 levels. (According to the Tobacco Manufacturers’ Association, the typical price of a packet of 20 premium cigarettes in Spain is €5.26 and in Poland €3.81, compared to £12.50 in the UK and €10 in Ireland. 38% of Polish and 33% of Spanish adult males smoke, according to the latest World Bank data [2011].)

Though the odds were stacking higher against them, the tobacco firms could still cope. Big Tobacco acclimatised to falling demand; the developing world was a growing market and, paradoxically, heavy tax regimes in the West disguised price hikes by the manufacturers. When much of the price is taxation, the manufacturer has a significant increase in share, with a relatively small increase at the retail level. The big-four global tobacco companies made €30bn in pre-tax profits in 2014.

Lately, though, change has been more drastic. In 2003, a Chinese technologist, Hon Lik, invented the electronic cigarette, which delivers nicotine through an aerosol of propylene glycol and glycerin, rather than via the combustion products of dried tobacco leaves.

Independent producers pioneered the first ‘e-cigarettes’, which were crude. Big Tobacco stood on the sidelines, content with the status quo. Soon, though, e-cigarettes improved and the market scaled up. Last year, global sales accounted for €4bn, a fraction of the €700bn that conventional cigarettes tallied in 2013, but still a significant sum. Pundits suggested that, in time, e-cigarettes would change the way nicotine was consumed.

“It’s game-changing,” says Bonnie Herzog, an analyst at Wells Fargo, in the US, and one of the most bullish exponents of e-cigs and other “reduced-risk products”. “I’m of the view that, in the next decade, consumption of these products will surpass consumption of tobacco cigs.”

Big Tobacco began to realise that e-cigarettes were not just a fad, but a new threat to their established markets. And they might be the prototype of a product the industry had long searched for in vain: the safer cigarette.

“The Kodak scenario, they talk about that,” says David Sweanor, a law professor at the University of Ottawa and veteran of tobacco control, referring to the film manufacturer that filed for bankruptcy in 2012, pole-axed by digital photography. “They don’t want to do a Kodak.”

“The potential for a product which satisfies their customers, but doesn’t do anything like the harm, is something they’ve been dreaming of for a long time,” says Jonathan Fell, who runs Ash Park Capital, a fund that invests in tobacco stocks. Latecomers to the e-cig party, the tobacco firms now began to move. Their mergers and acquisitions teams bought up independent e-cigarette producers. In April, 2012, American brand, Lorillard, purchased Blu for $135m. In 2014, Japan Tobacco took Zandera, maker of E-Lites. Imperial Tobacco concluded a deal with Hon Lik, the Chinese inventor of the e-cigarette.

Philip Morris International, the makers of Marlboro, bought Nicocigs. And, in December, 2012, British American Tobacco purchased a Manchester start-up, CN Creative. “They want a dog in the fight,” says Clive Bates, a former head of the campaign group, Action on Smoking and Health, who now blogs on the e-cigarette industry.

BAT’s research and development facility sits in a former cigarette factory in Southampton, on the south coast of England. Downstairs, a production line remains for trialling new products. All UK workplaces went smoke-free in 2007. However, BAT has, by special dispensation, a room where their internal blenders and testers can still work in a smoke-wreathed environment.

At the centre of this complex sits Dr David O’Reilly, BAT’s group scientific and R&D director. O’Reilly, who makes carefully measured movements, says that BAT’s experiments with alternative products predated the advent of the e-cigarette.

The R&D department was created in the 1950s in response to Doll and Hill’s report on the dangers of smoking. The first head of R&D was the physicist, Charles Drummond Ellis. His remit: to invent a safer cigarette. “The report came out,” O’Reilly says. “The response of the board was, ‘Okay, so we need to find out what’s causing this in cigarette smoke and remove the problem’.”

That quest proved long, and, ultimately, chimerical. At BAT, a final clinical study was concluded only three years ago, in 2012. The firm modified the source tobacco plant and inserted selective filtration devices into cigarettes.
But the resulting product was no safer. “There was disappointment, but that was offset with, ‘We’ve got a clear answer’,” O’Reilly says. “This gave us a very clear conclusion that there was no merit in pursuing this any further.”

O’Reilly says that when e-cigarettes first appeared, the company was uninspired by its initial iterations, and believed that European regulation would categorise such products as medicinal — a threshold that would be hard to meet using the propylene glycol model.

In June, 2011, therefore, BAT entered into a partnership with Kind Consumer, a company working on a nicotine inhaler that uses HFA, a chemical in asthma inhalers. In September, 2014, BAT became the first tobacco company to gain a UK medicines licence for a product it called Voke.

The founder of Kind Consumer is 32-year-old Alex Hearn. As an undergraduate at Oxford University, medical invention fascinated him. A smoker, he read scientific papers that suggested that the real harm came from the smoke, not the nicotine.

Hon Lik, (below), the inventor of the e-cigarette, had a similar idea. Yet Hearn ruled out heating vapour, wary of the potential of that process to create unwanted chemicals. He founded Kind in 2006. The company attracted investment from former Tesco CEO, Terry Leahy. However, he says, the cost of medical licensing made going it alone difficult.

Hearn pitched the idea to pharmaceutical and consumer-goods companies, but neither wanted to know. That just left Big Tobacco. “Do we partner with the old, 500lb gorilla, the dancing devil, which was BAT and others did, or do you try and do it yourself?” he says.

The collaboration with Kind required BAT to construct an in-house pharmaceutical firm. The architect of that institution was Kevin Bridgman, chief medical officer at Nicovations, BAT’s subsidiary for medically licensed products.

I met Bridgman one January afternoon at Globe House, BAT’s headquarters on the banks of the River Thames, in London. The building’s lobby includes a photo-mural of cheerful smokers, titled ‘Satisfying Consumer Moments’, and the hints of eccentricity run deeper. ‘Cigar Store Indians’ — carved statues of Native Americans traditionally found in tobacconists — adorn the otherwise modern offices.

Bridgman is 51. After eight years as a medical doctor, he moved into the pharmaceutical industry, where he spent two decades at Pharmacia & Upjohn, Pfizer, and then Johnson & Johnson. He had set himself up as a consultant when BAT called, in 2012.

“I was, as a physician, a little bit cautious about a tobacco company,” Bridgman says. “So I said, ‘I’ll come and join as a consultant’.”

After six months, he enlisted full-time. “I actually very quickly became very comfortable with what was going on here,” he says.

But a pharmaceutical job inside a tobacco company brings complexities. Some scientists refuse to accept funding from the tobacco industry. Likewise, some academic publications, including the British Medical Journal and its sister publications, refuse to publish research funded by the tobacco industry, suggesting it can be biased.

Voke, which BAT plans to bring to market by the end of this year, consists of a red-and-white cuboid the size of a normal cigarette packet. A hinge at one side reveals a removable, cigarette-like object. There are no electronics; no heating.

Compressed HFA powers the device and the consumer inserts the mouthpiece into a port at the base of the packet, to recharge it. Unlike an e-cigarette, no vapour is visible when you breathe out.

The scale of the cultural collision Voke is creating is clear on another day, in February, at Globe House. In a seminar room, Bridgman briefs Wheaton on the extensive regulations that apply to medically licensed products. The process takes hours. Bridgman’s slides explain the mechanisms required for recording unforeseen events and how advertising claims must be backed up. Tobacco veteran Wheaton looks like a boy on his first day at school.

He turns to Bridgman, who has spent much of his previous career working on pharmaceutical nicotine-replacement-therapy (NRT) products. “With all the power of big pharma companies,” he says. “With all the insight, everything they have in their toolkit, their inability to really break through with NRT still amazes me,” he says.

“There’s a major fear, among some parts, of having a product that looks like a cigarette,” Bridgman says. “They don’t want any kind of reputational challenge with their core customers, who are doctors. Secondly, there’s the whole addiction element.”

“I see,” Wheaton says. “Because addiction is a disease. Because they’re giving people nicotine, they’re saying, ‘I’m giving them a disease’.”

In parallel to the Voke project, BAT bought CN Creative. When questioned, BAT executives suggested a more conventional e-cigarette, in parallel to the Voke medically licensed product, to produce a wide range of products. A device that heats rather than burns tobacco is also in the pipeline for 2016, though BAT will say little about it.

Not everyone agrees. One public health operative, who did not want to be named, because of her public profile, suggested that a BAT executive called Adrian Marshall pursued the medical-licence route with Voke, until a separate faction in BAT witnessed the boom in e-cigarettes and then purchased CN Creative without consulting him.

Marshall, now working for an independent e-cigarette firm, Gamucci, did not respond to an interview request. In a statement, BAT says Marshall was “fully consulted regarding British American Tobacco’s e-cigarette business plans”.

BAT’s initial e-cigarette offering, the Vype, was first launched in July, 2013, eight months after the acquisition of CN Creative. In its compact eStick form, Vype comes in a container with a U-shaped cross section 9cm long.

Flipping the translucent lid reveals a removable, cigarette-like object, its base squidgy like a conventional cigarette filter. The product is available in ‘blended tobacco,’ ‘crisp mint’ and ‘dark cherry’ flavours. Vype is only available in the UK.

Wheaton says that in the UK BAT’s share of cigarette sales is just under 10%. If e-cigarettes or Voke take smokers away, there is a good chance they will prise them from another manufacturer. It would be different for the two firms that dominate the UK’s cigarette market: Japan Tobacco (which markets Benson & Hedges and Camel) and Imperial Tobacco, which sells Lambert & Butler. Others are sceptical of the cannibalisation argument. “Does selling spaghetti hoops hopelessly conflict with selling baked beans?” Clive Bates asks. “Heinz do both.”

How best to market e-cigarettes is a complex question. One Wednesday afternoon in February, I accompany Wheaton to Knightsbridge, in west London. Three-letter acronyms are in triple union at this meeting. BAT has come to WPP, the world’s largest advertising agency, to refine its strategy for selling NGP: next-generation products.

“This is the year in which it’s exploded; it’s become part of society and culture,” a WPP digital planning director, Malky Brown, says. He runs through the advertising tactics of BAT’s rivals in the e-cigarette market. Britain banned televised tobacco advertising in 1965, but, since November, 2014, e-cigarette promotion has appeared, controversially, on-screen, as well as in print and online.

Brown shows a campaign from Blu, the brand owned by Lorillard. Up flashes a slide of Blu’s ‘party bus’, which traverses bars and clubs disbursing product. The black vehicle sports the slogan, ‘Freedom for the Taking’, in large letters.

“It doesn’t look like a party bus, does it?” Wheaton asks. “If you’re, like, 19 years old, Kingsley, you’d think that was a party bus,” Brown says.

Now comes NJOY, the independent brand. In their ad, a man steals the oversized head from an American football team mascot. “Friends don’t let friends smoke,” a voice announces. “Give them an NJOY King electronic cigarette.”

For Brown, these efforts fall into two categories. Either they suggest freedom and excitement, like Blu, or they present a healthier alternative to cigarettes, à la NJOY. “It’s always about how we can position ourselves as close to cigarettes as we can,” he says.

When the presentation is done, Wheaton addresses the ad man. “So, Vype?” he asks. “Which of those two do we sit in?” Brown replies. “That’s the question.”

The answer, he says, is neither. Brown presents research, suggesting smokers who might switch over to vaping are baffled. “There’s this over here and people saying ‘let’s just get one that looks like a cigarette’ over here,” he says.

“Niche and unrecognised brands. Who do you trust, which one’s good?” His solution is to disregard the lifestyle choice idea and the better alternative to smoking. Instead, the line would be ‘simple, quality vaping products’.

“We gave ourselves 10 seconds to change the cartridge on our Vype ePen,” a voice announces. “We only needed seven.”

Wheaton is pleased. “I think it’s fantastic,” he says. “It’s clever, it’s clear, it’s smart, it’s of now. It’s cerebral in a way. Very hard to define.”

On a number of levels, the e-cigarette situation represents an encounter between individuals and behemoths, though it is not always clear who will prevail.

In Amsterdam, in February, fog hangs over the canals and the Dutch cycle with casual disregard for head protection. I have come to meet Hon Lik, the father of the electronic cigarette.

I arrive at the headquarters of Fontem Ventures, Imperial Tobacco’s own e-cig subsidiary. It is a strange meeting. Fontem HQ has a start-up feel. Young people tote laptops and wander past stacks of ‘Puritane’ e-cigarettes.

In this funky world, Hon presents a contrast — a bespectacled, middle-aged Chinese man in a dark suit. In close proximity follows his translator, Annie Zheng Yi.

Hon’s development of the e-cigarette began when he worked at a Hong Kong-listed healthcare firm, Golden Dragon. He was a heavy smoker — three packs per day.

“He had some physical reactions to it, for instance itchy throat, coughing,” Zheng Yi says. “So he realised there are some adverse effects of smoking.”

In late 2002, Hon began experimenting with alternative vehicles to deliver nicotine. The idea to use propylene glycol (PG) came from a method of dust removal, in which water mixed with PG is boiled, creating a mist that coats dust particles in the air, pulling them down to the ground.

Later, Fontem sent me a photograph of the initial prototype that he made at Golden Dragon. Its mouthpiece was attached to an external circuit board by umbilical wires. The contraption was designed to test automation; a coil passed through a nicotine solution, which carried a current, creating vapour. “You can assume that’s a test ground,” Hon says. “It’s not a product, not having the current look and feel. You would not realise it is an e-cigarette.”

The first device to come to the market, in October, 2004, was called Ruyan. Hon’s translator explains the etymology. “Ru means ‘likewise’, and sometimes it even means ‘beyond’, or ‘better’. Yan actually means ‘smoke’, and ‘cigarette’.”

In 2013, Imperial bought the patents from Hon and his firm, Dragonite, for $75m. In March last year, Imperial instigated lawsuits against 11 American e-cigarette manufacturers, including NJOY and Logic Technology Development, claiming their products infringed their freshly acquired IP.

There is a wider lesson here: Hon pioneered the product that threatened to disrupt Big Tobacco; 12 years on, he now works for Big Tobacco. Like Alex Hearn in England, he partnered with the 500lb gorilla. Wells Fargo’s Bonnie Herzog is among those who believe Big Tobacco will probably emerge as the eventual sector winner, though the market will retain room for “several smaller or independent players”.

Another Goliath vs David case is emerging between Big Tobacco and what has become loosely known as ‘vaping culture’. Vapelab is one of its institutions, based in Shoreditch, in east London. Vapelab is atypical of an alternative culture — “the Harrods of the market“, as one vaper says, its prices reflect the cost of London’s commercial real estate.

Despite that, the atmosphere amid its hipster, chic furnishings illustrates how vaping has burgeoned into a phenomenon.

Inside, an ATM is denominated in Bitcoin and bare bulbs hang from long cables. At the counter, serried ‘e-liquids’— nicotine solutions — sit in tanks. Flavours include tropical toucan, bananaquit, and crème de la vanille.

William Francome, a documentary filmmaker, discusses with Leonardo Verzano, one of the shop’s employees, how he can follow up on an e-cigarette he has acquired from the United States. Verzano talks Francome through four devices that Vapelab offers as starter kits: the Joyetech Joye510CC, the eCom-C Twist and two products made by TECC, the Curve and the Curve Mini. These range from £42-£70. None resembles a cigarette.

In this diverse new world, the kinds of devices pioneered by Hon Lik are now known as first-generation e-cigarettes, more recent products as second- or third-generation. The categories are slippery.

However, broadly, the following divisions can be drawn: first-generation e-cigarettes mirrored conventional cigarettes in form, hence the alternate name of the ‘cig-a-like’. These used sealed reservoirs of nicotine solution — cartridges — that cannot be refilled. Examples in the UK included E-Lites and some incarnations of NJOY. Conventional cigarette dimensions constrained battery size, with a consequent impact on performance. Many smokers found cig-a-likes unsatisfying.

“Products that look like a cigarette are, for the most part, unfeasibly expensive and, in reality, under normal user conditions, little more than a placebo,” says David Joyce, a 44-year-old vaper from Telford.

A second-generation device is distinguished by its reuseability, a battery that can be recharged and a reservoir that can be refilled with liquid. Some have adjustable power settings.

At the Vapelab, Hungarian manager, Gergely Fülöp, emitting clouds of watermelon mint vapour as he speaks, points to the Joye510CC, at £42, and the eCom-C Twist, at £63, as examples of these. Third-party e-liquids led to a proliferation of flavours. While these devices have a higher price than cig-a-likes, their ‘open systems’ make them cheaper to use in the long term.

Third-generation products are more elaborate still, distinguished by options for user customisation. Users say second- and third-generation devices are more effective at weaning them off conventional cigarettes.

“I started off with a ciggie lookalike, seven years ago in July,” says Chrissie Gray, a property developer from St Blazey, in Cornwall. “It helped me cut down drastically, but it wasn’t till I got better kit and e-liquids that I managed to completely give up smoking.”

That finding is supported by a paper published in the journal, Nature, last year, which showed that new-generation devices produced blood plasma nicotine levels 35-72% higher than first-generation devices, though delivery was still slower than with conventional cigarettes.

The growth of the vaping subculture is significant for Big Tobacco: it is not entering a virgin market. There are already loyalties, a knowledge base and, in many cases, profound scepticism of traditional cigarette manufacturers.

“We’ve already given them tens of thousands of pounds over the years each,” says Kevin Inskip, a 61-year-old graphic designer from West Yorkshire. “There’s a certain amount of resentment about giving them any more.”

This scepticism was apparent in responses to a thread I started on the E-Cigarette Forum (, one of the leading vaping sites, canvassing responses to BAT’s ‘next-generation products’.

Among 60 responses, scepticism of Vype fell into three areas: the first was the efficacy of the device and how it compares to the offerings of independent producers. The posters suggest the small version, the eStick, is fatally constrained by size limitations on its battery, while even the larger ePen, which has a 640mAh battery, still lacks adequate muscle.

The second area of criticism is the cost. The Vype, in both variants, is a closed system, compatible only with proprietary BAT consumables. The disposable razor blade is analogous; the manufacturer’s profit lies with the consumable rather than the initial purchase.

“I would not buy/use anything with proprietary cartridges or threading,” says one poster, using the handle Klynn. “All that does is keep you hooked to one supplier, creating a monopoly.”

Another calculates that Vype would cost four times the amount he pays with his independent system to vape the same amount of e-liquid for a year. So far, so negative. However, several posters acknowledge a desire for a simple product that does not require extensive modification.

“I would love it if I could get it down to the convenience similar to reaching into your pocket, pulling out a pack of cigarettes, pulling one out,” says ‘Lunar’. Vaper opinion then suggests there is a market for a plug-in-and-play e-cigarette.

Vype might not be that product. BAT’s pitch for Voke is that there is an untapped market of smokers who would like the reassurance of a device with medical certification. On this theme, too, the vaping community is unconvinced: “The MHRA will certainly license a product that may look like an e-cig,” says Chris Price, who runs the website, E-Cigarette Politics.

“It won’t be an e-cig, though. It will be a repackaged asthma inhaler of some kind, and will appeal to consumers like an expensive, and not very efficient, enema does.”

Ultimately, the deciding factor in Big Tobacco’s entry into the e-cigarette field lies beyond the vapers’ control, and in the hands of regulators. When e-cigarettes first arrived in Europe, medicine regulation looked like the probable path.

However, the EU’s second Tobacco Products Directive, which was approved in February, 2014 and will come into effect in May, 2016, will, instead, provide two channels, first with e-cigarette specific legislation that, in some ways, resembles tobacco laws, and, second, as a medical device.

The first category will be limited to maximum, e-liquid strength of 20mg/millilitre. Most forms of advertising, including broadcast and print media, will be banned.

Refill tanks will be limited to 2ml, which will outlaw some more sophisticated devices.

Taking the medical-device route will require a costly regulatory approval process, likely out of the reach of the independent players who pioneered the market.

“These developments are central to a view held by many e-cigarette users that regulators have massively overreacted to e-cigarettes, encouraged by public health organisations in a way that will choke off the supply of the most effective second- and third-generation products,” says Bates. Totally Wicked, a UK e-cigarette company that aspires to be a “modern-day tobacconist“, is bringing a legal challenge to the TPD.

“The metaphorical genie is now out of the bottle, you can’t now put it back in,” says its MD, Fraser Cropper. It remains to be seen whether his challenge will succeed.

Much of the drive for strict regulation has come from those concerned about the health and safety of e-cigarettes. Here, a fierce debate is underway: what is the impact of long-term nicotine use? What is the presence and consequence of contaminants in e-cigarette vapour? Could vaping provide a gateway to traditional tobacco use?

E-cigarette advocates admit long-term studies are not yet available, and so comparison with abstinence is difficult. But they are adamant that the devices are much safer than conventional cigarettes and that a widespread switch to e-cigarettes would have major public health benefits.

Many point to another reduced-risk product, the Swedish refined oral tobacco, Snus, which the EU banned in 1992. Sweden obtained a dispensation to continue selling Snus, when it joined the EU in 1995, and the product accounts for much of male nicotine consumption there.

European median occurrence of lung cancer deaths for men aged 60-69 is 220 per 100,000. In Sweden, the figure is 87. Yet, the Snus ban prevents the export of those benefits beyond Scandinavia.

Not all agree. Much of the fissure depends on a basic, and in many ways ideological, division central to tobacco control, and broader drug policy: whether to subscribe to a cessation approach, colloquially categorised as ‘quit or die’, or instead to ‘harm reduction’, acknowledging that a certain fraction of the population is likely to use the product and working out how to limit the damage incurred by those who do so.

The paradox is that while many of the most outspoken advocates of strict e-cigarette regulation come from public health — and are themselves vehemently opposed to tobacco companies — the winners from tight regulation are likely to be the tobacco companies themselves, who have the deep pockets to negotiate it.

Professor Peter Hajek, director of the Tobacco Dependence Research Unit at Barts School of Medicine, in London, is concerned that some figures within public health, wary, on instinct, of anything to do with nicotine, are pushing for levels of regulation that will make e-cigarettes uncompetitive and will maintain the market monopoly of deadly, conventional cigarettes.

“I fear the irrational view that the main priority is to eradicate nicotine use — even if it means that smokers are going to continue to die unnecessarily — is going to win,” he says in an email. “I’m doing what I can to make regulators realise that they are in danger of repeating the serious mistake made previously with banning Snus.”

In November, 2014, the second ‘E-Cigarette Summit’ was held at the Royal Society, in central London.

Traditionally, the tobacco industry convenes at tobacco industry conferences, and public health groups get together at tobacco control conferences. Rarely do the twain meet, but the arrival of e-cigarettes has broken this rigid divide.

The public health crowd blended — with evident suspicion — with tobacco and independent e-cigarette executives in the lobbies of John Nash’s edifice on Carlton House Terrace. At its dénouement, the conference became public theatre. Clive Bates took the stage, calling out “useful idiots” in public health, blindly doing the bidding of tobacco firms through evangelical opposition to anything involving nicotine.

The large firms, tobacco control veteran, David Sweanor, suggests, are trying to “figure out what to do, while waiting to see if regulators and anti-smoking groups rescue them again”.

If Big Tobacco carries the day with e-cigarettes, many believe it will have done so with the support of an unlikely fifth column.

Why you should care about the Trans-Pacific Partnership

WHEN Australia became the first country in the world to outlaw tobacco branding in 2011, it was hailed as a victory for the health lobby and a blow to big tobacco.

Australia’s parliament had decided that it would change the rules around what constituted acceptable marketing for an addictive product that kills people.

That seems fair.

Big tobacco did not see it that way, and Philip Morris Asia set about trying to find a way to claw back what it saw as its right to market carcinogens in a more palatable light.

It soon found a way — a trade agreement signed between Australia and Hong Kong back in 1993 that dealt with the “promotion and protection of investments’’.

Philip Morris’s case, which is ongoing, is the first ever “investor state dispute” lodged against Australia.

But the fear is that the Trans-Pacific Partnership, which the Australian Government and 11 other countries around the Asia Pacific region are currently negotiating, will open the floodgates of Investor State Dispute Settlement (ISDS), eroding our ability to set our own laws and benefiting big business to the detriment of everyday citizens.

The TPP is one of those issues that elicits dire warnings about the rise of a New World Order’, with Machiavellian business leaders pulling the strings while chomping away on Cuban cigars.

Activist group GetUp calls it “the scariest treaty you’ve never heard of’’, and this week WikiLeaks reportedly offered a $100,000 reward for all 29 sections of the agreement.

In short, the TPP is a trade deal between 12 countries, including the US and Australia, all around the Asia Pacific, covering about 800 million people and about 40 per cent of world GDP. It does not include China.

As with most trade treaties, the idea is to make trade between countries easier. The TPP wants to try to remove tariffs, but also to remove many of the “non-tariff barriers” to trade.

This means there is a push for uniformity, or recognition of the validity of a country’s regulations in areas such as labelling laws, food safety and copyright protection. These barriers can be even more damaging to international trade than tariffs, with countries able to block the entry of products if they don’t meet local guidelines.

Another benefit expected to flow from the TPP is the mutual recognition of qualifications, meaning that professionals such as architects and engineers could more easily work internationally.

But one of the concerning quirks of the TPP is that Joe Public won’t get a look at it until it’s been signed.

A treaty of extreme secrecy

Despite it having been debated back and forth for the past decade, no-one knows what’s in the TPP.

Australian politicians have been told they can view the documents, but only if they agree not to talk about what they have seen for four years. This is despite the fact that the agreement is expected to come into force within months. Trade Minister Andrew Robb has said, however, that the public will get to see the text once it is signed off, and before it comes into legislative force.

There are some key fears around the TPP, including that:

ISDS rules will erode government’s ability to make decisions and will open them up to multi-billion dollar lawsuits;

PRICES for generic drugs will increase;

JOURNALISTS could face significantly weaker whistleblower protections, and;

IT it will make sending low-wage jobs offshore easier.

The fear over ISDS is not an idle one.

ISDS basically allows companies to sue when the rules are changed and they stand to lose money, and it’s becoming more popular.

The North American Free Trade Agreement between the US, Canada and Mexico contains ISDS clauses that some consider to have been designed to protect US companies against Mexican law changes.

In her submission to the Australian Government on the TPP, Dr Kyla Tienhaara from the Regulatory Institutions Network at the Australian National University points out that by May 2010 Canada had received 27 notices of intent to launch ISDS claims, with several of them either settled or going to court.

In one case, Dow AgroSciences launched a claim against Quebec after a particular chemical was banned for use as a pesticide on lawns.

While the regulators were being conservative and banning the chemical despite no firm evidence of harm, the company argued that it was a restraint of trade.

In 2012, the Swedish nuclear energy company Vattenfall launched an ISDS claim worth 3.7 billion euro against Germany after it decided to phase out nuclear power following the Fukushima nuclear disaster.

Locally, if the Australian government was to decide, for example, to revoke the right of companies to explore for oil in the Great Australian Bight, as is going on now, it would open itself to an ISDS claim.

Dr Tienhaara says there has been an “explosive increase” in ISDS claims in recent years and “the Government should strongly oppose the inclusion of Investor-State Dispute Settlement in the Trans-Pacific Partnership Agreement’’.

The Government, which says its “decision to participate in the TPP in 2008 followed an extensive public consultation process”, assures the public that it should not be too concerned about the issue.

“Australia would retain the ability to regulate legitimately on social, environmental or other similar public policy matters,’’ a Government presentation says.

“Australia is considering the inclusion of Investor-State Dispute Settlement (ISDS) provisions in free trade agreements on a case-by case basis.’’

ISDS is not the only cause for concern, however.

So who wins from the TPP?

Nobel prize-winning economist Joseph Stiglitz believes the TPP “will benefit the wealthiest sliver of the American and global elite at the expense of everyone else’’.

He is worried, like many others, that standardisation of regulations means we will end up with the weakest regulations, allowing corporations to do as they please.

“There are other noxious provisions,” he says. “America has been fighting to lower the cost of health care. But the TPP would make the introduction of generic drugs more difficult and thus raise the price of medicines.”

The same concern has been raised in Australia by generic drug maker Alphapharm, which says that it produces one in five of all drugs supplied under the Pharmaceutical Benefits Scheme.

There are also fears that the TPP could criminalise whistleblowers and journalists. Earlier this month, hundreds of US tech and media companies sent a letter to the US congress warning “TPP’s trade secrets provisions could make it a crime for people to reveal corporate wrongdoing ‘through a computer system’”.

“The language is dangerously vague, and enables signatory countries to enact rules that would ban reporting on timely, critical issues affecting the public.’’

There are also stronger powers in leaked elements of the TPP for copyright owners to track down people who illegally download content.

While these fears are all valid, without seeing the documents it is impossible to make an accurate judgment of what the final agreement will look like.

For his part, Mr Robb has dismissed fears that the government will be selling the nation down the river as a signatory to this deal.

“Why would I set out to make Australians materially worse off?’’ he said recently.

Mr Robb argues that sectors such as tourism, hospitality and agriculture stand to gain substantially from the TPP.

“There are enormous growth opportunities for us at the premium end of markets across the Asia Pacific on account of our reputation for ‘clean, green and safe’ produce,” he says.

“Modelling conducted by the US Department for Agriculture shows Australian exporters would be the biggest beneficiary of all 12 countries under the TPP.

“When you add these gains to the benefits that will flow from the powerful trifecta of North Asia agreements … there is cause for real optimism around Australian agriculture.”

‘This will undergo extensive scrutiny’

Mr Robb says claims about secrecy and lack of transparency are “overblown”.

“Of course there is a degree of confidentiality around the negotiations, as there is with any commercial negotiation, but there is also extensive consultation with a wide range of stakeholders throughout,” Mr Robb says.

“This consultation is invaluable in both informing and guiding our approach to what are typically complex issues. There have, in fact, been more than 1000 TPP consultations since 2011 and these continue.

“Finally, the TPP text will not be kept secret.

“Once it is agreed between parties, it will be made public and also subjected to extensive scrutiny and inquiry before implementing legislation is considered and voted on by the parliament.”

The Dean of the School of International Studies at Flinders University, Martin Griffiths, believes the need for US president Barack Obama to get the TPP through Congress will filter out many of the more contentious elements.

“The difficulty in the United States with this agreement is with the Democrats, which is Obama’s own party,” he says.

“These kinds of agreements get a lot of hostility within the Democrats because they tend to benefit wealthier workers … because they’re linked to the outsourcing of jobs.

“It’s a very political document and because it is political I suspect we won’t have much to worry about.”

Mr Griffiths says Japan is very protective of its sovereign rights, and the US agriculture lobby will not stand for an agreement that seriously erodes protections.

Mr Griffiths says the US could be using the TPP as “bait” to attract China into a closer relationship with the region and the US, and this also weighed against an agreement that would seriously reduce sovereign rights.

“I would suspect that our biggest fears, despite the secrecy, are unfounded,” he says.

Many remain unconvinced however, including the 85,551 signatories to GetUp’s online petition.


Download (PDF, 1.32MB)

Smokie Bandits on the run

Illegal cigs are rife in Dundalk and Drogheda and are costing state €500 million a year

Early on Saturday morning, Drogheda town centre is buzzing. It’s the Bank Holiday weekend, there are loads of people around, shopping. But there is an underbelly here, rarely seen.

The trade in illicit cigarettes goes on, hidden in plain view and most people are oblivious to it. It’s here in Drogheda, and in Dundalk, if you know where to look and the team of former police officers from Ireland and England are experts in where to get cheap cigarettes.

The team works for tobacco manufacturer Philip Morris and are tasked with test purchasing illegal cigarettes. They travel around Ireland and Britain, hitting towns all over the country and assessing the trade in illicit tobacco. The company wants to know how big the trade is, where the cigarettes are coming from and how they are being sold.

Philip Morris also wants to know the extent of the ‘illegal whites’ – cigarettes that are manufactured in pop up factories close to the Russian border that are only made for the black market.

More importantly, the team has intelligence about the main players in cigarette smuggling in county Louth and the millions of euro they are making from it every year.

Most of the former police officers have worked undercover before. There are two main buyers – a former female detective from England and a man from Eastern Europe who speaks Polish and Latvian. They certainly don’t look like cops and it’s easy to tag along with them as they make their way around Drogheda, building on the research they have done the day before.

The man has been into a number of suspect shops the previous day and has asked to buy cigarettes. He was sold some, but most have told him to come back on Saturday. In the first store, the woman behind the counter recognises him and searches in her coat pocket, pulling out two packs of L&M – a legitimate brand, but most likely smuggled into Ireland via the suitcases of people returning from a trip to Poland or another Eastern European country.

He comes out, meets up with the other members of the team, and throws the two packs into a plastic bag. A former Met inspector writes down the location of the purchase, the cost (€5.50 a pack) and his colleague heads to a second shop. It’s a well-stocked store, and the woman behind the counter chats easily with him as he asks for cheap cigarettes. She tries to sell him some freshly baked bread while she goes in the back to get a couple of packs for him. It’s the same brand, and the same price, and these too are left with the other members of the team.

In Drogheda market, just off the main street, there seems to be no hiding of the illicit trade. Here some of the Irish cigarette sellers are selling illegal whites – cigarettes specifically manufactured for the black market and unavailable in any store in the world.

The female officer and I wander around, pretending to browse, returning to one of the stalls and asking for cigarettes. These ones are dearer – at €6.50 a pack, but represent a significant saving on the usual €10 cost of 20. They’re 821s, specially produced for the black market.

The other members of the team are stunned by the fact the cigarettes are on such public display. The former Met officer says: ‘I don’t think I have seen anything like that before – it’s quite brazen, isn’t it’.

There is no time to discuss the cigarette traders in Drogheda market as the woman has been in contact with a Drogheda man whom she got illegal cigarettes off before.

He’s still in business, by all accounts, and he meets her close to the town centre apartments where he lives. He has a sleeve (200 cigarettes) of illicit whites and he charges €55. All the while, the team sit in a jeep close-by, watching the transaction, which is over in seconds.

The next sting is just moments away as the Eastern European man has contacted a man who has agreed to meet him in a car park close to the Boyne. Unknown to the seller, there are half a dozen former cops watching nearby but he is oblivious as he chats to the buyer in his MH registered car before driving off, having sold him a sleeve of illegals.

And they’re not done yet. Another store, the woman walks in and, having been recognised from the previous day, a man pulls 200 Polish Marlboro out and sells them to her for €55. The team seems to be particularly excited by this as the branding on the Marlboro is new – just a few weeks old – and indicates these are new into the country.

There is one final purchase to make – at a shop just outside the town centre, the woman goes in and comes out with a pouch of Flandria tobacco, available only on the Continent.

On the way to Dundalk, the team chats about the illicit trade in Ireland, North and South, and in Britain. Asian and Eastern European stores are the main outlets in Britain, along with ‘old men in pubs’ but there is also a booming trade via Facebook. In the North ‘some of the little corner shops’ are selling illegal tobacco, while in the South, the markets are among the places to find illegal cigarettes.

In Dundalk, the first stop is another shop. The woman apologies to the buyer and rings a man she knows whom she says will be waiting for him on the Carrick Road. A few minutes later, there is indeed a man standing on the pavement and when we pull over, he comes over to the car and throws 200 L&Ms on the back seat before chatting to the undercover buyer, getting the cash off him (€55) and telling him he is able to get even more, if he needs it.

Back in the town centre, the female operative has managed to buy MGs off a bar worker who tells her that any of the staff will sell them to her, if she’s not there herself. A trip to another pub proves fruitless as the customer who comes in with a hold-all of illegal cigarettes has just left, but will be there around 1pm the following day.

The cigarettes and tobacco are put together into the boot of one of the cars. It’s an impressive haul for a day’s work. The team will send some of them off for testing, the rest will be destroyed. The intelligence they have gathered will be sent to Revenue.