Goldman Sachs predicts safer nicotine will overtake cigarettes in the U.S. this year. Millions have already made the switch, despite tobacco control efforts, not because of it. David Sweanor breaks down the consumer-led collapse of smoking and how it likely can’t be stopped.
Featuring:
DAVID SWEANOR
Adj. Professor, Faculty of Law, University of Ottawa
Tobacco-control Policy Expert
@ottawaharmredux
Transcription:
00:10 - 00:57
[Brent Stafford]
Hi, I'm Brent Stafford, and welcome to another edition of RegWatch on GFN.TV. Across the globe, a quiet revolution is underway. Millions of adult smokers are switching to safer nicotine products. The transformation is happening so quickly that in some countries, cigarettes are on the verge of being snuffed out. And yet, despite relentless regulatory pressure, public health moralizing, and a constant churn of misinformation, consumers are reshaping the nicotine market from the bottom up. Joining us today to explore the scope of this transformation and why public health continues to resist it is David Sweenor, tobacco control policy expert and adjunct professor in the Faculty of Law at the University of Ottawa. David, it's so great to see you again.
00:59 - 01:01
[David Sweanor]
Yeah, nice to be on the show again, Brent.
01:01 - 01:12
[Brent Stafford]
So David, when we last spoke last spring, you walked us through and our audience through the extraordinary growth in safer nicotine product use. Has that momentum continued globally?
01:13 - 01:18
[David Sweanor]
It sure has. It is going on. It's going gangbusters. If anything, it's accelerating, Brent.
01:19 - 01:26
[Brent Stafford]
Well, let's start with Japan then, because I know that's one of your favourite topics, and the heated tobacco. Has it overtaken cigarettes yet there?
01:27 - 03:41
[David Sweanor]
It's right on the verge of it. So the heated products are now in the range of about 48% of the total market of heated and cigarettes, and they've overtaken cigarettes in many of the major markets, including Tokyo. So many of the major cities where you expect innovation to take off. Anyway, we've seen this. And as I see when I'm in Tokyo, you go to some of the trendier areas of Tokyo and you're not going to see cigarettes. You'll only see the heated products. So it's a transformation. It's happening very rapidly in Japan. And it's happening in Japan, Brent, despite the fact that there's only one type of product that's been approved, despite not having a major effort to try to encourage people to transition. But we're still seeing this just massive transition away from cigarettes. So what's driving that success? Really interesting things I find in this is that, you know, having been involved in the field for so long, we've long had these polls of people who smoke cigarettes saying, Do you like smoking cigarettes? Would you like to not smoke cigarettes? And invariably, a very large percentage say, I wish I didn't smoke these. And then we come up with an alternative so people don't have to smoke them. And you find people are saying, whoa, this can't be. Well, like, you know, maybe people were telling us the truth all these decades. I mean, they're not satisfied with the product, you know, any more than if you went to people and said, you know, I'm just shocked. We made sanitary water available and you're not drinking out of these mud puddles anymore. What's going on? You always used to drink out of the mud puddles. Well, because we didn't have an alternative. So once people get an alternative, we see massive movement. And without doing very much to encourage it, you know, it's really like, you know, somebody has just gone out and done a two-hour marathon despite having ill-fitting shoes and their shoelaces tied together. You know, you get some idea of just what potential is there if we actually facilitated this, if we did true public health, if we empowered people to make better decisions about their own health.
03:41 - 03:48
[Brent Stafford]
Are public health agencies and tobacco controllers rushing to Japan to study what's going on there?
03:49 - 04:39
[David Sweanor]
No. I mean, this is one of the absurdities. We have noticed this for years because, of course, what's happening in Japan has been unfolding now for close to a decade. And we started seeing these massive declines in cigarette smoking as people moved to heated tobacco products. There was very little attention. And so we've got this huge cause for preventable death and disease globally. We're seeing a breakthrough in Japan. Surely the sky should be dark over Narita Airport with all the international experts coming in to study this, to try to understand, to learn what we could do elsewhere. And instead, what I've seen is an awful lot of people ignoring it, pretending it's not happening, denying that it's significant, but by and large, just not being curious.
04:39 - 05:03
[Brent Stafford]
David, we just had Derek Yock on the show, and he made the statement that in 2025, we're about to see the first time safer nicotine products overtake combustible tobacco. And he mentioned that about the U.S. So let's turn to the U.S. Is it true that safer nicotine products are responsible for driving down cigarette sales in the U.S.? And how big is that?
05:04 - 08:15
[David Sweanor]
Yeah, it's absolutely extraordinary. So if we're willing to look at the evidence, and a really good report came out in March from Goldman Sachs, the major investment bank that follows all of these things, huge report that said, yes, this year, the non-combustible products will outsell cigarettes in the United States. You know, that's extraordinary when you go back not very long ago, noncombustibles were something around 10% of the market, you know, the classic smokeless tobacco, moist snuff type products in the United States. And in a very short period of time, you know, we saw the rate of decline in cigarette smoking accelerate to the point that it's now close to 10% annually. We saw big increases in people using vaping products and now using nicotine pouches. And this was consumer-led. The very large majority of that vaping market are products that the FDA deems to be illicit. But consumers are using them, and they're using them in place of cigarettes. Now, I mean, is this unprecedented? It certainly is unprecedented when we look at the history of reducing cigarette smoking. You know, we have had throughout my career times where you can get a country to be able to reduce cigarette smoking by about 10% in a year. It was very rare, but we've managed to do it. Canada's done it. New Zealand's done it. Usually with a whacking big tax increase when you've got very low taxes to begin with. But it's not sustainable. You get a one-off effect. What we're seeing now is this sort of continuation of these very rapid declines in cigarette smoking. And we haven't seen anything like that. We certainly haven't seen it on a global basis. And we most definitely haven't seen it from non-coercive measures. This isn't something like, you know, I'm going to try to force you to change your behavior by making this product more expensive or harder to get or uglier or whatever. It's about saying, If you want to move to another product, there's some available. And in many cases, we're going to try to discourage you from using those products. We're going to ban those products. We're going to make you use illicit sources to get those products. It's much like we used to have on contraception with governments that simply banned contraception, moralistic reasons. and women got contraception. You know, they found ways to access those products, which is why, you know, those of us born the age that I was when these laws were in place, you know, weren't coming from families of 12 and 14. We were coming from families of three and four. So we've seen lots of examples of consumers that move to an alternative, even when the authorities are saying don't because they're saying this is for me, this is for my health. And indeed, that's what public health is supposed to be about, understanding people's lived experience, meet them where they are, empower them to make a better decision about their own health rather than get in the way of people trying to improve their well-being.
08:16 - 08:44
[Brent Stafford]
David, as we did last year, let's dive into the data that you provided from Altria's 2025 first quarter earnings conference call and Goldman Sachs market analysis. And here's the first chyron we have. In 2024, there were 18 million vapors in the U.S. Today, that number is 20.5 million, with 14.5 million using disposables, which, of course, are illicit in most cases. David, what do you think of those numbers?
08:46 - 09:46
[David Sweanor]
I mean, it's huge. I mean, even as Altria points out, I mean, Altria is getting beat up really badly as this market transforms, as is happening to most of the incumbent tobacco companies. And they're pointing out this rapid decline in cigarette smoking. They're pointing out that a great part of this is because people are transitioning to other products. And the other products are transitioning to are overwhelmingly what are deemed illicit products, illicit vaping products that have not been approved by the FDA. And indeed the increase in the number of users of the disposable vaping products is greater than the increase in the total number of people who are vaping. So in fact, what they deem as the licit market is actually shrinking, while the overall market for vaping products is growing very, very rapidly. And the total number of vapors is increasing dramatically, as you point out.
09:47 - 10:01
[Brent Stafford]
Right, and let's talk the size of the U.S. nicotine market. The U.S. nicotine market is worth more than $50 billion. With Goldman Sachs forecasting it will grow to $67 billion by 2035, driven by non-combustibles.
10:01 - 12:11
[David Sweanor]
The overall market in the United States is actually considerably larger than that figure of 50 billion. I think they're using Nielsen data, which does capture retail sales, but not all of them. And by other estimates, the US market is probably in the range of about $100 billion a year. It's huge. And the reason it's so huge is that cigarettes are so phenomenally profitable. that the cigarette companies figured out some number of years ago, they could just keep raising prices. And price elasticity being what it is, consumption would go down, but their profits would go up way more rapidly. And over time, they've had ever larger increases, ever more frequently, and never been called to account. I don't think there's any other business that could get away with doing this. They just keep jointly raising prices that now about four times a year. And some of the price increases are, they're just way bigger than they used to be. So it costs very, very little to manufacture cigarettes. They sell them for massively more. They have profit margins that dwarf anything you see in any other business. And as a result, it's a very valuable business. It's a market incentive now for others to come in to replace the cigarettes. Because the cigarettes in the United States, and even more so in other countries, have just become much, much more expensive. And it's not expensive to manufacture consumer nicotine products. So it can be done very inexpensively. And there's a huge business potential here now for someone to say, I want to do well by doing good. I can make a great deal of money selling something to cigarette smokers that doesn't kill them, that replaces their cigarettes. So I'm going to do something really good, and I'm going to do really well by doing it. I'm going to make a great deal of money. So we're seeing a lot of innovation, a lot of new companies. There's a tremendous number of companies that are now trying to produce the nicotine pouches, just like we have all the companies getting into different types of vaping products, companies trying to get into the heated tobacco sector, anything that can replace cigarettes.
12:12 - 12:31
[Brent Stafford]
So, David, let's look at the illicit numbers. Over 60% of all U.S. e-cigarette sales are now illicit. 60% dominated by unapproved disposable vapes sold outside of the FDA's regulatory framework. And that's a 10% increase over last year, which that's a lot to increase by 10%.
12:32 - 12:43
[David Sweanor]
Yeah, I mean, it's huge. The majority of the market, probably over two-thirds of the market. And by some estimates, there's researchers following this at Rutgers University who are saying by their estimates, it's probably 90%.
12:44 - 13:04
[Brent Stafford]
One of the things that's bothering me so much about this is that we're calling these products illicit. But in Canada, most of these products are legal. In so many other countries, they are legal. It's only because of the draconian PMTA process that the FDA is under that these products could even be considered illicit.
13:05 - 14:50
[David Sweanor]
Yeah, I mean, as a lawyer, I do wonder, I mean, I usually put illicit in quotation marks. They say they're illicit. I think it'd be a matter of what courts end up saying about something like this. And it really depends on what the law is in a country, what their constitution is. But the idea of saying, can you make it illegal for somebody to access a product that saves their lives? because that's what we're dealing with, a product that is massively less hazardous than a product that's the leading cause of preventable death. Is it possible that you can ban people from getting that? And as you know, Brent, we've had cases like that in Canada on even things like safe injection sites for illicit drugs. And our Supreme Court unanimously saying, You can do that because it's about the right to life. And if you don't have these safe injection sites, people are going to die. So even with an illicit drug, you can do it. Well, what are the courts going to say when the cases get to them about saying, should people be able to access a safer nicotine product? You know, one that doesn't kill them, doesn't pollute the air around their family, doesn't drain their resources financially so that they can support their family doesn't cause fires you know all the the various advantages that they would have you know is it possible that the courts will just say you can't deem these illicit you have to make them available and we've had these arguments before including on the the history of contraceptives of courts eventually saying no you you can't just ban these products uh they've got they've got to be available to people
14:50 - 15:13
[Brent Stafford]
So Goldman Sachs is saying that smoke-free nicotine products, including vapes and oral tobacco, will surpass consumables in volume in 2025 and then dominate in both volume and profit in 2035. Explain for our viewers, I guess, the nuances here, because they aren't actually yet overtaking. What does it mean by in volume?
15:15 - 15:57
[David Sweanor]
Well, they are overtaking in terms of what we would see as the products themselves. So more people will be using the non-combustible products than the cigarettes. But they're going to cost way more. Cigarettes will still be the majority of the market. They'll just be a minority of the users. And indeed, that goes back to what I was saying about how the manufacturers have so massively increased the price of cigarettes to pad their own profits. That does put up the dollar cost of cigarettes, but it's also spurring people to move to these alternatives. So, yes, cigarettes will continue to be a higher dollar figure in sales, but an ever smaller portion of the total products being sold.
15:57 - 16:06
[Brent Stafford]
So you've spent more than four decades working in tobacco control. Have you ever seen cigarette use decline this fast and this broadly and from the bottom up?
16:07 - 17:08
[David Sweanor]
Never. You know, there's sort of stuff that you could only dream about before of, you know, what if. And I remember having these sorts of discussions about what if a product could come in that could replace cigarettes, a product that didn't have all the disease risks of cigarettes. And now we're seeing it. uh we're seeing it in an environment that uh is not isolated it isn't like saying oh well the swedes are like that but nobody else i mean we're seeing it globally wherever people get an opportunity to switch to alternative products we're seeing switching to alternative products we're seeing cigarette sales fall we're seeing them fall more rapidly and consistently you know over time this isn't a one-off you know one-year decline this is year after year much more rapid declines in cigarette sales, cigarette smoking. It truly is extraordinary. We've seen things like this happen in other areas of the history of public health. We've never seen it happen with cigarette smoking.
17:08 - 17:12
[Brent Stafford]
Now, do you feel even just a smidgen of being vindicated?
17:12 - 17:59
[David Sweanor]
There's something nice about saying, you know, we've talked about this for a long time. I've written about it for a long time that, you know, this could happen. We should facilitate it. We should certainly not get in the way of it. I think I spent years trying to just prevent it being completely closed down, you know, try to keep it open long enough that we could start seeing these sorts of results. And we are now. uh and i don't think there's anything surprising about this it's what you would expect based on consumer behavior on so many other things and and what we'd already been seeing in places like sweden but it's now happening globally uh and uh you know it is a really significant uh change and it is amazing it's being led by the consumers themselves
18:00 - 18:08
[Brent Stafford]
So I'm a bit worried that public health and tobacco control are going to effectively be able to ignore this and will ignore it.
18:09 - 19:19
[David Sweanor]
Well, you know, there were still meetings of the Women's Christian Temperance Union, probably still going on now. They haven't given up on the idea of alcohol prohibition. But people don't pay a lot of attention to them anymore. People are not listening to the authorities. The authorities... the people who deem themselves authorities can say whatever they want. Consumers have moved on. The bigger concern is that this sort of action by people who call themselves public health, I think it's a question of whether they truly are in tobacco control, are harming the credibility of authority in general. You know, are people less likely to believe truthful information in public health because they've lost faith, they've lost the They no longer believe in the credibility of the field because of what they've experienced on nicotine. And I think that is a really big problem. And we've seen this is the destruction of public trust and authority. And it's to me very, very worrying to see that this field is adding to that. It's giving people reason to not trust authority rather than trying to build that trust.
19:20 - 19:25
[Brent Stafford]
It can't hurt that the actual tobacco companies themselves, for the most part, are behind the switch.
19:26 - 20:15
[David Sweanor]
Well, the tobacco companies have had no choice. They got beat up terribly. Their stock prices, they collectively lost over $300 billion in stock market valuation as vaping took off because the whole history of the cigarette, you know, it looked like it was going to end. And that's where they make all their money. So they've been pouring money into trying to adapt to this changing market, generally not doing very well at it, Philip Morris being an exception. But the others, Imperial Brands just announced today that their half-year results, they're still losing money on the alternatives, but they've got no choice. The market has changed and they're running to try to keep up with it. They're trying to stay relevant. And you've got all these new players that are looking to eat their lunch. So the capitalism is working very well for public health right now.
20:16 - 20:19
[Brent Stafford]
Yeah, except for in the U.S. because the government's in the way.
20:20 - 21:34
[David Sweanor]
Well, the government's trying to get in the way in the U.S., but again, look at what's happening. As you were just saying, there's over 20 million vapors now in the United States. Cigarette sales are plummeting in the United States at a rate way beyond anything we've ever seen. It's about four times the rate of decline that we were seeing as being what we used to consider to be a normal rate of decline in cigarette sales in the U.S. And that's despite people getting in the way. So again, it's like you going out and running a 10K at an amazing time. And at the finish line, you happen to mention, yeah, and Sweenor was back there throwing things at me from his bicycle the whole way and trying to trip me to say, well, and you still did really well, but imagine what you could do if we got Sweenor off the course next time. So the potential is just so great because it's happening despite all the opposition. Imagine what would happen if the opposition ended. And then imagine what would happen if instead of opposition, it was facilitated. We actually wanted to do things to get people off cigarettes as rapidly as possible. And I think that's the sort of stuff where we're headed. And I find that really exciting from a public health standpoint.
21:34 - 21:45
[Brent Stafford]
You know, David, I've always believed and said so many times in this show that disposables would actually protect the vaping industry because of their ubiquity.
21:47 - 22:24
[David Sweanor]
Yeah, it's really hard to know how you can stop anything like this. And we have had a history of governments trying to do things like whether it be banning alcohol or banning books they considered inappropriate or banning contraception. So many things, they don't work. People will get the products that they want. At what point do you consider that we're going to facilitate this in a way that meets societal goals rather than stand in the way of people being able to be empowered to make the decisions they want to do?
22:25 - 22:54
[Brent Stafford]
David, I know you will be attending the 12th edition of the Global Forum on Nicotine, the annual conference on safer nicotine products, which takes place again this year in Warsaw, Poland, from June 19 to 21, 2025. The conference theme is challenging perceptions. In your mind, what are some of the solutions to address the misunderstandings, misconceptions, and mischaracterizations that are holding back progress on safer nicotine products?
22:55 - 24:09
[David Sweanor]
Well, I mean, we're already seeing it with massive consumer movement to alternative products. I think it is being held back because of all the efforts to try to prevent them accessing these products, all the misinformation about these products. I mean, again, it's really extraordinary just how far we've come despite all the barriers. But I think we're now seeing more countries that are moving to facilitating people switching to lower risk alternatives. And New Zealand is a really good example where we're just seeing these very, very significant declines in cigarette smoking. And that's being replicated elsewhere. We're getting data on cities in Europe where alternative products have just made massive inroads. So I think getting more information about that for people to see the real world But I think it's worth noting that consumers aren't waiting for someone to tell them, hey, look what's going on, or the anti-smoking community has finally woken up to the huge progress being made here. They're just switching. They're already doing this. And I think it ranks with some of the most significant transformations we've had in public health history.