For Tobacco Harm Reduction (THR) to become widespread, affordable and appealing, reduced-risk alternatives to harmful tobacco products must be legally available and accessible. Achieving this requires sustained, substantial investment. The pace of harm reduction is closely tied to investment levels, influenced by potential risks and returns. Regulatory risk and uncertainty increase the returns required by investors, reducing available capital. Consequently:
- Reduced Investment in Product Development: Lower investment hinders the development of safer and more appealing products supported by scientific research. Without this, regulators are unlikely to consider them as effective harm-reduction solutions, and existing RRPs do not appeal to most smokers.
- Limited Accessibility in the Global South: Insufficient investment in cost reduction makes these products inaccessible to consumers in the Global South, home to 80% of harmful tobacco users.
- Hesitancy to Enter High-Risk Markets: Companies and investors are less likely to enter markets with high regulatory risk.
GFN 2024 Workshop - hosted by Pieter Vorster with panellists: Sud Patwardhan, Jonathan Fell and Marina Murphy
Transcription:
00:00:05 --> 00:06:32
Pieter Vorster: In more general terms, if you look at what the sort of key challenges are currently, firstly, and we've heard about this a number of times, is the appeal that current reduced risk products have. Although they're very successful in some areas, it's very clear that it's not good enough for quite a large proportion of current smokers and other users of harmful tobacco the second and a very important point is cost when you look at the cost of these products particularly where devices are involved they in particularly developed markets they are just unaffordable and certainly and that that is partly driven by taxation You know, to give you an extreme example, in the UK, you know, you're paying 10 to 15 pounds for a packet of cigarettes, and you buy a bottle of e-liquid for, you know, two pounds 50, and that probably is the equivalent of, you know, at least two to three packs of cigarettes in terms of liquids. So, whereas when you go to South Africa, for example, you're paying sort of on a like-for-like basis, you're paying the equivalent price of cigarettes, and in other developing countries it is even more extreme. There you would need to sell these products below the current cost of production, so that really is a big issue. accessibility. We've got these products banned in a lot of markets. And a very important point that we've heard about quite a lot over the last few days is perception that these products are not perceived by many consumers or most consumers probably as less harmful. So that brings us to the investment needs and why do we need investment and why do we need investment at at quite a significant scale. One clearly is for product development to develop more satisfying products and certainly cheaper products and I think that is a key issue. One thing that we don't, there is this sort of approach and understandably that is sort of one size fits all and perhaps in many markets that is not appropriate and I suspect there is room for more market specific products. I'm not going to go through the whole list of investments, but I think the one area of investment we don't often talk about is understanding consumers, making investments in consumer education, making investments into engagement with regulators and understanding what local regulators need. I think it's unequivocal that there is a very substantial investment need, and the more investment there is, the quicker all these things happen, which brings us to you know, what drives investment and what attracts money to the area. And the first and very important is returns. And if you look at, you know, what returns can an investor or anyone in this industry expect is driven by a number of things. The first one obviously is the potential market size. So if you have a situation where these products are banned in half the world, it clearly limits the potential market size. And that really is where the risk factors come in. What market share can you have? And very importantly, what price can you charge for the product? Regulatory risk and uncertainty increases the return that investors require from making this investment. So this is a very critical area in terms of what drives the potential pool of capital that is available to invest. If you have product bans, clearly there is no market. And I think... At the extreme end, a regulatory burden adds cost when you've got to make products in a certain way to comply with regulation. That all adds cost. And the extreme example is obviously the FDA's PMTA process, which costs, you know, They say $300,000, but we're talking about millions for a product, and that clearly is something that investors need to recoup. On the other extreme, and maybe we don't talk about this often enough, and this is what drives, is a very important investment driver, is where you have unregulated markets, where it's a free-for-all. You have really a very fragmented market in the first instance, so there's no pricing power, and that makes it very unattractive for investors. You have potentially unsafe product, which then invites extreme regulation, and you have potential irresponsible marketing practices, which again, these are, you know, you would think those are great markets, but those are not, from an investor perspective, attractive markets. I want to ask, firstly, Marina, your take, given your experience in terms of the different kind of corporates where you've been involved in. So from a company perspective, how companies look at the issue of innovation and putting that in the context of regulatory risk.
00:06:35 --> 00:12:14
Marina Murphy: Thank you, Peter. For those of you who don't know me, my name is Marina Murphy, and I've worked in this sector for about 15 years. And in that time, I've worked in different kinds of companies from big tobacco to very small startups. And it's interesting, as Peter said, to observe internally the different ways those kind of companies think about things and how they go about things. And you mentioned innovation and also in your slide you mentioned the important drivers for investment. And one of the most important ones, of course, being the potential for their returns. So the companies that are going to give the best returns, of course, are the companies that are the most profitable, which generally tend to be the companies that are the most innovative. And the traditional thinking is that big companies aren't very innovative. They're very slow. They might have a lot of resource, but they're stuck in their ways. And they might be locked into, you know, maybe two or five year kind of strategy. program that's very hard to divert from. So that's the traditional way of thinking. And then when you think about small companies, you think fast, flexible, and pretty creative and imaginative. And I think that has been the case. So if you look, say, 30 years ago, and I'm talking generally, not about the sector, 30 years ago, you would have had startups that came in with some great ideas and disrupted the existing businesses. And these are now pretty much the companies that, you know, the big huge conglomerates that we see, the big mega companies like Apple, for example. So if we look today, I think the situation has changed slightly, or a lot, in that when you look at the innovative companies, the companies that are doing well, they tend still to be the dominant companies. The dominant companies are maintaining their positions. And again, broadly speaking, that's a lot to do with the fact that they're in a good position to leverage what you would call a digital revolution. And actually, if you put up the next slide. So if you look at this list here, these are the top 10 most innovative companies in 2023. And you can see you know, there's a lot of technology companies there and there are companies that we now know very well and they are tending to maintain or they are maintaining that position. So you talk about the digital revolution, I think it's interesting to look at Moderna. So they used AI, for example, very efficiently in creating their COVID vaccine. So you can see that there's a difference between maybe 30 years ago and now. And I think an interesting question for an investor is how will this be played out in our sector? Are the big companies, that we see now, are they going to maintain their dominant position or are they going to be pushed aside by smaller companies? And I don't think that's an easy question to answer because there's, like most things, it's quite complicated. If you think about the mindset of the bigger companies, they are trying to change from companies that sold, we'll say, a glorified agricultural product. It's dried leaves rolled up in paper. And then moving to selling a gadget, a device, to being high tech. And I think that's a difficult mindset. It's difficult to change that mindset. And then, of course, you have the internal conflict between as I said, an agricultural product versus a high-tech product, and the different kinds of things that influence that. The other thing is regulation, and like you said, if regulation is overly strict, that means you've cut off innovation pathways anyway. But also there's, I think, a tendency sometimes to get distracted by regulation. If you think about maybe five or six, seven years ago, All that we talked about when we were talking about advocating and regulatory engagement was nicotine ceilings. We're like, we have to get over this 20 milligrams per mil is terrible. And we all hate these sigilics, they're useless. And then there was a massive focus on creating sophisticated products, different formats. And then there was even companies talking about mixologists and giving you recipes for mixing e-liquids. And then what happened... Jewel and Elfbar and they kind of went full circle back to a simple product and I can tell you that a lot of people were surprised by that at the time. I mean we know and love them now. They're there but it was a surprise at the time because a lot of the other companies were, you know, they didn't have their eye on the ball I think. The other thing I want to mention because it's in the title of course is harm reduction. So harm reduction and innovation. I think we have been very good as a sector creating innovative products that are, they are reduced harm. And we're in the position now where we have products that are very similar to NRTs. So the chemical profiles of those products are very, very close or almost identical. to an NRT. So I think we have achieved that because there's only so far you can go without creating a product that's so dull. Nobody wants it. But again, you mentioned perception. Again, so with harm reduction, I think we're still in that defensive mode where we're defending harm reduction, but the debate has actually moved on to nicotine. And the perceptions around harm reduction, nicotine, the regulator doesn't understand, the media love a scare story, and the consumer is confused.
00:12:19 --> 00:12:55
Pieter Vorster: Thank you, Marina. One of the points I touched on in the introduction was the availability in particularly low and middle income countries. I want to ask Sue to give us a bit more flavour on that and also talk about what the importance is of doing scientific research in those markets, specifically around harm reduction, and also how that could help promote accessibility in those markets.
00:12:56 --> 00:18:10
Sud Patwardhan: Thank you so much, Peter. And Marina, thanks for pointing to that chart, which I'll come back to in a few minutes. I am very happy that LMICs, low and middle income countries, or what they would call as the global south in some conversations in public health, are at least represented in this session. The reason I'm saying that is nearly 80% of the world's users of risky forms of tobacco products live in those countries. If you just add three or four of them, India, China, Indonesia, and Bangladesh, you kind of come to a number of 750 million people consuming risky smoked and smokeless forms of tobacco. And so if we ever want to have a sensible and a meaningful and an impactful conversation around harm reduction, having that as part of the equation is absolutely crucial, should be top on the agenda, is where I start from. And so then the question really is, what kind of investment needs to happen? Why is it not happening? And I want to just touch upon some of those thoughts. I've written a lot about some of the observations I've had recently in a visit to a very small mountainous country north of India. And I used a phrase called health imperialism. And I'll use that in this context by saying that Funny enough, or rather tragically, policies that are regressive have managed to reach LMICs much sooner than the transnational tobacco companies or innovative tech companies or even pharmaceutical companies who have the opportunity to provide safer nicotine alternatives. And what baffles me is that if you think of this concept, which I've also written about, and we wrote it together, in fact, in an article, Peter and I recently, on the bottom of the pyramid and the fortune to be made in the bottom of the pyramid. there are nearly 300 million users of risky forms of tobacco in India alone, another 300 in China. And look, yes, they are as a nation classified for economic reasons and sort of geographical and demographic spread as LMICs, but trust me, there are more billionaires and millionaires and a massive middle class in these countries, along with those who may not be able to afford hugely costly safer nicotine alternatives, but that is the concept of, I would say, a bottom of the pyramid plus plus, where there is a huge number of people who could benefit from safer nicotine alternatives, starting with nicotine replacement therapy. It is on the essential list, essential model, essential list of medicines of the WHO and even in countries such as India, where I originally am from, The irony is, in that same country today, nicotine replacement therapy is being pushed back. It's called reverse switch, which rarely happens for a medicine. It's being pushed back from over the counter sale to prescription only. And we're talking about access. This is the biggest block and hurdle to access to nicotine replacement. I'm not even saying go as far as saying safer nicotine alternatives such as electronic cigarettes and so on. Even nicotine replacement therapy available only on prescription going forwards is the proposal which is most likely going to be approved. And where is this regressive thinking coming from? So I'll finish with one thought, which is the lack of local regulatory science capacity. And I want to connect that dot, the dots between the so-called health imperialism, where ideas are just exported from the UK, oftentimes, where the policy on tobacco harm reduction is so enlightened. But they will export that idea to a country such as India, saying, ah, you should do this because we think this is good for you. And that idea is exported in a way that the local, regulatory machinery is almost feeling obliged to accept. And there is no local science to kind of talk about the principles of, be it tobacco cessation, harm reduction, understanding nicotine and the nicotine misperceptions that, funny enough, Marina and I were the first ones to publish it and do research about originally in 2012. And it's kind of come full circle. We look at this prevalent issue about nicotine misperception and how that drives wrong policy. Wrong in the sense, wrong for public health, wrong for consumers, and a missed opportunity for making a real difference. So investment is needed. Companies should be doing something about it, doing local research. One final thing, actually, if I may. Transnational companies talk a lot about doing a lot of research But it all happens primarily in the Western world. The US, because FDA requires it. In the UK, because it's got a good system for research and we can trust the research happening. But that doesn't mean they should not do research in Indonesia and Bangladesh and Kenya, where these companies have already launched products. So companies are rushing to launch their safer nicotine alternatives without actually doing local research. I think that's not done. They have to up their game and come and present that data in the next and the next and the next year here. Otherwise I'm not going to accept their so-called claim of transformation. It is not actually happening.
00:18:11 --> 00:19:18
Pieter Vorster: Thank you, Sud. I think let's switch gears a bit and hear from an investor perspective, because I think there is this perception that, and you talking about it partly, Sud, is these companies are big companies, they have deep pockets, why can't they invest more, why can't they, you know, they have a responsibility to do that. And I want to bring John into this, who John and I were both former analysts covering the sector. But John, subsequent to that, switched to being a fund manager and an investor in these companies. So I want to hear from John what his take is on how investors look at these companies, tobacco companies, what it does, you know, is there a cost, you know, what drives investment decisions, and how regulatory risk also comes into the equation.
00:19:21 --> 00:24:39
Jon Fell: Thank you, Peter. So, as you mentioned in your introductory remarks, we need investment in tobacco harm reduction to develop and market these products, and that investment only happens when investors can see that they're going to make a return. And to delve down into the basics, we all understand, I think, that if you're taking more risk when you invest in something, you want a bigger return to compensate for that risk. And the more money you have to invest up front, the bigger amount of money you want to have a prospect of making in the end in order to generate an attractive financial return. And if the prospective return isn't high enough, then you don't invest in those things. So if you believe in tobacco harm reduction, you want people and companies putting as much money as possible, as much money and effort as possible, into trying to make great, new, less dangerous products for people that encourages people who smoke to switch away from combustible cigarettes. Regulation's important because the regulatory framework has a major impact on the overall risk of a new tobacco harm reduction project. If the framework is rational, consistent, and predictable, you know the rules of the game you're playing, and you can be more confident that if you develop a great product, you'll be able to market it effectively. And on the contrary, if regulation's capricious, inconsistent and blown about by other forces, like the panics that media and politicians we know feed on and reinforce, then you're not sure what the rules of the games are, and you're not even sure that you'll be able to bring your product to market when you develop it. And I think probably all of us in this room would share the view that the current regulatory environment in the world for tobacco harm reduction products is far from ideal, and there's loads we can say about this. But I'll leave you with two examples for now, and we can come back to things later. So the first remark I'd make is that professional financial investors broadly really hate the tobacco sector. And I did a project last year for what was then called the Foundation for a Smoke-Free World for its now defunct Tobacco Transformation Index, which aimed to rank the largest tobacco companies in the world according to how fast they are transforming. And it was really hard to get investors to engage with that. I mean, many mainstream fund management houses have almost given up on the sector altogether. And a lot of them, sadly, don't get or just don't believe in the concept of tobacco harm reduction. Why is that? It's because They see the headlines about the products, about flavors being banned. They read the media scare stories. And a lot of them think this stuff is no better than cigarettes. What's the point? One of the consequences of that attitude is you've got two UK companies, BAT and Imperial, two of the world's largest tobacco businesses, on really very, very low valuations. They're on price earnings ratios of five or six times. Without getting too technical, That basically means they're priced as though they're going out of business in the next five, six years. And so a lot of people in the financial community are making the case that actually instead of investing lots of money in tobacco harm reduction in trying to make better products, they'd be better off just using that money to buy their own stock back or trying to maximize their cigarette cash flows. Because what's the point in investing in products which might not bear fruit for 10 years if you're priced as though you won't exist in 10 years' time. And the second point I'd make on this front is that not all companies have the same risk tolerance. And big publicly listed companies, again, the big tobacco guys, tend to be quite conservative. because they have an existing business model and reputation to consider. And the people who take more risk are small operators, small companies, individuals maybe. And they're also prepared to take more risk with tricky regulatory frameworks. And as we know, some of them have tolerance even for operating essentially illegally, because they can maximise profits in the short term and cut and run when things get too hot. So if you have the wrong regulatory framework, then as you see in many places, you know, Australia, US, India, the black or grey market takes over and large companies really struggle to operate in those environments. And the bigger problem is the image that that gives tobacco harm reduction as a concept and the pressure that that creates for even more crackdowns.
00:24:43 --> 00:26:35
Pieter Vorster: I want to get back to just one of those points where you're talking about the valuations of BAT and Imperial. Particularly, BAT is a company that is making very substantial investments into this area. For whatever the reason is, investors are basically marking down BAT because of a perception of risk. Now, that is be it the risk of their investments in new categories or the risk of, for example, mental getting banned in the US. But it doesn't matter what the reason is. It is an example of how investors will mark you down, doesn't matter what you decide as a company to do, investors will decide what the appropriate risk is. You know, if your valuation is at that level, that creates a lot of internal pressure in companies, does it not? I mean, Marina, maybe you can come in there as, you know, people get share incentives when all their sort of stock options they got are underwater because of whatever decision or announcement the company made. That creates a lot of internal tension. anybody sort of care to comment on that I think just you know I want to sort of really sort of bring this across is that you know these are these companies are not independent they have very significant shareholder basis to to answer to
00:26:38 --> 00:28:54
Sud Patwardhan: I'll have a go at it from a very different perspective, which, again, as smart analysts and investment fund managers of the past, you may just shoot down. Please do so and correct me. But I look at companies who invest a lot of money. Some of the examples you mentioned, big transnational tobacco companies investing millions, perhaps hundreds of millions of dollars annually to put together data that they have to submit to the FDA, for example. They look at the US market and say, ah, a lot of money to be made. And for sure, it's a lot of money to be made. However, the regulatory uncertainty, as I can see from across the Atlantic, I think that that market is just as messy as ever. I had a comment I heard yesterday, overheard about how we talk about Australia as an example of how black market has thrived. And the counter comment by an expert in this area said, look, America is no different. We have a huge rampant unregulated market flourishing purely because the FDA and whatever, whatever. So I'm no expert on the sort of nuances of the regulation, but my point here is big companies can justify their expenses and their investment in trying to get FDA licenses for their products because they show that, look, there is a promise of us getting whatever it is, a PMT or an MRTP, and hence make a lot of money. That's their investment case, right? Now, I would say, I would challenge, and I think if some of you have an opportunity to go and challenge the CEOs and the management boards of these companies, I would say go and challenge them and say, if you were to invest the same amount of money in Indonesia and Bangladesh and South Africa and India and wherever else, you would potentially be able to crack that issue about access to a few hundred million people who would use current tobacco users, I'm being very safe about this, current tobacco users who need access to safer alternatives and be able to also make the money. You need to justify your existence as a commercial enterprise. But I don't think anyone's making that case. Nobody goes to the CEOs and says, hey, you know what? You just got it completely wrong. Get out of your Western mindset. Look at the growth everyone else is betting on in China and India. Why aren't you doing the same thing for your tobacco business? Why is that not looking eastwards? So that's just my little naive medical doctor slash public health slash whatever viewpoint. I would love to hear your thoughts on that.
00:28:55 --> 00:31:18
Pieter Vorster: Well, I think, Sid, it's a very good observation. I would say, and maybe that brings us to the next point, is that I think in the minds of investors, those markets are sort of unknowns. People don't necessarily understand them. And perhaps the regulatory frameworks in those countries are viewed as less predictable. So the question is, how do we make those or reduce those regulatory or perceived regulatory risks? change that how do you make that more predictable what's the role for example of and you touched on it earlier of local research in terms of creating an understanding about those markets but also to help those countries not just take on whatever the WHO is saying and I think you know I'm not trying to answer my own question, but I think there are two reasons why countries adopt WHO regulations. One is they don't have the local capacity, and perhaps if you could talk about that. But the other one is it is convenient for many, because when you look at the reliance on tobacco tax revenues in many of these countries, and I wrote about it probably a few years ago now. But for some of these countries, a very large percentage of their gross government expenditure is funded by tobacco excise revenue. We spoke about this. So unless you have local knowledge, it is very easy to adopt whatever the WHO is saying and sort of protecting those cash flows under the guise of adopting the FCTC. Perhaps if you can sort of talk about the research side, and maybe John can sort of come in again on your sort of comments. Yep, please.
00:31:20 --> 00:33:15
Sud Patwardhan: I'll respond to the point about the role of tax and the revenue that governments make in LMICs as a significant proportion of the sort of intake of revenues. And I would push it back saying, actually, In those countries which have purportedly copy-pasted a WHO diktat on banning or limiting access to safer nicotine alternatives, and in the case of, as I mentioned earlier, even NRT in some cases, or making it very unaffordable, They are actually losing out. The governments are now losing out because the market, it's a free market generally. The world is pretty connected. Even in India today where e-cigarettes are banned, you fly from, let's say for example, you're getting on a flight in Mumbai and you are a vaper and you have to hand out, you have to give back, you have to sort of give away your e-cigarette. The moment you land in Bangalore, there is a chap who is having an e-cigarette to give to you. Yeah, so this whole black market is thriving and flourishing. Who is losing out? Well, there are at least two stakeholders losing out. The government is one of them. They are not getting the tax revenues they could have got. And the same with pouches. Pouches are on the cusp of being flooded in the market of India today. and there is no regulatory policy around it. So again, there's going to be lost revenue for the government from taxes on emerging tobacco and nicotine products. The second loser, obviously, which I care about a lot, are the consumers. The consumers are getting unregulated products because they are prohibited. There is no regulatory framework. They're going to get that chap who's going to give you an e-cigarette in Bangalore You do not know what's in that product. You do not know where it's come from. If it's come from China, it's taken two years to come through some dodgy supply chain. The nicotine there is perhaps expired. The liquid is all gone murky. You do not want that ex-smoker current vapor to be exposed to that risk. And so there's just so many downsides. I cannot say a single upside.
00:33:17 --> 00:34:57
Jon Fell: John? Yeah, so I'll make a few remarks about Your point, Sud, that maybe companies would be better off investing in LMICs rather than the US. I mean, the chart that Marina pulled up is interesting because look at those top six companies. Most innovative, they're all US businesses. And for better or worse, sometimes for worse, obviously, the US is just such a massive, cultural force around the world. And three of the large tobacco companies make the largest amount of money in the US. And so I don't think you can get away from the fact that the US is going to continue to be just a really important driver of what goes on in tobacco and tobacco harm reduction and how that how that is perceived globally. And as long as companies are making so much money there, investors are going to be asking, well, what are you going to be doing about your declining cigarette business? How are you going to transition that to something more sustainable? That's not to say that investment in LMICs shouldn't happen. It obviously should. We're not going to get away from the fact that the US is going to remain a dominant influence in what goes on here as well.
00:34:59 --> 00:35:58
Marina Murphy: I wanted to ask Sud a question. You probably think it's a really stupid question. So you're talking about investment in LMICs and you're saying, okay, Western companies need to get out of their Western way of thinking and think about putting their money there. But what's wrong with the companies that are there? I mean, why isn't ITC thinking, let's move away from X, Y and Z because we could actually sell nicotine pouches. They're very well established in other parts of the world. And actually, they're one of the products that you can... definitively say, as far as the chemistry goes, their toxicant profile is almost identical to an NRT. And they've proven very popular, and actually I was quite surprised at how popular they are. So why isn't the ITC, for example, and you probably know other companies, why aren't they doing that? I mean, they're there, and you talked about the regulatory environment being unsure, and people It's an unknown entity, but not really for RTC.
00:36:01 --> 00:36:45
Sud Patwardhan: May I dodge the question? I'll tell you why. Because it's not for me to speak on why. These are publicly listed companies. And I haven't seen any statement. And I would be very happy to be corrected from anyone in the audience when you open it up, Peter, to address this question specifically. But I don't think I can venture out to answer why are they not doing it. If you ask me simply, should they be doing it? I will say, yes, of course they should be doing it. It's a very logical thing for any company that is facing so much upheaval in the market that is way beyond their control. I would say they should go for it. So if let's assume they are doing it or they're at least planning to do it, I would say we should support that for sure. But let's find that out. I would not venture on saying they are doing it.
00:36:49 --> 00:37:33
Pieter Vorster: Marina, I want to ask you from your previous experience. I mean, we have an interesting situation in the US now where for the legal industry, it takes years to get a new product to market, to get through the PMTA process, et cetera. How, from your perception, has that affected the way companies invest in developing products specifically for the US market? And has it sort of shifted their focus? And again, bringing this sort of concept of regulatory risk driving investment into the equation.
00:37:37 --> 00:39:21
Marina Murphy: As you said, the regulatory environment in the US, I think it's interesting on one level because they talk about scientific evidence, and we love when people say scientific evidence, and you must have the data and be able to prove what you say, on the one hand. On the other hand, you have a situation where, as you mentioned, In order to put in an application to get an authorization, you end up spending millions and millions and millions of pounds. And the only people or the only companies that can do that are the well-established tobacco companies that have, you know, they can sell cigarettes, sell lots of cigarettes, and they still do, not least because they need that money to reinvest. in things like reduced risk products. So the smaller companies just have absolutely no hope. There is no hope of breaking into that market, despite the fact that it's a huge market and again, huge potential returns. But where are they going to get the money to do that? There's no certainty that they will ever get a PMTA. I mean, look at the dual situation where years down the line, The market denial order has only just been rescinded. So you're in the situation where you have a really clean product with a very big, impressive, expensive data set. They haven't been awarded a PMTA, yet you have a situation where a combustible cigarette has been given one. the very low nicotine cigarette. Now to me that makes absolutely zero sense, absolutely no sense whatsoever that you can get a PMTA for a cigarette and we're always talking about a combustion, eliminate combustion. It makes no sense.
00:39:21 --> 00:40:13
Pieter Vorster: So I want to just hear from all of you, maybe starting with you, Sud. I mean, we're talking about all these issues and all the problems. How do we overcome that? How do we overcome these regulatory risk issues, particularly in LMICs that, you know, from the outside appear to be a bit of a a crapshoot, if you can call it that, in that who knows what's going to happen because and really do we need to wait for the WHO? What can companies do? What can the industry do to help change that or to reduce that regulatory risk and certainly perceived regulatory risk?
00:40:15 --> 00:41:41
Sud Patwardhan: Well, it's a very loaded question. I've kind of answered it in my initial opening remarks that unless local regulatory science capacity is built among institutions, academia, local medical, public health professionals, be it by transnational companies or local national monopolies, local pharmaceutical companies, I'm agnostic. I don't care who does it, even the government, if they invest in doing actual proper research on the harms of tobacco, on tobacco cessation, and finally leading to that sort of enlightenment moment where they understand it's not the nicotine that's the problem, but it's either the smoke in the case of combustible or the added chemicals in the case of smokeless tobacco. I think that Eureka moment is what we have to all sort of strive towards either from outside or within the country. If there are companies who have a huge market share, like ITC, they should take the lead on actually funding research. They have much better access to local institutions than a foreign company for various foreign related currency related laws, in the case of India, for example. So there is a huge opportunity for all these companies to invest in local research which will pay the dividends for them to have the right regulatory framework when it comes to that. Waiting for the WHO to wake up and look at its own framework convention and discover the line which says harm reduction strategies along with demand reduction and supply reduction is waiting for another, I don't know how many hundreds of years, unfortunately.
00:41:43 --> 00:42:23
Pieter Vorster: Thank you. John, can I ask you from an investor perspective, how... do you, or certainly when you were in those shoes, how did you navigate regulatory risk? I think back of to, for example, 2017 when the FDA announcements came out where you have a very significant moves in these share prices. As an investor, How do you build that in? How do you think about it? And how do you make it manageable?
00:42:26 --> 00:44:50
Jon Fell: Yes, an interesting question because normally in investment situations which are very complicated, if you do the work to understand the situation and get your head around it and come to a position where you have a strong view about what the final outcome will be, that's a good position to make money. Except in tobacco, it doesn't seem to work out quite that way because of, you know, there's so many forces out there which are working against the companies. And I think it was obvious to plenty of people when Gottlieb announced his plan to take nicotine out of cigarettes that there was very little chance of that happening in the near term at all. And I thought that, and we're still as far away from ever as that is from actually happening. But the performance of the stock prices has still been Terrible, because it's not just a question of the profits that the companies make, but what is also going on in the sector more broadly is there is a big push to get people to divest. You have things like the tobacco free portfolios initiative, which is just telling people that There's no such thing as a responsible tobacco company. There is no responsible behavior that they could do apart from just stop selling cigarettes overnight. And so, you know, you've had this very long-running saga of basically people selling their tobacco stock over a period of years. And that's a kind of self... perpetuating negative cycle for investors. And that's one of the things also, which is, in addition to all the other news flow, just encourage people to get out of the stocks and not bother trying to understand the issues.
00:44:55 --> 00:45:08
Pieter Vorster: Perhaps we open to questions at this stage. Are there any questions from the audience? Chris? Yeah.
00:45:16 --> 00:46:07
Chris Snowden: Thanks. Chris Snowden, Institute of Economic Affairs. Just a question really regarding what John was just saying there about the divestment movement and so on. Would it really matter if the big tobacco companies end up just buying back all their shares and becoming private companies? I mean, would that have any effects on anyone apart from people who invested in in the stock, because most of the tobacco stock is ridiculously cheap by any normal measure, apart from possibly JTI, because it's had a very good year or two. But I think Imperial, the price-to-earnings ratio is like seven. No wonder they're buying back their shares. But my question is, would it matter to consumers or policymakers or anybody else if these companies ultimately just buy back all their shares and become private?
00:46:10 --> 00:47:22
Jon Fell: Shall I go at that first? I mean, personally, I think it would matter. So again, if you're a believer in tobacco harm reduction, then who are the people best placed to make a big impact in terms of reducing the harms of smoking for the world's population is the companies who sell cigarettes. And while they're publicly listed and have Normal shareholders, they have AGMs. You can go and question management. They do quarterly briefings where they tell you what's going on. And again, analysts and others can question them. They're accountable. And they can be influenced in their behavior. If they were completely private and owned by some shady billionaire in the, for instance, the Caymans, they could do what they liked. And in that situation, potentially, they would become much more about maximizing profits and about trying to sell as many cigarettes as possible for as long as possible. And that's likely to be a less desirable outcome for public health.
00:47:23 --> 00:49:44
Pieter Vorster: Yeah, I think maybe just sort of adding to that and maybe a bit more general comment is if you looked at the previously published, it still exists, the Tobacco Transformation Index, you had a very clear distinction between public, multinational companies where you would see the highest degree of transformation. Now, whether that's good or bad for shareholders remains to be seen. And the other end, the worst end, would be the single country privately owned, not even state owned, single country privately owned companies would have no interest in any transformation. Why would they? Unless they are forced to by competition, for example. But if you have a protected industry, it doesn't happen. So I think there is a lot to be said, as John said, for having public companies from a transformation perspective. Now, is that good or not for shareholders? I would say it is, because you look at the differential in the valuation of PMI versus say a BAT and Imperial, whereas PMI generates now a very significant proportion of its revenues from e-to-tobacco, essentially. I mean, it must be one of the, you know, we talked about this last night, one of the only big companies in history that has disrupted itself so successfully. And it is shown in what the valuation is. But it's also generating much higher growth. So there is an incentive for companies to do it, but to do it right. somewhere in between, it gets lost in some of the company valuations. So until you get, there is a pain period for investors to get through. David.
00:49:50 --> 00:51:18
David Sweanor: In listening to this and thinking about how markets work and the role of entrepreneurs and the ability of some people to look at something and not see the problems but see an opportunity, it seems to me that there's a huge opportunity here for a new player in a low-middle-income country, or some number of them, not so much... with an orientation toward what can we do for public health, but an idea of industrial strategy. Many of the markets where you would expect the new companies to emerge have committed regulatory suicide. It's impossible for a company to do something there. But if you were a mogul in Indonesia, India, and you said, I want to make this happen, and you had connection with government to get the regulatory structure necessary to do it and brought in the regulatory or the R&D expertise or bought the IP for products, it would look like you could go to scale in a country like that. and say we want to be like a Samsung or a Toyota or an ITC, you know, companies that, Taiwan Semiconductor, I'm sorry, companies that are a result of industrial strategy and came to be very dominant players in a marketplace. You know, go to scale in your own country, document what you've done and then take that global. I mean, is that where we might see the future of something like this?
00:51:23 --> 00:53:15
Pieter Vorster: Partly, yes, would be my answer. I sort of like to get the input from the panel as well. But, I mean, there are a few things I want to say about that. Number one is you made a very important point, is you need to get buy-in from the local government, from regulators. Now, that is quite a big if, right? So you're talking about a country like Indonesia, where you have a tobacco industry that is generating fairly significant tax revenues and quite a significant proportion of government revenues. What is their initial incentive to allow someone to come in or support someone to come in to disrupt that? Clearly, public health is important. it does come at a very significant cost, certainly in the short term. So I think, you know, there is a big hurdle. If you don't get the buy-in of government, you find that you have the situation that relax had in China that listed, There was a big white elephant in the room, is the potential risk of regulation of these products. Investors at the time either ignored it or just didn't think about it. And I mean, that valuation's gone from, John, correct me if I'm wrong, but you're talking about $35 billion to, I don't even know what it is now, but if it is a billion, that would be a lot, right? It is critical that you get that. The question is how you get that and how you convince those governments to allow you to do that.
00:53:19 --> 00:54:05
Marina Murphy: Tax revenues for cigarettes have come up many times and obviously, of course, governments need to make money. But what I don't understand is what's the difference between tax revenue from a cigarette or an e-cigarette? I mean, that's what you have regulation for. That's how you create stability. You regulate the product, the government makes money, and everybody's happy. So if you accept that an e-cigarette or a vape is a substitute, potentially, for a cigarette, I don't understand why governments can't go down the direction of thinking, I mean, maybe I don't understand, but what's the difference?
00:54:07 --> 00:55:43
Pieter Vorster: I think the main difference is the cost of manufacturing the cigarette versus these other products. So a big reason these products are attractive to consumers is because they don't attract the same excise tax because, and in countries where you have lower taxes, where you're paying a dollar or so for a pack of cigarettes, the cost of manufacturing those cigarettes is still only you know, call it sort of 10 cents a stick, not even. So we have a long way, and this is partly what we talked about, is investment in getting these products to be cheaper. But if in those countries that we're talking about is where cigarettes are really very cheap, so those for... reduced-risk products to compete in those markets is very difficult at the cost of manufacture. To give an example, I mean, the price at which, and this is not even talking about devices, but the price at which BAT and now PMI through Swedish Match is selling nicotine pouches in Pakistan is probably below the actual cost of production. And, you know, if you're going to wanna add a tax to that, a significant tax, to replace whatever revenues you're gonna lose, there's a long way to go here.
00:55:46 --> 00:56:07
Marina Murphy: What cost is directly related to scale, right? So if you have a huge number of cigarette smokers that you can switch to e-cigarettes, well, that's going to make a massive difference. And you already have companies like Elfbar, for example, and the scale of the production that they have is absolutely amazing, I would say.
00:56:08 --> 00:58:29
Sud Patwardhan: May I just add to that, and I want to answer what David asked, perhaps if I understood you right, David, regarding the industrial strategy and its application for almost transforming the way who manufactures and what do they sell and where. I'm going to just sort of tweak it a bit, if I may, and say that, look, to your example of Elfbar, and is it a Chinese company? I would say a similar example would be companies in India, for example, who currently manufacture oral tobacco of the nastiest kind. But these are massive companies. They make billions of dollars selling a product which is very toxic. I do know that many of them at least have started having those conversations of can we, shall we, should we, may we. start manufacturing pouches. And I think that's a very fascinating kind of transformation where we're not looking at a sort of a bunch of Western companies selling tobacco products or safer nicotine products in the LMICs, but actually China with Elfbar or or an Indian company that comes and say, look, you know what? I don't know what's happening in India in terms of nicotine pouches, but I'm going to try and sell pouches in a country where it's properly regulated. And I would rather that happens because it does a few things. Unlike some of the examples of where products have come from China and flooded the markets of the UK and US and elsewhere in the world, it's creating a black market completely disrupting and causing huge panics, real or moral. If there was, or there were a few countries where pouches were properly regulated for nicotine strength, for marketing to the right sort of consumers, and there's so many ifs here, by the way, so bear with me. But if that was the case, the industrial strategy approach would make sense for one or two companies to actually be able to do that. They would have deep pockets to fund that commercial activity, but I would hope, and this is, I'm putting the ball back in your court, David, or the likes of you who have over the years enabled transformation through your advocacy. I would say they need to hear from people like you. They need to hear from those who have seen the light of tobacco harm reduction and public health. to be given the confidence saying, look, you make as much as money you want, but please be responsible citizens of the global kind of nicotine corporations. And if you can please twist their arms and whisper in their ears and make them accountable, I think we might have just exactly what you're saying that we need.
00:58:29 --> 00:58:35
Pieter Vorster: Thank you.
00:58:42 --> 01:01:09
Bengt Wiberg: I'm Bengt Wiberg from Sweden, a US-European patent holder for a nicotine pouch that has a protective side against gum irritation and stinging sensation. Let me start with you. Sorry, I forgot your name. Pisa, yes. You were saying that cigarettes is much... less costly to produce than safer alternatives. That certainly doesn't go for Sweden. I was interviewed by Sweden's convenience store magazine and pointed out that the gross revenues for retailers selling nicotine pouches or snus is more than double that of selling cigarettes. So here we have, at least in Sweden, I think I've read also in Tobacco Reporter that the gross revenues for gross margin for nicotine pouches is about five, six times that of sale of cigarettes. So what we have in Sweden is a sort of tobacco retailer in sentiment to switch people from cigarettes to safer alternatives. Not just for the conscience, but for the profit of the shop itself. And I love David's question and Sud's reply. getting those with money and capacity in the limit countries to sort of seek help, start something locally. That would be the absolute best. But as for now, tobacco-free nicotine pouches is not yet allowed in India. Give it a couple of years and when these major companies today making billions of dollars of unsafe smokeless tobacco Realized here is something better Perhaps even with better profit. I'm sure somebody will speak to the government Somehow and bring about this change. Thank you very much
01:01:10 --> 01:04:06
Pieter Vorster: So thank you for that question. I think there are two things you touched on there. The first is the retail margins rather than the cost of production. And that is a function of whatever the market structure is in those markets, but also a function of excise tax. So it also depends on, from a retail perspective, on what price you calculate the retail margins. So for example, I'm just thinking of the UK. If you are making, as a retailer, 10% of the retail price of a pack of cigarettes, it's quite a significant amount of money. It is a pound to a pound 50. actual manufacturers selling price so excluding the excise tax it is a very significant percentage but it doesn't seem like a lot relative to the retail price whereas if you are for example taking the um nicotine pouches let's say they are selling at five pounds a can um there is no tax other than VAT on that. I think in the UK there currently is excise. If at all, there's very little excise on that. So when you're looking at it as a percentage of the retail price, it is going to look like a higher percentage. But if you look at it as a percentage of the actual sort of manufacturer's selling price, the numbers change. So it depends on which prices you look at there. And I think why these products are so profitable is because they are being sold as if they have excise tax on them in markets where cigarette prices are high. So if you think in the US, you're selling it for $5 a can, the manufacturing costs about 50 cents, where cigarettes, the manufacturing cost might be you know, 20 cents a pack or whatever, but you're selling it for $7, $8, but of that, there's this very significant excise portion. So, you know, all I want to say is be cautious about how you interpret some of those percentages, because it depends on what price, and those numbers will change as excise come into these products. But for now, In a market where you can sell it at $5 a can, it's very profitable. In a market where you cannot sell it for more than $0.50 a can, it's not profitable at all.
01:04:18 --> 01:05:16
Attendee: I can also change position to make it a little bit easier with the lighting. So otherwise, it's slightly challenging. Can you hear me? Yes, okay. I have a question. I'm a little bit new to the industry and I joined really to help with the transformation with Armored Action. You picture a little bit a very depressive situation where the stakeholders are not working together in a way and there is a lack of trust towards the tobacco companies and on the intention. What do you think should the industry do to build the trust or to really move? Because in all of everything you have been saying, there is really a loss for the consumer in terms of a better health. And there is a loss in terms of society, in terms of value. There is really a value which is wasted. So what should be done, in your view, to rebuild the trust?
01:05:16 --> 01:08:22
Jon Fell: I'll have a go at that first. I mean, it's going to be a long haul. I think one of the things the industry could do a lot better still is cooperate sensibly when it comes to regulatory frameworks and minimize the use of regulation for competitive advantage. I think there are still examples of that that you see around the world of companies trying to use particular regulatory situations for you know to maximize their own profits and do down their rivals and I think that is it's bad for the long-term future of harm reduction and it's you know creates confusion in the minds of regulators and governments themselves and I think it really pisses consumers off too and I think what the industry doesn't do enough of is trying to help consumer advocates. I don't mean by setting up organizations. One of the things that was slightly strange about people who use cigarettes is they would never speak up for the industry. They might consume the industry's products, but they hated the companies whose products they were buying. With people who use harm reduction products, be that vapes or tobacco heating or pouches, you have a bunch of consumers who are much more willing to talk and speak up for the choice they've made. I think there ought to be much more potential for maximizing the use of that consumer voice. Because, I mean, Peter asked earlier, what's going to change the stupid regulatory situations we have various places around the world? I mean, I'm short-term pessimistic but long-term optimistic. And the reason for long-term optimism is because consumers aren't stupid. They work this stuff out for themselves. And pretty much wherever you look, however stupid the regulatory situation, If it's stupid enough, people ignore it and just go and do what they want to do anyway. And I think it's kind of remarkable how resilient consumers have been in this space, considering all the crap that's been thrown at them. And it's amazing that the market is still globally been growing despite people's attempts to not let it grow. And eventually, I think those people will be listened to and governments will be forced to realize that look, this is going on regardless of whether we try to ban it or not. Let's create something more sensible.
01:08:26 --> 01:09:45
Marina Murphy: I'm just actually going to add to the comment that you just made. And one of the things that you said was the irony being about smokers buying products of companies that they hate. And I think that's probably why we're in a really weird situation now whereby CBD and THC is really trendy and it's gonna be legalized everywhere and all the rest of it. And then in the same breath, the same regulator will say, oh, we should ban nicotine containing products. And that of course is directly linked to the fact that there's a huge big industry and legacy associated with nicotine, but not necessarily CBD or not CBD at all. These companies are new, these products are new. So there isn't the company to hate. And I think that the way that plays into regulation is quite ironic as well because you have regulators that are doing things and they think we're sticking it to big tobacco. But what they're actually doing is recreating the kind of environment that led to the creation of big tobacco in the first place to create big vape. Because what will happen is, you know, you get a really commoditized product and the only companies that will have the scale and the wherewithal to be bothered to market a product that's that boring is big tobacco slash big vape. And all the other companies will be gone.
01:09:47 --> 01:09:48
Pieter Vorster: So did you have a...
01:09:49 --> 01:11:00
Sud Patwardhan: I have a very quick comment, if I may. I think this might sound like a broken record, but I always like to say that one fundamental thing that what can the industry do, among many of the things, is to address some of the most fundamental hurdle to acceptance of what the industry thinks as its future, which is reduced harm products, next generation products, and that is nicotine misperceptions. And for the last 10 years, I've come to this and other conferences and heard people moaning about how nicotine is misunderstood by all kinds of stakeholders. I do not see any genuine effort that is multi-stakeholder across all geographies that actually addresses this misinformation regarding nicotine done in a very objective way and not promoting a product. We don't want them to do a education training slash information campaign at the end of which you have a slide which says, ah, by the way, here is what we sell. So without that, just purely to get over that hurdle of nicotine misinformation and then have the right regulatory policies that follow over time. It's not going to happen overnight, but the industry has to come together potentially, perhaps, which it's not used to doing, and address this massive stumbling block, in my view.
01:11:01 --> 01:11:45
Marina Murphy: I'm going to go a step further than that because I think that, so you're talking about reduced harm. If you actually do the job that you really want to do, you entirely replace combustible products with what are now called reduced harm products, in which case they're not reduced harm anymore, they're just nicotine. And I think that's one of the things that the industry has been afraid to grapple with, is the idea that humans like to use stuff like nicotine and alcohol and caffeine. And that's the nature of human beings, and human beings have used nicotine for tens of thousands of years, and there's archaeological evidence to prove that. And I think that's the thing, that's the real thing that needs to be grappled with, is the idea that maybe it's okay for humans to use nicotine.
01:11:51 --> 01:12:16
Pieter Vorster: Anyone else? I think we got, we're sort of nearly at time, but I want to just ask, well, firstly, thank the panel for, certainly for me, was a very interesting discussion. And I want to ask, maybe starting with you, Sud, any sort of closing thoughts.
01:12:22 --> 01:13:23
Sud Patwardhan: Yeah, sure. Look, at the risk of repeating myself, I think where the action is on the ground in a significant proportion and percentage of consumption of risky tobacco products is where the investment has to go. The geopolitical reality of the world is that it's a completely different set of economies which are emerging and sort of leading the charts globally and there is a potential for companies either local or international or a combination of them to be innovative be adventurous but also as I said in my GFN Science Lab 5 or whatever, that there is a win-win-win, which is possible there with public health, with consumers, and with the industry. They can make the money, but they can also save lives and also achieve public health outcomes. And consumers can potentially, if that is what they need, they can get the nicotine in a safer form for their own use. So that would be a thing to push for and aspire for.
01:13:24 --> 01:13:25
Pieter Vorster: Thank you. So, John?
01:13:28 --> 01:14:12
Jon Fell: Yeah, I would pick up on a point that Marina just made, actually, which is I genuinely believe that the big tobacco companies do want to do better. They want to change. And it's ironic that the regulatory situation in many parts of the world is preventing them from changing as quickly as they they might want. And as you said, Marina, it's actually protecting the cash flows from their legacy dirty combustible products. And it seems very strange to me that people don't understand that more broadly. And I think it is a point that needs to keep on being reiterated.
01:14:16 --> 01:14:36
Marina Murphy: I think I'll just repeat myself. I think that the reality is, regardless of whether you're a big tobacco company or a tiny little vape company, we're all selling nicotine. And I think we need to own that, get off the back foot, not always be on the defensive and be a bit more proactive.
01:14:37 --> 01:16:14
Pieter Vorster: Thank you. Thank you, everybody, for attending. I think it's been, to me, certainly really interesting hearing very different opinions. I think, you know, it's very clear that, you know, Oh, there's a question. So all innovation and investments are in a major way affected by the fiscal policy in both developed countries and LMICs. How can fiscal policies be designed to incentivize the production, distribution, affordability of low-risk nicotine products, ensuring they're accessible to population in both LMICs and developed countries while also considering potential impacts on public health, and revenue streams? Well, I guess that is the million dollar question. I mean, what I would say is I mean, the ideal clearly is to incentivise both companies and consumers through lower taxes on reduced-risk products. I guess the question is, how do you incentivise the governments to take that leap and disrupt their tax revenues? So how do you, you know, where do you find that balance? I don't know, honestly, what the answer is. It's very clear. What needs to be done? How you do it? I'm not so sure.
01:16:14 --> 01:17:21
Sud Patwardhan: Maybe Sud, you have a... I'm going to have a go at it at a statement I made earlier, because I think it's very tempting to think that consumers of current forms of risky products want a cheaper alternative. And I don't know what the behavioral research... I mean, for them to switch to a safer order, for them to... go to a different consumption habit, they will need to be incentivized with a cheaper product. I don't know if that is the only reason of the decision-making process. And as I said earlier, if in countries like China and Indonesia and India and Bangladesh, there are enough people who may be consuming risky forms of tobacco, who can afford to buy a good costly pack of, good as in highly priced pack of nasty tobacco in those countries and they'll happily pay the same amount for a less risky product. So I wouldn't get bogged down into is it gonna be cheaper and hence I'm gonna switch to this product. I would say look, there are people who can buy 200,000 Porsche in midtown in India and happily so and there's many of them out there. So let's not get hung up on that sort of thinking.
01:17:21 --> 01:19:12
Pieter Vorster: Sure, I agree. What I would say, though, is when, and that comes back to how good these products are. So if you are compromising, then initially, certainly, you need to be incentivized in many markets, especially in markets where cigarettes are very expensive. So you have sort of two extremes. an expensive market like the UK. So if you're going to have to take out 10 to 15 pounds for something, it needs to be good if it's not your existing product. And that is why when you look at the history of ICOS in the UK, they initially came in at the same price as Marlboro per pack. And it didn't work at all. Now it's selling it. about a third is selling at around five pounds a pack. A pack of Marlboro now in the UK is about 15 pounds. So because for a smoker, there is, for many smokers, there is a compromise in terms of nicotine delivery, et cetera. So if the product is equally satisfying to the consumer, they probably don't need that incentive. But I think when you're paying that much, The other extreme is places where these products are so cheap. So maybe the consumers in India would, if they're only paying, let's call it $2 a pack for Marlboro, would be prepared to pay $5 for a reduced risk product. But it would need to be pretty good for them to pay more than double what they're currently paying.
01:19:13 --> 01:20:23
Sud Patwardhan: Can I just comment on that? And I'm going to switch gears and move away from India to, let's say, Indonesia, for example, which I still believe has not signed the FCTC or ratified it. So correct me if I'm wrong. But if that is the case, I think there should be, am I right to say that? So if they are not a signatory to the FCTC, I think there is no incentive for the country, back to the question on what policies, I wouldn't get stuck on fiscal policies. I would say, look, Tobacco harm reduction should not be seen in isolation from existing range of tobacco control policies, including higher taxes, public place bans, all the stuff that works. Now, you can argue how much it works, but taxes have worked. And I'm going to look at some of the public health experts here who have, over the years, contributed to that. I'm looking at you, David, particularly. And so these things work. If there is no incentive for those countries to sign up to these things, and even the tobacco companies are not asking them to, hey, you know what? Go and ratify the treaty. but then also include tobacco harm reduction as part of his strategy. I think we are missing a trick to not just look at those countries, but also saying the companies which sell there should also feel equally accountable, because if they really believe in harm reduction, it cannot be an isolated sort of strand of advocacy.
01:20:27 --> 01:22:04
Jon Fell: Yeah, I'll just make a point on that as well. So I think you're probably right, Sue, that When it comes to the actual consumer, they're not necessarily looking for a much cheaper product as the reason to switch to reduce harm. But I still think that tax policy sends an important message. I mean, tobacco tax is commonly called a sin tax. Yeah, it's a sin tax for a reason. So if you apply the same tax to vaping and pouches, you're basically sending a message to the consumer that this is just as bad a sin And maybe that's not particularly helpful in terms of the message you want to get across to people. So I think there's a strong argument for having, at the very least, a big tax advantage, a much less large tax burden on the reduced harm products. But Marina mentioned this earlier as well. potentially is useful to have reduced harm products taxed from the point of view of building the government in as a stakeholder to reduce harm products. So I think we sometimes see from advocates a lot of outrage when vaping taxes are proposed. And some of the vaping taxes that are proposed are really stupid. But some tax is probably a good long term thing from the point of view of making governments have an interest in how that sector is developing.
01:22:07 --> 01:22:22
Pieter Vorster: Anyone else? Thank you very much. It was great to spend time with the panel. Please join me in thanking the panel. And enjoy the rest. Thank you.