Tobacco companies have survived an onslaught on their operations through innovation, expansion and distribution, a new report indicates.
A December 2017 report by Genghis Capital says the industry has survived also due to its intimidation and threats to “weak” governments.
Tobacco makers have turned to innovation by introducing new products to the market to boost brand performance and meet health standards while maintaining their customers’ loyalty. In Kenya, the innovations include e-cigarettes.
“We see this (innovation) as the most effective survival tactic as the global onslaught on tobacco continues... Players are coming up with ‘reduced-risk’ products such as smoke-free cigars, heat-not burn devices, gum and lozenges among other products,” says the report.
Phillip Morris International, an American global cigarette and tobacco company with products sold in over 180 countries outside the US, has for instance launched IQOS devices (heat-not burn devices) while British American Tobacco has Glo and Japan Tobacco has Ploom Tech.
These companies also have other technologies which allow smokers to change the taste of cigarettes while maintaining freshness after the pack is opened. The report further said that research has played a big part in keeping the industry at pace with change in regulations and customer preferences.
“This investment in research and innovation will likely be transferred to regional subsidiaries as most of the markets continue implementing strict regulations on traditional cigarettes,” read the report. The World Health Organisation (WHO) has, however, raised concern over tobacco products manufacturers’ penetrating and upscaling their operations to the developing world such as Africa, where the number of smokers is predicted to double by 2025.
WHO estimates that by 2025, smoking rates will go up in 17 of the 30 Africa-region countries from their 2010 levels. In Kenya, smoking rates in both men and women is set to rise to 4.06 million in 2025 from 3.17 million in 2010.
Kenya produces about 16 million cigarette pieces annually, placing it first among its peers in East Africa. On intimidation, BAT #ticker:BAT has been accused of threatening eight African governments with lawsuits in a bid to block or dilute new regulations to limit smoking harm.