Snus focus of yearlong study

A University of South Carolina researcher is preparing to answer two questions with widespread implications for the tobacco industry and public-health community.
Can a smokeless product, in this instance Camel Snus, contribute to a smoker quitting cigarettes — particularly one who doesn’t want to stop?
If it does, could an increase in use of smokeless-tobacco products over cigarettes cause a net harm to the population?
Trying to provide clarity is Matthew Carpenter, an associate professor in the Department of Psychiatry and Behavioral Sciences and the Department of Medicine at the Medical University of South Carolina. Carpenter’s research focus has been on tobacco use and control, with his studies primarily funded by the National Institutes of Health.
The yearlong study will consist of 1,250 smokers nationwide, half being given Camel Snus or another smokeless product, and the other half given nothing.
Carpenter’s research team wants to learn whether Snus leads to quit attempts, smoking reduction and cessation. They also want to measure the amount and pattern of Snus use.
“The study will provide strong, clear and objective evidence to guide clinical and regulatory decision-making for this controversial area of tobacco control,” Carpenter said.
Matt Myers, president of the Campaign for Tobacco-Free Kids, said research of smokeless products must evaluate what harm is caused by the product along with how the product is marketed.
“If a smokeless product reduces the risk of disease, but results in more people using tobacco, it could result in more deaths, not fewer,” Myers said.
Carpenter said researchers are not trying to encourage the use of smokeless tobacco with the study.
“We’re just trying to mimic the real-world scenario of a smoker being exposed to these products in their own environment, such as a grocery store,” Carpenter said.
“If they decide to use them, what is the effect? We believe no matter the determination of this study, it will have a public-health impact.”
The study follows up on a similar smoking-cessation study Carpenter released in February 2010 on Star Scientific Inc.’s Ariva and Stonewell tobacco lozenges.
The main determination of that study was smoking decreased by 40 percent during the two-week study period, but overall use of tobacco remained stable.
“This suggests that Ariva and Stonewall are effective products to curb withdrawal and craving,” Carpenter said in his report. “We found no changes in overall craving or withdrawal, as smokers substituted Ariva/Stonewall for cigarettes.
“We found no evidence that smokeless tobacco (Ariva or Stonewall) undermines quitting. To the contrary, readiness to quit — in the next month and within the next six months — significantly increased among smokers who used a smokeless-tobacco product relative to those who continued to smoke conventional cigarettes.”
Carpenter said it is “doubtful that a smokeless-tobacco product could ever serve as a total substitute for cigarettes among a majority of smokers.”
“However, the amount of substitution among those smokers who choose to use smokeless products is not insignificant,” he said.
* * * * *
The multimillion-dollar Camel Snus study is part of an initiative the National Cancer Institute began in October 2009.
The institute wants to determine whether smokeless products, such as snus and dissolvable Camel Orbs, Camel Sticks and Camel Strips from R.J. Reynolds Tobacco Co., provide “a truly less-harmful alternative to conventional tobacco products, both at the individual and population level.”
“We want to explore all aspects of tobacco products, including the sale, marketing and health risks,” said Michele Bloch, medical officer of the Tobacco Control Research Branch of the National Cancer Institute.
Carpenter said “a number of short-term lab studies of toxicant exposure suggest smokeless tobacco could offer reduced harm as compared to conventional cigarettes.”
Major U.S. tobacco manufacturers, led by Reynolds, are putting more emphasis on smokeless products to gain market share and sales as the smoking rate among adults is declining. Government figures show that fewer than 44 million Americans smoke, down from a peak of 53.5 million in 1983.
“We certainly support studies conducted objectively while using sound scientific principles and techniques on the use of tobacco products and tobacco-harm reduction,” said David Howard, a spokesman for Reynolds.
The evolution of some health-advocacy groups from anti-smoking to anti-tobacco is ratcheting up the moralistic aspect of buying and consuming a legal product.
Some advocates say that smokeless tobacco can serve as a gateway for youths to smoking.
Others are encouraging the Food and Drug Administration to allow the advertising of smokeless tobacco as less harmful than cigarettes if such claims can be proved through research.
A study of smokers ages 18 to 70 — released in November by the Tobacco Use Research Center of the University of Minnesota — found that “quit rates for Camel Snus were comparable to those obtained with nicotine-replacement therapy.”
The Minnesota center said a “properly powered study is needed to determine if use of smokeless-tobacco products with higher nicotine content can be an effective path to smoking cessation, perhaps especially among smokers who are not interested in or previously were not successful with using approved pharmacotherapies.”
Reynolds added fuel to the debate in December when it launched its first campaign aimed specifically at encouraging smokers to switch to Camel Snus.
* * * * *
Reynolds has marketed Camel Snus as an option for tobacco consumers who can’t smoke in a growing majority of public venues.
Carpenter acknowledges the intensity of debate in his abstract. “There is limited evidence to determine if potentially reduced exposure products ultimately undermine or promote public health,” he said.
John Spangler, a professor of family and community medicine at Wake Forest University School of Medicine, said he supports research that determines whether smokeless tobacco can help with quitting cigarettes.
Spangler is conducting a National Cancer Institute study, which began in September 2009, that’s aimed at developing strategies to encourage reduced use or even quitting smokeless-tobacco products. Wake Forest received a $2.9 million grant for its study.
Among the goals are: determining the health risk of smokeless-tobacco products; whether the products serve as a gateway for nontobacco users, particularly teenagers and young adults, into smoking; and whether they can be accurately marketed as a reduced-risk alternative to cigarettes.
“We have a substantial amount of data in our research showing that users of smokeless tobacco have a very high likelihood, not of quitting smoking, but of co-using smokeless and cigarettes,” Spangler said.
Bill Godshall, executive director of SmokeFree Pennsylvania, said, “I’d be shocked if Reynolds would apply to market it as a smoking-cessation drug device.”
Scott Ballin, past chairman of the Coalition on Smoking or Health, said the study could demonstrate that there is not enough evidence available about reduced risk, “therefore products like snus or Ariva or Stonewall should not be able to make any claims.”
“That would preserve the status quo and give the pharmaceutical companies the competitive protections they want,” Ballin said.
In October, the consumer health care division of GlaxoSmithKline (GSK), which sells nicotine-replacement therapy products Nicorette and NicoDerm, requested that the FDA take Reynolds’ dissolvable tobacco products out of test markets.
The FDA acknowledges Reynolds is marketing the products to adult consumers, but has concerns that the marketing and shape of the dissolvable products might appeal to children and adolescents.
GSK’s request strikes at the core of Reynolds’ attempt to create a reputation as an innovator of products that could be less harmful to consumers than cigarettes.
Elizabeth Whelan, president of the American Council on Science and Health, said “GSK is clearly trying to protect its own market for dissolvable tobacco.”
“From a business perspective, this is understandable,” Whelan said. “But from a purely public-health point of view, if products like the orbs can help more smokers quit more effectively than other cessation products, then let them stay on the market.”

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Imperial Tobacco aims for organic growth

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On the first anniversary last week of Alison Cooper’s appointment as chief executive of Imperial Tobacco, an analyst at Investec Securities reminded investors of the fundamental question that she needs to answer: can the FTSE 100 tobacco company transform itself from the M&A machine it has been over the past two decades into a vehicle for organic growth?

The tobacco marketShareholders may have been temporarily distracted from that question by the announcement that Imperial would begin buying back shares.

The company has paid down debt from its last big deal – the acquisition of Altadis, maker of Gauloises Blondes, in 2008 – to just over two times earnings.

It will also push up dividends, hitting 50 per cent of adjusted earnings this year and aims to increase them ahead of the rate of earnings growth.

But with investors’ “cash return bloodlust now sated” – as the Investec analyst Martin Deboo put it – the organic growth question is nagging again.

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Ms Cooper does not deny the importance of the answer, for employees as much as investors. She recalls how, a year ago, some staff had seemed hesitant about the new direction she was advocating.

She wants to turn a team skilled at bedding down new businesses – from Australian, Dutch and African acquisitions in the late 1990s, to Reemtsma of Germany in 2002 and Altadis six years later – into one that can increase market share and volumes through better sales and marketing.

“They all said, ‘we like Alison, we really want to go for it’,” she says. “But they wanted to get some meat on the bones.” Enthusiasm has grown in the course of the year, she believes, as seen at a recent management meeting in Prague. “All the feedback from Prague was, ‘we really see it’.”

She has also brought in fresh blood. Two recent hires – a marketing director from Reckitt Benckiser and a sales director from Metro Group, the German retail business – underscore her belief that Imperial should think of itself as a regular fast-moving consumer goods company and that organic growth, not M&A, is top of the agenda.

Investors, meanwhile, saw some signs of progress in the company’s half-year results. Sales of its premium Davidoff brand were up 9 per cent, helped by a strong performance in emerging markets. And while the West value brand had subdued growth – up just 1 per cent – and cigarette volumes were down as a whole, fine-cut tobacco volumes rose 5 per cent.

“In most of my discussions with the investment community, I feel there’s a general growing confidence with the organic growth story,” says Ms Cooper.

Mr Deboo is less convinced. He points out that market share declined in the six months to March 31 in 11 of the company’s 20 reported markets, including Russia, France and regulation-hit Spain.

To counter these trends, Ms Cooper has been creating “cocktails” of solutions, designed for each territory. They are based on the notion that Imperial can improve revenues not just through pricing and cigarette sales, but by selling cigars, fine-cut tobacco, rolling papers and filters, even rolling machines.

The difficult UK market, where Imperial generates 13 per cent of its revenues via brands such as Lambert & Butler, Regal and Golden Virginia, is a good example. The company is coping with poorer, recession and austerity-hit smokers by pushing fine-cut tobacco as a cheaper alternative to cigarettes. This year, it introduced an alternative to roll-your-own tobacco: cigarette-making kits, with filters already fitted into tubes, and a special cut of loose tobacco to be fed into the tubes using a machine.

Julian Hardwick of RBS says: “There’s a perception in the market that the European Union is not a good place to have a tobacco business. One of the strong views that Alison has is that there are always growth opportunities. It may not be in cigarettes, it may not be in premium cigarettes, but there are always going to be opportunities, and it’s very important that Imperial capitalises on them through its ‘total tobacco’ portfolio. That’s a key mindset that’s brought to the whole business.”

If Ms Cooper can’t capitalise on these opportunities, M&A could be back on the agenda – this time with Imperial as the target.

Some of the 12 per cent climb in the share price since the start of the year has come on the back of research by analysts at Goldman Sachs arguing that four global tobacco companies – Philip Morris, British American Tobacco, Japan Tobacco and Imperial – is still one too many. They argue that debt across the sector is low, volumes are stagnating and competition issues are not insurmountable, particularly if BAT were to buy Imperial.

Ms Cooper, who occasionally deviates from the on-message, unironic language of top managers to show a more jaundiced view of the world, is sceptical: “Anything to do with four to three has got very significant antitrust issues; I always describe it as not impossible but very difficult. But I’m sure bankers in particular will continue to speculate. Because I’m sure they’d love the fees on a deal like that.”

Her counterpart at BAT, meanwhile, who is also new to the job, says M&A will not be his focus for the next few years at least.

Mr Hardwick, of RBS, argues, like Ms Cooper, that if the market were taking bid speculation seriously, the shares would be much higher than they are. Even Mr Deboo says that the stock is a safe buy, “the closest thing to a bond available in the equity market”. He contests the notion, however, that Imperial is cheap next to rivals with greater emerging markets exposure.

Ms Cooper prefers to see emerging markets as one of the opportunities on offer for a company occupying fourth position in the global market. For the M&A bulls on the sidelines, being fourth could offer other tantalising opportunities, too.

The Financial Times Limited 2011. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

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Philip Morris International: Alternative Annual Report

Every year, one of the world’s best-known corporations provides its shareholders a glowing image of a company that is handsomely rewarding its shareholders by expanding into new markets, developing new products, and overcoming market and regulatory challenges.
The truth is that this corporation makes its billions of dollars in profits at the expense of people’s health and their lives. This report reveals the dark truth behind how Philip Morris International earns its profits.

Philip Morris International (PMI) is the world’s largest, deadliest and most profitable publicly traded transnational tobacco corporation. PMI currently operates in 180 countries and holds more than 27 percent of the international tobacco products market (excluding the People’s Republic of China and the United States). In 2010, PMI reported revenues (excluding taxes) of over US $27 billion and an operating income of US $11.2 billion. Another way to look at it: That’s $5,500 in profits for every person who has died so far this year from tobacco-related disease.

FINANCIAL LOWLIGHTS: THE PRICE PAID FOR PROFITS

PMI reported 11.6 percent growth in profits and an increase of 4.1 percent in its cigarette shipment volume in 2010. This increase in profits and volume contributes to:

One tobacco-related death every six seconds worldwide. That’s 5.4 million people every year.
Premature deaths. On average, smokers lose 15 years of life and up to half of all smokers will die of tobacco-related causes.
Higher healthcare costs and lost productivity. Tobacco causes a $500 billion global economic drain each year — nearly $74 for each person in the world.
For every dollar of PMI revenue, health care expenses and productivity loss cost the world economy $7.39.

To achieve these profits, PMI:

Spends nearly $5 on its so-called corporate social responsibility initiatives for every tobacco related death — a means of distracting attention from its core business of selling a harmful and deadly product.
Implements a range of tactics to undermine the success of public health policies that protect people from the harms of tobacco, including:

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