The tobacco industry's challenge in selling its 'less harmful' transformation

Smoking kills . Smoking increases the risk of cardiovascular disease . Smoking seriously harms your health and the health of those around you . No one questions the harmful effects of tobacco, nor do the companies that market it. Their current discourse is different. This is reflected in the "smoke-free world" campaign by Philip Morris International (with brands like Marlboro and Chesterfield) and British American Tobacco (Lucky Strike and Dunhill), or in the case of Japan Tobacco International (Winston and Camel), with its intention to redefine the industry based on reduced-risk products (RRP) and leave the decision in the hands of "well-informed" adults.

The industry is reinventing itself to shake off the negative connotation surrounding it... and to escape the global decline in consumption that is plummeting every year. The Ministry of Health's Ages Survey (Edades) indicates that the current rate of daily smokers stands at 25.8% of the population aged 15 to 64, a "notable" decrease compared to 2023 (33.1%). This figure is similar to the European (24%) and global (20%) figures.

The tobacco industry is slowly burning out, especially at the national level. So far this year, sales in Spain have decreased by 7.53% compared to 2024 (and cross-border sales still mask the real decline, according to industry insiders). So companies are turning to alternative products to save the business: if smoking is bad, let those who smoke choose how to do it (or avoid it).

In this regard, European regulations have limited advertising and promotion since 2014, as well as aspects such as flavors and aromas in the case of traditional tobacco. In Spain, the anti-smoking law is moving forward and putting the tobacco industry (which already fears an economic blow) in real trouble by seeking, among other measures, to denormalize consumption by prohibiting smoking in many outdoor areas or preventing all forms of advertising, promotion, and sponsorship. Limitations would also be placed on the sale of new related products (such as vapes).

So, companies are now looking for ways to stay in the industry with RRP products or products that don't produce smoke at all, such as nicotine pouches. In the case of Japan Tobacco International (JTI) and Philip Morris International (PMI), their focus is more on heated tobacco , with the Ploom and IQOS devices, respectively. This solution doesn't prevent the habit of smoking , but is less harmful at the individual and collective levels.

Both companies defend the transition from combustible tobacco to other products as an upward trend : "More than 41 million adults worldwide have already opted for our smokeless alternatives, and 41% of our net revenue comes from these categories. Our ambition is that, by 2030, more than two-thirds of our revenue will come from non-combustion products," states PMI Spain. JTI directly projects strong growth in the sector. Compared to the 22% market share currently estimated for RRP (only 11% corresponds to heated tobacco, which moves $16.6 billion), in a decade this segment will grow to 38% (which would translate to $76 billion; $44 billion in net revenue from heated tobacco alone).

No one wants to miss this train. But in the leap to expanding the catalog for tobacco consumers (smoking or not), the problem is how. After spending billions annually on R&D to design new products or make existing ones more attractive , companies will be faced with the realization, when they reach Europe and Spain, that they cannot promote them.

Avoid smoke, but not smoking

In the world of innovation, consumer communication is key, but also arduous. In the case of JTI, the latest R&D venture focuses on heated tobacco (in its latest version, Ploom Aura), which has found a consolidated market (13.6%) in its native Japan , thanks to its society and its culture of not harming others, to the point of prohibiting smoking on the street except in designated areas. Heated tobacco uses the system of its devices to generate minimal combustion with less smoke, less odor, and, according to JTI, based on scientific reports, reduces levels of toxic substances by 90%. Its spokespersons are clear: reduced-risk products, but never risk-free.

For JTI, this represents an investment that reached 300 billion yen (around €1.73 billion) between 2022 and 2024, and that they plan to invest at 650 billion yen (€3.74 billion) between 2025 and 2027. For now, investing "decisively" in RRP is expensive - they expect to reach break even in 2028. But it's worth it, because it's "the key" to what consumers are looking for now: pleasure, ease of use, and less lung damage, explains Ian Jones, the company's vice president and director of the Development area, to Actualidad Económica from the group's headquarters in Tokyo. " Our strategy focuses on the consumer : we want to offer them the alternatives they are looking for," explains Alejandra Vidal , Director of Corporate Affairs and Communications at JTI.

Heated tobacco still maintains nicotine levels that satisfy the smoker. And, although there are already products without this addictive component, it's an element that none of the companies surveyed want to do without, at least not in the short term, not even in their innovation plans. Because the key, they argue, is to leave the customer satisfied (with nicotine).

JTI expects a long run for the heated tobacco segment, on which the company's future is largely based. PMI agrees, acknowledging that "smokeless alternatives require a significant additional investment, which is why 99.5% of our total R&D budget is allocated to developing and scientifically substantiating them." Compared to an R&D investment in non-combustion products of $2.4 billion in 2015, by 2024 it will reach $14 billion (approximately €12.068 billion at the current exchange rate). They do not clarify, however, whether it will be profitable.

Like any new product, they need to make this product known to customers. Especially in Europe, where the use of heated tobacco is not widespread: the latest Eurobarometer data shows that only 2% of the European smoking population uses it, and that 4% have tried it at least once. Its popularity is greatest in countries such as the Netherlands, Sweden, Greece, and Portugal. This is not the case in Spain, where consumers are still stuck with traditional tobacco (73.1% of smokers). Here, both JTI and PMI see their main challenge in consumer misinformation. That's why they fear the impact of the draft Health Law and its new measures, as it will prohibit the promotion of products inside tobacco shops, the only establishments where they can currently still run awareness campaigns.

Tobacco shops also serve as a checkpoint because they monopolize tobacco sales in Spain. Only e-cigarettes and nicotine pouches escape this siege. The Ministry of Health attempted to change this in its 2022 draft law. The National Commission on Markets and Competition (CNMC) reacted and questioned the measure, believing that limiting the sale of electronic products to tobacco shops would reinforce the already entrenched tobacco monopoly . Ultimately, the measure was not implemented, and the barriers to the sale of products such as vapes dissipate faster than the vapor they emit (which the industry is quick to clarify is not smoke, but water). This has resulted in a data gap that prevents the vaping market from being measured, something that does not occur with products controlled by the Tobacco Market Commissioner.

The vaping market and pure nicotine

E-cigarettes (or vapes) are devices that heat liquid containing nicotine, but not tobacco, and never in quantities exceeding 20 milligrams per milliliter, in accordance with European regulations. To estimate the relevance of their consumption, we must refer to the Ministry of Health's Ages Survey (Edades). The most recent survey, from 2024, estimated that 19% of people between 15 and 64 years of age had tried this product, a figure higher than that of 2022 (12.1%) and almost double that of 2020 (10.5%). Its positive reception among young people has experts fearing a gateway to the world of nicotine, one of the reasons why the Government wants to ban its flavor, its main attraction.

In this sense, Imperial Brands (marketer of the MyBlu vape) questions the effectiveness of the new Health measures because "the regulations on cross-border sales of these products are not harmonized within the European Union. Consumers in Spain will be able to buy flavored vapes in France, Italy or Germany. Cross-border purchases are not prohibited ." In light of the new measures, organizations such as the CNMC, while sharing the defense of prevention of the Anti-Smoking Law, also recommend strengthening the empirical evidence for their measures, since " they affect freedom of enterprise , so they should be justified under the principles of good regulation and included in a law." One of them is the obligation to sell nicotine pouches at 0.99 milligrams per sachet . "It is a de facto ban," denounces Andrés Martín, director of corporate and regulatory affairs at British American Tobacco (BAT) Iberia . The company reports that its annual R&D investment typically ranges between £300 million and £400 million (€344 million to €461 million at the current exchange rate).

The group argues that, whether consumers choose to smoke or are trying to quit, they need products for that purpose (which they sell). They point to nicotine pouches, which saw a 1.3% global market share last year, and more specifically to Velo , which has a 64.7% market share in Europe, based on pure distilled nicotine that avoids the carcinogenic nitrosamines in tobacco. The multinational uses all of this to argue that its catalog helps smokers who want to quit, and to warn that this improvement will be ineffective with such a low nicotine content.

In line with this idea, it is worth highlighting that in Spain, with almost 8 million smokers, the market of consumers who want to quit smoking accounted for 58.7% in 2024, where 24.2% achieved their goal. However, the use of alternatives was rather low: "14.5% have tried e-cigarettes and 7.9% have used heated tobacco products. The use of nicotine pouches remains a very small minority in our country. This pattern suggests that, although alternative products have some presence, the primary goal of the population remains complete abstinence ," comments Dr. Cristina Martínez, head of the Tobacco Control Unit at the Catalan Institute of Oncology (ICO) and associate professor at the University of Barcelona. The health expert insists that consumers consult a specialist for advice on available treatments, which include behavioral therapy and medications.

So this specific market is small, but with strong growth prospects for the groups. That's why they're calling for more regulatory leeway in Spain and Europe: "If they cut off our ability to innovate in less risky products, they'll never have a solution for smokers." Or for those who want to quit.