The golden days of cigarettes seem to be over. Even the world’s largest tobacco company is trying to quit. Anti-smoking campaigns, studies exposing health dangers, graphic warning labels on cigarette packs, policy regulations and the rise of e-cigarettes are all piling pressure on the tobacco industry.
Michael Kaib, chief executive of the cigarette manufacturer Reemtsma – which produces brands like West, Gauloises and Peter Stuyvesant – is feeling the heat. Parent company Imperial Brands has ordered a restructuring of the Hamburg subsidiary. Some 85 out of more than 1,000 jobs will be cut this year and one in four jobs could be at risk in future.
Reemtsma is not alone. Other tobacco companies are also cutting back in Germany, all the while fending off attacks from regulators who are chomping at the bit. The industry got a win recently by reversing a government proposal to ban advertising on walls and kiosks. A brief respite.
But they’re not going down without a fight. Mr. Kaib has invited his fellow industry members to Berlin on March 20 to discuss forming an umbrella foundation. “In order to find a voice for our common interests, we need a united, strong mouthpiece of the entire tobacco family,” reads a document for the meeting.
“The calls by tobacco opponents for a smoke-free future will intensify and are even echoed in our industry.”
The new super association aims to maximize its lobbying impact by bundling the activities for all tobacco products, ranging from small business owners and medium-sized manufacturers to global companies. Mr. Kaib warned: “The calls by tobacco opponents for a smoke-free future will intensify and are even echoed in our industry.”
He may have been referring to market leader Philip Morris. The company, known for its Marlboro brand, has left all associations in Germany and is currently pushing its cigarette alternative, a smoke-free tobacco device called IQOS. The tobacco super-giant has also established a foundation for a smoke-free world and wants to give up cigarettes, its long-standing core business, in the UK in 2018.
In a surprising move, the company placed full-page adverts in British newspapers that read: “Every year, many smokers give them up. Now it’s our turn. There are 7.6 million adults in the UK who smoke. The best action they can take is to quit smoking.”
This despite the fact that Philip Morris still holds a market share of almost 37 percent in Germany, followed by Reemtsma with 25 percent and BAT with 19 percent, according to the German Cigarette Association. But the popularity of classic tobacco cigarettes continues to decline. Back in 2002, some 398 million cigarettes were smoked daily in Germany. By 2016, that number dropped to 206 million, according to the market research firm Nielsen.
An increasing number of smokers are switching to e-cigarettes. Between September 2016 and September 2017 revenues from e-cigarettes more than doubled to €33.5 million ($41.4 million). Sales of classic cigarettes fell by 3 percent to €19.5 billion over the same period.
Innocigs is among those profiting from the rising demand. The e-cigarette maker based in Hamburg is one of the pioneers of Germany’s vaping scene, though it too is fending off efforts by governments to regulate the growing industry. Rather than fearing competition, the Dahlmann brothers who founded Innocigs believe that a shift into the market by traditional tobacco firms will benefit them, too.
Mr. Kaib is convinced that it’s wrong to throw in the towel. The market for e-cigarettes and other innovative products can succeed “without at the same time challenging the existence of traditional tobacco products,” he said. That means confronting challenges to the tobacco industry stemming from Berlin and Brussels, as well as one-time ally Philip Morris.
Hans-Jürgen Jakobs is a senior editor at Handelsblatt based in Munich, Stephanie Ott is a writer and editor for Handelsblatt Global based in New York City. Christoph Kapalschinski contributed to this article. To contact the authors: email@example.com and firstname.lastname@example.org.