Hostage to fortune: an empirical study of the tobacco industry’s business strategies since the advent of e-cigarettes

Abstract

The tobacco market has been transformed by the arrival of e-cigarettes and array of alternative nicotine delivery systems (ANDS). Public health has struggled to cope with these changes and clear divisions are apparent, but less is known about the tobacco industry (TI) response. This first empirical study to examine TI and independent ANDS companies' business strategies fills this gap. Primary data were collected through 28 elite interviews with senior/influential TI and independent stakeholders, triangulated with a documentary analysis of company reports, investor analyses, market research, and consultation responses (1022 documents). A deliberately emic analysis shows that tobacco multinationals were initially disconcerted by ANDS, but logic provided by the fiduciary imperative is enabling them to turn a potential threat into profitable opportunities. Interviewees argue market changes played to their strengths: customer links, expertise in nicotine, and enormous financial resources. This enabled portfolio diversification in which combustible and ANDS coexist; providing potential to develop robust scientific and regulatory positions and hope of retrieving corporate reputations. The principal threat for major tobacco players comes from the independent sector, which is prepared and able to satisfy bespoke consumer needs. Multinationals by contrast need to turn ANDS into a genuinely massmarket product appealing to its global customers. They are making progress. Given the continued buoyancy of the combustibles market, they have extensive resources to continue their efforts. Disruptive innovations are not unique to tobacco control. Equivalent technological solutionswith concomitant business opportunities − are emerging in obesity and alcohol fields with implications for public health.

Subculture wars: The struggle for the vape industry

“…The final element of the tobacco industry's strategy for market dominance was a business model which tied consumers into their brand. This started with an early interest in cigalikes and continued with the turn to pod systems using proprietary closed cartridges (de Andrade et al., 2018 ), which are more profitable than open devices (Levy et al., 2022 ). Independent vape shops complained that even when tobacco companies did sell open vape systems, they avoided compatibility with other device components for this reason.…”

“…James (employee, chain of four shops) said: “ We get people come in : “ I bought this Blu pen from [supermarket] and it doesn't work , and [the staff there]'ve got no idea ”… because of course they won't , they're just cashiers … or he'll go “ oh , I've already got a kit , can I just buy a replacement tank? ” We'll go yeah , and he'll show us a Blu kit and it's like , no … you have to buy a Blu tank because the battery threads are a different size to everybody else's so you have to buy all new kit .” The tobacco industry makes extraordinarily high profits on combusted tobacco products (Branston and Gilmore, 2015 ; Gilmore et al., 2010 ), and their preference for profitable closed systems is linked to the requirement to provide good returns to shareholders (de Andrade et al., 2018 ). Despite parent tobacco companies subsidies for vape subsidiaries, however, these failed to achieve market domination or indeed to break even.…”

“…We'll go yeah, and he'll show us a Blu kit and it's like, no… you have to buy a Blu tank because the battery threads are a different size to everybody else's so you have to buy all new kit." The tobacco industry makes extraordinarily high profits on combusted tobacco products (Branston and Gilmore, 2015;Gilmore et al, 2010), and their preference for profitable closed systems is linked to the requirement to provide good returns to shareholders (de Andrade et al, 2018).…”

Characterizing Vaping Industry Political Influence and Mobilization on Facebook: Social Network Analysis

“…Although independent manufacturers and retailers within the alternative tobacco industry attempt to distinguish themselves from Big Tobacco and the goals of these 2 segments of the provaping movement may differ [ 28 , 73 ] (eg, implications of changes in tobacco use behavior and product sales due to dual use of cigarettes and e-cigarettes vs transition from cigarettes to e-cigarettes), they nevertheless are working to the same policy ends: to minimize restrictions on the marketing, sale, and use of tobacco and alternative tobacco products. As multinational tobacco companies engage in efforts to increase their share of the alternative tobacco market and expend large sums of money to lobby and fight ENDS regulations and restrictions, the less politically powerful and poorly resourced independent entities within the alternative tobacco industry may serve the role that front groups traditionally have served for the tobacco industry [ 74 ].…”