Analytical Overview

The 2022 Tobacco Transformation Index utilizes 35 indicators organized across six categories to examine the relative progress of the 15 largest tobacco companies (Index Companies) toward harm reduction.

Transformation of the tobacco industry toward harm reduction remains inconsistent and in its early stages. The 2022 Index demonstrates that differentiation is forming across the largest tobacco companies, related to measures of commitment, performance, and transparency.

  • The Index brings visibility to the divergent strategies, product sets, and performance across the 15 largest tobacco companies in the world.
  • Index Companies are adopting distinct approaches and varying levels of strategic commitment to tobacco harm reduction, along with contrasting levels of execution of the respective strategies.
  • The outcomes are influenced by several factors, including ownership type, operating environment, and the regulatory context.
  • Based on the 2022 Index results, the Index Companies are coalescing around five broad clusters associated with patterns of behavior:
    1. Strategic commitment & execution: Swedish Match, Philip Morris International (PMI), Altria, and British American Tobacco (BAT) have demonstrated strategic commitment toward tobacco harm reduction and relatively consistent execution.
    2. Limited strategic commitment & execution: Imperial, Japan Tobacco Group (JT), and KT&G have demonstrated recognition of tobacco harm reduction but relatively inconsistent execution.
    3. No strategic commitment but limited execution: Swisher and ITC have demonstrated no strategic commitment toward tobacco harm reduction but an initial level of execution.
    4. Potential for change: CNTC, Vinataba, and Eastern have made no direct strategic commitment, and no or very limited execution, but have indicated potential for change.
    5. No indication of change: TAOT, Djarum and Gudang Garam have demonstrated no strategic commitment, no execution, and no indication of the potential for transformation.

The objective of the Index is to monitor and bring visibility to Index Company behavior over time. The Index accomplishes the task by evaluating company performance and the associated rates of change over the review period, as a demonstration of relative progress or the lack thereof. In addition, with the release of the second Tobacco Transformation Index, results can be compared to that of the first Index.

The 2022 Index demonstrates that momentum toward tobacco harm reduction is developing across a subset of the 15 Index Companies, albeit at varying degrees.

  • Swedish Match leads the Index ranking, with 53% of total sales volumes (per stick equivalent) derived from RRPs in 2021. PMI, second in the Index ranking, increased its volume share of RRPs from single digits (8%) to double digits (13%). Altria, ranked third, increased its volume share of RRPs from 25% to 26%, while BAT, ranked fourth, increased its share from 7% to 10%.
  • Over the 2019-2021 review period, several companies have taken action or stated intended future action, which suggests the potential for future concrete contribution to industry transformation.
  • Eastern in 2021 indicated it plans to start selling RRPs in Egypt in the near future.
  • Vinataba in 2021 indicated it is considering the possibility of selling RRPs in Vietnam in the future.
  • Others regressed or made little progress. For example, Imperial made the “strategic decision” to withdraw its closed system vaping product from Russia and Japan, and its heated tobacco product from Japan, as the company prioritized “investment in other market category combinations in line with our strategy.” JT’s Product Sales category score declined due to the company’s increasing HRP Volume Sales (CAGR: +0.8%), driven by its international business.
  • Ultimately, the tobacco industry has not phased out HRPs or transitioned smokers to RRPs quickly enough to achieve the goal of ending smoking completely in this generation.
  • At the present rate of decline, sales of HRPs will persist for decades to come. Globally, the 15 Index Companies sold 4.8 trillion cigarette sticks in 2021, down 0.1 trillion (from 4.9 trillion) in 2019.
  • Index Companies continue to focus the majority of their RRP efforts on High-Medium Income Countries (HMICs). Of the 15 Index Companies combined, 97% of RRP sales (per stick equivalent Volume Sales) were in HMICs in 2021, with 3% in Low-Medium Income Countries (LMICs). Share of global RRP sales in LMICs increased from 2% to 3% over the 2019-2021 review period. The legality of RRP sales influenced companies’ opportunities for tobacco harm reduction.

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