We are currently witnessing the biggest consumer shift in our history, with millions of smokers around the world choosing to switch to less harmful NGP.
As a result we are increasingly focusing our attention on developing and expanding our NGP portfolio, with new product launches in new and existing markets.
NGP offer smokers alternatives to combustible tobacco and are broadly divided into three main categories: vapour, heated tobacco and oral nicotine. Hybrid devices combining non-combustible and vapour technologies also exist.
Our work in this area prioritises vapour, by far the largest NGP category opportunity and the one we believe offers the greatest current potential for long-term sustainable growth.
At the heart of our strategy is a desire to create something better for the world's smokers. We want smokers to switch to alternative products with lower health risks.
Our NGP Report Creating Something Better for the World's Smokers was published for the first time in May 2018.
The report provides a comprehensive overview of our approach to NGP, charting the progress that we're making in transitioning consumers from tobacco to something better.
Vapour is by far the largest and most developed opportunity within NGP. It is estimated that global sales of vapour products, also known as e-cigarettes, are currently worth around £8 billion a year and could be worth at least £30 billion by 2020.
We are represented in this category by blu, which has strong positions in the USA and UK – the world’s two largest vapour markets. Through our Fontem Ventures subsidary, blu products are sold in a growing number of markets, including France, Germany, Italy and Russia.
In blu, we have one of the best vapour brands in the world and we continue to focus on providing an outstanding vaping experience.
There are four main vapour product formats. The fastest-growing format is the pod system – quick and easy-to-use devices such as myblu which feature either a closed pod containing a pre-filled liquid, or empty pods that can be refilled.
The other main formats are closed systems, which use a prefilled cartridge of liquid; open systems, such as blu ACE, where the consumer fills the device with a liquid; and open customisable systems which allow different components to be selected by the consumer.
Vaping technology is continually evolving and in 2017 we substantially enhanced our technical capabilities with the acquisition of Nerudia, a business with a strong track record of developing innovative vapour and nicotine products.
This built on the acquisition of vapour assets from Dragonite in 2013 and we continue to secure intellectual property royalties from companies using our first generation technology.
The FDA has requested information from 21 manufacturers, including our Fontem Ventures subsidiary in the US, to support their compliance with certain FDA rules.
We hosted a capital markets event in London to provide insights into how we are executing against our NGP strategy.
The UK Science and Technology committee has concluded that e-cigarettes are significantly less harmful than conventional cigarettes and too often overlooked as a stop smoking tool.
Vapour products are fundamentally different from all tobacco-based products and devices; they do not contain tobacco leaf.
A growing number of regulators and public health bodies have concluded that vapour products are less harmful alternatives to smoking and therefore have a role to play in reducing tobacco-related disease.
In the UK, for example, Public Health England and the Royal College of Physicians have concluded that vaping is substantially less harmful than smoking.
Underpinned by our leading-edge science, we are committed to making a significant contribution to the growing body of research around vaping products.
This includes assessing their safety and demonstrating the potential to reduce the risk of diseases associated with smoking when adult smokers switch to our vapour products.
We set high standards to meet the ever-evolving needs of consumers and regulators, and to enable the development of new and potentially safer products.
Heated tobacco is a smaller NGP category but one that is growing, most notably in parts of Asia. We have plans to launch Pulze, a heated tobacco product, in 2019.
As the name implies, these products heat a portion or rod of tobacco, releasing nicotine and other tobacco emissions at substantially lower levels than cigarettes.
We have a strong position in snus, an oral tobacco product with a long history of use in Scandinavia. In 2018 we launched a tobacco-free version of our Skruf brand in Sweden and initial consumer feedback has been extremely positive.