95% of global tobacco industry sales still dominated by cigarettes and other high-risk products

Though some tobacco companies have touted a desire to change, data still shows that 95+% of global industry sales are still dominated by cigarettes and other high-risk tobacco products.

Tobacco buyers told to be fair

With 85% of the investment in tobacco companies coming from large institutional investors such as banks and pension funds, accelerated transformation will likely come from greater financial market pressure on company management.

This was revealed on Monday by Derek Yach, President of the Foundation for a Smoke-Free World during a virtual press conference to announce the publication of the first-of-its-kind Tobacco Transformation Index.

The Tobacco Transformation Index will be providing comprehensive metrics and insights into how the world’s 15 largest tobacco companies are deploying (or not deploying) their capital and other resources in pursuit of such ESG goals as reducing tobacco harm, lowering health risks and mitigating the world’s smoking burden.

Made possible with funding from the Foundation for a Smoke-Free World, the Tobacco Transformation Index finds that most of the 15 largest tobacco companies are not making substantive progress in phasing out cigarettes and other high-risk tobacco products and transitioning smokers to reduced-risk alternatives.

A small group of companies have made public commitments to harm reduction and backed them with significant investments.

A majority of companies have made no such commitment to tobacco harm reduction. With 1.3 billion tobacco users in the world, of which 8 million die annually from tobacco-related diseases, the stakes for global health are high.

Adult cessation and tobacco harm reduction could reduce deaths within the next two decades.

The Tobacco Transformation Index is the first index to rank the world’s largest 15 tobacco companies (accounting for nearly 90% of global cigarette volume) on their relative performance, commitment, and transparency to deliver material progress in supporting tobacco harm reduction.

The 2020 Index assesses tobacco companies’ activities from 2017-2019 related to: strategy and management, product sales, capital allocation, product offer, marketing, and lobbying and advocacy.

The 2020 Tobacco Transformation Index ranks Swedish Match, which divested its cigarette business in 1999, in first position; Phillip Morris International second and British American Tobacco third.

Others in order of their ranks are Altria; Imperial Brands; Japan Tobacco; KT&G; ITC Ltd; Swisher International; Tobacco Authority of Thailand; Vietnam National Tobacco; Gudang Garam; Djarum; Eastern Co. and China National Tobacco Corp.

The Foundation for a Smoke-Free World President, Dr. Derek Yach said: “Inspired by the success that indexes focusing on other sectors have demonstrated, the goal of the Tobacco Transformation Index is to stimulate external pressure and the industry competition needed to take combustion out of the cigarette market, accelerate change, and lower the unnecessary disease, death, and misery it causes so many people.

“Society and large institutional investors such as banks and pension funds, which represent 85% of investment in publicly traded tobacco companies, have the leverage to push tobacco company management to drive measures that greatly improve health.”

In 2019, 13 of the 15 tobacco companies in the Index generated at least 95% of net sales value through high-risk tobacco products including cigarettes.

In 2019, Swedish Match’s sales of reduced-risk products accounted for 44% of its net sales, followed by Philip Morris International at 19%, and British American Tobacco and KT&G at 5% each.

Over the period of 2017-2019, eight of the 15 companies allocated 10% or less of research & development and capital investment expenditures to reduced-risk versus high-risk products.

During the Index’s review period of 2017-2019, several companies, including British American Tobacco, Japan Tobacco, Philip Morris International, and KT&G Corp, made acquisitions of primarily cigarette businesses.

These acquisitions were frequently focused on low-medium income countries (LMICs), where smoking rates are highest.

Among the six companies who made public commitments to harm reduction, between 30% and 55% of their marketing budgets were still devoted to high-risk products including cigarettes.

“The tobacco companies are still spending a significant amount of their marketing budgets on high-risk products and, while a handful have increased their focus on youth access prevention, the impact of these policies is still unclear,” said Yach.

Overall progress in reducing smoking and the use of toxic smokeless tobacco products globally remains frustratingly slow.

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