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Pop star invests in NJOY

| May 31, 2013

Music star and 13-time Grammy Award nominee Bruno Mars has joined NJOY as an investor. While the terms of the investment were not disclosed, Mars stated that he often uses NJOY’s King product in place of traditional cigarettes and is convinced that it is a revolutionary alternative to cigarettes.

“I’ve been using NJOY Kings instead of cigarettes these days and I’m sticking to it,” said Mars. “I believe in the product and the company’s mission.”

“Bruno Mars is an exciting addition to NJOY and we are pleased to have him on board,” said Craig Weiss, CEO of NJOY. “Adding Bruno to our team expands our reach, raising further awareness of the NJOY brand and our company mission to obsolete cigarettes.”

NJOY King was developed by an award-winning master tobacco flavorist. With a look, feel and flavor that closely mimics a traditional cigarette, it has become the bestselling e-cigarette in the United States.

WHO to conduct tobacco cost-benefit analysis

| May 1, 2013

A team of 20 WHO researchers will conduct a study in Uganda to determine the country’s earnings from the tobacco industry and costs incurred from treating people with tobacco-related illnesses, reports Monitor.

According to the Uganda Demographic Health Survey 2011, about 15 percent of males and 3 percent of females aged 15-49 use tobacco products. Statistics show that tobacco-related illnesses claim about 13,500 lives in Uganda annually. The government raises UGX80 billion ($30.9 million) per year in tax revenue from tobacco companies.

Video interview: BAT’s CEO on 2012 results

| February 28, 2013

British American Tobacco’s CEO, Nicandro Durante, comments on the company’s 2012 results.

Losing our way

| February 5, 2013

Contrary to what some headlines might suggest, anti-tobacco litigation is not benefiting plaintiffs.

 

By George Gay

Writing in March last year about litigation, I speculated that, at the then rate of progress, it would take 421 years to hear all of the so-called Engle progeny cases in the United States. The approximately 8,000 Engle progeny cases were those being tried in the wake of a 2006 Supreme Court decision that decertified a class-action lawsuit initially filed by Howard Engle but that allowed former class members to file individual lawsuits. My speculation was based on the fact that, as far as I could determine, it had taken three years to hear 57 cases, a rate of 19 a year.

As I wrote at the time, I had no idea whether special circumstances applied to the early cases, ensuring they would involve lengthy procedures, while subsequent cases would be heard in a much more timely fashion. In fact, my gut feeling tended to the opposite view—that the cases that seemed more clear-cut from the plaintiffs’ point of view would have been the ones to have been put forward first. But I was quite prepared for somebody to write to me saying I was wrong and that the Engle progeny cases would be heard within a short space of time because some specific legal logjam had been broken.

Photo: © lichtmeister - Fotolia.com

Only 7,829 cases to go.

I heard nothing. But, just before Christmas, I saw on the U.S. Tobacco Merchants Association’s website part of a story that had appeared in the Jacksonville Business Journal and that seemed to some extent to support what I had said. The story quoted Chuck Farah, a partner at the Jacksonville, Florida-based law firm Farah & Farah, which is representing smokers in Engle progeny suits, as saying that some of the cases may never be tried because of the sheer volume of the lawsuits. Farah said that of the 2,000-plus cases his firm was involved in, less than 10 had received a verdict so far. He was surprised, he added, at how long the judicial process took for individual cases.

The story quoted another local attorney, W.C. Gentry, of the Law Office of W.C. Gentry, who was among the team of attorneys that represented the State of Florida in its lawsuit against the tobacco industry that eventually led to the 1997 settlement. Gentry said the Engle progeny cases were not expected to stop, but that there was no guarantee that the smokers or their estates would win.

Righting wrongs?

One of the questions that arise from all of this is what is the point of such litigation? Surely, litigation should be about righting wrongs in a spirit of balance and fairness. Specifically in these tobacco cases, it should be about compensating people who have been found to have suffered as a result of using a product they could reasonably have expected not to have caused that suffering, or protecting the manufacturer of that product from unreasonable claims against it.

But such aims have to be qualified by time, I think, or there is a danger that they become meaningless. Either the company should be quickly absolved or the compensation should be delivered into the hands of the person who suffered directly—the person with the disease—while that person is still able to use the money to relieve suffering in whatever way he or she feels is best. There are good reasons for compensating, too, the family members who had to watch their loved one suffer with the disease, especially if that person was the sole breadwinner. But there can be no good reason to compensate the great-great-great-great-great-great-great-great-great-great-great-great-great-great-granddaughter of the person in question, as would be the case, according to my reckoning, 420 years down the line, always assuming that the company/companies being sued had beaten by many times the company longevity record.

Haven’t we lost our way here? Is there not a sense in which some tobacco product liability cases have become a series of interesting legal skirmishes in which the interests of the people who may or may not have been harmed have been pushed into the background? Is it not the case that litigation is failing a lot of those who should be benefiting from it?

Decomplicating matters

I understand that some of the issues are difficult because they are based on opinions rather than facts. And though some cases have been settled, there seems to be a continuing argument about what can and cannot be advanced as evidence. But to some extent these issues are as difficult as we allow them to be.

Would a new, realistic arbitration process be better suited to dealing with some of these cases? What if the major U.S. manufacturers, without admitting liability, paid into an account a sum of money that could be divided between some of the claimants automatically, without the need for huge administration costs? Come to think of it; perhaps there wouldn’t be any need for new money. Most of the funds currently paid as part of the 1998 settlement could be appropriated since they aren’t used to offset tobacco-caused suffering as one might reasonably expect them to be.

The claimants who would be eligible would be those who were suffering from diseases, such as lung cancer, in which smoking could reasonably be assumed to have been the cause or at least a causal factor.

The way I see it is that the amount of money each claimant received would be modest—very modest in relation to the claims currently made when cases finally get to court. But there would be advantages for the claimants who took part because the process would be quick and stress-free, and the amount that each would receive would be calculated on the basis of a simple, transparent formula. For instance, all of those claimants who took up smoking before or during 1966, the year in which the U.S. government first required cautionary information on cigarette packs, would get the same amount. Those who took up smoking after 1966 would receive an amount that could be read off a simple straight-line graph whose x-axis mapped the years following 1966 and whose y-axis showed the amounts payable; the amounts reducing as the years passed. There would be no adjustments for the level of suffering, the size of the person’s family or any other matters.

One of the main objections to such an idea would be that it would mark a return to a sort of class action, and, while it wouldn’t be a long, drawn-out court action but an agreement, it is true that it would bundle together and treat people in groups—as if their cases were the same, when clearly that couldn’t be the case. The seekers after absolute truths would object that some of those people would be getting more than they deserved and some would be getting less than they deserved. And they would be correct. But isn’t the alternative worse? At the moment, it seems, a very few of the people involved are receiving lottery-level awards, while others are going to their graves not having received anything and not knowing whether their loved ones are going to receive anything.

Another objection would be that such a system would not allow the claimants to pursue punitive awards against companies who had been proved to have misled consumers or indulged in other nefarious activities. Again this would be true, but it would not eliminate the pursuit of punitive awards, because some of the claimants would be ineligible to be part of the agreement—perhaps because of the type of disease they were suffering—or would decline to be part of it exactly because they wanted to have their day in court.

The point of punitive

In any case; I would question too what is the use of punitive damages? I know that many people in the U.S. are wedded to the idea of punitive damages and that, on the surface, they seem to be a good way of society’s underlining what it believes is unacceptable behavior by a company. But does it really work? The law might, in some ways, treat companies as if they were people, but let me assure you they are not. If you hit a big company—not only a tobacco company—with a colossal fine, it doesn’t go home that night and lie in bed unable to sleep because it’s wondering how it’s going to pay the school fees.

And the idea that if the fine and repercussions on the bottom line are big enough then the shareholders will vote out the top executives can be greeted only with the question: So what? Those executives are not going to have any sleepless nights either, because they will have already made enough money to live on for the rest of their lives and because, almost certainly, they will turn up at another company. Most executives are too big to fail.

Of course, it might be the case that the punitive damages are such that a company has to cut back on its R&D and marketing spends, and so loses market share to a rival, a situation that has a negative effect on the share price and on the shareholders of the company that was “punished.” But if you look at that from the other direction, unless the rival company were blameless of the activities for which the prosecuted company was punished—unlikely, I would imagine, given that they were both operating within the same industry—the result of the punitive damages would have been actually to have rewarded one company for its ill deeds, albeit that those deeds had not been exposed.

Finally, let’s look at the case where the punitive damages are so huge that the company is forced into administration. Who are likely to be the biggest losers? Almost certainly it will be the claimants who were backed up waiting their turn in court.

We have surely lost our way. What is written above concerns only one group of tobacco cases. There are countless others, at least one other involving thousands of people, at least one involving hundreds, and at least one that goes back 15 years or so.

Tip of the iceberg

There are cases in which governments are suing tobacco companies within their own jurisdictions, cases in which governments are suing companies in other jurisdictions, and cases in which a government in one jurisdiction is taking action against a government in another jurisdiction, perhaps supported by tobacco money. There is a continuing case in Canada that has crossed the 100-day mark and where multiple governments are suing multiple tobacco manufacturers.

Tobacco companies have sued governments over vending machine bans, display bans and the introduction of ugly packaging. Businesses have sued governments over the introduction of public-places smoking bans, and individuals have sued over the imposition of outdoor smoking bans. At least one group of lawyers is suing another group over contested fees originating from a tobacco case, and no doubt some individuals are suing their lawyers over the outcome of tobacco cases.

To my mind, the most worrying trend here is where companies are suing governments, especially where the companies are large and the countries are small. I’m not saying that such cases are always without merit. But it is concerning in a democracy to have companies—and I’m not confining myself to tobacco companies here—that are using the courts to overturn the wishes of an elected government, no matter how wrong-headed those wishes might appear. It could be argued—and I would certainly do so—that rich individuals and companies already have far too much influence on government policy through their support of political parties.

But my most immediate concern is that, as far as I can tell, the level of effort going into these cases bears no relationship to the amount of good that is being done in respect of compensating people for their ill health or forwarding the cause of tobacco harm reduction. Imagine what good could be achieved if all the money currently being spent on tobacco liability court cases were used directly to improve health outcomes. And then add in all the money being spent on court cases affecting other industries. It’s easy to be drawn into the idea that it is only tobacco that winds up in court, but that is far from the truth.

 

 

Pan African Tobacco Group founder to retire

| January 7, 2013

 

The Pan African Tobacco Group’s founder, Tribert Rujugiro Ayabatwa, will retire after a 52-year career, passing along the management of his companies to his sons and son-in-law.

Paul Nkwaya, Ayabatwa’s eldest son, will serve as the group’s marketing director, while his youngest son, Richard Rujugiro, will serve as technical director. Son-in-law Serge Huggenberger will serve as financial director.

Ayabatwa, 72, will continue to advise his sons and son-in-law on company management, but will no longer be involved in day-to-day operations.

“I am very proud of what I’ve accomplished over the last five decades,” Ayabatwa said. “I worked extremely hard to create jobs and opportunities for Africa, and have no doubt that my sons and son-in-law will lead my companies successfully into the future.”

In his retirement, Ayabatwa plans to spend more time on his charitable endeavors. He is developing a foundation mainly to help aspiring African entrepreneurs.

The Pan African Tobacco Group and the other companies Ayabatwa founded operate in 10 countries and trade in 27 countries in Africa and the Middle East. Combined, Ayabatwa’s companies employ 26,000 people who in turn support at least 182,000—in Sub-Saharan Africa, each employee supports at least seven people. From South Africa and the United Arab Emirates to Angola and Tanzania, Ayabatwa companies manufacture cement, tea, plastic shoes, beer, snack foods and cigarettes.

Ayabatwa, a Rwandan refugee with just an eighth-grade education, had to create many of his own opportunities. “My goal was never about making money; it was about building something up, creating something,” Ayabatwa said. “That is what I tried to accomplish and that is the legacy I leave to my sons and son-in-law.”

The Pan African Tobacco Group has subsidiaries in several African countries and in the UAE. Its subsidiaries include Leaf Tobacco & Commodities in Uganda, Vision Tobacco in Dubai, Barco Trading in Angola, Burundi Tobacco Company in Burundi, Leaf Tobacco & Commodities in Nigeria, the Congo Tobacco Company, Mastermind Tobacco Company in Tanzania and Arkan Leaf in Angola.

 

 

 

The future in fueling

| December 5, 2012

A new curing technology, developed in Croatia, substitutes biomass for expensive oil and gas.

By Robin Sutton Anders

For the past five years, Croatian tobacco growers have witnessed a startling decline in revenues. But unlike other farmers around the globe who attribute their recent losses to lower demand, poor weather conditions or stifling regulations, Croatian growers point to a rising cost of energy. “The decrease in growers’ profits is estimated to be 15 percent, so the production of tobacco is stagnating, or even slightly decreasing,” says Vladamir Hrovjc, managing director of Herbas d.o.o., a Croatian company that manufactures tobacco processing machinery.

“Tobacco drying costs have increased up to 40 percent in the last five years,” Hrovjc continues. This increase is foreboding for the entire Croatian industry, including Herbas, whose machinery sales depend on the industry’s success. So through long-term cooperation with Hrvatski Duhani, a leading Croatian manufacturer of flue-cured Virginia tobacco, Herbas set out to reduce the cost of drying flue-cured tobacco for struggling growers.

Fired up

Because the typical Croatian tobacco barn’s thermal generator relies on expensive gas or oil to dry its flue-cured tobacco, Herbas immediately recognized the need to find an alternative energy source. According to Hrovjc, the company started by experimenting with biomass like wooden chips, pellets and firewood. An effective generator, however, would take more than just a new fuel source, Hrovjc says. “Tobacco is typically dried using thermal generators fueled on gas and oil because using biomass tends to lead to great temperature losses. The temperature of outgoing gasses was around 300 degrees Celsius.”

The company developed a new model thermal generator based on the principle of pirolitic biomass burning, which it hypothesized would lead to more efficient combustion. The result was encouraging—the temperature of outgoing gasses in the chimney measured 130 degrees C.

Hrovjc explains how it works: “The biomass is put into the input hopper, which can be positioned at the side or in front of the thermal generator,” he says. “Then it is transported by a caterpillar conveyer system into the furnace. This dual-axial caterpillar transporter system ensures safety from [the] return flame.”

The barn’s thermal generator furnace—located beneath the ventilator—is made out of sheet metal, and the parts exposed to intense heat are constructed from fireproof sheet metal. “An 18,000 cubic meter air-per-hour ventilator creates forced air flow,” Hrovjc explains. “The thermal generator has primary and secondary air dampers which are angled at 90 degrees so to manually choose the ratio of external unsaturated air and internal recycled air. The temperature of output air is 130 to 150 degrees Celsius.”

Basically, Hrovjc says, the dry distillation of wood is carried out within the furnace, which creates a gas that burns with minimal ash and soot. “So cleaning the furnace is easy and done only once in a drying cycle.” Ash is removed manually by emptying the ash tray. And depending on the type of biomass used, it is necessary to periodically clean the thermal generator chimney.

Putting it to the test

Last year, Herbas conducted a series of tests to determine whether the biomass was, in fact, more cost-efficient. “We compared natural gas, oil and biomass,” says Hrovjc. “The results indicate that drying tobacco in thermal generators fueled on biomass is three to four times cheaper than those fueled on gas, and five to six times cheaper than those fueled on oil.”

Of the three biomass forms tested (wooden chips, pellets and firewood), firewood 1 meter in length was shown to be the cheapest fuel for drying.

Justin Macialek, a research assistant at North Carolina State University who studies tobacco mechanization and post-harvest curing structures, visited Herbas’ research facilities this past August to see for himself the company’s new curing technology.

Macialek also works with biomass fuels to generate heat for tobacco production and, like Herbas, understands growers’ interest in biomass fuels runs deep into their bottom line, as rising fuel costs in the United States also contribute to growers’ production costs. “One of the issues driving biomass burner selection is the uncertainty of gas prices that vary from year to year,” he says. “This past year it was $1 a gallon, but the year before it was $2 per gallon. That makes it tough for growers to budget their production costs.”

In Macialek’s view, Herbas’ biomass fuel system performs above standard, but he points to a remarkable adoption rate of the burners by Croatian growers as evidence of its success. “This is the second year biomass burners have been available to Croatian growers,” Macialek says. “The first year their technology was available, two growers used the burners. This past growing season, 42 growers utilized the technology. They were able to adapt the technology to existing barns and also build new barns using biomass burners. That greatly reduced their production costs.”

From hothouse to greenhouse

According to Macialek, U.S. researchers have been tinkering with biomass burner technology for a while.  At North Carolina State University, the biological and agricultural engineering department studied biomass as a fuel alternative for tobacco barns in the late 1970s and early 1980s. “When gas prices went back down, nobody wanted to use wood for heating,” Macialek says. “But in 2007, when gas prices started increasing again, people gained a renewed interest in alternative energy and we started looking at biomass fuels again.”

Whereas these new burners can torch costs in Europe, implementing the technology in the United States is not necessarily the most cost-efficient strategy, says Macialek. “In the United States, a very small percentage—at most 5 percent—of growers currently use wood as a fuel source.”

All things being equal, Macialek believes gas is more efficient and convenient for most U.S. growers, as fueling barns with biomass requires extra management time and maintenance costs.

And although the payback period for initial investment in Herbas’ technology is just three to five years, most growers only have contracts for one year at a time. “It’s difficult to make an investment for three to five years if growers are uncertain whether or not they will have a contract in the following years.”

For growers uncertain about their future with tobacco, old barns can be retrofitted to fit the biomass burner technology. Further, growers can use their burners for a variety of farming needs, dramatically slashing the payback time.

“A disadvantage of buying this equipment is that tobacco production only lasts two to three months a year, so you’ve got a short time to recoup costs,” Macialek says. “However, we work with a grower who uses this boiler system on his barn for tobacco in the summer, and in the winter he uses it for his greenhouses while he grows tomatoes. In late winter he’ll use the system to heat tobacco transplant houses.”

Hrovjc believes the investment in biomass burner technology can be recovered more quickly—in just two to three years. One grower, he says, even recouped his expenses in one year.

The future of biomass

Macialek predicts technology like Herbas’ biomass burner will only be adopted in the United States if the market turns enough so that alternative fuel technology offsets grower input. “It really comes down to convenience,” he says. “Even though gas prices are currently anywhere from five to 10 times the cost of wood, there’s a lot of value in the convenience of flipping a switch.”

In the meantime, there’s no question that Croatian growers have already realized the benefits of Herbas’ new technology. “It’s beneficial that the growers have committed to using biomass to fuel their barns,” says Macialek. “And if Herbas can help local growers produce tobacco for a lower cost, they can in turn pay lower costs for that tobacco.”

As local growers continue to realize the benefits of Herbas’ new technology that saves money while stabilizing input costs, what’s on the horizon for the tobacco machinery manufacturing company? “We’ve already come up with some high-quality solutions for increasing machine capacity and improving raw material processing,” says Hrovjc. “In the future, we’d like to continue to modernize production and develop new processing lines for our customers.” For the country’s growers and manufacturers alike, new technology that aids in production while reducing input costs will likely be an easy sell.