Participants in Rhodia’s filter colloquium debate the challenge of transition.
By Stefanie Rossel
It’s an institution in the tobacco industry: From April 22–25, Rhodia Acetow hosted its 11th Filter Colloquium in Freiburg, Germany. The event, which has taken place every three to four years since 1985, brings together filter experts from all over the world.
Attended by 170 delegates, this year’s symposium came after a turbulent period for the acetate filter tow manufacturer. In late 2016, the Blackstone Group, a U.S. private equity firm, acquired Rhodia from its holding company Solvay, a Belgium-based supplier of advanced materials and specialty chemicals. In June 2017, Blackstone and Celanese announced plans to combine their filter tow businesses. The deal would have created the world’s largest acetate filter tow company. In March 2018, however, Blackstone and Celanese canceled their project after EU regulators demanded “excessive” divestments to allay antitrust concerns.
Rhodia CEO Philippe Rosier expects the company to stay with Blackstone for at least five years. With around 1,300 employees and five industrial sites around the globe, the tow manufacturer holds a 21 percent share of the global acetate filter tow market. It is the third-largest player behind Eastman (28 percent) and Celanese (25 percent). Accounting for 35 percent of Rhodia’s businesses, Europe is the largest market for the company, followed by Asia (22 percent), the Commonwealth of Independent States (22 percent), Africa and the Middle East (11 percent) and America (10 percent).
The 2018 Filter Colloquium marked a milestone for Rhodia, according to Rosier. “It is the starting point for the new company after the dust has settled,” he says. “For the first time in 100 years, we are now a standalone company dedicated exclusively to the tobacco industry. We seize this conference as an opportunity to reinforce the partnership with our clients.”
The takeover by Blackstone, a renowned fund with about $100 billion in assets under management, came at a time of profound change in the tobacco industry. As consumption of conventional cigarettes continues to shrink, next-generation products (NGPs), such as heat-not-burn (HnB) devices are on the rise; many of them use components that are similar in construction to those used in traditional cigarettes and hence also require a filter.
“We are excited about the future,” says Rosier. “Rhodia filter tow stands for quality and innovation. Our filters are used for product differentiation both in combustible cigarettes and next-generation products. The global acetow market is rather stable. Cigarette filters are expected to decline by 2 percent annually. However, we think that heat-not-burn products can compensate for the reduction in demand and expect growth in specialty products. Our target is to grow in this segment of the market.”
For Rhodia to meet this goal, the sales volume of HnB consumables needs to be considerably higher than that of conventional smokes. The amount of cellulose acetate tow in a typical HnB filter amounts to only 50 percent to 80 percent of that in traditional cigarette filters, according to the company’s estimates.
“It needs to be seen how this new category will develop,” says Rosier. “We expect to see several generations and innovations in the area of HnB and NGP in the coming years. We think that HnB is the combination customers are looking for, since these products are probably less hazardous to health than conventional cigarettes but provide smokers with the pleasure of smoking. We expect a large success of the category as the products will improve over time, especially with regard to taste. The filter will play a key role in taste improvement.”
Unsurprisingly, innovation and transformation were the overarching themes of the colloquium. Using the story of Superman as an analogy, inspirational speaker and creative consultant Dietmar Dahmen urged the audience to think outside the box when adjusting to transformation. Embracing new technologies, such as artificial intelligence, he insisted, would help players turn “business as usual” into “business as personal.”
Mustering the courage to try out fresh approaches has indeed become a necessity for companies operating in the tobacco space. Rosier estimated worldwide cigarette sales at 6 trillion sticks in 2017, a decline of 1.3 percent from 2016. Following a drop of 5.6 percent in 2016, the Chinese market grew by 0.8 percent, to 2.5 trillion sticks, in 2017. The rest of the world saw a decline of 2.8 percent in the past year versus 2016, with consumption of 3.5 trillion sticks in 2017. Illicit cigarettes were estimated to represent 9.6 percent of the global market in 2016 and thought to have increased to more than 10 percent in 2017.
The future doesn’t look promising, either. According to Rhodia estimates, global cigarette sales will fall to 5.783 billion sticks by 2021, a figure that includes licit, illicit and roll-your-own-equivalent sticks. Sales in China and Asia are expected to grow at rates only slightly above average. Higher growth levels are predicted for Africa and the Middle East.
The global market for filter tow was estimated at 740,000 tons in 2017, a decrease of 0.3 percent from the previous year. China accounted for 290,000 tons (down 0.8 percent). Rhodia anticipates the worldwide filter tow market to grow by 0.4 percent to 757,000 tons by 2021, driven exclusively by China, where sales are forecast to pick up again.
The rise of heat-not-burn
One reason for the recent decline in the legal cigarette market are NGPs, which have begun to eat into conventional cigarette sales. This is especially true in Asia, where according to Rhodia, more than 90 percent of all HnB products were sold in 2017, and where this technology is the most widely accepted and fastest-growing NGP category. HnB sales accounted for 1 percent of the rest of the world’s cigarette market, where the new segment is expected to expand relatively quickly. Pricing and regulation will determine the segment’s future performance.
The novel products have sparked innovation; they have, for instance, significantly affected filter design. According to Robert Whiffen, global quality and best practices manager at Essentra, the filter is critical to an HnB product’s functionality, and its design needs to be considered carefully with regard to its interaction with the full system.
Humectant concentrations in HnB products are much higher than they are in conventional cigarettes, as the smoke aerosol body is formed of humectants. Consequently, the filter must help the aerosol form from the vapor phase by cooling it. At the same time, the filter needs to survive the heating process. Contrary to conventional cigarettes, the filter in an HnB product represents the largest part of the consumable, sometimes as much as four-fifths. The mono segment accounts for only 20 percent to 30 percent of the entire filter length. “New materials, such as polylactic acids or paper tubes, are required to provide additional functionality,” said Whiffen. “As the tobacco weight content in an HnB product is around 30–40 percent of [that in] a traditional cigarette, low filtration efficiency is needed in order to achieve the tar/nicotine ratio required to hit the yields.”
In addition, an HnB filter will require structural strength so that the consumable can be inserted into the device. To evaluate their products’ performance, suppliers must rely more on testing and experimenting than they do with traditional products because experience with the new products is limited. HnB consumables are also difficult to handle because their weight center is different from that of cigarettes. Conveying a final product with a length of only 42 mm to the packer at high speed is a challenge, according to Witold Bialas, business development manager at ITM Poland.
Like conventional smokes, HnB products need tipping paper to connect the tobacco rod with the filter plug. For HnB ventilation, the tipping paper used requires perforation. Beyond mere functionality, tipping allows for brand characterization via printing or hot-foil stamping and can act as a carrier for special substances, such as aromas, explains Tannpapier’s Michael Lindner. The tipping paper is the only part of an HnB product that is in direct contact with the lips of the user, and it’s the first item the consumer sees and touches after opening the pack. Addressing the tactile and haptic senses, it is therefore a perfect communication tool and a valuable means of product differentiation through surface features, such as textured, soft-touch or transparent tipping.
Capsule and slim cigarettes growing
For the time being, however, the conventional cigarette market dwarfs the NGP sector. Among other features, speakers at the Rhodia event highlighted the composition of a filter, which has to fulfill multiple tasks, including branding, feel and flavor, filtration and harm reduction.
“Combining the individual segments of the filter and handling this on the maker is demanding,” Bialas said. “One could say that, instead of the cigarette maker, the filter combiner has now become the main machine in the factory.”
The filter is also the component where taste solutions can be applied, be it to improve the tobacco taste or to create signature flavors. According to Andreas Briel, general manager of Borgwaldt Flavor, filter flavor treatment solutions can even mask the off-taste of charcoal filters to such a degree that the charcoal taste is no longer detectable, facilitating consumer acceptance.
Capsule-filtered cigarettes and super slims are the fastest-growing segments in the combustibles market. They present both challenges and opportunities. Colin Fairs, head of the European development center at Essentra, explained that important requirements in filter design include correct capsule positioning and defect detection in the maker. In addition, the quality of a capsule-containing product needs to be assured during transportation and on the store shelf.
Capsule breakages and leaks must be dealt with appropriately. In super-slim rods, capsule size also plays a role. As demand for these products grows, high-volume production increasingly becomes an issue. All these factors also apply to the manufacture of filters with a smaller circumference. Sales of demi-slims and super-slims have been growing at about 8 percent and 1 percent, respectively.
New developments in filter technology may also create new challenges for filter wrapping materials. Filters equipped with oil-containing flavor capsules require barrier plug wraps. Biodegradability of filters (see sidebar) is another increasingly important theme. Bernhard Eitzinger of Delfortgroup showed that this can be addressed by paper technology.
Rhodia’s filter colloquium demonstrated that, even in a rapidly changing industry, the filter—small as it may be—still holds considerable potential for further development.
New tow products
Rhodia Acetow’s 2018 Filter Colloquium provided an appropriate backdrop for the presentation of two new filter tow products.
The new generation Rhodia DE-Tow has been designed for accelerated biodegradability in versatile environments. Available starting this month, the product degrades quickly in water—including marine water—soil, home composting and industrial composting, according to Rhodia. The product has been recognized with three third-party biodegradability certificates, and Rhodia expects two more to follow. DE-Tow is made of cellulose acetate and is free of titanium dioxide (TiO2). It contains a food/pharmaceutical-grade biodegradation enhancer. The filter tow performance is equivalent to standard tow, with a slightly different color impression.
November 2018 will see the launch of Rhodia’s TiO2-free standard tow. A delustering agent used in paints, paper and many other applications, TiO2 has recently been suspected of being a cancer-causing substance. Although TiO2 has no substance-specific toxicity, and is not mutagenic or genotoxic, it is currently under review for classification as being potentially hazardous to health. To date there is no regulation of the substance. Hence, Rhodia’s decision to develop a TiO2-free tow was a proactive move. In the new tow, no other delustering agent is used. The product features a slightly different color impression, but within specifications, while its filter tow performance is equivalent to standard tow, according to Rhodia. —S.R.