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00:00This is a story about the many faces of a single vice.
00:03For more than a century, tobacco has been one of the most regulated industries in the global economy.
00:09And with every new regulation, it's come back in a different form.
00:13Now tobacco firms are adapting again, sidelining cigarettes in favor of smoke-free products.
00:19They call it harm reduction and are finding some business success.
00:24But critics say the long-term health effects are still unknown.
00:27Our colleague, Michael McKee, takes us to Switzerland.
00:32At a state-of-the-art facility in Neuchâtel, Switzerland, the world's biggest tobacco company is building a new future.
00:40I think cigarettes should end up in a museum.
00:43Cigarettes are out and smoke-free products are in, now consumed by more than 100 million people around the world.
00:50By 2030, we should have two-thirds of the revenues coming from this product.
00:54The products have also enjoyed a bit of a cultural moment.
00:58Where there's smoke, there's just me vaping.
01:01You guys zins?
01:01What?
01:02Zin?
01:02No.
01:03Everyone zins.
01:04Zin is not a sin.
01:05That's the advertising campaign.
01:06Really?
01:07But the tobacco industry has been here before when cigarettes were cool.
01:12Until they weren't.
01:19So the early days of cigarettes, it was hard to watch a movie without seeing someone holding a cigarette and
01:24smoking it.
01:25Bond.
01:27James Bond.
01:29It was just very commonplace.
01:31Shall we just have a cigarette on it?
01:34Yes.
01:35The level of awareness was just not there.
01:38It was culturally acceptable.
01:41Ken Shea is a Bloomberg analyst who's been covering the tobacco industry for more than 25 years.
01:47Back in the 1960s, roughly half of all U.S. adults smoked.
01:51Today, it's down about 11%.
01:54There is a definite, significant health hazard associated with cigarette smoking.
02:00The evidence was emerging that smoking was harmful to people's health.
02:05Lauren Seplicki is a public health researcher at Johns Hopkins University who studies corporate influence on health and policymaking.
02:13In the late 1900s and early 21st century, what we saw was really an emergence of public awareness of how
02:21much the tobacco industry had lied to the public.
02:25Even in front of Congress testifying that nicotine is not an addictive substance, that has really generated a lot of
02:33mistrust.
02:34Philip Morris International, or PMI, is the largest publicly traded tobacco company in the world, making some of the most
02:41well-known cigarettes on the market.
02:44I think we're at the stage that we're building the product and the functional benefits.
02:49Yasek Olczyk began his career with PMI in 1993, working his way up to become CEO in 2021.
02:57Olczyk's vision is delivering a smoke-free future for the company.
03:01The tobacco companies for years fought the idea that cigarette smoke was bad for you.
03:06When did you figure out that this was going to be a losing proposition business-wise?
03:10And how did you make that transition into the non-combustible space?
03:15When I joined Philip Morris, I think the positions were very clear.
03:19Okay, the cigarettes are not a great idea for your health.
03:23Cigarettes are addictive.
03:24The big question is, what are you going to do about it?
03:27We almost eliminated the entire investments behind the combustible cigarettes.
03:33And we redirected all of these resources behind new products.
03:37We now understand why cigarettes have such a negative impact on a human health, on a smoker's health.
03:43The whole thing is about the smoke, which is a result of combustion.
03:47And then you release all the hundreds and hundreds of quite deadly or very deadly toxicants.
03:53But if you remove the combustion, if you eliminate the smoke, then essentially you have a product which can allow
04:03smokers to continue using the product,
04:06but with a much, much, much lower exposure to all the harmful toxicants, etc.
04:12In recent years, the tobacco industry has focused on creating more nicotine products.
04:18So things that aren't necessarily combustible cigarettes, but can be things like vapes, or now we're seeing nicotine pouches.
04:26These products still contain nicotine, which is one of the most addictive substances that can be commercially purchased in the
04:34United States and around the world.
04:36Some even say that it's as addictive as heroin or cocaine.
04:40The health effects of nicotine addiction can lead to mood dysregulation, increased levels of anxiety,
04:47maybe even influenza-like feelings.
04:49If you are addicted to nicotine and you stop using it, you're trying to quit,
04:54you're going to experience that terrible withdrawal symptoms.
04:57Despite warnings from public health experts, smoke-free products have skyrocketed,
05:02driven by more and more users looking for an alternative to cigarettes.
05:06That's changing the bottom line for tobacco producers like Philip Morris,
05:10a company which has a market cap of nearly $300 billion,
05:14larger than Goldman Sachs, McDonald's, and Disney.
05:17So about 40% of Philip Morris International's revenues are what they call smoke-free.
05:22That includes the oil nicotine products like Zyn and also Icos, the heated tobacco product.
05:28Icos and Zyn are two of Philip Morris' most successful smoke-free products that are very different from one another.
05:35Zyn is a tobacco-free nicotine pouch that you insert between your lip and gum.
05:39It comes in a variety of flavors and nicotine strengths.
05:44Icos is a heat-not-burn device that takes out the combustion part of traditional smoking.
05:49The way we design Icos is essentially the replica of cigarettes.
05:53It didn't have to look like a cigarette, but it actually helps smokers together.
05:58And the big surprise, positive surprise at that time, was the adoption rate.
06:02Because very early we learned that from 100 people trying Icos, buying Icos device,
06:0870%, 7-0, will stay with Icos and will completely stop smoking.
06:14Icos was kind of a pioneer in that it was a product that was sleek.
06:19It wasn't embarrassing to bring out as a facsimile for a cigarette.
06:23It checked off all the boxes in terms of the ritual of smoking.
06:26But I think the early days, it was hard to convince a smoker that why would they want to fumble
06:32around with a device?
06:34But Philomoros was smart in going to some of the markets where new electronic gadgets were more acceptable,
06:41like Japan, South Korea, Italy.
06:45For whatever reason, these markets adopted these products early on.
06:49More than 42% of the revenue are coming from this product.
06:53Icos today by revenue is larger than Marlboro.
06:57Which is the best performing product at this point?
07:00Which one has been taken up most quickly?
07:02I mean, Icos is still the best performing in terms of a conversion.
07:06Obviously, there was a lot of excitement about the nicotine pouches
07:10because the growth rate month on month, quarter on quarter, year on year is much higher than Icos.
07:15But we're comparing to incomparable by size.
07:19Pouches are very promising.
07:20I think they offer very good harm reduction potential.
07:25Zinn is a product that was originally made by Swedish Match
07:28and had done really well in the local markets in Sweden.
07:31And Philomoros International thought it was a great idea to acquire them in 2022 and take it to the U
07:38.S.
07:38It has attained pre-market tobacco approval and is by far the biggest winner in the roughly $20 billion oral
07:46tobacco market.
07:48Consumers have really embraced Zinn as a product that is less harmful than cigarettes,
07:53but also it's more discreet.
07:55It comes in different flavors.
07:57They had coffee flavor.
07:58They had mint flavor.
08:00It's a product that it's not messy.
08:02You don't have to go out and smoke it.
08:03Unlike a tobacco smokeless product, you don't have to spit.
08:06It was small.
08:07I could use it and no one would know I had it in.
08:10It's a product that a white-collar consumer can use discreetly at his desk.
08:15It was a far superior product than any other nicotine pouch, and it made me feel great.
08:23And all that for a price that was pretty inexpensive.
08:28Global Zinn shipments are predicted to more than double, from just $421 million in 2023 to an estimated $1 billion
08:35in 2026,
08:37while nicotine pouch sales grew by more than 35% in both the U.S. and Europe last year.
08:43We're here at PMI's Aurora facility.
08:45We broke ground in December of 2024.
08:48This increase in demand led PMI to build a new production facility in Aurora, Colorado.
08:54As you can see, we have a state-of-the-art facility where we're producing Zinn nicotine pouches for distribution
09:00in the United States.
09:01And this is what the pouch looks like.
09:03It's really quite simple.
09:05It's a plant-based pouch, and inside there we have pharmaceutical-grade nicotine that is derived, it's extracted from tobacco
09:12leaf.
09:13We have fillers, we have stabilizers, and we have food-grade ingredients.
09:17So everything in here is basically either a food-grade ingredient or pharmaceutical-grade nicotine.
09:22It's placed between the upper lip and gum, kept there for about 30 minutes, and it's going to deliver nicotine
09:28over that time.
09:28The critics would argue that these products hook either existing users or even new users to nicotine.
09:37The marketing for nicotine pouches often uses potentially misleading claims, things like these are tobacco-free, which might make people
09:45believe that they're free of harm.
09:46But that actually downplays all of the risks that are associated with nicotine addiction.
09:52The nicotine had me.
09:54That's how addictions work.
09:55That's how nicotine works.
09:57And I was addicted.
09:58I was probably in my height of using Zin going through a tin a day.
10:04Remember on our first date that you told me you had a Zin a day?
10:08I did.
10:08I forgot about that.
10:10Will Lamas was a frequent user of Zin pouches, a habit he claims caused a number of health issues.
10:16So a few years into using Zin, I started having some health problems.
10:22I remember it started with a pain in my stomach, and then for about six months, my stomach was constantly
10:28irritated.
10:29And one day I was on Reddit, and I found a subreddit called quitting Zin.
10:34And I was reading some of the posts, and they were by Zin users trying to quit or on their
10:39journey to quit.
10:40And they were talking about how their stomach used to hurt, their blood pressure used to be high, their heart
10:47rate was always racing.
10:49And a few weeks after they quit, almost all those side effects were going away.
10:55From then on, I told myself, I'm going to quit.
10:58Zin for me was the healthier version of nicotine.
11:03And it's true.
11:03If you are addicted to nicotine, addicted to cigarettes or dip, Zin is a healthier version.
11:11But at the same time, it's the lesser of two evils.
11:13That doesn't mean it is healthy.
11:15In response to health concerns, PMI says that no nicotine product is risk-free.
11:20And for those worried about their health, the best choice is to stop consuming nicotine altogether.
11:26The research on the long-term health outcomes related to nicotine pouches isn't there yet.
11:32These products are relatively new on the marketplace.
11:36And so that research is necessary and needs to be supported to really understand the long-term health outcomes.
11:43But nicotine itself is an addictive substance, so we know that there's inherent harm with using any nicotine products.
11:50It can cause a lifelong struggle with addiction that can lead to potentially devastating mental and physical health outcomes through
11:58the withdrawal symptoms.
11:59And that addiction cycle can be really devastating.
12:03I needed Zin to feel normal.
12:05And at that point, I realized this has really got a grip on me and I do have a problem.
12:11Despite the potential risks, smoke-free products continue to gain traction across domestic and international markets.
12:17The nicotine profit pool continues to grow because it's just an innate craving that consumers have to satisfy.
12:25Consumers now have more choices to choose cigarette as a harmful product to things that are less harmful.
12:31And that's the bet.
12:32The nicotine craving will remain even if cigarettes fall into the ash heap of history.
12:37Can you imagine a day when Philip Boris does not sell cigarettes?
12:41Absolutely, absolutely, absolutely, absolutely.
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