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Brands that find a way to successfully deliver flavour while appealing to diversifying consumer desires will be best poised for success in a maturing heated tobacco market.
Flavours are still a significant expectation for many consumers, according to TobaccoIntelligence surveys. But prohibitions already coming into place in the EU and anticipated elsewhere will likely eliminate this as an attractor to convert smokers.
Companies have innovated to counter this by developing products such as herbal heated products that can get around these restrictions.
Regulators have started to take note. Currently, most countries in Europe do not specifically regulate herbal heated products, but some have started to draft regulations covering them. TobaccoIntelligence expects this trend to continue and for regulation rather than prohibition to be the main path chosen, at least in Europe.
The upcoming EU Tobacco Products Directive revision (TPD3) is expected to regulate herbal heated products as emerging products but not prohibit them. This will leave the door open for companies to continue to produce flavoured herbal heated products for the time being, though further restrictions on flavours may still be proposed.
Beyond that, companies will also have to innovate in other ways to continue to maintain and build market share as consumers in established markets grow more discerning and more attention is paid to trying to attract new users in emerging markets.
Design, personalisation, and where hardware might go
In developed markets, design elements such as aesthetics, battery life and speed of charging are likely to become increasingly important. Aesthetic appeal was already a significant driver for smokers to choose to move to heated tobacco, alongside scientifically sound reduced-risk nicotine-delivery benefits. This contrasts with other reduced-risk products that can lack the same sleek aesthetic and are beset by misconceptions about their reduced-risk potential.
Now moving forward for heated tobacco, a wider range of personalisation and “designer” designs are expected to come to the fore – with product partnerships, limited editions and variable colour palettes becoming more common.
But also, “soft” elements such as environmental credentials will become more important to consumers. As the heated market matures and consumers are presented with a choice of products, features such as recyclability and sustainability will be sought more as differentiators between brands.
In newer markets, consumers will expect heated tobacco to be more and more price competitive with existing tobacco options. This will require brands to develop more cost-effective reusables.
In terms of hardware, two branching paths could be taken. Some could look to focus on hard-wearing, long-lasting devices that rarely need to be replaced but may have a higher initial outlay, in the hopes that cost-effectiveness over the lifetime of the product will win out.
Alternatively, brands could look to make hardware as accessible as possible by making it as cheaply as possible – in much the way disposable vaping products have cornered a significant portion of the market from more durable but more costly cartridge, pod and tank devices.
Methods brands are using to increase their market share
Philip Morris International (PMI) may also have found a third way with its Iqos device. It is starting to offer refurbished devices sold at a discounted price as well as device-exchange programmes where users can trade in an old device for money off a newer model. Both are practices copied from other fields of electronics.
Interestingly, earlier this year, TobaccoIntelligence found no relationship between pricing levels and income levels of countries for hardware, though that did exist for consumables. This more than likely will change as more attention is paid to emerging markets.
Also more than likely to change is how companies ring-fence products against cross-compatibility. This may not be something consumers desire from their devices – almost certainly preferring the ability to use a variety of consumables in their heated tobacco hardware – but brands will look at it in more detail to further secure and consolidate market share.
- TobaccoIntelligence will be discussing these topics and more at the upcoming InterTabac conference held from 19th to 21st September in Dortmund, Germany, where our managing director, Tim Philips, will be in attendance. You can also hear our head of legal analysis, Pablo Cano Trilla, speak at the first conference session, and visit our booth.
– Freddie Dawson TobaccoIntelligence staff
Photo: AI-generated
