Difference between revisions of "Fontem Ventures"
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Latest revision as of 09:47, 19 February 2018
Fontem Ventures was set up in December 2012 as a wholly owned Dutch subsidiary to Imperial Tobacco to develop “non-tobacco consumer experiences”, notably e-cigarettes and "Re/On" caffeine sachets.
The company has marketed its products in the United States (US), the United Kingdom (UK), France and Italy.
- 1 Background
- 2 Employees: Past and Present
- 3 Consultancies
- 4 E-cigarette Portfolio
- 5 Product Innovation: Flavours
- 6 Legal Challenges
- 7 Advertising Strategies
- 8 Funding E-Cigarette Research and Harm Reduction Claims
- 9 Lobbying Decision Makers To Secure Less Restrictions
- 10 Pricing and Profitability
- 11 TobaccoTactics Resources
- 12 Relevant Links
- 13 TCRG Research
- 14 Notes
In August 2013, shortly after its establishment, Fontem Ventures paid US$75 million to acquire Hon Lik's e-cigarette company Dragonite, including its Research & Development facility in Beijing. Lik, a Chinese pharmacist, is credited with inventing the first e-cigarette in 2003.
Employees: Past and Present
A full list of the company’s leadership team can be accessed at Fontem Ventures’ website.
Fontem Ventures has worked with several public relations (PR) firms and advertising agencies, including:
- PR firms: Aspect Consulting (2015 and 2017) and FTI Consulting (2015/16).
- Advertising agencies: Why Not! Think People (2017), Momentum Worldwide (2016), Ocean (2016) , and The Corner London (2016).
Flagship Brand: blu
Since 2014, Imperial Tobacco has owned e-cigarette brand blu (see image 1), which has been marketed as a lifestyle product. The company acquired the brand when US tobacco company RJ Reynolds purchased US tobacco company Lorillard in July 2014. Amidst antitrust concerns that the merger would give RJ Reynolds an unfair advantage over the US nicotine market, Reynolds sold the blu brand (along with cigarette brands Kool, Salem and Winston, and a manufacturing plant) to Imperial Tobacco for US$7.1 billion.
2016, blu was reportedly the second largest e-cigarette brand on the US and UK markets. According to Fontem Ventures, blu held a 16% UK market share in 2016. This is in line with reports from tobacco market analyst Euromonitor International, which reported that blu was only second to Philip Morris International’s Nicolites in 2015.
In 2017, blu was marketed in three versions:
- GO, a so-called 'entry-level' e-cigarette resembling a conventional cigarette;
- PLUS+, a closed tank system;
- PRO, a tank system based on refill liquids.
Discontinued Brands: Puritane and Jai
The first e-cigarette launched by Fontem Ventures was called Puritane (see image 2). This brand, a result of Fontem Ventures’ collaboration with Hon Lik, was marketed as a healthcare product. Imperial closed a deal with Boots pharmacies to sell the Puritane brand throughout its pharmacies in the UK. Puritane was also available to purchase online on a dedicated website.
In April 2017, all products on the Puritane website were listed as ‘out of stock’. Similarly, the brand disappeared from UK pharmacy shelves and Imperial Tobacco investor presentations from January 2015 onwards do not mention the brand. If successful, this would have allowed the company to market the product with reduced risk claims. In April 2017, in response to a Freedom of Information request by the University of Bath's Tobacco Control Research Group, the MHRA confirmed that “according to our licencing records there are no currently granted licences for any product named ‘Puritane’, nor are there any licences held by Fontem Ventures”. In other words, if Fontem Ventures had lodged an application for Puritane in 2014, the application was unsuccessful or has expired.
Unlike Puritane, Fontem Ventures positioned JAI as a lifestyle product, marketing the product through tobacconists. PR company Aspect Consulting helped launch the e-cigarette in France through a mix of “online, traditional media and trade communication activities”.
In February 2016, a French vaping blog announced that Fontem Ventures had discontinued JAI in France to focus on blu. A June 2016 Imperial Tobacco presentation about ‘New consumer experiences’, in other words the company’s NGPs, did not mention JAI. An April 2017 check of the JAI Vaping website redirected to a page dedicated to blu. Like Puritane, it appears JAI was also discontinued.
Product Innovation: Flavours
Similar to cigarettes, flavour is an important product innovation tool to boost e-cigarettes sales.
In a 2015 submission to the Australian Senate inquiry into ‘Personal choice and community impacts’, Fontem Ventures declared that:
“flavours that clearly appeal primarily to minors (e.g. candy flavours, bubblegum, milkshake) should not be marketed”.
In line with its policy, Fontem does not market aforementioned flavours.
However evidence also shows that fruit and menthol-flavoured e-cigarettes are more appealing to young people than tobacco flavoured e-cigarettes. In 2017, Fontem Ventures marketed a variety of flavoured e-cigarettes, including: Magnificent Menthol, Cherry Crush, Vivid Vanilla, Glacier Mint, Pina Colada , Blueberry Strawberry Mint, Berry Cobbler, Mint Chocolate, and Caramel Café (see image 3).
In March 2014, Fontem Ventures launched legal proceedings over patents in California against nine of its American e-cigarette rival companies, including the top three: Lorillard's Blu Ecigs (now owned by Fontem Ventures), NJOY (bankrupt since September 2016) and Logic (acquired by Japan Tobacco International in July 2015). The lawsuits alleged patent infringement, citing four intellectual property patents that Fontem purchased as a part of its Dragonite acquisition.
The majority of the cases were settled out of court in 2015 and 2016.
In 2015, tobacco market analyst Euromonitor International labelled Fontem Ventures’ blu as “one of the most marketed vapour product brands in the UK”, referring to the brand’s strong presence on British television and strong point-of-sales displays at small retailers and supermarkets. Although marketing strategies used by the industry to promote tobacco have been banned under Article 13 of the Framework Convention on Tobacco Control to promote tobacco products and tobacco use, these same techniques are now being used to promote e-cigarettes, including:
- Direct targeting of individuals with promotional material;
- Free samples, in conjunction with taste testing;
- Incentive promotions, e.g. redeemable coupons provided with the purchase of the product, or discounted products; and
- Display of products and branding at social venues like shopping centres.
“Amnesty For Cigarettes” (January 2017)
On 1 January 2017, Fontem Ventures held a so-called ‘amnesty for cigarettes’ in the UK cities of Birmingham, London and Manchester. The campaign, hoping to capitalise on smokers’ New Year resolutions to quit smoking, saw young sales representatives (referred to as ‘brand ambassadors’) encourage smokers to publicly shred their cigarettes, sample a blu product, and in return, receive a discount on blu products (see images 4-7; all screengrabs taken from eventmagazine.co.uk in January 2017). The activities were supported by billboards with slogans like “Dump the things you hate about smoking”.
“Six Weeks To Fall In Love” (2016)
From 17 October to 13 November 2016, Fontem Ventures staged a “Six weeks to Fall in Love” campaign at a London shopping centre (images 8-12), developed by creative agency Momentum Worldwide and advertising firm Ocean. The theme of this campaign, ‘dating’, arguably appealed to a younger audience. Young sales representatives invited shoppers into branded booths and try blu PLUS+ and its range of flavours. Shoppers were subsequently encouraged to sign up to a six-week blu trial, with a starter kit worth £56, heavily discounted to £8 (comparable to the price of a pack of cigarettes).
“Just You and blu” (April 2016)
On 4 April 2016, the “Just You & blu” campaign was launched in the US, UK, Italy and France in the shape of television and cinema commercials, printed advertisements, billboards and online promotion. The campaign used videos and black and white images to convey a youthful, adventurous lifestyle, and a strong statement of identify (see images 13-16). According to the people behind the campaign, it aimed to “celebrate the individualistic lifestyles of blu consumers”, and “each representing an independent spirit, carving their own paths in life and enjoying blu along the way”.
Some imagery showed a strong visual similarity between vaping and smoking, with a review from the MailOnline describing the campaign simply as “Marlboro Man 2016”.
Funding E-Cigarette Research and Harm Reduction Claims
In April 2017, Fontem Ventures’ science webpage included links to six articles published in peer-reviewed journals, which examined the exposure of vapers to harmful chemicals, and assessed the indoor quality following e-cigarette use.
Fontem Ventures further funded two external studies carried out by the UK Centre for Substance Use Research, a private research institute which, amongst others, also received funding from Philip Morris International and British American Tobacco (BAT). One of the Centre’s staff, Neil McKeganey, supported BAT’s challenge to introduce plain packaging. In December 2016, McKeganey and the Centre published a report funded by the tobacco industry front group, Foreston “The Pleasure of Smoking”.
The findings of the e-cigarette studies shed a positive light on the health impact of vaping, with one study of the UK Centre for Substance Use Research concluding that e-cigarettes act as a deterrent to smoking, rather than a gateway, suggesting that e-cigarettes de-normalise smoking “through increased awareness, understanding, visibility and social acceptance”. In 2016, Imperial Tobacco made similar harm reduction claims to its investors, claiming that with blu products “there’s greater than 98% reduction in harmful and potentially harmful constituents in the aerosol, relative to the cigarette. There’s no negative impact on indoor air quality when you vape our products”. 
Health charity Cancer Research UK, a strong supporter of a “balanced approach to e-cigarettes”, cautioned that the tobacco industry’s research into e-cigarettes cannot necessarily be trusted due to the industry track record of distorting scientific evidence. Furthermore, research from the Tobacco Control Research Group has showed that harm reduction rhetoric offers the tobacco industry two main benefits: an opportunity to (re-) establish dialogue with and access to policy makers, scientists and public health groups, and to secure reputational benefits via an emerging corporate social responsibility agenda. The authors caution that care should be taken that harm reduction debates do not undermine gains previously secured in efforts to reduce the ability of the tobacco industry to inappropriately influence policy.
- For more information on how the tobacco industry has used science to distort the evidence on smoking tobacco and the health impacts, go to our page on Influencing Science
Lobbying Decision Makers To Secure Less Restrictions
Since the first NGP products hit the market, tobacco companies have lobbied for more favourable marketing and tax regulations than cigarettes. Fontem Ventures has lobbied decision makers in the UK and internationally (including where it does not yet sell its products) to oppose tougher regulations on e-cigarettes.
Scottish Members of Parliament (2017)
In 2017, public relations company Aspect Consulting, contacted Scottish Members of Parliament to promote the alleged health benefits of e-cigarettes. Although the company disclosed that it acted on behalf of Fontem Ventures, it failed to mention that Fontem was a subsidiary of tobacco company Imperial Tobacco. Despite lack of conclusive evidence, Aspect Consulting claimed that e-cigarettes acted as a barrier to tobacco use.
Norwegian Consultation on the Implementation of the Tobacco products Directive (2016)
Despite not selling its products in Norway, Fontem Ventures responded to a consultation by the Norwegian Department of Health on the implementation of the European Union Tobacco Products Directive (TPD). In its response, Fontem Ventures claimed that e-cigarettes offered a “huge public health benefit”, and that pharmaceutical-type restrictions will unintentionally make smokers continue to use tobacco, or see them turn to illegal e-cigarettes.
Public Health (Wales) Bill (2015)
In 2015, Fontem Ventures lobbied the Welsh government against the inclusion of e-cigarettes in existing smoke-free regulations, arguing that it would force vapers to use their e-cigarette in designated smoking areas where they would be exposed to second-hand smoke. It argued that the proposed Bill was based entirely on “precautionary impulse and not scientific evidence”.
Australian Senate Inquiry (2015)
In 2015, Fontem Venture told an Australian Senate inquiry that “E-cigarettes do not contain tobacco, do not emit smoke and do not involve any combustion. It is therefore unfair and inappropriate to conflate them with tobacco products. 
Pricing and Profitability
In 2016, Fontem Ventures reported that, although the company expected e-cigarettes to add value to its business in the long term, e-cigarettes had yet to become profitable. The company has indicated that it will seek to get e-cigarette bottom-line profitability mainly via a pricing strategy. Arthur van Benthem, then Fontem Ventures’ CEO, was quoted as saying:
- “The average consumer in the UK spends about £2 on his habit on a daily basis, versus £5 on cigarettes. The opportunity for pricing, even with excise coming in, is quite significant.”
Van Benthem also indicated that the company would seek to reduce retailer margins on e-cigarettes and achieve cost reduction through economies of scale and focusing on online sales.
- Imperial Tobacco
- Next Generation Products: Imperial Tobacco
- E-cigarettes: At The Pharmacy
- Aspect Consulting
- FTI Consulting
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