Home Business Big Tobacco squares up as EU rules aim to track every cigarett

Big Tobacco squares up as EU rules aim to track every cigarett


BAYREUTH Germany – It takes a British American Tobacco factory machine three minutes to load 4 million cigarettes onto a truck in northern Bavaria – but it can take a lot longer to figure out whether those cigarettes end up where they should.

So the EU is asking tobacco firms to do more to track and trace their goods, in order to tackle a huge black market and ultimately prevent some of the 700,000 deaths each year in the EU from smoking-related diseases.

The legislation, which takes effect over the next two years, is part of a package that also slaps no-holds-barred pictures of the health effects of smoking on packets, and bans menthol. Alongside it, an international treaty ratified by 178 countries – the Framework Convention on Tobacco Control (FCTC) – aims to ensure similar measures are introduced right across the world.

There’s one problem, however: The big international tobacco firms – Philip Morris International, British American, Japan Tobacco (2914.T) and Imperial Tobacco (IMT.L) already use a track and trace system called Codentify, developed by Philip Morris, which they say works perfectly well.

They do not want to have to add costly third-party systems to their massive operations, which turned out more than 2 trillion cigarettes last year.

“Our biggest concern is proprietary solution providers pushing unproven solutions on to governments,” said Daniel Hubert, BAT’s supply chain tracking and verification program manager and a director of the Digital Coding & Tracking Association (DCTA), a group made up of BAT, Philip Morris, Japan Tobacco and Imperial.

But tobacco industry critics say Codentify is simply not good enough, because it focuses too much on production and does not store product codes or track them. Last year Luk Joossens, advocacy officer of the Association of European Cancer Leagues, and Anna Gilmore, director of the University of Bath’s Tobacco Control Research Group, published a report listing the system’s technical and ethical limitations.

“Codentify is not up to the task and worse than that, it puts the fox in charge of the hen-house,” Gilmore told Reuters.

In response, Big Tobacco acknowledges that Codentify only does part of the job, and says critics fail to include third-party technology used alongside it to make it fully compliant.

EU member states have two years to bring their national legislation into line with the new tobacco directives. So most of the new rules will apply in the first half of 2016. In the interim, experts are analyzing the feasibility and cost of a range of alternative track and trace options from security printing companies and IT/data processing companies, and will report back at the end of the year.

For now it is not clear what they will recommend, but industry sources doubt Codentify will be adopted without at least significant changes.

“There’s a lot of resistance to allowing the tobacco industry to use its own technology,” said Euromonitor International analyst Shane MacGuill.


Track and trace technology aims to pinpoint cracks in the supply chain where cigarettes fall into illicit trade, which according to the WHO, makes up about 10 percent of the global tobacco market, robs governments of over $30 billion a year in taxes and undermines public health goals with a cheap supply.

In order to comply with the EU laws, governments must impose complex control systems on manufacturers that track every pack from factory floor to store shelf, through all the hands it passes with details such as time and place of production, intended market, names of buyers and payment records.

The industry has reason to help. By stamping out illicit trade, it would recoup millions in annual revenue lost to counterfeits and lower the chances of costly “seizure payments” when its goods turn up contraband.

Over three days in March, private investigators working for Philip Morris say they made 23 purchases of illicit tobacco in London’s central borough of Westminster, from well-known international brands to so-called illicit whites – fake cigarette labels made outside the EU especially for smuggling.

“If we’re finding product here, what is it like elsewhere in more of the deprived areas?” said Will O’Reilly, a former Detective Chief Inspector with the Metropolitan Police now working for Philip Morris, the world’s No. 1 tobacco company.

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