What separates NEAFS from other heated cigarettes is the brand’s unique approach to heated tobacco.
Containing no tobacco, NEAFS heated sticks contain a special blend of tea leaves, gently steeped in nicotine and a range of flavours.
Compatible with many devices, the NEAFS Stick offers a fantastic alternative nicotine delivery system to conventional cigarettes and other heated tobacco alternatives, avoiding the release of toxins that are created when a cigarette is burnt.
Adrian Everett, NEAFS CEO, tells Wholesale Manager what makes NEAFS different from other HNB products.
What does your role as CEO involve?
My first role as CEO was at E-Lites, which I Co-founded with my older brother’s £5k credit card in 2008. I was effectively homeless & bankrupt with a product and idea that basically didn’t exist in the U.K. at the time, and most people laughed at. That was a very different journey, organically growing a start-up from a credit card to more than £50m per year in retail sales inside 4 years. It was a baptism of fire doctorate in business, the nicotine industry, wholesale & retail, product design, manufacturing and cashflow. That journey gave me the experience and strongest foundation possible before taking on this much bigger role as the CEO of NEAFS, and to take it to the top of the heated category.
As a global brand a lot of my time & focus is spent working with our department principles and international partners on the consistency of our brand, products, service & communication. Consistency is a big focus for us, which means we carefully manage our growth to ensure we never over-promise and under deliver. We are expanding fast, so it’s important to have steady hands at the helm of a ship that’s gaining so much momentum. We are very fortunate to have some of the industry’s most experienced & capable people at NEAFS, which I feel is one of our greatest strengths – but as we are spread literally across the globe I don’t have what you would call a 9-5 existence!
Our President Daniel Chen is (in my view) the worlds foremost ‘Vape’ manufacturing expert, whom I’ve had the pleasure of working with since 2008 when I was at E-Lites. Our Global Head of Digital assets is Sam Marks, the founder & CEO of Sky Cig (now Blu, having sold to LORILLARD) and Nick Smith (founder & CEO of Elonex) is our Global Director of Media. We have 2 incredible GM’s – Julian Clarke in the U.K. and Ricardo Palau in Europe, who manage all our U.K. & EU accounts, both offline and online. Our R&D team based in both China and Tajikistan is led by Professor Xavier, formerly a chief scientist at CNTC, whilst our production is overseen by Jason Yang, who has also worked in the industry with us since 2008. Fortunately we use English as our common language! Probably the most important job I do though is support our team and our trading partners. I enjoy being as hands on as possible whenever I can, and wherever I’m needed.
Tell us more about the Heat Not Burn category – how big is the category compared to vaping and is it in growth?
Well, that very much depends on the country. Globally it is estimated to be almost the same size by value & volume as the Vape market currently but growing exponentially. It is anticipated to be bigger than the Vape category in 2024 and surpass the combustible market by 2030. Currently 2.5% of the global $1Tn annual market value is spent on Liquid Vape products, with heated tobacco ‘hot on their tail’ at 2.4%. That’s big. And fast. Japan is by far the most adopted territory with over 36% of ‘smokers’ now using heated tobacco rather than combustible products. Some European countries like Italy have also really embraced this new technology, but the U.K. is a little behind. Given the publicly stated intentions of Phillip Morris to cease production of combustible cigarettes by 2030, and their currently uncontested market leadership & multi-billion dollar investments in IQOS & HEETS, we have the Marlboro Man to thank for this incredibly ‘authentic’ next generation solution to reduced risk recreational nicotine consumption. With heated tobacco (and non-tobacco) there really is no longer a need to burn your leaf to achieve the same (if not better) experience from ‘smoking’. NEAFS simply went a step further by finding an alternative to tobacco leaf as the base ingredient.
What about regulation for this new category? Are heated products classified as tobacco or vape?
NEAFS are tobacco free, so they are classified and regulated the same as liquid vape products by the MHRA. Heated tobacco products however, are classified and regulated the same as any tobacco product, but due to the unquestionably reduced risk they pose to consumers, they are taxed lower than combustible cigarettes. It has been widely recognised that heated tobacco is around 95% less harmful than traditional cigarettes, so it makes sense that they are taxed lower to promote harm reduction, and support the ‘2030 Smoke Free Britain’ initiative. Because NEAFS do not use tobacco we are regulated by the MHRA as a vape category product, so NEAFS can be visibly displayed and advertised according to Article 20 in the U.K. and EU countries. Our head of compliance Charlotte Best secured our MHRA authorisation in the U.K. earlier last year, and now most of the 27 EU member states also, with the last few countries set to approve our licence to trade in March this year. So, alongside our licence to sell in the UK, just a few weeks after this is printed NEAFS will be legal to sell in every EU country, plus a few dozen others outside of the EU. NEAFS continue to engage in the regulatory debate and work closely with the authorities in each country to ensure we always remain compliant and protect our trading partners and customers.
How does Neafs differ from other HNB products currently available?
Our background is in tobacco alternatives, so naturally we don’t use tobacco as our base ingredient, we use organic green tea leaves. Billions of people have been heating tea leaves and consuming them as a drink for thousands of years, due to the positive properties of tea, and it’s suitability for flavour manipulation and heating. So it made sense to us to use heated tea rather than tobacco, which allows NEAFS to create a variety of subtle flavours and nicotine strengths, including zero nicotine – which of course is not possible using tobacco leaf. Ultimately tobacco burns exceptionally well, but isn’t so good at heating. Tea heats exceptionally well, but isn’t so good at burning. As we aren’t a tobacco company (although we do have a tobacco manufacturers license) we have the freedom to choose what we have identified as the best and most effective base leaf for heated products. Tea. Using tea leaves also eliminates the associated cleaning and unpleasant odour issues that heated tobacco creates, so in our opinion tea leaves provide a superior experience compared to tobacco leaves in heated devices. Also, by using tea as our base ingredient instead of tobacco it allows us to offer more flavour and nicotine strength options. NEAFS can also be visibly displayed in store and advertised within Vape category regulations, due to the absence of tobacco & combustion. Retailing at a lower price than Heated tobacco (RRP £3.99 for 20 sticks) NEAFS provide the retailer with 2-3 times the POR and more cash profit per pack sold.
This category has really take off in a short period of time. What growth do you think we can see over the next few years for HNB products and why?
The formative ‘big tobacco’ companies are all now very focused on reduced risk (and higher profit) products, with the heated category being their absolute priority. It makes great sense for them, as they own the tobacco plantations and have found a new and clever way to continue selling tobacco in a less harmful and more profitable way. I believe that heated tobacco is the saviour of the tobacco industry, given ever escalating costs and regulatory restrictions inhibiting growth in the combustible market. In fact, combustible tobacco consumption has consistently been declining by around 5% per year by volume, which doesn’t need a mathematician to forecast its future. PMI have led the charge with IQOS & HEETS, but BAT, JTI, Imperial, Altria and even CNTC are all now committed to the heated cannibalisation of their own combustible market, and quite honestly that means it’s happening. I genuinely believe the heated category will surpass the Vape category by value & volume in 2024, and represent more than 50% of the global nicotine market by 2030.
What are your key brands that wholesalers should be stocking? How much are these brands worth?
The rise of heated products is very similar to the evolution of the liquid Vape market. Now that the ‘big 4’ all have device & stick propositions, others will follow and help to build the availability, knowledge and range of options for consumers. Vaping was considered a novelty when it started in the U.K. in 2008, but soon became a category in its own right. Heated products are able to leverage the years of education and trial by consumers of reduced risk and vaping products that the Vape evolution provided. I believe this foundation in awareness and availability is critical to the success of heated products, as smokers are now being given options that up until 15 or so years ago simply did not exist. Smart stockists will be creating a heated range to meet the ever growing demands of the modern and highly educated ‘smoker’, and exploit the huge marketing budgets that tobacco companies are committing to their heated propositions. NEAFS is currently the only non-tobacco heated product available in the market, and we are supporting our retailers with over £10m in 2023 already committed to outdoor media, along with shows, festivals, pop-up promotions, trade advertising and social media. IQOS and NEAFS are by far the most visible brands in the U.K. at the moment, and at NEAFS we are experiencing double and even triple digit percentage monthly growth in sales volumes since we launched in 2022.
How do heated products compare to Vape products, and why would someone choose to use them?
This is a critically important question, to fully understand why heated products have such an expansive opportunity and are almost certain to become the most popular choice for ‘smokers’ in the mid to near term future. Liquid vaping products are an excellent alternative for committed combustible smokers, but they do take a little getting used to. Liquid Vape delivers the nicotine in a slower, progressive load sort of way, whereas combustible cigarettes and heated products deliver the nicotine much more quickly and directly. This is the ‘hit’ or ‘spike’ of nicotine absorption achieved by burning tobacco, which is most closely replicated by heating tobacco (or tea) rather than warming Vape liquid.
Any combustible smoker that is looking for a reduced risk option, or a far less expensive alternative to filter cigarettes should try heated products or liquid vape products. If you don’t get on with liquid vaping then try heated ‘cigarettes’ before defaulting back to combustibles. Heated ‘cigarettes’ provide an almost identical experience to smoking a filter cigarette, and cost around 60-70% less than a pack of regular cigarettes. So heated ‘cigarettes’ not only provide regular smokers with an extremely cost effective and authentic alternative, but they are also ideal for those who have struggled to transition across to liquid vaping.
Do you have any NPD to talk about?
Innovation and improvement is never ending, especially when it comes to the world of recreational and medicinal nicotine products. We now have 2 dedicated R&D facilities based in China, and one in Tajikistan. Here we permanently experiment with ways to improve our unique flavour formulations, physical structure of NEAFS products, heating device technology and anthropometry and of course our packaging.
Recyclability & sustainability are always at the forefront of our thinking, and the new product development (NPD) is the most exciting and interesting part of the business for me, with new ideas always being tested and literally hundreds of designs to review and critique each year. Obviously ‘perfection’ is subjective, so we focus on what we call finding ‘Goldilocks’ – not too much or too little, just right. That’s the key to satisfying the largest audience. In September 2023 we will launch our next generation, blade-free heating device to market. The working name is ‘TEO Pro’ but that is yet to be confirmed. This device heats at a far reduced temperature of only 240 degrees, but with our new heating system it enables over 99% of the leaf to be heated in a consistent and even way, which of course delivers an even better experience for the customer.
I’m also now able to share something even more exciting and groundbreaking to expect from NEAFS in 2023. For a few years we have been pioneering heated CBD sticks, which we have now perfected. Our CBD range is likely to be available to order by retailers and wholesalers in May this year. Neafs CBD sticks will be launched at the CBD show, Olympia London on 22nd & 23rd May on stand T21-T22 and will come in 3 or 4 distinct variants. Heated CBD is an extremely efficient and effective way to enjoy the positive effects these plants provide, and our CBD plants are grown and propagated in the EU. These will of course be nicotine free, using CBD isolate which is also THC free. This will be a world first, and manufactured under our pharmaceutical license in our own proprietary laboratories.
What marketing activity do you have to support your ranges?
As NEAFS are classified as Vaping products we are able to advertise in all the same ways that liquid Vape can. Being a global brand it is important that we deliver consistent, compliant and responsible messaging in all markets. We have formed an exclusive global partnership with Elonex Media based in Birmingham, and their founder & CEO Nick Smith has joined the board of Eson Corporation, the parent company of NEAFS & TEO brands. Nick’s experience in the industry, his disruptive and sharply innovative marketing strategies and his enthusiastic, zestful and infectiously positive personality make him the ideal person to oversee NEAFS global messaging and brand image. Between January and September this year, Nick is orchestrating the largest Vape category advertising budget in Europe with over £10m being attributed across 3,000 digital outdoor screens in the U.K. This is a massive media presence and bigger than all our heated category competitors.
How can wholesalers maximise sales of your products?
NEAFS can be visibly displayed at point of sale as can liquid Vape products, so we offer wholesalers a very convenient and inexpensive new stockist countertop display unit (CDU) for their retailers. Our CDU is backlit with sample products visible to the customers and a video screen playing to show how to use NEAFS. This CDU is provided free with the stock, which is only around £300 and delivers the retailer 25% POR. We also provide an empty CDU to any wholesalers who would like one to promote the NEAFS range, and we hold enough stock in the U.K. to replenish our wholesale and retail partners very quickly. At its peak, E-Lites represented over 64% of the entire U.K. Vape market with our products available in over 28,000 shops (including the big 4 supermarkets), so as the CEO of E-Lites I gained a good understanding of the service & quality expectations for our wholesale and retail partners, whom we respect & value very highly. With 2-3 times the POR compared to heated tobacco options, and the ability to visibly display NEAFS in store, it’s an obvious choice for any heated products or liquid Vape stockist.
What is Neafs’ ambitions in the HNB category?
We are committed to supporting ‘2030 Smoke Free Britain’ and providing the best tobacco free alternative to the 7m smokers in the U.K. We expect the global heated category to grow and surpass the scale of combustible tobacco by 2030, and NEAFS as a brand, under Eson Corporation ownership to be the leading tobacco free option with a value aligned with the big 4 tobacco companies. We are in our second year of preparation for an IPO, which we anticipate launching in 2024.
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