NetworkNewsWire Editorial Coverage: An estimated 17% of the world, or 1.3 billion people, use tobacco, creating a global tobacco market that approached one trillion dollars in 2020. Given all of the health risks associated with smoking, a significant portion of those tobacco users are looking for other smoking options, alternative that offer a smooth and satisfying tobacco-free and nicotine-free experience that tastes as well as or better than traditional tobacco products. For many, eliminating nicotine is a priority. Addressing this problem head on and carving out a new market niche, TAAT(TM) Lifestyle & Wellness Ltd. (CSE: TAAT) (OTCQB: TOBAF) (Profile) recently launched TAAT, a nicotine-free and tobacco-free cigarette, available in three flavors: Original, Smooth and Menthol. The retail launch included a comprehensive unveil in Ohio, and an e-commerce site went live last week. The company is reshaping the smoking experience by offering a smokable alternative. TAAT is looking to grab significant shelf space alongside the big tobacco oligopoly of Philip Morris International Inc. (NYSE: PM), Altria Group Inc. (NYSE: MO) and British American Tobacco Industries p.l.c. ADR (NYSE: BTI) as well as Chinese vaping giant RLX Technology Inc (NYSE: RLX).

  • TAAT looking to capture a sizeable share of the $100-plus billion U.S. tobacco market.
  • The Beyond Tobacco(TM) base material undergoes patented 14-step refining process to taste, smell and smoke like tobacco.
  • TAAT CEO Setti Coscarella, CRO Tim Corkum bring decades of tobacco industry experience after serving in leadership roles at Marlboro maker Philip Morris.
  • TAAT has recently been named to CSE25(TM) as one of the biggest CSE Composite Index companies by market capitalization.

Click here to view the custom infographic of the TAAT editorial.

Bringing a Substitution Model to Smoking

Health and wellness has become a top priority in today’s world, creating a global climate of consumers clamoring for choices that offer the same experiences they’ve come to enjoy but with different ingredients. This is on full display with the surging popularity of alternative food and beverages that create the same feeling that one is accustomed with only a change in ingredients. Today, burgers and seafood look, smell and taste like hamburger and crabmeat, respectively, while being made from plants. Zero percent alcohol wine and beer that cut out traditional ingredients such as gluten are so refined that they can fool even the most discerning palates of alcohol connoisseurs.

That same sentiment is carrying over to the world of tobacco, where enthusiastic adult smokers are eagerly looking for different options. Many want tobacco-free and nicotine-free alternatives; however, they also seem to prefer the sensation and experience of a combustible product.

Same Format, Different Ingredients Model

TAAT Lifestyle & Wellness Ltd. (CSE: TAAT) (OTCQB: TOBAF) has brought the “same format, different ingredients” model to the smoking market like no one before. With senior leadership coming directly from big tobacco, the life sciences company has developed its products to closely replicate a conventional tobacco cigarette while changing the composition so it doesn’t include tobacco.

Based on consumer response, TAAT hits its target dead center. Early market testing revealed no significant experiential differences between TAAT and tobacco cigarettes. That response speaks volumes as TAAT looks to capture a sizeable share of the $100-plus billion U.S. tobacco market.

Furthermore, the company is using an attractive pricing structure to offer a substantial consumer savings compared to top-selling tobacco cigarettes. As TAAT embarks on a nationwide launch after commencing sales in Ohio late in December 2020, management has engaged a leading consumer packaged goods sales agency to accelerate brick-and-mortar retail sales while online sales are generated through a brand-new online portal.

Meticulously Crafted, Perfectly Priced

The Beyond Tobacco(TM) base material of TAAT undergoes a 14-step process to taste, smell and smoke just like tobacco, which includes a patent-pending refinement process. In doing so, TAAT touches the all-important five sensory elements of a smoking tobacco cigarette. This includes nearly identical packaging and smoke volume (visual), crackling sound upon lighting (auditory), a tobacco-like scent while burning (smell), and “hand-to-mouth” motor habits (touch). Ashes can even be “flicked” in a similar manner to tobacco ashes. TAAT completes the sensory experience by using its patent-pending Beyond Tobacco base material      to create a tobacco-like taste without using nicotine or tobacco.

The formulation provides a competitive edge over other types of tobacco alternatives currently available. Primarily, it appeals to current smokers aged 21 years and older who are looking to keep the experiences they enjoy while leaving the nicotine behind. Even better, smokers aged 21+ who switch to TAAT are not replacing one nicotine product with another, as is often the case with alternatives such as vaping.

In addition, while the packaging and smoking experience may be nearly the same as a tobacco cigarette, the price point for TAAT’s product offering is far different. A pack of TAAT is priced at $3.99 in Ohio, approximately a 43% savings from a pack of Marlboro, which costs about $7.00 per pack.

Marketing Blitz and Expansion

While meticulous and methodical in its development, TAAT is starting to hit the gas in expansion. Subsequent to its December launch in Ohio, TAAT initiated a 60-day, digital, out-of-home (DooH) advertising campaign composed of video ads streaming on thousands of video screens on gasoline pumps across a network of chain and independent gas stations in Ohio; the videos promoting TAAT products target smokers aged 21 and older. The “out-of-home” video ads are running concurrently with other promotional initiatives targeting legal-aged smokers, including a digital marketing campaign for the TryTAAT landing page.

In just two months of being sold at retail, the brand is gaining traction as evidenced by 60% of retailers that have carried TAAT for three or more weeks placing at least one reorder, with many reorders increasing in volume. The Menthol variety was the first to be sold out and reordered during its first weeks of availability in Ohio. The TryTAAT campaign is also being warmly received, considering that one-third of all visitors to the page had submitted requests for a sample pack of TAAT, representing an exceptionally high conversion rate by industry standards.

This month, TAAT engaged CROSSMARK Inc., a Texas-based omnichannel sales agency with more than 25,000 employees serving all of North America. TAAT will leverage CROSSMARK’s existing relationships with more than 100,000 convenience retailers directly serviced by the firm to potentially expand availability of TAAT products in Ohio and elsewhere in the United States. The new relationship dovetails perfectly with TAAT’s launch of its new ecommerce website this month, which sold more than CAD $50,000 of product in its first 48 hours.

Tobacco Industry Acumen

TAAT has assembled a world-class management team with diverse experience deeply rooted in the tobacco industry. CEO Setti Coscarella not only spent years working in private equity and banking, he was also a lead strategist for Reduced-Risk Products ("RRP") in Canada for international cigarette behemoth Philip Morris International where he developed deep expertise in commercializing smoking alternatives.

TAAT chief revenue officer Tim Corkum also has a long history in tobacco, working various senior roles involving sales, supply chain management and commercialization during his 21 years at Philip Morris across Canada and in the Caribbean.

Under this leadership, TAAT has raised capital and organized for expansion by doubling production capacity and filing trademarks in 54 countries. In October, TAAT received $5 million in a private placement from a group of investors led by Debbie Chang, co-founder of Horizons Ventures (in her personal capacity), a Hong Kong-based venture capital firm. As management evaluates domestic and international commercialization, the company optimized its Las Vegas, Nevada, processing facility with automated workflows and adding new machinery to efficiently increase production Beyond Tobacco base material by 100%.

These efforts and leadership have not gone unrecognized. TAAT share price has appreciated substantially, including a big jump in September that led to TAAT being added to two Canadian stock indices in December 2020 including the CSE Composite Index as well as its CSE25(TM) index, an exclusive subset featuring the 25 largest companies in the index by market capitalization.

Market Opportunity

With hundreds of millions of people around the world smoking cigarettes and many aspiring to leave nicotine behind, a huge opportunity exists for savvy companies ready to seize the moment. Even with the negative effects of vaping being fleshed out as the market matures, Grand View Research still sees 23.8% growth in the space from 2020 to 2027, ultimately reaching a projected $67.3 billion.

Philip Morris International Inc. (NYSE: PM), maker of Marlboro, Virginia Slims and some of the world’s most popular cigarette brands, made the decision in 2016 to transform its business, moving away from combustible products to smoke-free ways to deliver nicotine. The company set a goal of getting 40 million of its customers to quit smoking by 2025, of which it touted making substantial progress in a 2019 report showing a reduction in cigarette shipments and a rise in shipments of its smoke-free products.

PM parent company Altria Group Inc. (NYSE: MO) has a 10-year vision to lead the transition of adult smokers to a noncombustible future. The company is the owner of highly popular smokeless tobacco brands such as Copenhagen and Skoal, in addition to a large stake in Juul Labs, a top-selling e-cigarette brand in the United States. Altria is also a large shareholder in Cronos, which it believes it can help position in the legal cannabis market as part of encouraging consumers to move beyond smoking to potentially reduced harm alternatives.

British American Tobacco Industries p.l.c. ADR (NYSE: BTI), which makes Camel and Newport cigarettes and Grizzly smokeless tobacco, has also focused some R&D and marketing on less-risky products to give its customers more options, including its Vuse (vapor), glo (tobacco heating) and Velo (nicotine pouch) products. In the company’s 2018 Harm Reduction Focus Report, BAT lays out its commitment to support consumer use of what are labeled PRRPs, o potentially reduced-risk products.

RLX Technology Inc. (NYSE: RLX) made a big splash with its initial public offering in January, bumping up its IPO price from $8 per share to $12 per share before opening at $22.34 as investors jumped headlong into the Chinese vaping company. Ultimately, the company jumped 86% in its U.S. stock market debut, giving the Chinese vaping firm a market capitalization of nearly $35 billion. While RLX Technology sells products in 13 countries, its bread and butter is China, where it controls 62% of the market with only a 1.2% penetration rate.

With smokers aged 21 and above looking for alternatives that provide the pleasure of smoking without the nicotine or tobacco, the tobacco industry is clearly showing an interest in widening its reach and providing choices to its consumers.

For more information about TAAT Lifestyle & Wellness Ltd., please visit www.TAATGlobal.com.

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