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Year: 2023

  • Vaping Down Among U.S. Youth

    Vaping Down Among U.S. Youth

    Photo: Daisy Daisy

    One in 10 U.S. middle and high school students reported using of any type of tobacco, according to data from the 2023 National Youth Tobacco Survey (NYST) that were collected between March and June 2023 and released today.

    Among U.S. high school students, current overall tobacco product use declined during 2022-2023 from 16.5 percent to 12.6 percent, a development attributed primarily to reduced e-cigarette use, which dropped from 14.1 percent to 10 percent. Among high school students, declines in current use were also observed during 2022-2023 for cigars and overall combustible tobacco smoking, representing all-time lows.  

    “It’s encouraging to see this substantial decline in e-cigarette use among high schoolers within the past year, which is a win for public health,” said Brian King, director of the U.S. Food and Drug Administration’s Center for Tobacco Products, in a statement. “But we can’t rest on our laurels. There’s more work to be done to build on this progress.”

    Among middle school students there was an increase in current overall tobacco product use (4.5 percent to 6.6 percent) and multiple tobacco product use (1.5 percent to 2.5 percent). However, among middle school students overall, no significant change was observed during 2022-2023 for current use of any individual tobacco product type, including e-cigarettes.

    It’s encouraging to see this substantial decline in e-cigarette use among high schoolers within the past year, which is a win for public health. But we can’t rest on our laurels.

    Brian King, Director, CTP

    E-cigarettes remained the most commonly used tobacco product among both high school and middle school students for the 10th year in a row. Among youth who reported current e-cigarette use, approximately one-quarter reported using e-cigarettes every day. Disposable e-cigarette products were the most common product type used by youth who reported e-cigarette use. However, the most popular brands included both disposable and cartridge-based products. Among current youth e-cigarette users, the most commonly reported brands were Elf Bar (56.7 percent), Esco Bars (21.6 percent), Vuse (20.7 percent), Juul (16.5 percent) and Mr. Fog (13.6 percent).  

    Among youth who reported current e-cigarette use, nearly all used flavored products (89.4 percent), with fruit, candy, mint and menthol being the most commonly used flavors. For the first time in NYTS, the 2023 questionnaire asked about use of flavors that included the word “ice” or “iced” in their name, along with other concept flavor names—that is, names that imply flavor but do not explicitly indicate any particular flavor, such as “island bash.”

    R.J. Reynolds Tobacco Co. said it welcomed the decline in overall youth tobacco use. “This is good news, and we agree with Dr. King that more needs to be done,” the company wrote in an e-mailed statement.  “Future progress requires regulators—especially FDA—to seriously address the influx of irresponsibly marketed, illegal flavored disposable vapor products.”

    In October, Reynolds filed a complaint with the International Trade Commission charging multiple manufacturers, distributors and retailers of disposable vaping devices with unfair importation.

  • Tobacco Income Up at Vector

    Tobacco Income Up at Vector

    Image: Vadym

    Vector Group announced financial results for the three months and nine months ended Sept. 30, 2023.

    Consolidated revenues for the third quarter were $364.1 million, down 3.7 percent, or $13.9 million, compared to the prior year period.

    The tobacco segment wholesale market share declined to 5.3 percent from 5.7 percent in the prior year period, and retail market share increased to 5.9 percent from 5.7 percent in the prior year period.

    Montego wholesale market share increased to 3.5 percent from 2.8 percent in the prior year period, and retail market share increased to 3.8 percent from 2.8 percent in the prior year period.

    Operating income was $90.5 million, up 7.9 percent, or $6.6 million, compared to the prior year period.

    Tobacco segment operating income was $94.8 million, up 7.6 percent, or $6.7 million, compared to the prior year period.

    Adjusted EBITDA was $94.9 million, up 8.8 percent, or $7.7 million, compared to the prior year period. Tobacco Adjusted EBITDA was $96.3 million, up 7.4 percent, or $6.7 million, compared to the prior year period.

    Year-to-date consolidated revenues were $1.06 billion, down 1.2 percent, or $13.3 million, compared to the prior year period. Tobacco segment revenues were $1.06 billion, up 0.2 percent, or $2.6 million, compared to the prior year period. Tobacco segment wholesale and retail market share increased to 5.5 percent and 5.8 percent from 5.4 percent and 5.4 percent, respectively, in the prior year period.

    Year-to-date Montego wholesale market share increased to 3.4 percent from 2.4 percent in the prior year period, and retail market share increased to 3.6 percent from 2.4 percent in the prior year period. Operating income was $236.4 million, down 5.3 percent, or $13.3 million, compared to the prior year period. Tobacco segment operating income was $248.5 million, down 2.2 percent, or $5.5 million, compared to the prior year period. Adjusted EBITDA was $267.1 million, up 2.9 percent, or $7.6 million, compared to the prior year period. Tobacco adjusted EBITDA was $271.0 million, up 5.6 percent, or $14.4 million, compared to the prior year period.

    Tobacco segment wholesale and retail market share increased to 5.5 percent and 5.8 percent from 5.1 percent and 5.2 percent, respectively, in the last 12 months ended Sept. 30, 2022.

    Montego wholesale and retail market share increased to 3.3 percent and 3.5 percent from 2 percent and 2 percent, respectively, in the last 12 months ended Sept. 30, 2022.

    “We are proud that Montego grew to be the largest discount brand in the United States in the third quarter of 2023, demonstrating the strength of our strategy and the skillful execution by Liggett to offer the best value proposition in the U.S. cigarette industry,” said Howard M. Lorber, president and CEO of Vector Group, in a statement. “As Liggett continues to outperform the market, we remain focused on optimizing long-term profit and driving value for stockholders by effectively managing its volume, pricing and market share.”

  • Nicotine a Top ‘Intangible’ Sector

    Nicotine a Top ‘Intangible’ Sector

    Photo: Smoore

    The tobacco and vaping business is the world’s most “intangible” sector in relative terms, according to the brand valuation consultancy Brand Finance.

    Intangible assets are identifiable, non-monetary assets without physical substance. They can be grouped into three broad categories—rights (including leases, agreements, contracts), relationships (including a trained workforce) and intellectual property (including brands, patents and copyrights).

    According to Brand Finance, intangible assets account for 91 percent of the tobacco and vaping sector’s total enterprise value—a condition that the consultancy attributes to tobacco and e-cigarette companies’ heavy investments in proprietary vaping-related technology and patented intellectual property. The China National Tobacco Corp., BAT and Philip Morris, for example, have each accumulated significant disclosed intangibles and goodwill due to large acquisitions.

    “While tobacco products are increasingly regulated in developed markets, e-cigarettes are at nascent stage and currently proving to generate high intangible value thanks in part due to lack of regulation of marketing these products in some jurisdictions,” Brand Finance writes in its report.

    Remarkably, the tobacco and vaping business was the second-largest contributor (after semiconductors) to the performance in the rankings of Japan, which saw the value of its intangible assets jump by $587 billion this year.

    “Our research aims to demonstrate the continued growing importance of intangible assets like strong brands and innovative technology in driving productivity and growth potential,” said Annie Brown, general manager at Brand Finance UK, in a statement. “Companies that strategically deploy their intangible assets have the ability to significantly outperform their competitors.”

  • Growers Demand Voice

    Growers Demand Voice

    Photo: ITGA

    Stakeholders in the nicotine business gathered in Dar es Salaam from Oct. 29 to Nov. 1 for the annual meeting of the International Tobacco Growers’ Association (ITGA).

    Hosted by the Tanzanian Minister of Agriculture Hussein Bashe, the conference focused on environmental social governance (ESG) practices and the socioeconomic impact of tobacco, among other topics.

    ITGA’s President José Javier Aranda urged governments to consider tobacco growers as partners, given the contribution of tobacco as an income generator and employer. He cited the example of Tanzania, where tobacco provides livelihoods to more than 2.5 million people and generates around $180 million annually in export revenue.

    The ITGA president also highlighted the lack of alternatives to tobacco production: “Tobacco is still among the main cash crops in most of the countries where it is grown,” he said. “There is no room for crop substitution at this moment and only complementary crops can be considered as a way of transitioning away from tobacco in the long term.”

    Participants in the conference also debated the increasing regulatory pressure on the tobacco industry. For example, the EU Supply Chain Due Diligence Directive, which is expected to enter into force in 2024, will require total transparency in the social and environmental sourcing of products imported into the EU. The ITGA delegates agreed that compliance is key, as compliant markets will have better opportunities to position their products and remain stable in the long term.

    Speakers encouraged growers to actively pursue ESG initiatives in their communities. Such efforts, they said, will contribute to the long-term viability of the sector.

    The forum also reflected on the Conference of the Parties (COP10) to the Framework Convention on Tobacco Control (FCTC), which is scheduled to take place Nov. 20-25 in Panama. As the only global tobacco growers association, the ITGA is looking forward to seeing the evolution of FCTC Article 17 (economically viable alternatives to tobacco growing) because the group has yet to see any evidence of viable alternatives to tobacco growing, ITGA CEO Mercedes Vazquez noted.

    Vazquez also insisted on the inclusion in the discussions of farmers, who have been denied a voice in the FCTC debates for nearly two decades. She said the COP has yet to respond to ITGA’s request for observer status at the conference.

    The Dar es Salaam meeting also took stock of the latest consumption trends. Modest growth in Asia Pacific and Latin America was offset by significant declines in developed markets, leaving total global cigarette volumes largely unchanged. Among emerging products, heated tobacco products continue to make inroads while e-cigarettes face regulatory headwinds, and nicotine pouches struggle to expand beyond their core markets.

    In the leaf market, China, Brazil, Zimbabwe, Malawi and India significantly expanded production in 2023, while volumes in Europe and the United States continued to decline, according to ITGA experts.

  • A Taste of ‘Terroir’

    A Taste of ‘Terroir’

    Photos: CTS
    Photos: CTS

    With its origin-focused approach, CTS has become a successful niche player in the French RYO category.

    By Stefanie Rossel

    “Shrinking” is the first word that comes to mind when thinking about the French tobacco sector. According to Statista, French tobacco sales are expected to decline by almost 1 percent annually between 2023 and 2028. In 2022, the tobacco market in France experienced its strongest value decline in a decade.

    With the country’s last cigarette factory in Corsica closing this December, cigarette manufacture in France will come to an end. Due to the phaseout of EU tobacco subsidies in 2006, the area dedicated to tobacco cultivation in France has decreased as well—from 3,149 ha in 2016 to 1,205 ha in 2021.

    Sadly, the only part of the tobacco landscape that continues to flourish is the illicit cigarette trade. According to a KPMG study commissioned by Philip Morris International, illegal smokes represented 32 percent of the French tobacco market in 2022.

    However, this dark environment conceals some remarkable success stories.

    One of them has been written by Collaboration Traditab Santele (CTS), an alliance of Traditab, a company run by small tobacco producers in southwestern France, and Santele, a Flemish family-owned manufacturer of traditional Belgian rolling tobacco.

    Considering the pressures from increasing regulation, the two companies felt it made sense to join forces. Traditab provided the raw materials and tobacco cultivation knowledge; Santele contributed roll-your-own expertise and manufacturing facilities.

    Established in 2016, CTS today is a medium-sized enterprise headquartered in Belgium with offices in France and Spain that currently manufactures and markets four brands of RYO tobaccos, focusing on the concept of “terroir.” The French term is used to describe the environmental factors that affect a crop’s phenotype, including unique environmental contexts, farming practices and growth habitat.

    CTS’ Vasconha RYO brand, an American-blend type, is made of 100 percent tobacco cultivated by farmers in Gascony, the Basque Country and Aragon, traditional tobacco cultivating regions on both sides of the Pyrenees. Wervikse Tabak b34, a fine-cut dark blend, comes from Wervik, a historical tobacco-growing region in Flanders. The tobacco for Veramia, a Virginia blend, is cultivated exclusively in the western Spanish region of Extremadura, where tobacco has been grown since the 16th century.

    Focus on Origin

    The company’s bestseller is 1637. In October 2023, the product was the third-bestselling RYO brand in France. Made of French tobaccos grown in the southwest, its name alludes to the year when tobacco was first planted in the region. The brand was created in 2008 by Traditab at the initiative of a cooperative of small tobacco growers, Tabac Garonne Adour (TGA), that sought to improve the price paid for local tobacco growers.

    Anne-Marie Bracq

    Marketing began regionally, with an emphasis on tobacconists. “At that time, there weren’t many such products on offer, as organic tobacco products were popular,” says Anne-Marie Bracq, director of CTS France. “We started out with 20 tons of tobacco and grew step by step, explaining to tobacconists that if they choose to sell our products, they support their country’s growers.”

    It’s a concept that works well in France, which takes pride in domestically produced cheese and wine varieties that derive their identities from clearly demarcated origins. The company has applied the same philosophy to the other two markets. In Spain, for example, it has a sales force of 17 people.

    CTS works with 120 tobacco farmers in France, who are organized in the TGA cooperative and cultivate almost 300 ha in the region between Bordeaux and Lot-et-Garonne. The farms are small, with tobacco representing only one of a variety of crops, typically planted on 2 ha to 4 ha.

    While in Belgium, CTS works with only one or two growers, it cooperates with 150 growers of a cooperative in Spain, which cultivates tobacco for CTS’ RYO brands on 550 ha.

    Jerome Duffieux

    “In France, tobacco growing is not as much a tradition as in Spain, and Burley is the main variety, with flue-cured Virginia [FCV] being more of a filler type,” explains Jerome Duffieux, director of Traditab. “Burley production is more mechanized whereas FCV production is more of a manual process in France. In Spain, where farms are bigger and more specialized in tobacco, it’s the other way around; Spanish FCV is more aromatic.”

    Like Traditab, CTS aims to preserve a centuries-old regional tradition. “Our objective is to promote tobacco culture, which involves paying farmers an adequate price,” says Bracq. “This is also important in Spain. Extremadura produces 95 percent of Spain’s tobacco, accounting for 1,900 jobs, and provides €91 million ($95.83 million) to the region’s gross domestic product.”

    CTS’s bestselling 1637 brand was named after the year that tobaccos were first grown in the southwest of France.

    Expansion Planned

    The tobacco growers cooperating with CTS face a challenge shared by farmers in other fields of agriculture: finding successors when they retire. “Maybe it’s more difficult for tobacco because it’s difficult to promote from a health perspective,” says Bracq. “But we still have the problem of economic viability. At CTS, we are looking at ways to maintain tobacco cultivation, trying to develop a future for growers and [figuring out] how to support them economically. We are also running a program to find new farmers.”

    CTS plans to expand its current portfolio by developing a new RYO brand, but it’s not easy, according to Bracq. Almost three years ago, France raised tobacco excise taxes to €6.61—substantially above the EU average of €3.34.

    The government has continued raising RYO taxes since, thus eliminating the buffer function RYO usually plays between factory-made cigarettes and cheap illegal smokes. “A pack of 20 cigarettes now costs €11 and a 30-gram pouch of rolling tobacco €15 to 20,” explains Bracq. “The RYO segment is now declining more heavily than the cigarette market.”

    CTS is presently also involved in a cigar project. “We are developing cigars that are made of tobacco from southern France and plan to launch them in the next three years,” says Bracq.

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • JR Cigar Introduces JR Pure Origin: Terra de Andes

    JR Cigar Introduces JR Pure Origin: Terra de Andes

    Image: JR Cigar

    JR Cigar is introducing its second blend, JR Pure Origin: Terra de Andes, beginning Nov. 1. The product will be available exclusively online at www.jrcigars.com.

    The JR Pure Origin line was born out of JR Cigar’s desire to offer its customers something truly unique by using rare and exotic tobaccos from around the world, according to the company.

    The cigar derives its name from the Andes Mountains of South America, home of the tallest active volcano in the world. Not only do the Andes have an incredibly rich history—it’s the birthplace of one of the six earliest civilizations—but the Andes is where the tobacco plant first blossomed. Aided by the nutrient-rich soil, unique microclimate and special ecosystem, tobacco grown in this mountain range produces a bold yet delicate smoke with amazing and diverse tonalities.

    “With JR Pure Origin, we have brought our exclusive lines to new heights, and we look forward to continuing that success with this release,” says Brad Winstead, CEO of JR Cigar. “In partnering with Rafael Nodal and the legendary A.J. Fernandez, we have created a unique and complex cigar that tells the story of the region with each puff.”

    JR Pure Origin: Terra de Andes uses aged Nicaraguan and Peruvian filler tobaccos, giving it a sweet and spicy center. Its Ecuadorian Sumatra binder adds touches of coffee and richness while its Ecuadorian Habano wrapper offers up notes of spice, leather and tobacco sweetness.

    JR Pure Origin: Terra de Andes is packaged in boxes containing 10 cigars, and it is available in three classic vitolas: 5X50 Robusto ($108 per box, $12 per single); 6X50 Toro ($117 per box, $13 per single); and 6X56 Toro Gordo ($126 per box, $14 per single).

  • Quebec: Flavor Ban Takes Effect

    Quebec: Flavor Ban Takes Effect

    Image: Pixel-Shot

    Quebec’s ban on flavored vapes took effect Oct. 31.

    The measure includes vaping products with flavors other than tobacco and will prohibit e-liquid sold in bottles with a capacity greater than 30 mL and prefilled devices with a capacity greater than 2 mL.

    The ban was announced in a draft published in April. More than 30,000 citizens of Quebec commented on the proposed ban, according to the Quebec Vaping Rights Coalition, but the health ministry reportedly didn’t make any changes to the rules in response.   

    Quebec is the largest province in Canada to enact a flavor ban. Four other provinces and territories already ban flavors, and one has passed a ban but has not set an effective date yet. Three other provinces restrict flavored products to adult-only stores.

    Darryl Tempest

    “It’s high time for provinces like Quebec, New Brunswick, Nova Scotia and PEI to reevaluate their stance and stop yielding to the influence of big tobacco companies. These regions must come to the realization that they are inadvertently supporting the very issues they claim to be combating.”

    Darryl Tempest, government relations counsel to the CVA

    The Canadian Vaping Association (CVA) has expressed concerns to the Quebec government, arguing that this regulation will not achieve its intended goal of curbing youth experimentation.

    According to the CVA, the consequences will include the closure of specialty vape shops within the province, the loss of over 1,000 jobs and a shift in consumer demand toward foreign suppliers and the illicit market.

    “It’s high time for provinces like Quebec, New Brunswick, Nova Scotia and PEI to reevaluate their stance and stop yielding to the influence of big tobacco companies. These regions must come to the realization that they are inadvertently supporting the very issues they claim to be combating,” said Darryl Tempest, government relations counsel to the CVA.

    The available data consistently finds that flavor bans fail to effectively protect youth and lead to increased tobacco sales among both young people and adults.

  • Former STMA Deputy Prosecuted for Bribery

    Former STMA Deputy Prosecuted for Bribery

    Image: Kampan

    Former Deputy Chief of China’s State Tobacco Monopoly Administration (STMA) He Zehua has been prosecuted for accepting bribes, according to China Daily.

    Zehua was accused of taking advantage of his former positions to seek profits for others, accepting a large amount of money and valuables in return, according to a statement by the Supreme People’s Procuratorate.

    Zehua was arrested in July.

  • Gotham Cigars Launches Back Alley Cigarillos

    Gotham Cigars Launches Back Alley Cigarillos

    Gotham Cigars released a new line of cigarillos called Back Alley.

    Back Alley cigarillos are made in the Dominican Republic and are constructed using a blend of carefully aged Dominican tobaccos. The cigars are 4.5 inches long with a ring gauge of 27 and are packed three cigars to a pouch. Six popular flavors are available—Banana, Russian Cream, White Grape, Blue Vanilla, Mixed Berry and Sweet—and benefit from a premium infusion process to ensure the flavors are authentic and delicious, according to a press release. Back Alley cigarillos will be priced at $18.99 for 15 pouches.

    “For some time, I have wanted to introduce a cigarillo that brings something new to the market … Back Alley does just that,” said Manny Balani, owner and president of Gotham Cigars. “Staying true to our urban upbringing, founded in New York City and operating out of Miami for the last 20-plus years, our Back Alley cigarillos are created for an urban audience that is looking for something new, exciting and just a little bit mysterious. We want adult cigarillo smokers to find their own back alley when they light up! We are very proud of this cigar and look forward to introducing it to the market.”

    Back Alley cigarillos from Gotham Cigars are available now at www.gothamcigars.com.

  • Trinidad And Tobago: ‘Illicits Diverting Tax Dollars’

    Trinidad And Tobago: ‘Illicits Diverting Tax Dollars’

    Image: japhoto

    Trinidad and Tobago loses about $30 million annually in uncollected taxes from illicit cigarettes, according to participants in a forum on anti-illicit trade hosted by the T&T Manufacturers’ Association, reports The Trinidad Guardian.

    Policymakers, law enforcement agencies, regulatory bodies and major brands, such as Puma, Moet Hennessy, Servier and BAT, participated in the forum.

    “The illicit cigarette trade makes up 5 [percent] to 10 percent of the market, and British American Tobacco fears this share can grow as consumers tend to favor these brands because they sell at a lower price,” said Arturo Payro of BAT. “Cigarettes are T&T’s most illegally traded products in quantity and value.”

    Randall Karim, permanent secretary (ag) of the Ministry of Trade and Industry, stated that a strong legal framework will act as a powerful deterrent and send a strong message to smugglers that illegal trade is intolerable.