2023 - Tobacco Reporter

Volatile Environment Weakens STG Quarter

Scandinavian Tobacco Group (STG) posted net sales of DKK2.2 billion ($320.09 million) in the second quarter of 2023, down 2.3 percent from the comparable 2022 quarter. Its EBITDA margin was 23.1 percent, and free cash flow before acquisitions amounted to DKK159 million.

The group reports that it lowered its full-year guidance to net sales between DKK8.7 billion and DKK9 billion following a more volatile than expected trading environment. According to STG, the adjustment reflects ongoing inventory adjustments among customers and distributors, slower regain of market shares in Europe, delays in new store openings in the U.S. and changes in exchange rates.

“On the back of a volatile environment, we had to adjust our guidance even though we are continuing to make good progress on our ambition to grow the size of the company through retail expansion, acquisitions and portfolio diversification,” said STG CEO Niels Frederiksen in a statement.

“In the second quarter, we completed the second acquisition of the year and opened another Cigars International retail superstore. For the remainder of the year, we are focusing on leveraging the current strength of our online business and on building a stronger momentum in our Europe branded business.”

The company expects some recovery in net sales growth for the second half of the year as well as slightly higher free cash flow before acquisitions than in the second half of 2022.

August 29, 2023

Governments Urged to Raise Smoking Age

Researchers are urging governments to raise the legal smoking age to 22 after a study found that those who start smoking before the age of 20 find it more difficult to quit.

The scientists analyzed the associations between nicotine dependency and successful smoking cessation according to the age participants started smoking. They presented their findings at the European Society of Cariology Congress, which took place Aug. 25–28 in Amsterdam.

The study included 1,382 smokers, of whom 30 percent were women. Early starters reported a higher number of cigarettes per day (25) compared with late starters, who smoked 22 cigarettes per day. Those who started early had higher respiratory carbon monoxide levels compared with those who started late (19 ppm versus 16.5 ppm, respectively) and higher scores on the Fagerstroem test for nicotine dependence (7.4 versus 6.3, respectively).

Less than half of early starters (46 percent) successfully quit smoking compared with 56 percent of late starters, for an odds ratio of 0.711 after adjusting for sex, age at clinic visit and smoking cessation aids—indicating that early starters were 30 percent less likely to successfully kick the habit compared with late starters.

“Our results show that starting smoking early is linked with higher nicotine dependency, even in young adulthood,” said study author Koji Hasegawa of the National Hospital Organization Kyoto Medical Center in Japan in a statement. “The study indicates that increasing the legal age to buy tobacco to 22 years or older could lead to a reduction in the number of people addicted to nicotine and at risk of adverse health consequences.”

August 29, 2023

Kaival Promotes Stephen Sheriff to COO

Kaival Brands Innovations Group has promoted Stephen Sheriff to chief operating officer.

Sheriff succeeds Eric Mosser, who was recently promoted to CEO, and joins Mosser and recently appointed Chief Financial Officer Thomas Metzler as a part of Kaival Brands’ expanded senior management team.

“Promoting Stephen to the role of chief operating officer was a natural and logical next step given his contributions to the success of Kaival Brands to date and his experience helping businesses navigate through rapid periods of growth and change,” said Mosser in a statement. “He has a strong entrepreneurial spirit and will be instrumental in helping us take our business to the next level. With a deep understanding of our operations, the capital markets and what it takes to develop and execute a strategy with proven results, he is a great addition to our C-suite leadership team.”

Sheriff brings more than a decade of finance and entrepreneurial leadership to his new role. Most recently, he served as the director of administration and communications at Kaival Brands. In this role, he managed the company’s investor and public relations and human resource programs in addition to overall responsibility for the development and implementation of key programs and initiatives, including customer and vendor relations.

Prior to Kaival Brands, Sheriff co-founded Riverhill Group, a capital markets advisory and consulting firm.

August 29, 2023

Brazilian Crop Reaches 605.7 Million Kg

Tobacco growers in southern Brazil harvested 605.7 million kg of leaf in 2022-2023—8.1 percent more than in the previous growing season, reports Kohltrade, citing figures from the Brazilian Tobacco Growers’ Association Afubra.

The crop included 551.59 million kg of flue-cured Virginia and 46.47 million kg of burley. The area devoted to tobacco production in the region was up 6.1 percent to 261,740 ha.

Growers received an average price of BRL18.12 ($3.72) per kg this year, up 6.5 percent over the average price paid by buyers in 2021-2022.

Observers expect a slight increase in the amount of tobacco planted for the 2023-2024 growing season.

Tobacco transplanting began earlier than normal this year and is already being finalized on most farms in southern Brazil. Adapting to higher temperatures and less rainfall during the growing season, tobacco growers have been gradually bringing transplanting forward in recent years.

Tobacco is a major economic pillar in southern Brazil. There are more than 124,000 tobacco farmers spread across 491 municipalities in the states of Rio Grande do Sul, Santa Catarina and Paraná.

August 28, 2023

Smoking Persists Despite FCTC

China continues to grapple with significant tobacco consumption, despite adopting the World Health Organization’s Framework Convention on Tobacco Control (FCTC) two decades ago, reports The Straits Times.

In November 2014, the State Council released a draft on national tobacco control guidelines to meet its obligations under the FCTC. However, the draft never progressed beyond the public consultation phase, which was supposed to be completed by the end of that year, according to the Singpore-based newspaper.

As the world’s largest tobacco producer and consumer, China still boasts an estimated 300 million smokers, constituting nearly a third of global smokers. According to The Straits Times, this phenomenon persists due to various factors including social norms, affordability of cigarettes and limited public education.

Despite efforts such as anti-smoking campaigns and banning smoking in government buildings, many individuals continue to smoke, encouraged by the ubiquity of tobacco shops, low-cost cigarettes and deeply rooted cultural practices.

The State Tobacco Monopoly Administration (STMA), which controls the tobacco industry, also acts as a significant employer, providing jobs to over half a million people across the nation.

In much of China, the tobacco industry is considered a prestigious employer, with its stable income, generous salaries and employee benefits. In surveys of fresh graduates, China’s big tobacco firms—largely state-owned enterprises—are consistently rated some of the best companies to work for, with degree holders happy to take on blue-collar jobs on the factory lines.

Manufacturing some 2.4 trillion cigarettes a year, China’s tobacco industry posted a profit of RMB132 billion ($18.3 billion) in profits in 2022, up nearly 12 percent from the year before.

STMA’s operational arm, the China National Tobacco Corp., does not report sales figures but posted a record taxable income of RMB1.44 trillion in 2022. By comparison, the second-highest taxpayer, the Industrial and Commercial Bank of China, reported taxable income of RMB109 billion.

While the anti-smoking lobby has been urging the government to sever the ties between the industry and its regulator, few expect that to happen, citing a lack of political will.

August 28, 2023

Cuban Tobacco Protected from Rain

Cuban tobacco growers have taken measures to protect their harvested tobacco from heavy rainfalls in the wake of a tropical storm in the Caribbean, according to Prensa Latina.

Leaf totaling 18,000 tons has been distributed in warehouses and selected from different territories, and around 1,000 tons remain in farmers’ natural curing houses with proven protection conditions, according to Yoel Hernandez, territorial delegate of agriculture.

Osvaldo Santana, a Tabacuba representative, stated that farmers have the necessary blankets to prevent water from damaging the tobacco leaves.

Due to the impact of rainfall, food for consumption is collected, seedbed irrigation is suspended, and work is done on soil drainage to help minimize damages. Seeds of root vegetables and other vegetables are also preserved to help guarantee future crops, according to Hernandez.

August 28, 2023

Ukraine Lists JT as a War Supporter

Ukraine’s National Agency on Corruption Prevention has put Japan Tobacco International on its list of companies supporting the Russia-Ukraine war, reports The Japan Times.

JTI holds about a third of the Russian market. The company has suspended new investment and marketing activities in Russia based on Western sanctions on Moscow following the country’s invasion of Ukraine. The corruption prevention agency, however, criticized JTI for continuing business in Russia, resulting in the company paying large amounts of taxes to the country, helping the economy.

The company is aware of the agency’s action, according to a Japan Tobacco official, who also stated that the company is doing business in Ukraine as well. “We are providing aid and support to (Ukrainian) people in need and continuing to make contributions to the Ukrainian economy,” the official said.

August 28, 2023

Rio Grande do Sul Takes Stance Ahead of COP

The Rio Grande do Sul State Assembly’s Subcommittee on the Defense of the Tobacco Supply Chain held meetings in several tobacco-growing municipalities to develop a common stance ahead of the Framework Convention on Tobacco Control’s 10th Conference of the Parties (COP10) set for November in Panama.

“Contrary to other developed countries, as is the case of the United States, Brazil gave in to political correctness upon signing the Framework Convention, a fact that, in my opinion, was a mistake,” said State Deputy Marcus Vinicius in a statement. “From there to here, several restrictions were imposed on the sector, and we are going to take this document to all major representatives of the federal government who are part of this initiative so that no one can excuse themselves from failing to defend the sector, making it possible for us to promote a respectful debate but equally more responsible about the entire supply chain.”

“The COP is the worst dictatorship that exists, where our business is debated, and we are not allowed to take part,” said Iro Schunke, president of the Interstate Tobacco Industry Union (SindiTabaco). “Brazil, which should be the protagonist of the cause that comprises the production and export of tobacco, is walking in the opposite direction, adhering more quickly than other countries, where tobacco is neither grown nor exported, to the recommendations issues by the Conference of the Parties.”

A presentation of the final report based on the meetings is set for Aug. 29 at 4 p.m. during the 46th Expointer at the Assis Brazil Exhibition Park.

August 28, 2023

ENDS Bans Spread in the Americas

Following the recent ban on the use and marketing of electronic cigarettes in Venezuela, 21 countries in the Americas regulate electronic nicotine-delivery systems (ENDS), such as e-cigarettes and vapes, according to the Pan-American Health Organization (PAHO).

“The resolution that regulates new and emerging nicotine and tobacco products in Venezuela is an important step forward for the country and for the region,” said Anselm Hennis, PAHO director of noncommunicable diseases mental health.

“We hope that this measure motivates other countries to take action on these products, which are addictive, harmful and aggressively advertised toward the youngest,” he added.

The most recent countries to join the initiative are Argentina, Brazil, Mexico, Nicaragua, Panama, Suriname, Uruguay and Venezuela, and the PAHO said these countries prohibit ENDS sales altogether, and 13 other countries have partially or totally adopted one or more regulatory measures.

Fourteen countries in the Americas, including the Caribbean, lack any regulation of vaping products, according to the PAHO report.

August 28, 2023

TPMP Comment Period Extended

The U.S. Food and Drug Administration has extended the comment period on its proposed rule for tobacco manufacturing practices.

Stakeholders now have until Oct. 6, 2023, to share their thoughts.

The proposed rule would place new requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of their products. According to the FDA, these proposed requirements would help protect public health by, among other things, minimizing or preventing contamination and limiting additional risks by ensuring product consistency.

August 28, 2023

Year: 2023