2023 - Tobacco Reporter

Philippines: Partnership Against Illicit Trade

The Philippines Bureau of Customs (BOC) has partnered with tobacco companies to help combat illicit trade in the country, reports the Philippine News Agency

“These groups [smugglers and illicit traders] have been very creative and aggressive in entering our markets,” said Bienvenido Rubio, BOC commissioner. “Accordingly, close cooperation with tobacco companies is aimed at addressing their various modus (operandi) with even more comprehensive methods.”

The BOC met with Philip Morris International and Philip Morris Fortune Tobacco Corp. executives. Rubio said they will work together to ensure public health safety and fair tobacco trade.

“That has always been our goal and our mandate—to put these smugglers away and make them accountable, answerable and ultimately face the consequences of their nefarious activities,” he said.

“It is important for us to recognize that these (schemes) are not only very real threats but well-orchestrated plans aimed at circumventing our laws,” said Verne Enciso, customs intelligence and investigation service director.

July 31, 2023

JT Launches ‘With 2’

Japan Tobacco has launched With 2, its new infused tobacco vapor device, under the company’s respective new brand, With. It will be sold at convenience stores and tobacco stores in Japan beginning Sept. 5, 2023, and will be available for presale online from Aug. 7, 2023.

With 2 is the first device of the new infused tobacco brand With. It features JT’s unique infused technology, which generates vapor while an atomized liquid passes through a capsule containing granulated tobacco.

Since tobacco vapor is generated the moment it’s inhaled, there is no delay in delivery, JT explained in a press note. There is almost no tobacco smoke smell with the product since tobacco leaves are not directly heated. The device is equipped with a dual mode that allows consumers to switch between two heating modes at the touch of a button. The high mode produces 1.3 times more vapor than the normal mode, delivering a more intense flavor experience, according to JT.

July 31, 2023

Former Juul Exec Loses Contamination Case

A former Juul Labs executive has lost a case accusing the vapor company of shipping contaminated vaping pods to retailers and firing him in retaliation for complaining, reports Reuters.

Siddharth Breja, a former senior vice president of global finance, sued Juul in October 2019. He alleged that the company endangered consumers by refusing to recall mint-flavored e-cigarette nicotine pods or to issue a safety warning.

Breja said he objected to the company re-selling products that were nearly a year old without a “best by” date on their packages. He said his complaints angered his superiors and that he was fired in retaliation in March 2019.

Juul denied all claims and sought to have the case sent to arbitration. The federal court lawsuit was put on hold pending arbitration in March 2020.

In a joint filing on July 27, lawyers for both parties said an arbitrator had ruled against Breja and ordered him to pay certain of the company’s legal costs. They did not give further details about the decision, but asked that the lawsuit be dismissed once Breja had paid the award.

July 31, 2023

JT Group Reports ‘Solid’ Quarter

The JT Group’s revenues increased 9.9 percent to ¥1.39 trillion ($9.17 billion) in the second quarter of 2023, up 9.9 percent over the comparable 2022 period. Core revenue at constant exchange rates increased by 6.8 percent to ¥1.3 trillion, while adjusted operating profit at constant exchange rates increased by 4.7 percent to ¥434.3 billion. On a reported basis, adjusted operating profit increased by 6.7 percent to ¥442.8 billion. Operating profit increased by 8 percent to ¥413.6 billion, and profit increased by 8.7 percent to ¥287 billion.

“The JT Group posted another strong set of results for the first half, said JT Group President and CEO Masamichi Terabatake in a statement. “In particular, the tobacco business reported solid growth across its indicators, driven by a more resilient industry volume and continued market share gains, as well as robust pricing.

“Considering the accelerated investment towards heated tobacco sticks (HTS) in the second half of 2023, we have kept the full year forecast for adjusted operating profit at constant FX unchanged. On a reported basis, recognizing the current positive foreign exchange trend, we have revised upward our forecast, including the adjusted operating profit. Dividend per share guidance for full year remains unchanged taking into account our dividend policy at 188 yen per share. The interim dividend is 94 yen per share.

As announced in February, we are accelerating investment towards HTS to establish the foundation of our future growth. Ploom X is now available in six markets, following the launch in the Czech Republic in June, and will be launched in Switzerland in September. Geographical expansion is on track with the expectation to complete launches in 14 markets by the end of 2023 and 28 markets by the end of 2024.

July 31, 2023

Mastermind Sounds Alarm Over Illicit Trade

Mastermind Tobacco has asked the government of Kenya to crack down on the illicit cigarette trade, reports The Standard.

“We are concerned at the growing level of illicit cigarettes making their way into the country, especially from Uganda,” Mastermind said in a statement.

“We are the biggest losers in the market because when we have 80 percent of illicit products bearing the name of our product and are sold cheaply in the country, we will not be able to compete.”

Mastermind said it is ready to work with government agencies including Kenya’s Inter-Agency Anti-Illicit Working Group and the Anti-Counterfeit Agency, regional bodies including the East African Community and COMESA as well as international organizations such as the World Trade Organization and World Health Organization to eliminate the illicit tobacco trade.

“If we do not work together, we may be forced to shut down because we will not be able to compete against products that are not paying tax,” Mastermind Tobacco stated.

A recent survey by its competitor British American Tobacco found that Kenya is losing up to KES6.5 billion ($45.67 million) annually in taxes as a result of the illicit cigarettes.

An estimated one in every five products sold in Kenya is counterfeit and almost 4 million Kenyans are using counterfeit goods that include sugar, cigarettes, bottled water and cooking oil.

Last month, the Kenya Revenue Authority in collaboration with the Inter-Agency Team destroyed an assortment of illicit goods seized from the market worth KES500 million with an estimated tax value of KES150 million.

July 31, 2023

ITC Plans To Spin off Hotel Business

ITC plans to spin off its hotel business, separating it from its cigarettes and food units. The company intends to retain a 40 percent stake in the new entity, with ITC shareholders holding the rest.

At its July 24 meeting, the board noted that the ITC’s hotels business has matured and is well positioned to chart its own growth path as a separate entity in the fast-growing hospitality industry with sharper focus on the business and an optimal capital structure, while continuing to leverage ITC’s institutional strengths, brand equity and goodwill.

According to the board, the demerger will help the new entity in attracting appropriate investors and partners whose investment strategies and risk profiles are aligned more sharply with the hospitality industry.

Driven by strong macroeconomic fundamentals and the Indian economy’s strong growth prospects, the Indian hospitality industry is expected to witness rapid growth going forward.

“The proposed demerger of the hotels business is testament to the company’s commitment to creating sustained value for stakeholders,” said ITC Chairman Sanjiv Puri in a statement. “Creation of a hospitality focused entity will engender the next horizon of growth and value creation by harnessing the exciting opportunities in the Indian hospitality industry.”

ITC’s largest revenue contributor is its consumer goods business, led by cigarettes.

July 28, 2023

Distributors Warned Over Unauthorized Products

The U.S. Food and Drug Administration has put ABS Distribution, EC Supply and Easy Wholesale on notice for selling and/or distributing multiple unauthorized e-cigarette products. The illegal products listed in the warning letters include the popular and youth-appealing e-cigarette products Elf Bar/EB Design, Esco Bars and Puff Max.

“FDA is committed to keeping a finger on the pulse of the rapidly evolving e-cigarette landscape, including through a variety of scientific assets equipped to quickly identify products with high youth appeal,” said FDA Center for Tobacco Products Director (CTP) Brian King in a statement. “We will continue to use this data-driven approach to inform actions across the entire supply chain, including against those who distribute illegal products between manufacturers and the point of sale.”

Warning letters are generally the first step once an inspection reveals a violation of the law. “We will monitor to ensure these violations are corrected, and if they are not, the recipient is at risk of further actions such as civil money penalties, seizures, and injunctions,” said Ann Simoneau, director of the CTP Office of Compliance and Enforcement.

July 28, 2023

Iran: Smuggling Ring Busted

Iran’s intelligence ministry busted a large tobacco smuggling network, reports Press TV. According to the ministry, members of the network were operating in 10 Iranian provinces as part of 15 connected smuggling bands.

Millions of dollars from the illicit products were funneled into bank accounts outside Iran via illegal currency exchange shops. Foreign sanctions have caused a shortage of hard currency resources, leading to Iran introducing strict regulations to crack down on smuggling. Preventing smuggling is also part of Iran’s plans to help domestic manufacturers and prevent use of unsafe products.

Increased prices of domestically produced cigarettes have led to an increase in smuggling, according to some experts.

The smuggling bust led to 60 arrests and the closure of over 100 warehouses used to store the illicit tobacco products.

July 27, 2023

PMI Takes Charge on Healthcare Business

Philip Morris International’s foray into pharmaceuticals is proving more challenging than expected, according to The Wall Street Journal.

The tobacco multinational took a $680 million charge in the latest quarter on its wellness and healthcare business, two years after agreeing to buy inhaled-medicine maker Vectura Group for £1 billion ($1.31 billion).

After an unsuccessful clinical trial, Vectura won’t be submitting its inhalable aspiring product to the U.S. Food and Drug Administration this year.

PMI is postponing its 2025 goal to exceed $1 billion in net revenues from health and wellness products. The company still sees growth potential in products such as smoking-cessation treatments and medicinal cannabis.

The setbacks have been compounded by the recent departures of several top Vectura executives.

According to a report in The Times, Vectura CEO Michael Austwick is stepping down having been in the role only since he joined from Novartis in June last year.

Thomas Gibbs, Vectura’s chief executive in the United States, also left in 2023 after just over a year at the company to join Lundbeck, a drugs company based in Denmark, and there is uncertainty over the future of Lizzie Knowles as Vectura Group’s chief financial officer.

Austwick’s predecessor, Will Downie, and Chief Financial Officer Paul Fry stepped down shortly after PMI’s takeover of Vectura.

The tobacco group’s acquisition of Vectura caused a backlash among public health professionals, with pharmaceutical conferences banning Vectura representatives from their events.

July 27, 2023

New Categories Boost BAT Half-Year Revenues

British American Tobacco reported revenue of £13.44 billion ($17.35 billion) in the first six months of 2023, up 4.4 percent over the figure recorded in the comparable 2022 period. Growth was driven by the company’s “New Categories” segment. Revenue from noncombustible products now accounts for 16.6 percent of group revenue, up 180 base points (bps) versus fiscal year 2022.

BAT’s Vuse and Velo brands enjoyed strong revenue growth, and New Categories’ financial delivery significantly improved, contributing a £201 million increase to group profit as losses reduced.

Reported profit from operations was up 61.4 percent (with reported operating margin up 1,560 bps to 44.2 percent). Adjusted profit was up 3.6 percent at constant exchange rates. Adjusted operating margin was up 40 bps to 44.3 percent.

“Having been in my new role for 10 weeks, I’m pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organization,” said BAT Tadeu Marroco, who assumed the top job in May. “It is a challenging external environment. High inflation and slower global growth are impacting consumers and business. Yet our revenue, profit from operations and earnings are all up.

“We are making great progress in New Categories. Revenues are up by 29 percent, and we are now close to break[ing] even, with consumers of noncombustible products up by 1.5 million versus FY 2022. While it’s encouraging to see continued good performance in vapor and modern oral, we recognize more work is required in heated tobacco.

“I remain confident that New Categories will deliver a positive contribution in 2024. However, we do not expect contribution growth to be linear, as levels of investment will align with the phasing of our big innovation platforms.

“While more focus is required in the U.S., our sequential performance improvement in the critical premium U.S. combustibles business since January 2023 is encouraging.

July 26, 2023

Year: 2023