2023 - Tobacco Reporter

KT&G Receives AAA Credit Rating

KT&G has obtained the highest grade of AAA in all three major domestic corporate credit ratings: Korea Ratings, Korea Credit Rating and NICE Credit Rating.

Among domestic private companies excluding financial and telecommunications companies, KT&G is the only company to achieve a corporate credit rating of AAA.

The corporate credit rating agencies have assessed KT&G’s business stability as extremely excellent based on its high market position in key business sectors. The agencies have given high evaluations to the company’s solid domestic market dominance, built on its long history, high brand recognition as well as its strong presence in the global tobacco and e-cigarette industries.

Furthermore, with plans for dividend payments, share buybacks and investments aimed at shareholder returns and expanding domestic and international production facilities, it is expected that KT&G will maintain excellent financial stability by ensuring smooth cash generation to meet funding requirements in the future.

A KT&G representative stated, “Amid increased uncertainties in both domestic and international markets, such as recent interest rate hikes, many companies have faced challenging business environments. In this context, we believe that KT&G’s achievement of the highest AAA rating from the three credit rating agencies is a recognition of our company’s stability and profitability by external entities.” They further added, “We will continue to strive to maintain a stable financial structure based on our excellent creditworthiness and make every effort to ensure financial stability in the future.”

June 30, 2023

Hungarian Economy Hit by Illegal Trade

Half a billion illegal cigarettes were bought in Hungary in 2022, preventing the country from receiving HUF30 billion ($87.9 million) in excise tax revenue, KPMG data shows, according to Hungary Today.

The illegal cigarette market in Hungary recorded a three percentage point increase in 2022 despite falling consumption. According to KPMG, the country’s share has reached 2019 levels mainly due to products made specifically for smuggling and due to counterfeit tobacco.

Most of the illegal products come from Ukraine.

Criminal organizations are making increasing profits by distributing illicit products in countries with higher prices and taxes, according to the study. The pandemic and the Russian-Ukrainian war are also noted as reasons why illicit trade has increased.

June 30, 2023

CTP Reports Progress on Reagan-Udall Review

Brian King, director of U.S. Food and Drug Administration’s Center for Tobacco Products (CTP), published a statement summarizing the CTP’s progress in addressing the recommendations from the Reagan-Udall evaluation.

At the request of FDA Commissioner Robert Califf, the Reagan-Udall Foundation evaluated the CTP’s operations. In December, the foundation submitted its report, which identified several problems hindering the agency’s ability to regulate the industry and reduce tobacco-related disease. Among other recommendations, the foundation urged the CTP to make process improvements and increase transparency.

According to King, the CTP has made significant strides in putting its plans for improvement into action. The agency, he said, is on track to issue proposed goals this summer, and to release the final plan by December 2023. The CTP intends to hold a public meeting in summer 2023 to seek stakeholder feedback about the strategic plan.

Meanwhile, said King, the CTP Ombuds Office is leading the creation of an operational strategy to improve transparency and information sharing across all programmatic areas, including through the establishment of transparency liaisons. Externally, the center is planning for upcoming public meetings to gather stakeholder input. CTP also published a webpage of all the tobacco products-related citizen petitions received by the center to provide the public with information about such citizen petitions that is easy to access and user-friendly.

According to King, the center has reviewed 99 percent of tobacco product applications submitted over the past three years, authorizing 23 tobacco-flavored e-cigarette products and devices. The CTP is currently planning a public meeting to take place in fall 2023 regarding the application review process.

Meanwhile, the center is in the process of finalizing rules related to menthol cigarettes and flavored cigars and continues to work toward publishing a proposed rule that would establish a maximum nicotine level to reduce the addictiveness of cigarettes and certain other combusted tobacco products.

CTP also recently proposed new requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of their products.

King also highlighted the CTP Office of Science leadership’s participation in conferences and external meetings. For example, representatives from the Office of Science recently presented at the Food and Drug Law Institute’s Nicotine Product Regulatory Science Symposium, the E-Cigarette Summit and the TMA annual meeting (see Todd Cecil’s TMA presentation here).

“I am proud of the significant progress the center has made to date in addressing the external evaluation recommendations, and I am confident that we’ll continue to make important strides in continuing to build and strengthen FDA’s tobacco program in the future,” said King.

A comprehensive list of CTP status updates for each Reagan-Udall Foundation recommendation is available here.

June 29, 2023

New Deadline for South Africa Vape Comments

The public consultation on South Africa’s new Tobacco Products and Electronic Delivery Systems Control Bill will end on July 28, the Portfolio Committee on Health announced.

In a media statement from Parliament, the government said that written submissions on the bill must be emailed to tobaccobill@parliament.gov.za or submitted online at https://forms.gle/FLrhnvThDk8ccLG97.

The submission period was originally between June 21, 2023, and Aug. 4, 2023.

The bill aims to regulate not only traditional tobacco smoking but also electronic cigarettes, such as vapes, which have become immensely popular not only as a means to stop smoking normal cigarettes but as a gateway into nicotine consumption.

In broad terms, the bill aims to regulate the sale and advertising of both tobacco products and electronic delivery devices, reports Business Tech.

According to Parliament “the bill will also focus on legislating electronic nicotine and electronic non-nicotine delivery systems; introduce plain packaging with graphic health warnings and pictorials; introduce a total ban on display at the point of sale; introduce 100 percent smoke-free areas—indoor public places and certain outdoor areas; and a total ban on vending machines for tobacco products.

At the start of the month, the Portfolio on Health briefed Parliament on the new bill with mixed reactions. Many stakeholders were concerned as to the severe knock-on effects the new bill could have on the tobacco/smoking industry, which is a key driver of economic growth in South Africa.

Members of Parliament said that the bill could lead to more people turning to the already budding illicit tobacco industry and lead to job losses.

Asanda Gcoyi, chief executive of the Vapour Products Association, said that combustible alternatives to traditional cigarettes should form the backbone of tobacco harm reduction in South Africa and be seen more as a solution to a problem rather than a new problem.

She said that the government has managed to demonize vaping, marking it as more damaging than traditional cigarettes.

Vapes are not only getting regulated by the new bill but are also being drawn into the ambit of excise taxes as provided in the updated Tobacco Product Excise.

Barry Buchman, managing director of Vaperite, said that the newly imposed excise duty on vaping products has taken its toll on retailers, with many arguing that the tax has had the adverse effects of driving consumers toward the illicit market.

Buchman added that the tax is pushing consumers to purchase the highest and most addictive nicotine content e-liquid as it is a cheaper option, negating the original aim of the National Treasury to tackle health-related issues.

June 29, 2023

Minister Expresses Support for Tobacco at ITGA Meeting

Zimbabwe’s minister of agriculture, Anxious Masuka, opened the International Tobacco Growers Association’s (ITGA) 2023 Africa regional meeting June-28-29 expressing strong support for the tobacco sector

Growers’ representatives from four of the leading tobacco producing markets in Africa—Malawi, Tanzania, Zambia, and Zimbabwe—gathered in Harare to debate the challenges and opportunities facing their sector. Participants requested the support of their governments in the face of multiple threats affecting tobacco production, which brings considerable socioeconomic benefits to the region. Among other topics, they discussed growers’ sustainability efforts and the situation of in their respective markets.

Highlighting the central role of tobacco growing in Zimbabwe’s economy, Masuka provided details about the country’s Tobacco Value Chain Transformation Plan, which is supposed to increase value addition of the crop and improve local earnings (also see “The Man Behind the Plan,” Tobacco Reporter, May 2023). Masuka aims at record volumes, record earnings and record average prices for tobacco growers. He stated that the actions of the World Health Organization Framework Convention on Tobacco Control (FCTC) are “ill-informed and ill-timed.” “Tobacco in Zimbabwe is an important crop and we are not making any apologies about it,” said Masuka.

Ryan Swales, the president of Zimbabwe Tobacco Association (ZTA), highlighted the important opportunity presented by the meeting in debating the regional and national issues, given the specific challenges attached to the market, predominantly in sustainability.

Governments need to look at farmers as their main strategic partners and support their efforts.

Jose J. Aranda, president, ITGA

ITGA’s President Jose J. Aranda called on governments to support growers in their sustainable tobacco production efforts as the livelihoods of millions of people around the world depend on it. Tobacco growing, he said, brings valuable contributions to local economies in the form of labor, income, and further opportunities for growth. Aranda also emphasized that tobacco growers operate within a legal framework. “Governments need to look at farmers as their main strategic partners and support their efforts.”

During the Open Session, participants were able to follow presentations about the current developments in the global leaf market, with focus on African production and pricing, the outlook of the regulatory environment and possible implications for growers, along with a detailed analysis of the ITGA 2023 Market Survey, which highlights the economic, social and environmental challenges for growers in all leading tobacco growing areas. Finally, there were two comprehensive debate sessions with key stakeholders in the four represented markets discussing sustainable tobacco productions and the efforts made to overcome the pressing challenges of the region—cost of production, deforestation, climate change, poverty and lack of opportunities for the youth.

The ITGA also highlighted its World Understanding Tobacco Farming Day campaign. Aranda urged the sector to work together against the demonization of tobacco growing. ITGA is raising awareness about the realities of tobacco farming to stop the unfounded claims by the WHO FCTC in their World No Tobacco Day.

June 29, 2023

New Zealand Urged to Reject Australia’s Model

The Coalition of Asia Pacific Tobacco Harm Reduction Advocates (CAPHRA) is calling on the New Zealand government to reject Australia’s approach to vaping and continue to follow the science and evidence.

CAPHRA has submitted comments on New Zealand’s proposals for the smoked tobacco regulatory regime, which include tightening current restrictions on vaping product safety requirements and packaging and reducing nicotine levels in disposable vapes as well as restricting the location of specialist vape retailers.

“CAPHRA believes that the regulations, as they are, work perfectly well, and that further restrictions will only serve to limit access to safer nicotine products for adult smokers seeking less harmful alternatives to combustible tobacco,” says CAPHRA executive coordinator and prominent New Zealand public health consumer advocate Nancy Loucas.

“The announcement that New Zealand would not follow Australia’s lead to a full prescription model for nicotine vaping further reinforces the need for a harm reduction approach that is based on science and evidence, not scaremongering by crowing Australians.”

CAPHRA believes that the regulations, as they are, work perfectly well, and that further restrictions will only serve to limit access to safer nicotine products for adult smokers seeking less harmful alternatives to combustible tobacco.

Nancy Loucas, executive coordinator, CAPHRA

In a press note announcing its submission to New Zealand’s proposals, CAPHRA cites an article in The Critic, “The Vape Scare Down Under,” which describes the Australian government’s approach to vaping is misguided and based on fear rather than evidence. The article argues that the government’s proposed ban on flavored e-cigarettes is not supported by the evidence and will only serve to drive vapers back to smoking. The article also highlights the success of vaping in reducing smoking rates in countries like the U.K. and New Zealand.

“Unfortunately, the vaping debate has become highly political instead of being about the science or the evidence which continues to show that vaping is reducing smoking rates around the world,” says Loucas.

CAPHRA continues to urge the New Zealand government to take a risk-proportionate approach to regulations that protect public health while ensuring the availability of these products for adult smokers seeking less harmful alternatives to combustible tobacco.

“New Zealand should not follow Australia’s policy on vaping, and instead continue to follow a harm reduction approach that is based on science and evidence. Harm reduction should be the driving force behind tobacco policy, and regulations should be risk-proportionate and protect public health while ensuring the availability of these products for adult smokers seeking less harmful alternatives to combustible tobacco,” Loucas said.

June 29, 2023

Tobacco Production Up in Tanzania

Tanzania produced 125 million kg in 2023, up from 60 million kg in 2022, reports the Xinhua News Agency

Addressing the fifth general meeting of the Tobacco Cooperative Joint Enterprise in the Morogoro region, Stanley Mnozya, the director general of the Tanzania Tobacco Board, said his organization has taken measures to increase the production of the crop to 231 million kg in 2024.

The increase is in line with the objectives of Tanzania’s ruling party, Chama Cha Mapinduzi, which wants the country to produce 250 million kg of tobacco by 2025.

Mnozya attributed this year’s increase in tobacco production to the emergence of new buyers on the markets. There are now 11 companies purchasing tobacco in Tanzania.

TCJE Chair Ntezilyo John said Tanzania tobacco cultivation is facing a number of challenges, including delayed payments and a lack of subsidized fertilizers.

June 29, 2023

Zimbabwe Sales Surpass $800 Million

Since auction and contract floors opened in March, Zimbabwe has sold more than 270 million kg of tobacco worth $817 million, reports The Herald.

The target this year was 230 million kg compared to last year’s 212 million kg.

Tobacco Industry and Marketing Board (TIMB) data shows that this year’s sales have increased 52 percent from 2022 sales of 177 million kg during the same period.

The highest price at the contract floors was $6.10 per kilogram while the highest price at the auction floors was $4.99 per kilogram.

“The prices are hovering around $3.02 per kilogram, and we hope they will improve as the marketing season progresses. If the prices continue like this, we will manage to go back to the field again,” said Marjory Munengerwa of Rusape.

So far, farmers have been happy with the marketing season and the fast, fair payments. TIMB has been working to create a marketing season without side marketing.

Zimbabwe generates $1 billion annually from tobacco exports to over 60 countries around the world, among them China, Japan, the United Arab Emirates, Indonesia, Belgium, the United Kingdom, the United States, Brazil, South Africa, Botswana, Malawi, Egypt, Tanzania, Zambia, Mozambique and Lesotho.

A new target of 300 million kg per year has been set with plans to transform the sector into a $5 billion industry by 2025.

June 28, 2023

FDA Urged to Reconsider Menthol Ban

Twenty U.S. representatives are urging the Food and Drug Administration to reconsider the proposed ban on menthol cigarettes and flavored cigars, reports CSP. The ban would exacerbate existing illicit trade of tobacco products, according to a letter sent to FDA Commissioner Robert Califf.

A final rule is set to be published in August but would not go into effect until at least next year.

“When Congress enacted the Tobacco Control Act in 2009, the intent was for the FDA to use regulation to ensure proper oversight of the tobacco industry. When prohibition-based actions result in large illicit markets, it causes more risk for Americans, more crime, more burden on law enforcement and more opportunities for policy and community conflict,” the letter said. “We urge FDA to take illicit markets seriously. The FDA can do this by using regulation to safely meet adult consumer demand while also establishing controls on how those products are marketed to protect kids. We urge you to reconsider FDA’s proposed rules on menthol cigarettes and flavored cigars and refrain from any further prohibition-based actions that threaten to expand illicit markets.”

The proposed ban would result in about one-third of all cigarettes sold in the U.S. becoming illegal, according to the letter, highlighting concern that the ban would lead to a similar illicit market to vapor products.

“With this prohibition-based approach, we now see thriving illicit e-vapor markets all over the U.S.,” the letter stated, pointing to states that have enacted flavor bans. “These markets include illegal products with some of the highest incidence of underage use; products made in Chinese manufacturing facilities with no FDA oversight; products being illegally smuggled over U.S. borders and through U.S. ports; products being trafficked in violation of state and local criminal laws; and products being sold without age verification.”

The letter was signed by U.S. Representatives John Rutherford, Don Bacon, David Valadao, Ben Cline, C. Scott Franklin, Troy Nehls, Richard Hudson, John Rose, Jerry Carl, Eric “Rick” Crawford, Daniel Meuser, Andrew Garbarino, Debbie Lesko, Byron Donalds, Mike Ezell, David Rouzer, Anthony D’Esposito, Kat Cammack, Diana Harshbarger and Jeff Duncan.

June 28, 2023

Unauthorized Vapes Flood U.S. Market

The number of vapor devices on the U.S. market has nearly tripled since 2020, with a majority being unauthorized disposables from China, according to IRI sales data reported by the AP.

The influx comes more than three years after the U.S. Food and Drug Administration declared a crackdown on kid-friendly flavors; many of the unauthorized products come in sweet and fruity flavors that are technically illegal. This means the FDA must focus on removing unauthorized products from the market rather than carefully reviewing individual products that could help adult smokers.

Last year, cheaper disposables made up 40 percent of the $7 billion retail market for e-cigarettes, according to IRI data. IRI collects barcode scanner sales from convenience stores, gas stations and other retailers. The data shows that more than 5,800 unique disposable products are being sold in numerous flavors and formulations, up 1,500 percent from 365 in 2020, when the FDA banned all flavors except menthol and tobacco from cartridge-based e-cigarettes. The ban excluded disposables, though.

“The FDA moves at a ponderous pace, and the industry knows that and exploits it,” said Robert Jackler of Stanford University, who has studied the rise of disposables. “Time and again, the vaping industry has innovated around efforts to remove its youth-appealing products from the market.”

“I don’t think there’s any panacea here,” said Brian King, director of the FDA’s Center for Tobacco Products. “We follow a comprehensive approach and that involves addressing all entities across the supply chain, from manufacturers to importers to distributors to retailers.”

The surge of disposables was preventable, according to Mitch Zeller, former FDA head. “I told them: ‘It doesn’t take a crystal ball to predict that kids will migrate to the disposable products that are unaffected by this [ban], and you ultimately won’t solve the problem,’” Zeller said.

IRI restricts access to its data, selling it to companies, investment firms and researchers. The data was shared with the AP by an anonymous person not authorized to share the information. IRI declined to comment or confirm the data, stating the company doesn’t offer that information to news organizations.

June 28, 2023

Year: 2023