Author: Staff Writer

  • Essentra ‘Reviewing’ its Filter Business

    Essentra ‘Reviewing’ its Filter Business

    Photo: Essentra

    Essentra is reviewing strategic options for its tobacco filters business, as it looks to focus on its component-making division for other sectors, reports Reuters.

    The company, which has supplied filters to cigarette manufacturers for more than 80 years, said the review is expected to finish in the second quarter of 2022.

    According to Reuters, Essentra has concluded that it should become a pure play global components business over time and that the strategic review of the filter division was the first step to achieving that.

    Essentra’s filter division reported a 2.8 percent rise in revenue in the three months to September.

    The company said its components business, which makes plastic molded, vinyl dip molded and metal items used in equipment manufacturing, automotive and electronics, performed strongly in the quarter.

    The tobacco industry is facing heavy scrutiny and mounting regulations due to the health risks of its products.

    Essentra declined to speculate on whether the firm would divest it cigarette filters business. “As of now, we are unable to comment on the final outcome of the strategic review which is targeted to conclude by second quarter 2022 as it is still ongoing,” a company spokesman told Tobacco Reporter.

  • Prosecution for Exchanging Price Info

    Prosecution for Exchanging Price Info

    Photo: promesaartstudio

    The Belgian Competition Authority (BCA) has decided to prosecute Philip Morris Benelux, Établissements L. Lacroix Fils, JT International Company Netherlands and British American Tobacco Belgium for the exchange of information on prices between competitors.

    Together, the accused parties account for 90 percent of cigarette consumption in Belgium. The competition prosecutor alleges the existence of anticompetitive practices that lasted for several years and consisted of repeated exchanges of information on their future prices through wholesalers.

    According to a BCA press release, the manufacturers sent information on their own future prices to their wholesalers and, through the wholesalers, received information on the future prices of their competitors.

    Such conduct may be contrary to Article IV.1 CEL and Article 101 TFEU, according to the BCA.  

    This case will now be examined by the Competition College. The defendants will have an opportunity to defend themselves against these objections in front of the college. The parties will be able to submit written comments to the Competition College and will be heard at a hearing.

  • U.S. Sales up for the First Time in 20 Years

    U.S. Sales up for the First Time in 20 Years

    Photo: akolosov.art

    The number of cigarettes that the largest cigarette companies in the United States sold to wholesalers and retailers nationwide increased from 202.9 billion in 2019 to 203.7 billion in 2020, according to the most recent Federal Trade Commission Cigarette Report. This represents the first time annual cigarette sales have increased in 20 years.

    According to the 2020 Smokeless Tobacco Report, smokeless tobacco sales increased from 126 million pounds in 2019 to 126.9 million pounds in 2020. The revenue from those sales rose from $4.53 billion in 2019 to $4.82 billion in 2020. For the first time, the Commission is reporting sales of nicotine lozenges or nicotine pouches not containing tobacco. In 2020, the companies sold 140.7 million units of such products in the United States, for $420.5 million.

    The amount spent on cigarette advertising and promotion increased from $7.62 billion in 2019 to $7.84 billion in 2020. Price discounts paid to cigarette retailers ($6.07 billion) and wholesalers ($876 million) were the two largest expenditure categories in 2020. Combined spending on price discounts accounted for 88.5 percent of industry spending.

    Spending on advertising and promotion by the major manufacturers of smokeless tobacco products in the U.S. decreased from $576.1 million in 2019 to $567.3 million in 2020. As with cigarettes, price discounts made up the two largest spending categories, with $296.6 million paid to retailers and $83.5 million paid to wholesalers. Combined spending on price discounts totaled $380.1 million—or 67.4 percent of all spending in 2020, up from the $376 million spent in 2019.

    For the first time, the 2020 data include information on the flavors of the companies’ smokeless tobacco products. Menthol flavored smokeless tobacco products comprised more than half of all sales revenues (54.5 percent); tobacco flavored products (that is, no added flavor) comprised 43.4 percent; and fruit flavored smokeless tobacco products comprised 2.5 percent.

    The Commission has issued the Cigarette Report periodically since 1967 and the Smokeless Tobacco Report periodically since 1987. Given the concerning trends highlighted in this report, including the first increase in cigarette sales in two decades, the Commission will continue to expand its approach in reporting shifts in the tobacco industry. The FTC also will use the newly captured data regarding smokeless tobacco products to align the Commission’s enforcement efforts with the emergent realities in the tobacco industry.

  • FDA Stays Bidi Vapor MDO Pending Review

    FDA Stays Bidi Vapor MDO Pending Review

    The U.S. Food and Drug Administration has issued an administrative stay of its marketing denial order (MDO) for nontobacco flavored bidi sticks, pending the agency’s review of Bidi Vapor’s request that the MDO be rescinded based on product-specific scientific evidence in its premarket tobacco product applications (PMTAs).

    Bidi Vapor’s flavored Bidi Sticks may remain on the market without the threat of enforcement while the FDA reviews the company’s request.

    Bidi Vapor, which is part of Kaival Brands, submitted PMTAs for all 11 flavor varieties of its Bidi Stick. The applications ran over 285,000 pages and contained information supporting the products as appropriate for the protection of the public health.

    On Sept. 29, 2021, Bidi Vapor filed a Petition for Review with the U.S. Court of Appeals for the 11th Circuit, seeking judicial review of the MDO under the Tobacco Control Act, the Administrative Procedure Act as well as the U.S. Constitution.

    “We appreciate FDA’s decision to stay, or put on hold, the MDO as it reconsiders its denial,” said Bidi Vapor Niraj Patel in a statement. “As we explained to the agency, Bidi Vapor submitted scientifically rigorous PMTAs that contained product-specific evidence demonstrating that the added benefit of our flavored Bidi Sticks to adult smokers outweighs any potential risks to youth, especially considering our stringent youth-access prevention measures and commitment to mature, adult-focused marketing.”

    “That said, we are still seeking a formal, judicial stay from the appellate court pending the outcome of the lawsuit,” Patel noted.

    The company has now filed a Motion for Stay Pending Review with the 11th Circuit Court of Appeals citing the “irreparable harm” it continues to suffer from the MDO.

    Multiple companies have challenged their MDOs in recent weeks. In early October, the FDA rescinded MDOs it has issued to Turning Point Brands and Fumizer, placing their products back under review.

    According to Filter, Triton, Bidi and Gripum recently received some temporary form of stay, and My Vape Order has demanded a recission due to the fact its PMTA includes some of the same data and studies that also appears in TPB’s applications.

  • Court: Triton Can Sell Flavored E-Cigs Despite MDO

    Court: Triton Can Sell Flavored E-Cigs Despite MDO

    Photo: kwanchaift

    The 5th U.S. Circuit Court of Appeals has ruled that Triton Distribution can continue selling its flavored e-cigarettes despite a decision to the contrary by the Food and Drug Administration, reports Reuters.  

    In a unanimous opinion on Oct. 26, the 5th U.S. Circuit Court of Appeals said that when the FDA last month denied the Texas company’s application to sell its products, the agency did not adequately consider Triton’s marketing plan to reduce the products’ appeal to youth.

    The court found the FDA pulled a “surprise switcheroo” from earlier guidance stating that manufacturers would not need long-term studies to support e-cigarette applications.

    The FDA initially said in guidance accompanying the deeming rule that it did not expect companies would need long-term studies to support their application. However, in an August announcement that it would deny a first batch of applications, the agency said that manufacturers would likely need studies that followed a cohort of people over time to show that their products’ use in helping adult smokers quit cigarettes outweighed the risk to youth.

    Triton challenged the agency’s decision, saying it had relied on the earlier guidance in its application.

    Multiple companies have challenged their MDOs in recent weeks. In early October, the FDA rescinded MDOs it has issued to Turning Point Brands and Fumizer, placing their products back under review.

    More recently, the FDA issued an administrative stay of its MDO for nontobacco flavored bidi sticks, pending the agency’s review of Bidi Vapor’s request that the MDO be rescinded based on product-specific scientific evidence in its PMTAs.

    According to Filter, Bidi and Gripum too recently received some temporary form of stay, and My Vape Order has demanded a recission due to the fact its PMTA includes some of the same data and studies that also appears in TPB’s applications.

     

  • Altria Reports Third Quarter Results

    Altria Reports Third Quarter Results

    Photo: Casimiro

    Altria Group reported net revenues of $6.79 billion in the third quarter of 2021, down 4.7 percent from the previous year’s third quarter. Revenue net of taxes was down 2.6 percent to $5.53 billion. Net revenues for the 2021 nine months were $19.76 billion (down 0.5 percent), while net revenue net of excise was up 1.5 percent to $16.03 billion.

    “Altria continued to balance maximizing profitability from our core tobacco businesses with investing to realize our Vision of responsibly leading the transition of adult smokers to a smoke-free future,” said Altria CEO Billy Gifford. “Our tobacco businesses performed well against difficult year-over-year comparisons, and we’re encouraged by the significant retail share growth from On! in the third quarter.”

    In the third quarter, Altria sold its Ste. Michelle Wine Estates business and received net cash proceeds of approximately $1.2 billion, which Altria used to partially fund its expanded share repurchase program.

    Marlboro HeatSticks retail sales volume increased by more than 20 percent sequentially, primarily driven by broader distribution outside of established metro markets and increasing demand in the Northern Virginia metro market.

    However, Altria’s plans to roll out Philip Morris International’s IQOS tobacco heating system in the United States suffered a setback when the International Trade Commission (ITC) banned imports of that product following a dispute between PMI and British American Tobacco’s Reynolds American. subsidiary over intellectual property.

    In a press note, Altria said it disagrees with the ITC’s decision as it believes that the plaintiff’s patents are invalid and that IQOS does not infringe those patents. The ITC’s decision is currently under a 60-day review by the Biden Administration. If the decision is not rejected through the administration’s review, the ITC cease-and-desist order will take effect on Nov. 29, 2021, making all IQOS and Marlboro HeatSticks products unavailable in the U.S. marketplace.

    Altria said its Philip Morris USA subsidiary is preparing contingency plans surrounding sales and distribution, and has been in communication with PMI regarding its domestic manufacturing plans.

  • David Levy

    David Levy

    Photo: Malcolm Griffiths

    In his keynote speech, David Levy, professor of oncology at Georgetown University in Washington, D.C., looked at the divide between public health and the industry, which, he indicated, judging from GTNF discussions, might not be as great as he had thought—although, it might be greater in some parts of the market than in others. One of the topics perhaps most overlooked in the discussion about harm reduction, he pointed out, was market structure and competition, which generally play an important underlying role. “They are not only important in understanding the use pattern itself but also in the interaction between public health policies and the industry,” he said.

    Levy distinguished between the industry before 2005 and after. Pre-2005, it was clear to the U.S. Federal Trade Commission, and in general, that cigarettes were a distinct market. Since the 1950s, the industry had become increasingly concentrated, with Altria gaining a 40 percent-plus market share, making it a dominant player. The industry of that time was also characterized by high barriers to entry—it effectively controlled retail shelf space, thereby limiting competition, introduced predatory pricing and used a coupon system for customer loyalty. The lines were clearly drawn; there was stability. Tobacco control had a number of policies, and their target was clear.

    Around 2005, the market started to change. Price sensitivity of consumers increased. U.S. smokers started to switch to other products, at first to little cigars and later to vaping. The market suddenly became much broader than cigarettes. “One of the most important changes was that sales of vape products took place on the internet and in vape shops—a whole new arena,” Levy explained. “Both [sales points] also played an important role in providing information on the new products.” Levy doesn’t expect the heated-tobacco products sector to see the same competition as e-cigarettes. The current tobacco market, he pointed out, showed an exceptionally steep decline in youth and young adult smokers, which have fallen by 60 percent since 2013. Levy called this a vital alteration.

    He predicted stricter policies toward cigarettes worldwide, including the introduction of health warnings, menthol bans and a higher selling age. “Pressure on cigarettes will increase,” he said. For vape products, Levy forecast, the future was uncertain. The outlook for the industry remains unclear in the wake of the marketing denial orders issued to tobacco companies after Sept. 9, according to Levy. “I don’t think it’s the final word from the Food and Drug Administration,” he said. Levy suggested the industry accept the uncertainty—which he thought was here to stay—and embrace change. The United Kingdom and New Zealand with their progressive tobacco harm reduction policies provided examples for others to follow. “Things will slowly change,” said Levy.

  • Science

    Science

    Photo: Malcolm Griffiths

    Regulators globally are becoming more understanding of what they expect next-generation tobacco products to accomplish. Regulators want manufacturers to demonstrate, on a product-specific basis, whether the vaping products are a benefit to combustible cigarette smokers. More importantly, manufacturers must ensure that vulnerable populations such as youth are not using these products.

    During the lunchtime GTNF panel “Science Driving Innovation,” one speaker also mentioned that manufacturers must be more conscious about the environmental impacts of vaping products too. The environment is a big issue in the minds of governments, regulators and society as a whole. The panelists agreed that vaping manufacturers should produce products that are environmentally sustainable.

    “Think about all the batteries that go to waste every time an e-cigarette is disposed of. What are we doing as an industry to address the fundamental questions that society and regulators are concerned about?” a panelist asked. “We need to start thinking about what views of science we need to really put our investments in [and start] focusing on going into the future.”

    Another major industry concern that should be addressed through innovation is youth initiation. One panelist said this topic should be a primary focus of scientific efforts relating to vaping products. Reduced-risk products must exist for adult smokers, so it’s imperative that the industry proactively addresses the underage use issue. “If we don’t, others will try to do it for us, and then collectively, we will all compromise the potential that [we are focusing on during the conference] today,” one panelist said. “It’s a critical balance. It’s important that we offer adult smokers an alternative, and we can also combat underage use. We can do both, and we must because there’s too much at stake if we don’t.”

    Another speaker discussed her company’s global retailer compliance monitoring program. The company sends thousands of “mystery shoppers” into U.S. retail outlets that sell its vaping products and collects data around whether the retailers are abiding by federal age verification laws and/or other local policies.

    “What we found is that retailers need help. There’s a lot going on in this world. We help them by providing information on how they’re performing, education and training, and we can also assist in changing their existing point-of-sale technology,” she said. “It can actually prompt the clerks to check ID when they’re selling an interesting new product. And it alleviates the mental burden on their end.”

    Another concern for the industry that can be addressed through innovation is improving nicotine delivery and satisfaction. That satisfaction delivered by products today is not enough to sustain the large number of people we want to see switching from cigarettes to electronic nicotine-delivery systems.

    “To achieve meaningful harm reduction, we need these products to appeal to and be affordable to most adult cigarette smokers. Which means those consumers would need to like the product and be able to afford the product,” a speaker said. “They need to be able to trust these products, and it requires a significant investment in innovation if you want to do it properly.”

  • Innovation

    Innovation

    Photo: Malcolm Griffiths

    Innovation is grounded in regulation. Regulators can either embrace innovation as a tool to support harm reduction, or they can regulate them to the point that any innovation is impossible to bring to market. During the GTNF panel Innovation as the Path to Progress, one speaker explained that the U.S. Tobacco Control Act was written with the goal that the state of public health will change over time. The idea is that as smokers quit and product standards are implemented, many may migrate to products lower on the risk continuum. As a result, as the state of public health changes, the products that the U.S. Food and Drug Administration determines to be appropriate for the protection of the public health (APPH) will also change.

    “If you think about the significance of the innovation of the e-cigarette, today we have major companies that are in the tobacco space talking about eliminating combustion altogether,” a panelist noted. “We have companies giving up their entire combustible segments, and that would not have happened, in my opinion, had it not been for the innovators.”

    Making innovative progress in the vapor industry is measured by transitioning adult smokers to noncombustible products, according to the panel. However, there are many avenues to accomplish this goal as well as numerous obstacles. One speaker offered the audience three focus areas that he described as the pillars of innovation. The first pillar is product innovation. “If the product is not satisfying, people are not going to switch,” the speaker said. “In order to get there, we will need a very disciplined, science-based approach in understanding some of the questions underlying satisfaction. As we think about innovation and product innovation, it’s important for smokers to have a range of products to choose from.”

    The second pillar is scientific innovation. There must be a comprehensive assessment of science to demonstrate that a product is APPH, and while all novel products tobacco products must be held to this high standard, it is rigorous and takes time. There are innovations in scientific methodologies that must be made, the speaker explained.

    The speaker cited dissolution methods to understand nicotine release profiles and computation of toxicology as examples of tools that can help accelerate this pathway for getting products in the market. “Along with that, I think that regulators have an opportunity to create some innovative processes,” the speaker said. “For example, establishing product standards that will hopefully help these products be reviewed in an expedited manner, and most importantly, get them in the hands of consumers.”

    The third pillar is communication. The industry needs to make clear the benefit to smokers by switching to noncombustible products. The industry needs to address the misperceptions surrounding nicotine and the wrong assumption nicotine causes cancer. “This clouds the decision-making process of adult smokers,” the speaker said. “As manufacturers in the U.S., we have to seek FDA authorization before we can communicate a modified-risk or modified-exposure order. That, too, is important but time-consuming and resource intensive. This is a responsibility for everybody to explore innovative communication approaches that can address these misperceptions.”

    Another area ripe for innovation in the electronic nicotine-delivery system industry is environmental sustainability. For example, e-cigarette batteries contain heavy metals. The industry must innovate battery technology that will reduce their products’ environmental impact. Responsible disposal of any product is important. Regulation can also impact environmental issues. In the U.K., for example, requiring 10 mL bottles instead of larger bottles creates more waste.

    Finally, synthetic nicotine also offers innovative advancements for next-generation products. “I think that when we talk about moving away from combustion, that is one thing, but when we talk about moving away from tobacco—in other words, giving consumers a truly tobacco-free option—that’s where science comes in,” a panelist explained. “The promise that is involved with synthetic nicotine is significant. They need to research it closely and recognize that it does provide certain benefits that perhaps the tobacco-derived nicotine does not.”

  • Frank Han

    Frank Han

    Photo: Malcolm Griffiths

    During a keynote address for GTNF, Frank Han, senior vice president of Shenzhen SMOORE Technology Co. and CEO of its FEELM business division, said that there are exciting innovations—big and small—happening every day in the vaping industry. Vaping products using FEELM atomization technology have now reached millions of users in more than 50 countries.

    “Vaporization technology is still just at the beginning; we could welcome the opportunity for innovation to create a better life together … Basic Science Innovation has been the cornerstone for sustainable growth; it is the science of atomization that we need to build as the foundation supporting the industry,” he said, speaking through an interpreter. “As a firm believer of innovation, SMOORE has integrated disciplines like engineering thermodynamics and biomedical sciences into our atomization research.”

    SMOORE has been actively learning to understand and assess the long-term health effects of vaping, according to Han. The company currently has seven research centers between the U.S. and China, “bringing in global talents” from different backgrounds. In addition to in-house R&D resources and efforts, SMOORE is also focused on partnering with leading universities to transform the company’s scientific discoveries into applied technologies. “The way vape products are manufactured is also constantly evolving; more effectively and definitely more environmentally friendly,” said Han.

    SMOORE had begun operations using the first fully automated pod production line in the world. Each new manufacturing (single) line can produce 7,200 standard vaporizers per hour, double the previous generation’s output. “We have been working with business partners to improve sustainable practices in all stages of product development, especially manufacturing with the common goal of reducing carbon footprint,” said Han.

    SMOORE is currently evaluating the underlying technology of atomization for its potential applications in other fields. “With one direction of our R&D focus on the atomization application in healthcare, I am proud that SMOORE has made progress on the research of atomized medication, along with partners from different sectors,” Han said. “The initial results are all positive. We are hoping in the near future, more and more people might be able to inhale medicines or even vaccines with atomization devices.”

    Looking ahead at the vaping industry overall, Han said that policymakers and NGOs must be inclusive. Regulation has been a heated topic recently in both the U.S. and China, and while institutional innovations to promote healthy industry development and more balanced regulations are needed, regulators must also embrace vaping as a strategy to improve public health while safeguarding against youth initiation, he said.

    “The global media must also be inclusive. We must value the media that report from an unbiased perspective, involving more people in the public dialogue on vaping, discussing the pros and cons and discovering the truth,” said Han. “I’d like to share an old Chinese saying here: ‘Though the road ahead is dangerous and difficult, we can only achieve our goals with constant efforts.’ We must press ahead with a sense of perseverance to expect a better future.”