Author: Taco Tuinstra

Growers Want Amends for Below-Market Prices

Photo: Taco Tuinstra
Tobacco growers in Pakistan have asked tobacco companies to compensate them for tobacco purchased at below-market prices and losses caused by rains and hailstorms in Khyber Pakhtunkhwa Province, reports The News International.
In a letter to their representative organizations, the farmers said that independent purchasers paid high price while some domestic and multinational companies purchased the produce at a lower rate.
They urged the organizations to take up the matter with the companies to repay the growers for the lowest price. The tobacco growers also urged the companies to tap into the corporate social responsibilities fund to accommodate the growers.
Pakistan law requires tobacco companies to spend a certain percentage of their profit on the welfare of farmers.
October 26, 2023
Altria Revenues Down 4.1 Percent

Photo: Phimwilai
Altria Group reported net revenues of $6.28 billion in the third quarter of 2023, down 4.1 percent from the comparable 2022 quarter. The decrease was driven primarily by lower net revenues in the company’s smokeable products segment.
Altria’s domestic cigarette shipment volume decreased 11.6 percent from quarter to quarter, driven by the industry’s overall decline rate, retail share losses, calendar differences and trade inventory movements, among other factors.
Following the completion of its Njoy Holdings acquisition on June 1, 2023, Altria has been strengthening Njoy’s global supply chain to support the anticipated volume increase associated with its expansion plans for the Njoy Ace brand.
The company shipped 7.5 million Ace pods during the quarter. The retail share of Ace pods in U.S. muti-outlet and convenience stores was essentially unchanged since the completion of the Njoy transaction.
The U.S. cigarette retail share of Altria’s Marlboro brand dropped 0.3 points, to 42.3 percent versus the prior-year quarter, primary due to increased macroeconomic pressures on disposable income and increased competitive activity.
Net revenues in the oral tobacco products segment increased 2.2 percent, driven by higher pricing and lower promotional investments.
“Our highly profitable traditional tobacco businesses were resilient in a dynamic operating environment during the third quarter and first nine months, providing fuel for our business transformation and significant cash returns to our shareholders,” said Altria CEO Billy Gifford in a statement.
“I believe we have the appropriate strategies and people in place to execute our growth plans. I continue to believe that we can achieve our vision and create long-term value for our shareholders.”
October 26, 2023
Nabil Sakkab To Retire From Altria Board

Photo: gustavofrazao
Nabil Y. Sakkab will retire as a member of Altria Group’s board of directors following the completion of his current term. Consequently, Sakkab will not stand for re-election to the board of directors at Altria’s 2024 annual meeting of shareholders, which Altria anticipates holding on May 16, 2024.
“Nabil’s contributions have significantly benefited Altria over the past 15 years,” said Kathryn McQuade, Altria’s independent chair of the board, in a statement. “We thank him for his long and distinguished service and wish him the very best upon his retirement.”
Sakkab chairs Altria’s innovation committee and is a member of the company’s executive, finance and nominating, corporate governance and social responsibility committees. He held a variety of positions at The Procter & Gamble Co. beginning in 1974. He retired in November 2007 as senior vice president, corporate research and development. He is a director of several privately held companies. He served as a director of Deinove from 2010 to April 2016, Givaudan from 2008 to March 2015 and Pharnext from 2012 to July 2020.
October 25, 2023
Panel: Economics of Harm Reduction

The panel was moderated by economist and author Sinclair Davidson, who argued that through irresponsible fiscal policy on tobacco and nicotine products, the Australian government had created a well-organized illegal market that would be impossible to eliminate even if the government changed course.
The market for next-generation products (NGPs), Tim Phillips, managing director of Tamarind Intelligence, said, is a complicated, quickly moving sector, which today has a significant global volume of over $50 billion and more than 100 million users. Market development heavily depends on product regulation. In North America, vape products dominate the market, with a small but growing portion of nicotine pouches. In Europe, the Middle East and Africa, vapes are still growing but at a slower pace while heated-tobacco products (HTPs) are establishing themselves in some markets. In the Asia-Pacific region, HTPs are the most popular NGPs. Despite overall increase, the global NGP market still has headroom compared to the combustible cigarette market with its value of $800 billion. Phillips suggested that in 10 years’ time, vape products and HTPs could overtake combustible cigarettes, but he pointed out regulatory issues, consumer confidence and the debate about disposable vapes as headwinds for the sector. The latter issue, he added, could be solved through innovative technologies.
James Lambert, director of economic consulting Asia at Oxford Economics, warned that a harsher regulatory and fiscal stance on reduced-risk products (RRPs) could create negative economic and health consequences over time. Bans of RRPs will favor the illicit trade, especially in markets where illicit trade is difficult to manage and mitigate and where price sensitivity is higher. For optimal policy, Lambert proposed three key principles: Tailoring the restrictions of use to different market segments to eliminate youth use and at the same time provide adult smokers access to options; differentiating the treatment of RRPs from conventional tobacco products to incentivize the adoption of healthier alternatives; and finding constructive policy stances that include regulatory and fiscal measures to incentivize innovation of less hazardous products.
Comparing the U.S. tobacco market pre-2005 and after, David Levy, professor of oncology at Georgetown University, said that the advent of Juul in 2018 was a game changer that fueled competition among the cigarette industry, which had reluctantly ventured into vape products and independent players. At the same time, nicotine pouches were growing, like vapes taking market share from cigarettes. Levy predicted that HTPs will become more popular and are likely to be favored by tobacco companies because they are more profitable and because the companies have a first-mover advantage. He expected competition among HTP manufacturers and nicotine pouch manufacturers to intensify and wondered whether the Food and Drug Administration, in its focus on a menthol cigarettes and cigars ban, would recognize the role of harm-reduced substitutes.
Paul Blair, regional director of external affairs at Philip Morris International, emphasized that there is no one-size-fits-all approach to the transformation opportunities and needs of the tobacco industry. The industry, he said, must be aware of three areas. First, supply: Companies have to take the risks of transformation to meet consumer demand. Second, demand: Consumers will continue to want to quit or are looking for less hazardous products, regardless of any stringent regulations on reduced-harm products. Third, an affordable and accessible marketplace: Cost incentives to quit smoking are extremely important to consumers even in high-income countries as smokers are often from low-income and middle-income groups. A tax differential between RRPs and combustible cigarettes is hence essential, Blair stated, both in the signal it sends to consumers and businesses and because of the cost differential in this journey. To further reduce the U.S. smoking rate, which presently stands at 11 percent, Blair recommended making available a wide range of RRPs and creating a favorable public policy environment.
Anna Choi, assistant professor in the Department of Public Administration at Sejong University, presented the results of her study on the role of vape products and HTPs in encouraging smokers in South Korea to switch from combustible cigarettes.
A huge tax hike on cigarettes of about 40 percent in 2015, she said, significantly depressed cigarette consumption. A subsequent health ministry report implying that RRPs were potentially even more dangerous than smoking impacted negatively on the electronic nicotine-delivery system (ENDS) market.
Since 2017, RRPs and combustibles have been taxed at almost the same rate, eliminating the cost advantage of the former. Despite this, ENDS’ market share increased from 2 percent in 2017 to 17 percent in 2023.

October 25, 2023
Panel: Regulation: International Perspectives

Regulation of nicotine products is at a tipping point, said David Bertram, director at EUK Consulting, who moderated the panel. Generational bans and mandatory nicotine reduction for combustible cigarettes have been introduced, whereas taxation of flavors and the move against disposable vapes have the potential to threaten the whole next-generation products (NGPs) category. Panelists provided overviews of the regulatory situation in their respective countries.
Dave Dobbins, former chief operating officer of the American Legacy Foundation/Truth Initiative, criticized the U.S. Food and Drug Administration’s authorization process for novel products as lacking order. He called for the agency to “clear the field.” “The FDA has two choices: either a market serviced by unregulated actors that don’t have to report to the agency and don’t follow its rules, mandates and instructions or a robust market of approved products that fulfill the demand for adult consumers, and then the FDA can focus its enforcement on actors targeting youth.” The agency, he added, could use its power of post-market surveillance and regulation. Dobbins was concerned that the FDA was paralyzed by fear, making it unable to analyze the benefits of reduced-risk products (RRPs) for adult smokers.
Adam Afriyie, member of Parliament for Windsor, U.K., said his country was in the pole position in tobacco harm reduction (THR) because of five factors: operating according to the principles of THR and encouraging the good instead of the perfect; treating RRPs as consumer products not medicine; encouraging public bodies to spread the word; trying to de-politicize the issue; and applying pragmatism as a response to changes. Pointing out that the U.K. government was currently consulting on disposable vapes and underage vaping on the base of evidence, he argued that it would only ban the products if this made sense from a point of view of harm reduction to the environment, children and healthcare. Regarding the upcoming tenth Conference of the Parties (COP10) to the Framework Convention on Tobacco Control, Afriyie said he was encouraging his contacts to help the U.K. delegation feel sufficiently emboldened to stress that THR needs to be the principle behind regulation and that a greater degree of transparency is required in how decisions at the COP are made.
In its traditionally heavy regulation of nicotine products, Australia has always been driven by health considerations, according to Kezia Purick, member of the Northern Territory Legislative Assembly for Goyder, Australia. Tobacco-related diseases are the single biggest cause of death from behavioral risks in the country, with the disadvantaged indigenous population being affected most. Australia banned all tobacco advertising in 1976 and was the first country to introduce plain packaging in 2012. Nicotine vape products are available only from pharmacies with a doctor’s prescription. Health Minister Butler’s approach to ban all disposable vapes is primarily driven by concerns about the rising popularity of vaping among young school children. Purick expects regulation of RRPs to become ever stricter in the future.
Marina Foltea, managing director at Trade Pacts Consultancy, outlined the complex policy-making process in the European Union. Directives, such as the Tobacco Products Directive (TPD), are binding for all 27 member states and have to be transposed into national law to take effect. The revision of the present TPD2, which already has strict requirements for combustible cigarettes and sets clear product standards for vape products, is currently being discussed. The regulation of tobacco products in the EU is regarded as a model by many countries. However, Foltea said, she didn’t see any explicit recognition of THR in the EU system. “But if you already have this category in the TPD, this means some indirect recognition,” she noted.
Douglas Ming Deng, head of the NGPs Industry Study at Yunnan University, reminded his listeners of Asian diversity and the resulting differences in regulation of NGPs across countries. South Korea and Japan, he emphasized, have set up good tobacco control systems together with the provision of suitable RRPs, thus becoming blueprints for other countries to follow. He noted that the industry had changed more rapidly in the past 20 years than it had in the century before, meaning the sector was no longer static but dynamic. “As a consequence, regulators, consumers and the industry don’t know each other as they did in the combustible era,” Deng said. “Regulators should study the industry and vice versa.”
October 25, 2023
Investor Panel

This year’s panel looked at how investors view the industry’s transformation and the challenges regulations hold for the further proliferation of reduced-risk products. Among the multinational players, Philip Morris International leads the pack regarding performance of smoke-free products. In the first half of 2023, 34.1 percent of its revenues were generated by such offerings. The acquisition of Swedish Match has catapulted PMI forward in the smokeless category. At BAT, the segment accounted for 16.6 percent of revenues. It was followed by Imperial Brands, with 3.7 percent, and Japan Tobacco, with 3.2 percent. With an operating margin of around 39 percent in 2022, PMI also achieves higher profitability from the category than BAT and JT, which plan to break even by 2024 and 2028, respectively.
With the introduction of its heated-tobacco product (HTP) brand IQOS in Japan in November 2014, PMI started a success story—reduced-risk products (RRPs) currently account for 37 percent of the country’s tobacco market. Using its first-mover advantage, PMI today holds around 72 percent of the HTP market followed by BAT with 18 percent. JT, which was relatively late to launch Ploom Tech in its domestic market, stands at 10 percent.
In South Korea, the world’s second-largest HTP market after Japan, PMI’s first-mover advantage was shorter lived as KT&G responded with the introduction of Lil only six months after IQOS had entered the market. The HTP category now represents 19.2 percent of South Korea’s tobacco market, with KT&G being the leading player with a share of 47 percent followed by PMI (41 percent) and BAT (12 percent).
In addition to Japan and South Korea, Sweden and the U.K. provide examples of how a tobacco harm reduction approach can lower smoking rates. Using these countries as models for others, however, is difficult as the conditions for the success of RRPs vary. In Japan, for instance, HTPs are under the authority of the ministry of finance and looked at from a taxation point of view. They are also boosted by the fact that nicotine vaping is prohibited. In the U.K., government and health bodies have been supportive of RRPs, which played a significant part in the success of the category. Furthermore, there’s a significant price gap between combustible cigarettes and RRPs in the U.K., which nudges consumers toward the latter. In Sweden, the transition to less hazardous products was driven by consumers without government support.
In general, publicly listed, multinational companies are pushing transformation harder than privately held, single-country companies as demonstrated by the Tobacco Transformation Index, which ranks the world’s 15 largest tobacco companies on their relative progress toward harm reduction. In many countries where the latter are operating, RRPs are banned and the cost of cigarettes is low, so there’s little incentive for these companies to change.
Companies with a strong exposure to the U.S. market, such as Altria, BAT and Imperial, continue to face regulatory uncertainty. Investors, however, want clarity. In August, the U.S. Food and Drug Administration missed another deadline to finalize its long-anticipated rule prohibiting the use of menthol in cigarettes. The recent Udall-Reagan report on FDA proceedings called for more clarity to ease the burden on the agency and increase efficiency, but panelists were pessimistic that the FDA will put recommendations into practice.
The upcoming tenth Conference of the Parties (COP10) to the World Health Organization’s Framework Convention on Tobacco Control is expected to bring new, illogical restrictions on RRPs, judging from proposals published in advance, such as a redefinition of aerosol as smoke. Panelists feared that with an “any risk is bad” approach, RRPs will increasingly be treated like combustible cigarettes.

October 25, 2023
22nd Century Group Reduces Debt

Photo: mrmohock
22nd Century Group has reduced the outstanding principal of its senior secured credit facility from approximately $22.1 million to approximately $14 million as part of an amendment and waiver process with its lenders.
The reduction reflects a waiver and repayment of the $7.5 million minimum cash balance required under terms of the original debenture agreements, which was held in an escrow account. The company also assigned an existing promissory note pertaining to the company’s previous holdings in Panacea Life Science Holdings as additional consideration in the debt reduction transaction.
In a nonmonetary exchange, the assigned value of the promissory note was allocated as $600,000 to further principal reduction and $2 million to a reduction in the put price associated with the lender’s outstanding warrants, which portion was subsequently cancelled.
The remaining principal loan balance of $14 million and the remaining $500,000 of the put price will be due at maturity in 2026 in accordance with the original terms of the debenture agreements. The company was not required to pay any cash to the lenders in connection with this transaction.
“We continue to actively manage our balance sheet, with a focus on executing our cost reduction initiatives. The reduction in principal amounts owed under the senior secured credit facility as a result of the amendment and waiver will provide for annual cash interest savings of approximately $0.5 million per year,” said Hugh Kinsman, chief financial officer of 22nd Century Group, in a statement.
Subsequent to the debt reduction, the company announced the consummation of a public offering with $5.25 million in gross proceeds, which will be used for general operating purposes.
October 25, 2023
Nearly Half of Alto Users Quit Smoking: Study

Nearly 45 percent of participants who use Vuse Alto in a study completely switched away from cigarettes, according to the interim results of research conducted by Reynolds American Inc. (RAI).
The proportion of Vuse users who reported completely switching was higher for young adults aged 21–29 versus those who were 30 years or older; the proportion of Vuse users who reported completely switching was higher among minority demographics versus those who identified as non-Hispanic white; and the proportion of Vuse users who reported completely switching was higher among those who use menthol-flavored Vuse products versus those who use tobacco-flavored Vuse products.
For adults who smoke and had yet to switch completely, there was a greater reduction in cigarettes smoked per day for participants who used menthol-flavored Vuse products than those who used tobacco-flavored Vuse products.
The findings are part of a 24-month study, termed the Longitudinal Tobacco Use and Transitions Survey (LTTS), in support of RAI’s premarket tobacco product application for Vuse Alto.
Reynolds presented a summary of the interim results through the first year of the LTTS at the Food and Drug Law Institute Tobacco and Nicotine Regulatory Product Science Symposium on March 30, 2023, to an audience that included senior officials from the U.S. Food and Drug Administration’s Center for Tobacco Products as well as several prominent public health researchers.
James Murphy, global director of research and science, and Chris Junker, vice president of science and regulatory affairs, provided an overview of the study’s importance and interim results in a video.
In early October, the U.S. Food and Drug Administration issued marketing denial orders (MDO) for six flavored Vuse Alto-branded products. At the request of Reynolds, an appeals court stayed the order, allowing Reynolds to continue offering Vuse Alto menthol products pending review of the company’s formal challenge of the order.
October 25, 2023
Fireside Chat: Talking About COP10
The upcoming 10th meeting of the Conference of the Parties (COP10) to the World Health Organization’s Framework Convention on Tobacco Control (FCTC), which will take place this November in Panama, was the theme of a “fireside chat” moderated by Chris Kodderman, director of Kodderman Public Affairs.
The disinformation that is making physicians skeptical about reduced-risk products and the misinterpretation of the FCTC’s Article 5.3 are the two biggest impediments to tobacco harm reduction (THR), said global health advocate Derek Yach, who was significantly involved in shaping the FCTC treaty. In his prework on the FCTC, Yach related, he invited tobacco companies to hear directly from them how the complex health problems relating to tobacco could be solved. “We never built on that, and then the shutters came down.”
Flora Okereke, head of global regulatory insights and foresights at BAT, said the opportunity in COP10 lay in the fact that both the industry and public health have the same goal: getting people off cigarettes. In addition, she reminded her audience that the treaty mentions THR, which seems to suggest that it’s possible for countries to explore alternative ways of reducing smoking apart from handling the demand and supply side. “That provision has never been talked about in COP,” said Okereke. “We now have an array of reduced-risk products, consumers who have indicated that they can live with these products, and countries with experiences that are proof that adopting this THR approach as a policy has led to a decline in smoking rates.”
Recent WHO documents, reports and statements suggest that the global health body is skeptical about the role of smoke-free alternatives in smoking cessation and concerned about underage access—a sentiment that will likely be echoed by the convention secretariat at COP10, Okereke said. “However, the treaty makes it clear that the power for decision-making is within the parties, insisting that decisions are made by consensus. If parties wanted to share their positive experience with THR, this is an opportunity for them to start requesting an independent team to evaluate the role of these products. All they would have to do is use their mandate effectively and withhold their consensus.”
Yach pointed out that by developing guidelines on Article 5.3, the secretariat went beyond their legal briefs. “All of the guidelines that include words such as ‘banning,’ ‘demonizing,’ [and] ‘excluding’ in my view are against international law,” said Yach. “We have allowed these guidelines to slip away as if they are facts, but they’re not, and they need to be challenged legally. The member states are the best to do this.”
At COP10, Yach recommended, countries with positive experiences with THR should share the positive changes that their policies have brought about. He also called for the industry to come together in a consortium to take concerted action. “It is long overdue that tobacco companies, despite competition, recognize that there are some areas where they must come together and present a united front that, I believe, would build confidence in their long-term intent.”
For this approach, Yach singled out two areas: “A commitment made between the industry to prevent youth access would be very powerful.” In addition, he said, referring to an example where pharma giant Merck collaborated with the WHO to eliminate river blindness disease in West Africa and committed to making the drug forever, the tobacco industry should harness the use of nicotine pouches and snus. “This way, they could eliminate oral cancer in South Asia,” said Yach. “If they were to make that bold statement that they want to do this with the WHO, member states and all other private and nongovernmental organizations together, this would be a surprising and bold move that would get people to take note, particularly the people in these countries who are dying at the rate of 350,000 per year.”
October 24, 2023
Filter Makers Partner for Biodegradables

Photo: DragonImages
Greenbutts and Filtrona have established a partnership to manufacture biodegradable filters for tobacco companies in the U.S.
Under the joint development agreement Filtrona will lease a manufacturing machine from Greenbutts to produce biodegradable filters using proprietary technology. The partnership supports the strategy of both companies to drive the industry’s transformation by providing alternative sustainable filter solutions to traditional cellulose acetate filters.
“In response to the detrimental impact of plastic pollution on our planet, there is an urgent need to address the No. 1 most littered item globally. Greenbutts has pioneered proprietary technology and advanced material science to bring a novel, performance-driven plastic alternative to the tobacco industry,” said Greenbutts CEO Tadas Lisauskas in a statement.

By partnering with Filtrona, this joint endeavor is set to transform the way cigarettes are manufactured, with post-consumer waste and our planet front of mind.
Tadas Lisauskas, CEO, Greenbutts
“Our certified biodegradable technology offers a new alternative to single-use plastic filters, providing a pathway for the industry to embrace environmental sustainability without compromising performance or consumer experience. By partnering with Filtrona, a company committed to driving positive change within the industry, this joint endeavor is set to transform the way cigarettes are manufactured, with post-consumer waste and our planet front of mind.”

We believe that by collaborating with other suppliers who share our environmental goals, we can meet the growing demand for sustainable products more rapidly.
Robert Pye, CEO, Filtrona
“We recognize that our customers are increasingly seeking sustainable products, and we are on a journey with them to support this transformation alongside Greenbutts with our advanced filter technology and portfolio of renewable, degradable and sustainable filters that can meet their product and regulatory needs,” said Filtrona CEO Robert Pye.
“Today, Filtrona alone cannot meet the volume requirements in terms of sustainable filter conversion. We believe that by collaborating with other suppliers who share our environmental goals, we can meet the growing demand for sustainable products more rapidly. This joint development with Greenbutts is the first of many such collaborations which we will embark on to help drive the industry forward,” said Pye.
“We believe that true impact can be achieved through strategic collaboration, and that’s why we are partnering with Filtrona,” said Lisauskas. “Our dedicated innovation hub is committed to fostering new technology, collaboration and knowledge exchange, propelling the industry towards a more sustainable future.”
October 24, 2023