Author: Taco Tuinstra

  • KT&G: Half of Sales from Abroad by 2027

    KT&G: Half of Sales from Abroad by 2027

    Photo: KT&G

    KT&G Corp. aims to earn over half of its sales from overseas businesses in 2027, the company told participants in an investor event.

    The South Korean cigarette manufacturer targets sales of KRW10 trillion ($8.1 billion) by that year compared with an estimated annual sales of KRW5.9 trillion for 2022. Last year, KT&G likely earned about one-third of its sales from overseas operations. 

    In addition to focusing on its combustible cigarette business, the company will reinforce its next-generation product (NGP) businesses, which include heat-not-burn (HnB) products and health functional food products, KT&G Senior Executive Vice President Bang Kyung-man was quoted a saying by the Yonhap News Agency.

    “We will invest KRW4 trillion to build new overseas production facilities and expand existing ones in the next five years to meet growing demand for NGPs, like HnB products,” he said.

    The company is also considering building a new factory, either in Kazakhstan or eastern Europe, Bang said. To raise the necessary capital, the company plans to sell unused property and borrow money from banks, he said. 

    KT&G has exported its HnB products to more than 30 countries since 2020 when it signed an agreement with Philip Morris International for the commercialization of KT&G’s smoke-free products outside of South Korea.

    KT&G currently earns 90 percent of its revenues from cigarette sales and 10 percent from HnB products. The company has four tobacco manufacturing plants—one each in South Korea, Russia, Turkey and Indonesia—with a combined capacity of 13.6 billion cigarettes a year. 

  • Three Heating Products Authorized in the U.S.

    Three Heating Products Authorized in the U.S.

    Photo: Destina

    The U.S. Food and Drug Administration has authorized the marketing of three new tobacco-flavored heated-tobacco products included in Philip Morris Products’ supplemental premarket tobacco product applications (PMTAs). The products receiving marketing granted orders are Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks and Marlboro Amber HeatSticks, each of which is used with the IQOS tobacco-heating device.

    Based on the FDA’s review of the supplemental PMTAs, the agency determined that the marketing of these products should be authorized because, among other things, the net population-level benefits to adult smokers outweigh the risks to youth.

    In 2019, the FDA authorized the marketing of IQOS and several other Marlboro HeatSticks products through the PMTA pathway. Philip Morris pursued marketing authorization for these new Marlboro HeatSticks by submitting supplemental PMTAs for modified versions and line extensions of the tobacco-flavored product for which the company had previously received a marketing granted order. A supplemental PMTA can be submitted in situations where an applicant is seeking authorization for a new tobacco product that is a modified version of a tobacco product for which they have already received a marketing granted order. 

    Following the FDA’s rigorous scientific evaluation of the applications, the agency determined that Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks and Marlboro Amber HeatSticks are comparable to the previously authorized tobacco-flavored product. Like the previously authorized products, the FDA has placed stringent marketing restrictions on the new products in an effort to prevent youth access and exposure.

  • Indonesia Mulls Ban on E-Cigarettes

    Indonesia Mulls Ban on E-Cigarettes

    Photo: ink drop

    Indonesia may ban cigarettes if they are found to be harmful to public health, reports Antara News.

    Speaking at the University of Indonesia in Jakarta on Jan. 26, Vice President Ma’ruf Amin stated that thorough assessment of the effects of e-cigarettes on public health would be conducted before the government takes its decision. 

    If e-cigarettes are found to be safe for public health, the government will consider how to tax the products, he noted. 

    Earlier, the government proposed to strengthen health warnings on tobacco packaging, restrict advertising and prohibit the sale of single cigarettes, among other measures.

  • Juul in Talks With Tobacco Companies

    Juul in Talks With Tobacco Companies

    Photo: vchalup

    Juul Labs is in talks with leading cigarette manufacturers about a partnership, alliance or sale of its business, reports The Wall Street Journal.

    Juul executives have had separate discussions with Philip Morris International, Japan Tobacco and Altria Group, according to the newspaper.

    The talks are at an early stage and might not result in a sale of partnership, The Wall Street Journal’s sources pointed out. Altria, which owns one-third of Juul, valued the vaping company at $1 billion in October.

    Once the undisputed leader of the U.S. vape market, Juul reached the brink of bankruptcy last year after the Food and Drug Administration denied its marketing applications and ordered the company to remove its products from the market.

    The order has been stayed pending appeal but the still-unresolved dispute made it difficult for Juul to raise money to cover its legal liabilities. In December, Juul agreed to pay $1.7 billion in a broad legal settlement covering more than 5,000 lawsuits accusing the company of marketing its products to teens and children. Juul denies targeting underage consumers.

    To pay for the deal, Juul secured an equity investment from a group including two Juul directors. The settlement and financing put Juul on firmer ground and allowed the company to begin talks with potential strategic partners.

    On Sept. 30, Altria announced it was ending its noncompete agreement with Juul. The decision gave Juul the freedom to sell itself—or a significant stake—to one of Altria’s competitors.

    Altria can’t buy Juul outright because of antitrust concerns: The Federal Trade Commission is seeking to unwind Altria’s 2018 investment in Juul. Altria and Japan Tobacco in October formed a partnership to develop and sell heated-tobacco devices in the U.S. and other new tobacco products abroad.

    If the FDA ultimately halts Juul’s sales, Juul could seek U.S. authorization for a newer version of its vaporizer that has been released in Canada and the U.K. Juul also has other products under development.

  • Reynolds to Appeal Menthol MDOs

    Reynolds to Appeal Menthol MDOs

    Photo: BAT

    BAT will appeal the U.S. Food and Drug Administration’s marketing denial orders for its Vuse Vibe Tank Menthol 3.0 percent and Vuse Ciro Cartridge Menthol 1.5 percent, the company announced in a statement.

    On Jan. 24, the FDA denied marketing applications for two menthol refills used in Vuse Vibe and Vuse Ciro vaporizers, which are sold in the U.S. by BAT subsidiary R.J. Reynolds. According to the agency, Reynolds’ applications presented insufficient evidence to show that the potential benefit to adult smokers outweighs the risks of youth initiation and use.

    “Reynolds intends to seek a stay of enforcement immediately and will pursue other appropriate avenues to allow Vuse to continue offering its innovative products to adult nicotine consumers age 21-plus without interruption,” the company said.

    “We believe that menthol vapor products are critical to helping adult smokers migrate away from combustible cigarettes. FDA’s decision, if allowed to go into effect, will harm, not benefit, public health.

    “We remain confident in the quality of all of Reynolds’ applications, and we believe that there is ample evidence for FDA to determine that the marketing of these products is appropriate for the protection of public health.”

    Anti-tobacco campaigners countered that menthol e-cigarettes appeal to underage consumers. “Existing evidence demonstrates that nontobacco-flavored e-cigarettes, including menthol flavored e-cigarettes, have a known and substantial risk with regard to youth appeal, uptake and use; in contrast, data indicate tobacco-flavored e-cigarettes do not have the same appeal to youth and therefore do not pose the same degree of risk,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, in a statement.

    Morgan Stanley said it expected the rejected products to remain on the U.S. market for the duration of BAT’s appeal, with minimal impact on the company’s operations. “Longer term, should today’s denial order reflect a broader effort by the FDA to ban menthol e-cigarettes, BAT’s U.S. cigarette business could benefit given its menthol mix as it might discourage some smokers from quitting or switching to reduced-risk products,” the bank wrote in a note to investors. Reynolds’ Newport brand represents about 40 percent of BAT’s U.S. cigarette dollar sales, according to Morgan Stanley.

    The Jan. 24  rejection of the Vuse refills underscores the FDA’s ongoing reluctance to approve menthol e-cigarette flavors. To date, the agency has approved only tobacco-flavored e-cigarettes.

    However, the FDA has granted both a premarket tobacco product application and modified-risk tobacco product designation to IQOS’ menthol variant, which may eventually leave Philip Morris International’s heat-not-burn product as one of the few menthol reduced-risk alternatives on the market.

    The FDA is targeting publishing a final rule to ban menthol cigarettes in August 2023, but considering expected industry litigation, final implementation could be five to six years away, according to Morgan Stanley.

  • FDA Denies Two Vuse Menthol Vapor Products

    FDA Denies Two Vuse Menthol Vapor Products

    Photo: rangizzz

    The U.S. Food and Drug Administration issued marketing denial orders (MDOs) for R.J. Reynolds Vapor Co.’s Vuse Vibe Tank Menthol 3.0 percent and the Vuse Ciro Cartridge Menthol 1.5 percent.

    “Consistent with the authorities granted by Congress, the FDA remains committed to evaluating new tobacco product applications based on a public health standard that considers the risks and benefits of the tobacco product to the population as a whole,” said Brian King, director of the FDA’s Center for Tobacco Products. “The applications for these products did not present sufficient scientific evidence to show that the potential benefit to adult smokers outweighs the risks of youth initiation and use.”

    “Existing evidence demonstrates that nontobacco-flavored e-cigarettes, including menthol-flavored e-cigarettes, have a known and substantial risk with regard to youth appeal, uptake and use; in contrast, data indicate tobacco-flavored e-cigarettes do not have the same appeal to youth and therefore do not pose the same degree of risk,” the FDA wrote in a statement.

    “Given these existing differences in youth risk, applicants need to provide robust evidence to demonstrate that using their menthol-flavored e-cigarette products are likely to promote a complete switch or are likely to significantly reduce combustible cigarette use in adult smokers beyond that facilitated by tobacco-flavored e-cigarette products. Data from the 2022 National Youth Tobacco Survey found that Vuse was the second most common brand youth e-cigarette users reported ‘usually’ using.”

    “Today’s decision pertains to the specific application submitted for review by FDA,” said King. “It is the responsibility of the applicant to provide sufficiently robust scientific evidence to demonstrate that the necessary public health standard has been met. In this case, the presented evidence did not meet that standard.”

    In assessing the implications of the most recent MDOs for RJRV’s parent company, BAT, Morgan Stanley noted that Vuse Vibe and Vuse Ciro represent only a small portion of BAT’s overall e-cigarette sales in the U.S.

    “Should it choose to appeal, we would expect its products to remain on the market as the appeal is ongoing, resulting in minimal/no operating impact,” the investment bank wrote in a note to investors.

    Morgan Stanley said the MDO provides another example of the FDA’s ongoing reluctance to approve menthol e-cigarette flavors. To date, the agency has approved only tobacco-flavored e-cigarettes.

    The financial institution also noted that the FDA has granted both a premarket tobacco product application and modified-risk tobacco product designation to IQOS’ menthol variant, which may make it one of the few menthol reduced-risk alternatives on the market.

    The FDA is targeting publishing a final rule to ban menthol cigarettes in August 2023, but considering expected industry litigation, final implementation could be five to six years away, according to Morgan Stanley.

  • Pouch Trade Secrets Dispute Settled

    Pouch Trade Secrets Dispute Settled

    Photo: Andrii

    Kretek International, Modoral and Swedish Match have settled a legal dispute relating to nicotine pouch trade secrets, reports Law360.

    In 2020, Swedish Match alleged that Kretek and its subsidiary Dryft Sciences, as well as Modoral, misappropriated six trade secrets concerning the manufacturing and formulation of nicotine pouches.

    The defendants all denied Swedish Match’s claims and said they don’t owe the company any damages.

    Swedish Match sells nicotine pouch products under the name Zyn based on U.S. Patent No. 9,161,908 and trade secrets that it bought from Swedish nicotine company TillCe. According to Swedish Match, one of TillCe’s affiliates in 2016 breached its agreements with Swedish Match by selling the trade secrets to Kretek, which formed Dryft Sciences to sell products in competition with Swedish Match.

    Kretek then formed Dryft Sciences to sell products that misappropriated Swedish Match’s trade secrets, the complaint states.

    In November 2020, BAT—which owns Modoral’s parent company Reynolds American—bought Dryft Sciences’ nicotine pouch business and its product line.

    After Swedish Match informed BAT that it owned the U.S. patent and other trade secret information, Modoral filed a declaratory judgment action for noninfringement and also sought invalidity of the patent as well as for no misappropriation of Swedish Match’s trade secrets, the complaint states.

    On Jan. 19, U.S. District Judge Stanley Blumenfeld Jr. entered partial judgment in favor of Modoral, finding that Swedish Match couldn’t establish that Modoral’s accused product infringed any of the asserted claims of the patent.

    In their trial briefs filed earlier this month, Modoral and Kretek both argued that Swedish Match can’t sustain its trade secret misappropriation claims because its alleged trade secrets aren’t actually secret.

  • Trade Group: Germans Smoking Less

    Trade Group: Germans Smoking Less

    Photo: Rene Van Den Berg | Dreamstime.com

    Contrary to what the recently conducted German Survey on Smoking Behavior (DEBRA) suggests, Germans are smoking less, writes the German Association of the Tobacco Industry and New Products (BVTE) on its website, citing figures from the Federal Statistical Office (FSE).

    According to the FSE, sales of taxed cigarettes will decline in 2022 for the fourth year in a row, falling well below the 70 billion unit threshold for the first time.

    “People are smoking less and less in Germany. That is a fact that cannot be disputed,” says Jan Muecke, chief executive of the BVTE. “If more smoked, we would have to see that in the sales statistics. The opposite is the case.”

    Conducted at the University of Duesseldorf, the DEBRA found that the proportion of smokers in the total population increased from 25.4 percent in 2020 to 37.6 percent in July 2022. Among underage tobacco users, the prevalence had even almost doubled within one year, showing an increase from 8.7 percent in 2020 to 15.9 percent in 2022. According to the DEBRA, several million adults and around 200,000 minors have (re)started smoking.

    The BVTE noted that such a significant increase in smoking prevalence should have been reflected in government sales statistics, even if the new smokers were only occasional users.

    However, fewer cigarettes have been sold in Germany every year since 2019. From 2019 to 2021, cigarette sales fell by 3.6 percent to 71.7 billion units. This trend continued in 2022. The FSE reported tax stamp purchases for 60.7 billion units from January 2022 to November 2022. This means that 8 percent fewer cigarettes were produced for the German market than in the same period of the previous year.

    For 2022 as a whole, the agency expects sales of around 67 billion units.

    “People are smoking less and less in Germany. If more smoked, we would have to see that in the sales statistics. The opposite is the case.”

    Jan Muecke, chief executive, BVTE

    According to the BVTE, the discrepancy between official sales statistics and the DEBRA data points to methodological weaknesses in the survey. For example, the alleged increase in the proportion of underage consumers is based on a sample of only about 50 young people—apparently including eight people who reported smoking. Based on this data, says the BVTE, any estimate of smoking prevalence is highly uncertain.

    Muecke lamented the fact that the dubious DEBRA results were used to justify misguided demands for regulation. “Tobacco is fully regulated,” he said. “Adult smokers in Germany already feel unduly patronized and are not reached even with ever new bans and restrictions.”

    At the same time, German policy fails to expand the range of new alternative products for smokers and to create more opportunities and greater acceptance for potentially risk-reduced nicotine consumption, according to the BVTE.

    For example, the Federal Ministry of Agriculture is delaying the regulation of tobacco-free nicotine pouches, which are still not available to smokers in German shops despite the fact that the Federal Institute for Risk Assessment has acknowledged that switching from cigarettes to nicotine pouches could represent a reduction in the health risk for a person who smokes.”

  • Pyxus Appoints New Chief HR Officer

    Pyxus Appoints New Chief HR Officer

    Fernanda Goncalves (Photo: Pyxus International)

    Pyxus International has appointed Fernanda Goncalves as its new senior vice president and chief human resources officer.

    Goncalves joins Pyxus with more than 20 years of global human resources and business experience, most recently serving as global HR head at Red Hat, an IBM subsidiary headquartered in Raleigh, North Carolina, USA. She has also held positions with multinational companies including BASF, Hamburg Sued and Ernst & Young.

    Goncalves has a Master of Business Administration degree from Duke University in Durham, North Carolina; a master’s degree in supply chain management from Universidade Mackenzie in Sao Paulo, Brazil, and a bachelor’s degree in business management from the University of Salvador in Salvador, Brazil. In addition to her professional experience, Goncalves serves as a board member of the National Hispanic Corporate Council, working to promote diversity, equity and inclusion (DEI) strategies, talent acquisition goals and employer branding and talent strategies.

    “On behalf of Pyxus and the board of directors, I am pleased to welcome Fernanda to the company,” said Pyxus president and CEO Pieter Sikkel in a statement. “During the extensive search to fill this position, we were impressed by Fernanda’s perspective on talent management and experience with HR strategy, DEI programs and organizational transformation. She has a clear passion for making the greatest impact through shaping the employee experience, coaching and developing leaders, and driving overall business success, which aligns with Pyxus’ purpose and business strategy.”

    Reporting to Sikkel, Goncalves will serve as a key member of Pyxus’ executive management team. She will provide leadership to the company across several core functions and support its strategic priorities, including upholding its commitment to environmental, social and governance targets. Goncalves succeeds Laura Jones, whose last day with the company was Dec. 31, 2022.

    “The board and I would like to thank Laura for nearly 24 years of leadership and dedication to the company,” said Sikkel. “She was integral in shaping the company’s culture and driving organizational growth and performance. It was a privilege to work with her, and we wish her success in her future endeavors.”

  • Preliminary Approval for Juul Settlement

    Preliminary Approval for Juul Settlement

    Photo: Juul Labs

    Juul Labs secured preliminary court approval on Jan. 20 of a $255 million settlement resolving claims by consumers that it deceptively marketed e-cigarettes, reports Reuters.

    U.S. District Judge William Orrick in San Francisco said the proposed class action settlement was “fair, reasonable and adequate.”

    The settlement is part of a larger, global agreement by Juul to resolve thousands of lawsuits by school districts, local governments and individuals accusing it of contributing to a youth vaping epidemic.

    In December, Juul Labs settled more than 5,000 lawsuits covering more than 10,000 individual plaintiffs. The deal is valued at $1.7 billion, according to The Wall Street Journal.

    The recent class action settlement resolves claims by people who say they would have paid less, or not bought the e-cigarettes at all, if Juul had not downplayed the products’ addictiveness and appealed to teenagers through social media campaigns and other means.

    A pioneer in the vaping business, Juul Labs has gone from dominating the U.S. e-cigarette market to fighting for its survival in a relatively short time.

    Following its initial success, the company quickly came under regulatory scrutiny over its marketing practices. Critics blame Juul Labs for contributing to an “epidemic” of underage vaping.

    Thousands of lawsuits have been filed against Juul over the past several years, alleging that the company marketed its e-cigarettes to children. Juul has said it never marketed to underage users.

    In September, Juul Labs agreed to pay nearly $440 million to settle a two-year investigation by 33 U.S. states into the marketing of its vaping products.

    Juul’s e-cigarettes were briefly banned in the U.S. in late June after the Food and Drug Administration concluded that the company had failed to show that the sale of its products would be appropriate for public health. But following an appeal, the health regulator put the ban on hold and agreed to an additional review of Juul’s marketing application.

    In October, Juul published the details of its marketing denial order appeal. In late September, Juul shareholder Altria Group exercised the option to be released from its noncompete deal with the e-cigarette maker.