Author: Taco Tuinstra

Illegal Cigarettes Seized in Germany

Photo: Alterfalter
German authorities seized around 10.4 million undeclared cigarettes in Lubeck-Travemunde, reports Xinhua, citing a statement by the customs investigation office in Hamburg.
The discovery was made when customs officers performed a routine check on a trailer arriving by ferry from Latvia. The truck had declared a consignment of peat, but instead, officers found cartons each containing 10,000 cigarettes.
According to customs officials, the smuggled cigarettes represented a tax loss of €1.9 million ($1.9 million). Authorities are now investigating the origin of the cigarettes and the recipients, who are believed to be located in Western Europe.
“Customs have once again uncovered a significant tax loss in Travemunde and are thus making a major contribution to tax justice in Germany and Europe,” Stephan Meyns, spokesperson for the Hamburg customs investigation office, was quoted as saying by Xinhua.
Earlier this month, German authorities arrested four people for cigarette trafficking.
Investigators had searched 46 residential and business premises throughout the country, confiscating cash, cigarettes and tobacco. German authorities estimate that the smugglers caused tax losses of around 11 million euros.
As par the operation, authorities also uncovered illegal manufacturing plants in Romania and Slovakia, according to the Osnabrueck Public Prosecutor’s Office and the Prosecutor’s Office and Customs Investigation in Essen.
November 10, 2022
Mativ Sales Up 76 Percent

Photo: SWM
Sales of Mativ Holdings increased 76 percent to $674.1 million in the third quarter of 2022, with 12 percent constant currency organic sales growth, or 7 percent organic growth including negative currency impacts, the company announced in a press note.
Strong sales growth in release liners, protective solutions, filtration, and paper and specialty packaging led the portfolio, according to the company, which was created in July following the merger between Schweitzer Mauduit International and Neenah.
Pricing actions drove top-line gains while offsetting raw material cost increases, with margin expansion across most categories. Macro trends such as negative currency changes, increasing global economic uncertainty and European energy inflation impacted results, as did a cybersecurity incident unrelated to the integration of the Neenah merger during the quarter
Fiber-Based Solutions segment sales were $248 million, up 101 percent, and reflect the merged company results versus the prior year period, which reflected only legacy SWM results. Organic sales growth was 7 percent, or 12 percent excluding negative currency impacts, driven primarily by price increases, and comparable adjusted operating profit increased 6 percent. Double-digit sales growth in packaging and specialty papers led the portfolio. Price increases exceeded inflationary pressures for the segment.
“Mativ delivered organic constant currency sales growth of 12 percent in the quarter, with most business areas delivering increased price, revenue and margin,” said Mativ CEO Julie Schertell. “On a comparable basis, adjusted operating profits were up nearly 25 percent. Our merger integration is progressing well, and we are executing on our $65 million cost synergy plan. Based on current performance, we now expect to exceed our previously communicated $20 million synergy run-rate exiting 2022.”
November 10, 2022
KT&G to Release New HnB Products in Korea

Photo: Tobacco Reporter archive
KT&G Corp. will launch new heat-not-burn products in South Korea to strengthen its electronic nicotine devices lineup, reports the Yonhap News Agency.
The South Korean cigarette manufacturer will release Lil Able and its premium version, Lil Able Premium, on Nov. 16.
KT&G’s third-quarter net profit jumped 29 percent from a year earlier on increased exports and a strong U.S. dollar. Currently, the company earns 90 percent of its sales from the cigarette business division and 10 percent from the heat-not-burn division.
The company has been stepping up efforts to increase sales in the noncigarette business division.
From January to September, net income climbed 21 percent to KRW1.06 trillion from KRW878.58 billion in the same period of last year.
On Nov. 4, the company announced a KRW350 billion share buyback to boost shareholder returns.
November 9, 2022
Illicit Trade Persists After Lockdown

Photo: Tobacco Reporter archive
The illicit cigarette trade continues to thrive in South Africa despite recent enforcement actions, according to a new Ipsos study.
According to Ipsos’ latest study, shops nationwide are still flooded with illegal tobacco products more than two years after the unconstitutional tobacco sales ban was imposed by the government as part of their response to the Covid-19 pandemic.
The study found that almost four out of five stores in the Western Cape (77.9 percent) sell cigarettes below the minimum collectible tax (MCT) rate of ZAR22.79 ($1.28) per pack. Almost three in four shops in Free State (72.3 percent) sell cigarettes below the MCT as do 66.2 percent of outlets in Gauteng, a significant increase compared to research conducted a year ago.

“The latest Ipsos study is irrefutable proof that the unconstitutional lockdown tobacco sales ban created a monster with an insatiable appetite.”
Johnny Moloto, general manager, BAT South Africa
A single pack of 20 cigarettes can be bought for as little as ZAR7, down from ZAR8, which was the lowest price found in the October 2021 study, according to Ipsos.
“The latest Ipsos study is irrefutable proof that the unconstitutional lockdown tobacco sales ban created a monster with an insatiable appetite,” said Johnny Moloto, general manager of BAT South Africa.
“Criminal manufacturers of tax-evading cigarettes are refusing to give up their control of the South African tobacco market and are pocketing billions in illicit profits that deprive the state of vital revenue and destroy honest jobs.”
November 9, 2022
Californians Uphold Flavored Tobacco Ban

Photo: PX Media
Californians voted to uphold a state law ending the sale of most flavored tobacco products, including flavored e-cigarettes, menthol cigarettes and flavored cigars.
Proposition 31, the ballot referendum to uphold the law, was ahead by a margin of 65 percent to 35 percent on Nov. 9. The Associated Press called the race, though official results will take longer to finalize. The state mailed ballots to all active voters. Ballots postmarked by election day have a week to arrive.
In 2020, California lawmakers passed a ban on all flavored nicotine products except hookah, loose leaf tobacco (for pipes) and premium cigars. Menthol products are also covered by the legislation.
Opponents of the ban collected more than 1 million signatures and forced the state to hold a referendum on the ban. Originally scheduled to take effect Jan. 1, 2021, the legislation was then suspended until the Nov. 8 vote.
Advocates for Proposition 31 argued the restrictions would deter tobacco use among kids by eliminating youth-friendly flavors, such as bubblegum, cotton candy and cherry.
Opponents said the ban would remove flavored electronic nicotine-delivery systems as an effective tool to quit traditional cigarettes and that some communities were unfairly targeted by the law. Black smokers, for example, are more likely to use menthol cigarettes.
Supporters of the ban outspent opponents by a significant margin in the runup to the ballot. By mid-October, the billionaire anti-smoking and anti-vaping activist Michael Bloomberg had provided $15.3 million of the $17.3 million raised by the committee in favor of the ban, according to the San Francisco Chronicle. By contrast, the opposition had raised just over $2 million, almost entirely comprised of donations from Philip Morris USA ($1.2 million) and R.J. Reynolds ($743,000).
California joins Massachusetts and the District of Columbia in ending the sale of flavored tobacco products, including flavored e-cigarettes, menthol cigarettes and flavored cigars. Three other states—New Jersey, New York and Rhode Island—prohibit the sale of flavored e-cigarettes. With local laws included, 25 percent of the U.S. population will now be covered by laws ending the sale of flavored e-cigarettes.
November 9, 2022
Shares Sold in Imperial’s Former Russia Unit

Photo: Imperial Brands
Russian businessman Sergei Katsiev has acquired a 15 percent stake in International Tobacco Group, the former Russian subsidiary of Imperial Brands, reports Interfax, citing data from the Unified State Register of Legal Entities (USRLE).
In March, Imperial Brands announced that it was suspending operations in Russia, including production at its factory in Volgograd, sales and marketing, in response to Russia’s military assault on Ukraine. In April, the company said it had transferred its business in Russia to local investors.
Earlier this year, Imperial Tobacco Sales and Marketing and Imperial Tobacco Volga were renamed International Tobacco Group and International Tobacco Group Volga, respectively.
According to the USRLE, Nikolai Tyaka owns 75 percent of International Tobacco Group and International Tobacco Group Volga.
Following the Feb. 24 invasion, international cigarette manufacturers announced they would end their operations in Russia, but retreating from such a major market is easier said than done. Tobacco companies have had to carefully navigate shifting regulations and avoid missteps that could prompt the government to seize the business, for example—all the while trying to protect employees from becoming targets for arrest.
Tax payments by the leading international cigarette manufacturers have provided the Russian government with at least $7.25 billion in additional income since President Vladimir Putin ordered his army to attack Ukraine, according to an analysis of Russian Treasury figures conducted by The Telegraph.
Because Russia and Ukraine were relatively small markets for Imperial Brands, representing around 2 percent of net revenues and 0.5 percent of adjusted operating profit in 2021, the company may have found it easier to extract itself from Russia than some of its larger competitors.
November 9, 2022
Voedsel Banned From Contracting Farmers

The TIMB headquarters in Harare
(Photo: Taco Tuinstra)
Zimbabwe’s Tobacco Industry and Marketing Board (TIMB) has banned Voedsel Tobacco International from contracting farmers this season after failing to pay farmers for two years, reports The Herald.
“Voedsel won’t be participating this year because they owe huge amounts of money to tobacco growers,” an unnamed official told The Herald.
Voedsel Director Tennyson Hwandi blamed “white-owned companies” for working against indigenous tobacco merchants.
“Big tobacco companies are being threatened by Black-owned tobacco companies, and Voedsel being one of the major players has been a target. They are determined to see us closing down,” he was quoted as saying, adding that Voedsel has already been giving its farmers inputs for the upcoming growing season.
A TIMB official said that if Voedsel was indeed issuing inputs, this would be illegal because the regulator had not licensed the company.
With buying facilities in tobacco-growing regions, including Rusape, Marondera and Karoi, Voedsel was among the major financiers of tobacco contract schemes.
Zimbabwe sold 212.7 million kg of tobacco at a value of USD650.3 million during the 2022 tobacco marketing season, compared with 211.1 million kg worth USD589.6 during the previous buying period.
November 8, 2022
STOP Adds to Industry Allies Database

Photo: courtyardpix
STOP, a tobacco industry watchdog, has added 25 organizations from 12 countries to its Industry Allies database. Organizations on the list are categorized as front groups, “astroturf” groups or third parties that promote the tobacco industry’s agenda while appearing to be independent.
“This update provides further evidence that the tobacco industry uses different types of organizations to build influence. They range from traditional allies like farmers’ groups and retailers’ associations, whose members have a vested interest in the sale of the industry’s products, to groups promoting the industry’s electronic products,” said Phil Chamberlain, deputy director of the Tobacco Control Research Group at the University of Bath, a partner in STOP, in a statement. “The common factor is shared interest, with tobacco companies as founders, funders, members or sources of revenue.”
STOP has added 135 groups across 33 countries since the database launched in 2019. The update includes organizations that focus on countries with some of the highest rates of smoking and largest populations, including Bangladesh, India, Indonesia and Pakistan. Colombia is newly represented on the list.
Many of the newly added groups promote the industry’s newer nicotine and tobacco products; four are associations of grocers, news agents and convenience stores that sell the industry’s products; several position themselves as representing the interests of tobacco farmers, and three are Chambers of Commerce or business groups, according to STOP.
November 8, 2022
22nd Century Reports Third-Quarter Results
22nd Century Group reported net sales of $19.4 million for the third quarter of 2022, up 148 percent over that posted in the comparable 2021 period. The increase was due to increased contract manufacturing volumes as well as the addition of GVB Biopharma revenue for the full third quarter.
Revenue from tobacco-related products was $11.5 million, an increase of 47.7 percent from 2021, primarily driven by volume increases in the number of cartons sold, price increases and favorable mix for filtered cigar and cigarettes (including export cigarettes).
Revenue from hemp/cannabis-related products was $7.8 million compared to $0 in the prior year third quarter.
During the quarter, the company expanded distribution of its VLN reduced-nicotine cigarettes, accelerating sales in Colorado and Illinois while launching the brand in the “Four Corners” states—Arizona, Utah and New Mexico.
“The past few months have demonstrated tremendous commercial progress in 22nd Century’s reduced-nicotine tobacco and hemp/cannabis businesses,” said 22nd Century CEO James A. Mish in a statement. “Our VLN product launch has expanded from the exceptional pilot in Chicago to now five states. We plan to expand that base to as many as 18 states over the next 12 months.
“Doing so would give us access to more than half the $80 billion U.S. tobacco market and position us in most, if not all, of the states that have enacted MRTP (modified-risk tobacco product) excise tax provisions favorable to our unique product authorization. Even just a 1 percent share, which we view as eminently achievable based on our pilot results, would be transformative to our revenue line.
“The FDA is also continuing to advance its interests in transformative menthol and reduced-nicotine policies, and 22nd Century is positioned at the forefront of this opportunity with the only MRTP authorized 95 percent reduced-nicotine combustible cigarette and years of clinical research documenting the benefits of our products.”
November 8, 2022
Turkiye to Crack Down on Illicit Trade

Photo: Dzmitry
Turkiye plans to crack down on illicit tobacco production and consumption, which cost the state an estimated TRY30 billion ($1.61 billion) in lost tax revenue, reports Daily Sabah.
A draft bill set to be discussed at Parliament will bring prison terms of up to five years for people selling tobacco without licenses from the Ministry of Agriculture and Forestry.
Illicit product is estimated to account for 20 percent of Turkey’s tobacco market. In 2021, some 35 billion cigarettes containing contraband tobacco were sold. This year, consumption is projected to reach about 50 billion.
The majority of illicit trade comprises illegally produced, unlicensed tobacco sales, such as hand-rolled cigarettes, representing around 27 percent of Turkish cigarette consumption. Counterfeit or smuggled cigarettes, by contrast, constitute about 3 percent of the market.
Authorities seized 4.7 million packages of smuggled cigarettes, 273 tons of tobacco products and 329,000 cigars during the first nine months of 2022, preventing a loss of TRY625 million in tobacco taxes, according to police data.
November 8, 2022