Author: Taco Tuinstra

RLX Obtains Chinese Manufacturing License

Photo: RLX Technology
China’s State Tobacco Monopoly Administration (STMA) has licensed RLX Technology to operate in the vapor business.
On Nov. 26, 2021, China’s State Council amended the country’s tobacco monopoly law to include vapor products, giving the STMA authority to regulate the sector.
The STMA license, which is valid until July 31, 2023, allows RLX Technology to manufacture 15.05 million rechargeable vaping devices, 328.7 million cartridges and 6.1 million disposable e-cigarettes per year.
Since the first quarter of 2022, Chinese authorities have issued a series of implementing rules and guiding opinions to strengthen oversight of e-cigarette products and regulate the e-cigarette industry. These rules and opinions set forth that all e-cigarette manufacturing enterprises must obtain a license from the STMA.
“This license represents an important milestone in our strategic roadmap as we strive to comply with the new regulatory requirements in a timely manner,” said Ying (Kate) Wang, co-founder, chairperson of the board of directors and CEO of RLX Technology, in a statement.
“We believe that we are well-positioned to achieve compliance in our operations according to schedule. To adapt to the new market dynamics and ensure business development, we will, and will urge our business partners to, continue making efforts to comply with all applicable regulatory requirements, including, but not limited to, obtaining requisite licenses and regulatory approvals, developing products that meet the mandatory national standards, and processing all transactions via the National E-cigarette Transaction Platform when it is implemented.
“We will remain committed to providing high-quality products that deliver superior performance and safety in strict compliance with legal and regulatory requirements, while exploring new growth opportunities in the industry.”
July 24, 2022
PMI Reports Second Quarter Results

Photo: PMI
Philip Morris International reported net revenues of $7.83 billion in the second quarter of 2022, up 3.1 percent over that reported in the comparable quarter of 2021. Operating income was $3.06 billion, compared with $3.13 billion during the prior-year quarter. Net revenues from smoke-free products accounted for 29.9 percent of total net revenues.
PMI shipped 157.69 billion cigarettes and 24.82 billion heated tobacco units in the second quarter of 2022, up 1 percent and 1.9 percent, respectively, over the volumes shipped in the comparable 2021 period.
Given uncertainty and volatility created by the war between Russia and Ukraine, PMI also provided financial figures on a pro forma basis, which exclude the company’s operations in those markets and thus provide a more comparable view of PMI’s business performance.
On a pro-forma basis, the company’s net revenues increased by 6.2 percent between the second quarter of 2021 and the second quarter of 2022, while its operating income grew by 1.6 percent. Net revenues from smoke-free products accounted for 29.9 percent of total net revenues on a pro forma basis.
The company has suspended its manufacturing operations in Kharkiv, Ukraine, and intends to exit the Russian market. In 2021, Ukraine accounted for around 2 percent of PMI’s total cigarette and heated tobacco unit shipment volume and under 2 percent of PMI’s total net revenues. Russia made up almost 10 percent of total shipment volumes and around 6 percent of PMI net revenues.
“First and foremost, the war in Ukraine continues to deeply affect the lives of our employees and families in the region,” said PMI CEO Jacek Olczak in a statement. “My first priority is to give them the help they need and as a company we are focused on doing our utmost to support them throughout this conflict.”
“Turning to our results, our strong underlying performance continued in the second quarter, with top- and bottom-line growth exceeding our initial expectations. This reflected excellent IQOS momentum, including accelerating growth in pro forma total IQOS users and heated tobacco unit in-market sales volume, as well as favorable cigarette category trends.
“We are raising our outlook for the full year and now expect to deliver pro forma adjusted growth in net revenues of 6 percent to 8 percent, on an organic basis, and diluted earnings per share of 10 percent to 12 percent, excluding currency, underpinned by pro forma heated tobacco unit shipment volume of 90 to 92 billion units.”
July 24, 2022
BAT Launches Glo Hyper X2

Photo: BAT
BAT unveiled its Glo Hyper X2 tobacco heating device in Tokyo on July 21.
Building on the technology of Glo Hyper+, which launched in 2020, the Hyper X2 incorporates advanced induction heating technology encased in a smaller, lighter weight device. A separate boost function for faster heating, battery status LED indicator, a protective iris-shaped shutter and bold new colors complete the new hyper X2 offer, according to BAT.
Hyper X2 works with existing consumables from the Glo Hyper series.
“The launch of Glo Hyper X2—our newest, state-of-the-art heated tobacco product—marks another key milestone in our transformation as we build the brands of our future,” said Kingsley Wheaton, chief marketing officer at BAT, in a statement. “Since launching our first Glo product in Japan in 2016, we have built Glo into a billion-dollar global brand through our deep consumer insights, science and innovation.
“Our multi-category portfolio offers the industry’s widest choice of scientifically substantiated, less risky and enjoyable products for adult smokers who are looking to switch. This is a further big step in accelerating our transformation into a consumer products business that defines itself by the consumer needs that we meet, rather than the products we sell.”
“In addition, final results from our landmark one-year clinical study of Glo have provided important new data that adds to evidence supporting Glo as a reduced-risk product. In the study, people switching completely to Glo achieved significant and sustained improvements across many exposure and potential harm measures compared to those who continued to smoke, with many indicators similar to quitting.”
Glo hyper X2 will be available in Glo stores across Japan and on the Glo and Velo official online store from July 25, 2022, and in convenience stores in Japan from August 2022.
Glo products are available in 25 countries. The global rollout of Glo Hyper X2 will take place over the coming months.
July 24, 2022
USTC Exits Bankruptcy

Photo: USTC
U.S. Tobacco Cooperative (USTC) exited bankruptcy on July 14. The announcement follows the federal Bankruptcy Court’s approval of the cooperative’s Chapter 11 plan of reorganization on June 23, 2022, along with approval of the settlement terms with the Lewis Class.
USTC filed for bankruptcy protection in July 2021 in order to meet contractual obligations to its member growers while the company addressed uncertainty presented by the ongoing Lewis class action lawsuit.
“Today’s exit from bankruptcy marks the end of more than 17 years of class action lawsuits following the termination of the federal price support program that ran from 1946 to 2005,” said USTC CEO Oscar J. House in a statement.
“Our exit allows us to now focus solely on the services and products our cooperative is known for. I want to thank our customers, employees, suppliers, board of directors and especially our member growers for their continual support throughout the bankruptcy proceedings, which are now officially behind us.”
In accordance with the plan, the cooperative pays in full its secured lenders, suppliers and unsecured creditors in addition to settlement amounts to the Lewis Class.
“We are energized,” continued House. “Our business is robust with our farmer members contracting for this fall’s harvest, customers ordering our products and shipments processing daily. With our experienced management team, dedicated employees and our strong market position, the cooperative is poised for a successful future.”
July 18, 2022
Romania to Hike ‘Sin Taxes’

Photo: Maksym Kapliuk
Romania’s government will increase tobacco and alcohol excise duties as of Aug. 1, aiming to boost public revenue, reports SeeNews. The measure will be followed by a 10 percent tax hike on sugary drinks effective Jan. 1, 2023
The excise duty on tobacco and alcohol has been unchanged since 2015.
The European Union requires member states to impose an excise duty of at least 60 percent of the weighted average retail selling price of cigarettes.
The Romanian government expects the measures to boost budget revenues by RON1.2 billion ($242 million) this year and RON10.57 billion in 2023.
July 17, 2022
Zimbabwe to Wrap up Auction Sales

Photo: Taco Tuinstra
Zimbabwe expects to wrap up its tobacco auction season July 20 with slightly better prices than last year, reports Xinhua News Agency, citing the Tobacco Industry and Marketing Board (TIMB).
A flue-cured auction mop-up sale will be conducted on Aug. 17, 2022, and depending on the volume of deliveries, the clean-up sale may be continued for more than one day until all delivered tobacco is sold.
The TIMB added that because of significant volumes that are still being received, contract sales will continue until further notice.
Zimbabwe’s 2022 tobacco auction selling season started March 30, 2022.
Tobacco prices have been slightly firmer this year, due to better leaf quality despite the difficult weather conditions experienced during the season.
The opening price this year was $4.60 per kg, compared with $4.30 last year.
Over the course of the selling season, prices remained firm, averaging above $3 per kg compared to an average of $2.80 per kg last year.
As of July 12, farmers had sold 179.4 million kg of golden leaf at an average price of $3.04 per kg.
The bulk of Zimbabwe’s tobacco leaf is sold through contract floors, as only 5 percent of farmers are able to self-finance tobacco leaf production.
Tobacco is Zimbabwe’s second foreign currency earner after gold, with China and South Africa being the major buyers of the country’s golden leaf.

July 17, 2022
Malaysia’s Generational Tobacco Ban Clears Cabinet

Photo: PX Media
Malaysia’s Cabinet has approved the Tobacco and Smoking Control Bill, reports The Star.
“I will be sending [the Bill] to Parliament for this session,” Health Minister Khairy Jamaluddin told reporters during the presentation of a new drug perception study report on July 14.
Among other provisions, the bill calls for a ban on sales of cigarettes, tobacco and vapor products to those born after 2005.
The proposed law is modeled on legislation in New Zealand, which in December 2021 revealed a plan to phase out smoking by gradually raising the smoking age until it covers the entire population.
Presently, some 40.5 percent of men and 20 percent of women smoke in Malaysia.
July 17, 2022
Patent for Biodegradable Filter
Image: Greenbutts
Greenbutts has received a Canadian patent for its biodegradable filter tow technology.
The patent adds to Greenbutts’ proprietary technology stack, offering an all-natural, biodegradable and water dispersing cigarette filter. Previously, Greenbutts obtained patent recognition in the United Kingdom and the United States.
“Greenbutts’ mission started 12 years ago, at a time when the phrase ‘single-use plastic’ was not used as often as it is today,” said Greenbutts CEO Tadas Lisauskas in a statement. “Our dedication through extensive R&D with our world-class scientific team is now being recognized on a global scale as governments, industry and consumers are all in alignment with a green, clean future.”
According to Lisauskas, Greenbutts’ biodegradable cigarette filter is compatible not only with traditional combustible smoking products but also with heat-not-burn products. In August 2021, Greenbutts signed an agreement to supply its biodegradable filters to Poda Lifestyle and Wellness.
“This patent has strategic importance to our organization as it comes in full alignment with the Canadian government’s decision to ban the manufacture and importation of harmful single-use plastics, a historic move for North America,” he said. “Our technology is a viable and sustainable alternative to cellulose acetate filters while maintaining the sensory experience, delivering the high-performance filtration capability of a traditional filter.”
“The granting of this new IP by the Canadian Intellectual Property Office is another demonstration that the company is advancing in becoming the most strategic partner to catalyze the tobacco industry to, once and for all, migrate from single-use plastic to a planet friendly, consumer-aligned and government-supported solution,” said Greenbutts’ chief strategy officer, Luis Sanches.
July 17, 2022
Trial Board Upholds Validity VPR Patent

Illustration: VPR Brands
The U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) upheld the validity of a VPR Brands patent that is considered one of the first patents for modern electronic nicotine-delivery system (ENDS) products.
The PTAB denied an appeal by Jupiter Research to invalidate VPR’s U.S. Patent 8,205,622 B2. The decision of the PTAB final.
The VPR patent dates to 2009 and includes independent claims covering electronic cigarette products containing an electric airflow sensor, including a sensor comprised of a diaphragm microphone.
The sensor turns the battery on and off, and covers most auto-draw, buttonless e-cigarettes, cigalikes, pod devices and vaporizers using an airflow sensor rather than a button.
According to VPR, the PTAB’s decision clears the way for infringement litigation against Jupiter pending in the District of Arizona.
VPR Brands and its legal representative, SRIPLAW, have started to identify and notify more than 50 of the leading companies using the auto-draw technology. VPR Brands says it intends to vigorously enforce its patent.
“These companies were prioritized, based on sales volume and popularity,” VPR wrote in a press release. “Most recently VPR Brands LP and its legal team, headed by Joel B Rothman of SRIPLAW, have filed litigation against nine of the companies. Additional lawsuits will continue to be filed as necessary to protect the company’s intellectual property rights.”
A majority of the vaping devices sold in the U.S. now utilize an auto-draw/button-less technology. The company is investigating all buttonless vape devices within the nicotine, CBD and cannabis space that initiate vaporization from the user’s airflow inhalation as those types of products would be suspect of infringement.
The company may also seek a buyer for this patent in the future. In August 2013, Imperial Tobacco Group (now ITG Brands) purchased the intellectual property behind the Ruyan e-cigarette, often considered the first modern ENDS product, for $75 million.
July 15, 2022
Indian Cigarette Sales on Track to Surpass Pre-Covid Levels

Photo: Taco Tuinstra
Indian cigarette sales are set to touch 93 billion sticks this year on the back of a stable tax regime and increased mobility after the ebbing of pandemic restrictions, reports The Financial Express, citing a study by rating agency Crisil.
Covid-19 lockdowns caused cigarette volumes to plunge to 77 billion sticks in 2021 from 90 billion sticks in 2020. As restrictions eased, cigarette sales recovered to 88 billion sticks.
The higher volumes will help cigarette manufacturers cope with the rising cost of inputs, which Crisil expects to shave manufacturers’ gross margins by 100-150 basis points.
Indian cigarette makers use flue-cured Virginia (FCV) tobacco, which is grown mostly in Andhra Pradesh, Telangana and Karnataka. FCV prices have risen 15 percent since last year as cultivation was impacted by untimely rainfall in December 2021 and January 2022.
Meanwhile, prices of paper are estimated to be 10 percent higher this fiscal year on an already-elevated base from 2020. India’s recently enacted ban on single-use plastics has driven up products costs, too, as cigarette manufacturers shift to biodegradable materials.
Between 2013 and 2017, excise duties on cigarettes rose annually at 15.7 percent. In fiscal 2018, the industry saw a further 20 percent hike in taxes as a result of the increase in excise duty and transition to a good and services tax.
Despite such challenges, cigarette manufacturers appear to be in good financial shape.
According to Crisil Associate Director Gopikishan Dongra, tobacco companies are likely to retain around 65 percent operating margins, due to the strong competitive advantage of established manufacturers and high entry barriers such as entrenched distribution channels and restrictions on advertising.
July 14, 2022