Author: Taco Tuinstra

  • FDA Urged to Follow the Science

    FDA Urged to Follow the Science

    Photo: Pixel-Shot

    The U.S. Food and Drug Administration’s Center for Tobacco Products (CTP) should open the marketplace for electronic nicotine delivery systems to products with varied characteristics so that those interested in alternative nicotine products can access them, according to R Street resident senior fellow Jeffrey Smith.

    In a recently published analysis, Smith critiques the FDA’s disregard for the current research on ENDS, diving into new data that he says represents a “tectonic-shift in the academic medicine community” regarding the safety of ENDS for smoking cessation. 

    ”As evidence grows for the utility of ENDS and other potentially life-saving alternative products, the CTP continues to limit Americans’ access to these products,” writes Smith.

    “Though the CTP has received millions of applications for ENDS products, it has only allowed a few to be marketed legally in the United States. Of those that have received marketing clearance, only older closed systems have been approved—with tobacco as the only permitted flavor.”

    Arguing that a diverse range of ENDS products available to those who smoke and want to quit is critical to reducing the health burdens associated with smoking, Smith urges the CTP to revise its processes and procedures, and allow more cigarette alternatives on the market. Continued delay by the CTP, he says, will only lead to more unnecessary deaths and disease in the United States.

  • Hong Kong to Push Pack Price Above HKD90

    Hong Kong to Push Pack Price Above HKD90

    Photo: Heorshe

    Hong Kong will hike the duty on cigarettes by HKD0.80 ($0.10) per stick, pushing the price of a pack of 20 cigarettes to HKD94, reports The Standard. The duty on other tobacco products will be increased by the same proportion.

    Currently, a pack of cigarettes costs HKD78 after a 25.8 percent increase last year.

    Finance Minister Paul Chan Mo-po expects the proportion of tobacco duty in the retail price of cigarettes to rise to about 70 percent, gradually approaching the 75 percent level recommended by the World Health Organization.

    Chan believes this will provide the public with a greater incentive to quit smoking. He said the government will step up enforcement against illicit cigarette trading and strengthen smoking cessation services, publicity and education.

    The Coalition on Tobacco Affairs expressed regret over the government’s decision to increase tobacco taxes without disclosing how last year’s price hike impacted the prevalence of smoking.

    The coalition said the prior-year increase had exacerbated illicit cigarette activities with customs seizing a record-high 650 million cigarettes in 2023.

    “This indicates how syndicates take advantage of Hong Kong’s high tobacco tax policy to control the sale of illicit cigarettes with the aim to provide funding to other criminal activities,” the coalition said in a statement.

  • Ireland Prepares Vape Tax

    Ireland Prepares Vape Tax

    Image: Zerbor

    The government of Ireland is working to introduce a tax on e-cigarettes in 2025, reports The Irish Times.

    Finance Minister Michael McGrath confirmed that his department had started work with the revenue department to announce the tax in the next budget and introduce it next year.

    McGrath cited the vaping industry’s “insidious” targeting of e-cigarettes toward young people as justification for the tax.

    “There’s no doubt, but it is a deliberate policy,” he was quoted as saying. “In my mind, what is happening when you see all the attractive flavors and names, it’s definitely targeting young people and very successfully.”

    While acknowledging that e-cigarettes are helping some smokers quit more harmful combustible cigarettes, McGrath also noted that there are many unknowns about the long-term effects of e-cigarettes.

    He said it was important for the Department of Finance’s proposed tax to align with policies of other departments around e-cigarettes and vapes, such as the Department of Health and the Department of Environment.

  • More FDA Warnings

    More FDA Warnings

    Photo: Ljupco Smokovski

    The violations involve products sold under the Elf Bar/EB Design/EB Create, Funky Republic, Lost Mary brands.

    The U.S. Food and Drug Administration has warned five more online retailers for selling flavored disposable vaping products.

    On Feb. 28, the regulatory agency announced that the warning letters cite the sale of disposable e-cigarette products marketed under popular brand names such as Elf Bar/EB Design/EB Create, Funky Republic, Lost Mary, Hyde, Breeze and Cali Bars, according to a press release.

    “Protecting our nation’s youth from the harms of tobacco products is crucial to our center’s public health mission,” said Brian King, director of the FDA’s Center for Tobacco Products in a statement. “We’re committed to continuing to use a data-driven approach to identify and prevent the sale of unauthorized tobacco products and to take compliance and enforcement action when appropriate.”

  • A New Reality

    A New Reality

    Photo: Delovoy Petersburg

    Two years into the Ukrainian conflict, tobacco businesses still scramble to adapt.

    Contributed

    Since Russian forces crossed the Ukrainian border on Feb. 24, 2022, tobacco business on both sides of the conflict has been a roller-coaster ride. As the second anniversary approaches, tobacco companies have yet to fully adapt to the new reality.

    In 2022, sweeping Western sanctions triggered massive disruptions in the supply of raw materials for tobacco factories in Russia and Belarus. The logistics havoc that followed the first EU sanctions packages took a heavy toll on production costs. Besides, the restrictions directly prohibited the delivery of some raw materials to the country.

    Nearly two years since, this issue is yet to be fully solved, according to Sergey Glushkov, head of the communications department at Japan Tobacco International Russia.

    “Two years ago, 100 percent tobacco and more than 90 percent of nontobacco materials were produced abroad. However, after necessary raw materials were included in the list of dual-use products and were placed under the U.S., EU and Japanese sanctions, tobacco companies operating in Russia started diligently looking for suppliers in China, India and other markets,” Glushkov said on the company’s social media networks in Russia.

    In addition, to mitigate risks, the company puts a lot of effort into import replacement. JTI Russia has localized foil, plastic film, cardboard packaging, most paints and some raw materials. As a result, the share of localized raw materials has nearly tripled compared to pre-sanction times, though it is still falling miles short of the desired level.

    Raw material supply is still a pressing issue, which is far from being sorted out, Glushkov admitted.

    There are many reasons why sanctions keep executives of the Russian tobacco factories awake at night. As Western technologies are no longer available on the Russian market, modernization issues also come to the fore.

    Some necessary equipment and production lines are nearly impossible to get, Glushkov stated, adding that this situation might push factories to somehow rejiggle operations. He didn’t elaborate, only admitting that this would incur costs.

    Numerous reports indicated that Russian businesses find creative and effective ways of circumventing Western sanctions, sourcing necessary raw materials in third countries like Turkiye, China, Kazakhstan and Georgia.

    However, as Western countries double down on their efforts to close the existing loopholes allowing Russian firms to bypass the restrictions, this work is growing trickier by the day. U.S. President Joe Biden signed an executive order in December announcing secondary sanctions on foreign banks suspected of supporting Russia’s campaign in Ukraine.

    This move has seemingly hit the target, as banks in Turkiye, one of the largest hubs for re-exporting Western goods to Russia, have started closing Russian corporate accounts following threats of secondary sanctions from the United States, the local press reported, citing market players.

    There are problems in China as well. A major Chinese bank for Russian importers, Chouzhou Commercial Bank, ceased operations with Russian and Belarusian companies. Occasional reports indicate difficulties Russian business has in other jurisdictions.

    In Ukraine, plans are drafted to move cigarette factories to safer territories (Photo: Fifth Channel)

    Seeking a Safe Harbor

    On May 28, a kamikaze drone hit Imperial Tobacco Group’s factory near Kyiv, Ukraine. Although the destructions reportedly were insignificant, this event once again reminded foreign investors operating in the country that in the context of constant shelling, no place can be considered entirely safe.

    Imperial Tobacco Group resumed operation soon after the Russian troops fell back from Kyiv. Galina Vorobieva, director of Imperial Tobacco Production Ukraine, claimed that the company faced a hard choice whether to resume operation, as safety risks were undeniable.

    Plans were drafted to move the production to a Western region, which is considered safer, but the wheels are yet to be set in motion.

    Philip Morris International, in turn, has recently confirmed plans to build a new cigarette factory near Lviv, not far from the Polish border, to manufacture around 7 billion cigarettes per year.

    Maxim Barabash, director of Philip Morris Ukraine, explained that the company is primarily driven by safety concerns, as the factory in Kharkiv in the eastern part of Ukraine sits too close to the battlefields.

    The Ukrainian authorities estimated that every third building in Kharkiv had been damaged by shelling. For this reason, putting the local factory into operation never seemed like a feasible option.

    “We understand that in the medium term, it will be challenging for us to put the Kharkiv factory back into full operation. And we need local production as soon as possible to meet the demand on the Ukrainian market,” Barabash told local press.

    In the good old days, the Kharkiv factory manufactured 20 billion cigarettes per year, of which nearly half was exported. It is hard to imagine this now, but a share even landed on the Russian market.

    The Lviv factory will manufacture less because export is not in the cards. Besides, the demand on the domestic market has plummeted by roughly a third as millions of Ukrainians fled from the country seeking shelter in the neighboring countries.

    The fate of the Kharkiv factory remains vague. According to Barabash, Philip Morris is not contemplating shutting it down completely, but the company also won’t need two production assets.

    Almost all smaller tobacco factories continue operation in the country despite multiple challenges, spanning from worsening labor shortage to waning demand and flourishing illegal trade. A recent report by the Kyiv School of Economy indicated that the share of the shadow segment of the cigarette market in Ukraine spiked to a record-breaking 20 percent.

    Illicit cigarettes remain a problem in both Russia and Ukraine. (Photo: Russian government)

    Looming Nationalization

    Since early 2022, all leading Western firms have been pressured to sever their ties with the Russian and Belarussian markets. Not all tobacco firms, however, were quick to do so.

    In August 2023, Ukraine’s National Agency on Corruption Prevention even added Philip Morris International and Japan Tobacco International to the list of “international war sponsors” for not pulling a plug on Russian operations. The Ukrainian government agency claimed that both companies generated solid revenue in Russia and kept paying taxes to the Russian budget.

    Imperial Brands was the first of the global tobacco firms to leave Russia in April 2022, followed by BAT in September 2023.

    JTI Russia decided to continue its business in the country to not deprive customers of the products they are accustomed to, Glushkov unveiled. Despite that, JTI will not introduce a new generation of tobacco-heating devices to the Russian market. JTI also complies with all regulatory rules when working on the Russian market, Glushkov emphasized.

    In March 2022, JTI announced that it suspended new investments and marketing activities in Russia. In April 2022, the company claimed it mulled various options for developing its business in Russia, including transferring it to new management.

    Negotiations on the sale of PMI’s Russian business have reached a dead end, Jacek Olczak, CEO of PMI, told the Financial Times in February 2023. He explained that PMI’s position was that it would rather keep its business in Russia than sell it on unfavorable terms, at an unfair price to shareholders.

    However, the reality is that Western firms running business in Russia no longer have an option to sell it, at least under reasonable terms. Since the middle of 2022, the Russian authorities have been consistently tightening screws for the foreign companies seeking an exit from the market.

    In October 2023, the Russian government stipulated that to sell Russian assets, investors from the countries deemed as unfriendly will need to make a voluntary contribution to the Russian budget comprising at least 15 percent of the cost of the deal. During the previous year, this contribution was limited to 10 percent.

    Besides, the Russian government commission on foreign assets requires Western firms to offer a nearly 50 percent discount on their assets for the deal to get a green light from the Russian regulator.

    However, even fulfilling these terms doesn’t guarantee a success. In July 2023, Russian President Vladimir Putin signed an order to nationalize the Russian operations of Danone and Carlsberg—both companies were working on selling their Russian assets.

    The move, among other things, has largely discouraged other foreign firms from executing their exit plans. The threat of forced nationalization has been looming over assets of foreign firms during the past two years.

    The Russian tobacco industry must be nationalized, claimed Biysultan Khamzaev, a member of the State Duma Committee on Security and Anti-Corruption, in an interview with state press on Jan. 19, 2024.

    “I would nationalize [assets of] all tobacco corporations in Russia. I would do it following the example of China. They established the China National Tobacco Corp. The system should be in the hands of the state, not private corporations. But it turns out that they earn money while the burden on the state, healthcare and social services rise,” Khamzaev said.

    Although the public attention to hostilities in Ukraine has tangibly diminished, the challenges they brought to the tobacco business are still as real as ever. As the war grinds into the third year, the future of the tobacco factories in all countries involved remains highly uncertain.

  • Tax Would Restrict Harm Reduction to the Rich

    Tax Would Restrict Harm Reduction to the Rich

    Photo: Anastasia Kargapolov

    The U.K. risks becoming a harm reduction country for the wealthy only, according to the World Vapers Alliance (WVA).

    The government, led by Prime Minister Rishi Sunak, is reportedly planning to impose increased taxation on vaping products alongside traditional cigarettes. The proposal has sparked significant concern among U.K. vaping advocates, who argue it threatens to undermine the nation’s progress in harm reduction and smoking cessation efforts.

    “It appears that in a bid to generate additional tax revenue, the U.K. government is willing to compromise the health of thousands of smokers,” said WVA Director Michael Landl. “This is yet another step in the wrong direction. By making less harmful alternatives to smoking more expensive, the government is effectively deterring smokers from making the switch. This measure will disproportionately affect the less affluent and exacerbate health inequalities, especially during a cost of living crisis.”

    The WVA cites statistical evidence revealing the disproportionate impact of smoking on lower socioeconomic groups. In 2021, the Office for National Statistics highlighted a stark disparity in smoking prevalence related to economic status in the U.K. Unemployed individuals reported a significantly higher smoking rate (25.7 percent) compared to those in paid employment (13.3 percent). Furthermore, in England, a pronounced smoking prevalence was observed in the most deprived neighborhoods (23.8 percent) in contrast to the least deprived (6.8 percent).

    Landl also criticized the government’s proposed bans on disposable vapes and generational restrictions on heat-not-burn products.

    “Along with the proposed tax increases, these bans will only serve to transform the U.K. from a leader in tobacco harm reduction into a haven for black market activities,” he said.

  • E-cig Harm Perceptions Worsening: Study

    E-cig Harm Perceptions Worsening: Study

    Photo: Asier

    Harm perceptions of e-cigarettes have worsened substantially over the last decade among adult smokers in England, according to a study published by Jama Network Open.

    In 2023, most adults who smoked believed e-cigarettes to be at least as harmful as cigarettes. The timing of the changes in harm perceptions coincided with the e-cigarette, or vaping product, use-associated lung injury outbreak in 2019 and the recent increase in youth vaping in England since 2021.

    Researchers collected data from 28 393 adult smokers. In November 2014, 44.4 percent thought e-cigarettes were less harmful than cigarettes, 30.3 percent  thought e-cigarettes were equally harmful, 10.8 percent thought they were more harmful, and 14.5 percent said they did not know.

    However, by June 2023, the proportion who thought e-cigarettes were less harmful had decreased by 40 percent, and the proportion who thought e-cigarettes were more harmful had more than doubled.

    Changes over time were nonlinear: late 2019 saw a sharp decline in the proportion who thought e-cigarettes were less harmful and increases in the proportions who thought they were equally or more harmful. These changes were short-lived, returning to pre-2019 levels by the end of 2020.

    However, perceptions worsened again from 2021 up to the end of the study period: the proportion who thought e-cigarettes were more harmful increased to a new high, and the proportion who thought e-cigarettes were less harmful decreased to levels comparable to those in late 2019.

    As a result, in June 2023, the perception that e-cigarettes were equally as harmful as cigarettes was the most commonly held view among adults who smoke, with roughly similar proportions perceiving e-cigarettes to be less and more harmful.

  • Poland Mulling Ban on Disposables

    Poland Mulling Ban on Disposables

    Photo: Yelena Belodedova

    Polish Health Minister Izabela Leszczyna is mulling a ban on the sale of disposable electronic cigarettes, according to the Polish edition of Business Insider.

    Leszczyna added that she would like to pursue the fastest possible legislative path to such as measure, given that as many as 64 percent young people in Poland had “contact” with the product.

    The news comes after the United Kingdom announced a ban on single-use cigarettes in January.

    Meanwhile, Poland is preparing to implement the EU directive banning the sale of flavored heated tobacco products. According to local media reports, the regulation may take effect from next year.

    The EU directive prohibits the placing on the EU market of flavored heated tobacco products and removes the possibility for member states to grant exemptions for such products from certain labeling requirements set out in EU law.

  • Sindh Bans Shisha and E-cigs in Public

    Sindh Bans Shisha and E-cigs in Public

    Photo: GlobalReporter

    The government of Sindh, Pakistan, has banned the use of shisha and e-cigarettes in public places. The government directed authorities to implement the Prohibition of Smoking and Protection of Nonsmokers Health Ordinance 2002.

    The ban includes hotels, restaurants, parks, cafes and picnic areas; however, the ordinance is not being implemented in “true and spirit,” according to Pakistan Today.

    The health department has directed authorities to “take relevant action against the violators” of the ban.

  • TPB Announces Financial Results

    TPB Announces Financial Results

    Photo: Summit Art Creations

    Turning Point Brands announced financial results for the fourth quarter and full year ended Dec. 31, 2023.

    Total consolidated net sales decreased 6.1 percent in the fourth quarter of 2023 to $97.1 million. Zig-Zag Products net sales decreased by 2.9 percent. Stoker’s Products net sales increased by 18.6 percent. Creative Distribution Solutions net sales decreased by 43.7 percent. Gross profit increased 1.9 percent to $50.5 million. Net income increased $26.4 million to $10.1 million. Adjusted net income increased 15.9 percent to $15.3 million. Adjusted EBITDA increased 7.5 percent to $24.8 million.

    “Our fourth-quarter results were at the high end of our expectations,” said TPB President and CEO Graham Purdy in a statement. “The Zig-Zag segment was stable from the previous year, excluding the impact of a discontinued product line, and is well positioned to return to growth in 2024. Stoker’s had an outstanding quarter, posting its highest growth rate in over four years led by double-digit growth year-over-year in Stoker’s MST. We also had strong free cash flow generation during the year, allowing us to build a cash balance to address the remaining principal amount of our convertible notes at maturity in July. Our outlook for 2024 is positive as we expect solid growth in our Zig-Zag and Stoker’s Products businesses.

    “Our U.S. Zig-Zag papers and alternative channel business posted a strong quarter with double-digit growth to close the year. With the reduction of trade inventory through the year, Zig-Zag is now positioned to return to growth aided by industry secular growth trends and internal growth initiatives.”

    “Stoker’s had an exceptional quarter with strong market share gains in both the MST and loose-leaf categories as its value proposition continues to resonate with consumers,” continued Purdy. “We are excited about the planned expansion of our FRE white nicotine pouch product throughout the year.”