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  • California Flavor Ban Spawned Illicit Market

    California Flavor Ban Spawned Illicit Market

    Photo: sosiukin

    California’s 2022 ban on menthol cigarettes and flavored vapes has spawned a large, illicit marketplace for such products in the state, according to a study carried out WPSM Group.

    The researchers collected 15,000 empty discarded cigarette packs and 4,529 vapor product packages from May 1 through June 28 in 10 California cities. The study shows that the flavor ban has had limited effect on the access or demand for flavored vapor products or menthol cigarettes throughout the entire state. The results of the study include:

    • Of the vapor packs found, almost all (97.9 percent) were flavored.
    • Menthol (14 percent) and “menthol workaround” (7.1 percent) cigarettes combined made up 21.1 percent of the packs found compared to 24.5 percent of the California marketplace prior to the ban implementation.
    • More than one-quarter (27.6 percent) of products found were nondomestic products, which are not intended for the U.S. market. These products were primarily from U.S. Duty Free, Worldwide Duty Free, China and Mexico.
    • One cigarette brand, Sheriff, the fifth most prevalent brand found, is only intended for use outside the U.S.
    • The study indicated significant loss of state cigarette tax revenue. Among packs where it was possible to determine what tax stamp was applied, only 45 percent bore the California tax stamp.
    • This data suggests illicit cigarette markets are costing California as much as $1.27 billion annually in cigarette excise tax revenues—a funding source that supports important government programs.

    “This study provides further evidence that keeping products legal and regulated is the best path forward for tobacco policy,” said David Fernandez, vice president of government affairs and public policy of Altria Group, in a statement. “This data shows these products shifting in real time to illicit markets, which we know lack proper government oversight and other benefits of a well-regulated system.”

    The ban, which was implemented in December 2022, covers menthol cigarettes, flavored cigars, flavored smokeless tobacco and flavored vapor products.

  • Latvia to Raise Liquid Tax by 21 Percent Yearly

    Latvia to Raise Liquid Tax by 21 Percent Yearly

    Photo: alexlmx

    Latvia will increase excise taxes on e-liquids by an average of 21 percent annually until 2026. The excise tax rates on heated-tobacco products and combustible cigarettes are set to increase by 5 percent and 5.6 percent every year, respectively.

    Meanwhile, the tax on other “tobacco substitute” products, including nicotine pouches, will rise by 10 percent.

    Tobacco harm reduction advocates warned that the measure would negatively impact Latvia’s efforts to curb smoking by making safer alternatives less attractive.

    “Increasing the taxation of safer nicotine products will discourage smokers from switching and push users back to smoking,” said Alberto Gomez Hernandez, community manager of the World Vapers’ Alliance, in a statement.

    “The international evidence has shown that increasing taxation of e-cigarettes and e-liquids has always led to an increase in smoking, particularly among young adults and low-income groups.

    “Latvia should follow the steps of countries that are successfully reducing smoking rates by encouraging smokers to switch, such as the United Kingdom and Sweden, instead of making it more costly for them.”

  • American Vaping Association Shuts Down

    American Vaping Association Shuts Down

    Greg Conley

    The American Vaping Association (AVA) plans to shut down operations, reports Vaping360, citing a letter to supporters from AVA President Gregory Conley. The group was an advocacy organization representing both consumers and the independent industry, and it was in operation for almost 10 years.

    “While this may be the end of AVA, our common goal remains,” wrote Conley in the letter, “ensuring that smokers have access to safer alternatives. Despite rough times to come, I am hopeful for the future.”

    “As many of you may know, back in July 2022, I took on a new role as the director of legislative and external affairs for the trade association the American Vapor Manufacturers (AVM),” Conley wrote. “Since that time, AVA has gone dormant, although I have remained in my position as a volunteer to assist with administrative functions.”

    Following the dissolution of the AVA, Conley will continue in his role with the AVM, representing AVM members rather than his more universal spokesperson role with the AVA.

    The AVA’s remaining funds will be split into donations to the Consumer Advocates for Smoke-Free Alternatives Association and the Influence Foundation, which funds Filter’s online publication.

    “Looking ahead,” Conley wrote, “the vaping industry—and the tobacco and nicotine industry as a whole—face immense challenges, from byzantine regulatory hurdles to billionaire-funded misinformation campaigns. My work with the AVM will continue and is geared toward addressing some of these challenges head-on.”

  • Pacific Disputes ‘Shocking’ Tax Bill

    Pacific Disputes ‘Shocking’ Tax Bill

    Pacific Cigarette Co. co-founder and chairman, Adam Molai, during a virtual press conference on Oct. 11

    Pacific Cigarette Co. (PCC) of Zimbabwe has rejected a US$33 million tax bill (comprising separate assessments of US$19 million plus ZWD79 billion) and hopes an ongoing discussion with the national revenue collector will lead to an amicable settlement of the impasse.

    PCC went into voluntary business rescue soon after the Zimbabwe Revenue Authority (ZIMRA) in June handed it the assessment covering the periods 2018, 2019 and 2020.

    Adam Molai, co-founder and chairman of the Harare-based firm, told journalists during a virtual press conference on Oct. 11 that the bill was too high for any local company to be liable for over three years.

    “I don’t believe there is any company in Zimbabwe which over a period of three years can rack up a tax bill of over $20 million so that’s why we are disputing it,” he said.

    “This period that is being talked about is the period 2018, 2019 and 2020, but from the year we started operating until 2020 we have been audited every single year by ZIMRA, so it shows that we are compliant.”

    PCC”s production has, since 2005, been based on toll manufacturing, which meant it manufactured cigarettes for other firms.

    However, authorities have changed the way they calculate tax for toll manufacturers, which left PCC with obligations amounting to $33 million.

    The bill, Molai said, is “shocking” in terms of its magnitude.

    “Effectively what this assessment means was that if you look at a company [which for example] sells a product at $100, it has a cost of sales of $70 which is raw materials,” he said.

    “ZIMRA came in and said the $70 of raw materials is also income and because ‘we are deeming it income, we are going to levy VAT on it and after levying VAT because it is 2018, 2019 and 2020 we are also going to levy interest and then we are also going to levy a penalty for each of the years,’ so effectively what that would mean is Pacific produces their cigarettes at a price of zero. If our cost of sales is also deemed income it means our cost of production is zero, our raw materials are for free and that is what we are disputing.”

    PCC says it pays an average of $3 million in taxes yearly and has invested up to $250million since it started operating in 2002 as a threshing company.

    ZIMRA has 90 days within which to respond to an objection but before that period had elapsed, it, Molai claimed, issued a garnishee order against PCC.  The tax collector also wrote to the company’s clients asking them to pay all they owed PCC to ZIMRA instead.

    “That closes all our income streams and that is when we took the decision to say the most responsible decision is to place the business under business rescue,” said Molai.

    Responding to a question from Tobacco Reporter, Molai expressed confidence that ZIMRA will hand down a favorable decision but if it turns out negative, the company will appeal to the courts.

    “The day that the contingent liability is removed off our balance sheet, we will have an extremely strong balance sheet,” he noted.

    “The good thing about our company that is different from other companies that go into business rescue is we don’t have multiple challenges to address, we only have one single challenge to address which is this dispute.”–Daisy Jeremani

  • Disposables Approach 40 Percent of Market

    Disposables Approach 40 Percent of Market

    Photo: Alexander Gavrilichev

    Disposable e-cigarettes account for almost 40 percent of the vape sector, according to new analysis from ECigIntelligence.

    After an initial boom in the United States, the disposables market is now growing at a faster pace in other countries.

    Consumers are attracted to disposables mainly by convenience and low price, but there are variations in products internationally.

    For example, due to the EU Tobacco Product Directive’s (TPD) restrictions on the amount of e-liquid in vape products, the size of disposables has increased much more in non-TPD countries.

    On the other hand, in some TPD markets there has been an increase in zero-nicotine products, as these are allowed to have a larger tank capacity.

    Another notable recent development is the emergence of products that address the environmental concerns associated with disposables, for example products made mostly of paper, or with biodegradable components.

    To provide further insight into the global disposables market, ECigIntelligence has now launched a disposable e-cigarettes tracker.

    The data shows how disposable vape pricing, technical features, flavors and nicotine strengths have developed since 2020 across brands carried by leading online retailers. Users can even select specific models and see their closest competitors in the market in terms of features such as number of puffs, e-liquid capacity, battery capacity, and physical shape.

    “The disposables market has ballooned at such a rate that there is an urgent need for reliable, in-depth data,” said Tim Phillips, managing director of Tamarind Intelligence, which produces ECigIntelligence. “This new tracker will provide the intelligence that players at every level in the industry have been crying out for as they formulate their strategy on disposable products.”

  • GTNF 2023 Sessions

    GTNF 2023 Sessions

    Arizona Advances Landmark Vape Bill

    The Arizona Senate passed House Bill 4001 on May 26 with an overwhelming bipartisan vote of 24-2, establishing the state’s first formal regulatory framework for

  • Bonus Content: Rob Burton

    Bonus Content: Rob Burton

    In a video recording posted as part of the Bonus Content of the September Global Tobacco and Nicotine Forum in Seoul, South Korea, Robert Burton, group scientific and regulatory director of the Plxsur Group, made the case for the vaping industry to comply with the highest standards of integrity—even going beyond the requirements of regulations where necessary.

    “As the world’s largest group of independent vaping companies, we at Plxsur take our responsibilities very seriously and to that end we have developed a set of standards that we feel are appropriate, not just for ourselves, but for the industry as a whole,” Burton said.

    “Our first standard is in relation to compliance. We believe that all products should be manufactured to the highest possible standards. This includes the ingredients that go into them, the packaging, and the final product in terms of how it is merchandised, distributed and consumed.

    “Our second standard is youth access prevention. Nobody under the age of 18 should get access to these products. We should only be targeting adult smokers and adult vapers. To that end, online age verification systems should be standard. In-store education of shopkeepers, people selling these products, should also be standard, and systems in place in those stores to prevent access … [by] youth, such as age verification, facial recognition systems, which are now standard in many of our stores.

    “Our third standard is recycling, and obviously this is a very hot topic at the moment, particularly relating to disposables, the single use of plastics and the battery-use regulations that are coming into many countries. We believe it is the responsibility of not just the manufacturers but of the retailers of these products to encourage consumers to recycle and to proactively encourage facilitation of that recycling with collection sites and partnerships with recycling companies.

    “Our fourth standard is responsible marketing. We believe, as with our child-protection standards, that these products should not be marketed to youth. They should be marketed to adult smokers and vapers, and that includes the way that these are packaged—so no cartoon characters, no descriptors that imply these are sweets, confectionery. And also, that should be encouraged through the retailers as well to make sure these products are not in obvious areas where youth can have access to … [them] visually; or even access to them from a purchasing point of view.

    “The final standard, standard five, relates to child protection. And this relates to protecting children from access to these products; so accidental vaping or swallowing ingredients that could potentially cause harm. Specifically, we believe that all manufacturers should look at methods to protect their devices from access … [by] children. That includes pod activation systems, child locks on the devices themselves, and also various types of packaging that prevent access .. [by] children. There is no justifiable reason why any vape system should find its way into a child’s hands.

    “One thing that we need to remember is that this industry is still new, it’s still emerging, it’s still disruptive. Regulation is still playing catch-up. And just because that regulation either doesn’t exist or is being abused doesn’t mean that we as an industry should not set the highest possible standards. We at Plxsur are doing that not just for ourselves, we believe that this is a benchmark for the whole of the industry to follow.”

  • Bonus Content: Christopher Russell

    Bonus Content: Christopher Russell

    In a 45-minute video recording posted as part of the bonus content of the September Global Tobacco and Nicotine Forum in Seoul, South Korea, Christopher Russell, director of Russell Burnett Research and Consultancy of Glasgow, U.K., described a type of study that manufacturers of new tobacco products can conduct to demonstrate the cigarette-switching and smoking reduction potential of their products.

    Russell started by outlining the risks associated with smoking and the importance of reducing smoking prevalence and smoking-related harms.

    Then, in a presentation largely looking at the U.S. and the Health Risk Investigations section of the Food and Drug Administration’s system of premarket tobacco product applications (PMTAs), which require the submission of substantive amounts of data and information, he focused on the requirement to demonstrate the impact of a new tobacco product on tobacco use behavior among current tobacco users.

    The FDA, he said, had recommended that an applicant manufacturer conduct an Actual Use Study (AUS) but had not provided any formal guidance on how to design and conduct such a study in respect of a new tobacco product. Russell therefore spent some time describing how pharmaceutical manufacturers carried out AUSes in support of applications to change the marketing status of a drug from prescription to nonprescription and followed that up by describing how a PMTA applicant might take some of the key principles and design elements from such a drug-switch AUS and apply it to an AUS for a new tobacco product aimed at assisting adult smokers completely to switch or substantially to reduce their cigarette smoking when using a new product in everyday settings. He described four core principles that underpin how an AUS should be designed and conducted and on the objectives that new tobacco product AUSes had focused to date.

    Russell referenced a number of studies conducted primarily by the major tobacco manufacturers, Philip Morris International, Altria and Reynolds American. And he briefly described the design and key results of two of these studies, one involving a heated-tobacco product and another involving a nicotine pouch.

    In summary, Russell said the AUSes that had been completed to date showed they could provide near to real-world evidence that new tobacco products can serve as complete or substantial substitutes for combustible cigarettes for many adult smokers, so demonstrating the utility of this behavioral study design for providing the FDA with reliable and robust real-world information about the likelihood that if a new tobacco product were to be authorized for marketing, it would be used by adult smokers and that those adult smokers using the product in question would ultimately, in the short term to medium term, completely switch to using the product or, if not completely switch, substantially reduce the number of cigarettes they smoke while continuing to use the product, hopefully on a path to complete abstinence from cigarettes.

    Finally, Russell outlined a number of factors that manufacturers should have in mind when considering undertaking AUSes, including the company’s internal and external expertise capacity; the time required to design and conduct a study; the timing relative to the proposed PMTA; scientific engagement with the FDA’s Center for Tobacco Products; the possible availability of a robust, reliable alternative; the cost of the study and the cost of a lost opportunity.

  • Panel: Pathways to Sustainability

    Panel: Pathways to Sustainability

    The panel discussion “Pathways to Sustainability” explored how different companies approach the topic and navigate the path to a sustainable future.

    Christopher Fleury, senior vice president of regulatory affairs research at Ipsos, who moderated the panel, started off with a simple statement: “Promoting sustainability is a priority for businesses, but it is not easy.” This idea of sustainability being a complex goal remained a theme throughout the discussion.

    Each panelist brought a different perspective to the conversation. Ana Krasojevic, sustainability strategy and reporting director at Japan Tobacco International, offered corporate sustainability insight, noting that to achieve sustainability in any aspect requires full commitment.

    Sudhanshu Patwardhan, HealthTech entrepreneur and director of the Center for Health Research and Education, brought in the consumer perspective, having worked with many consumers in a medical capacity. He noted that sustainability brings with it a broader discussion of society at large and the environment.

    Diane Raverdy-Lambert, chief scientist and director of regulatory affairs at SWM, discussed the papers side of sustainability and how SWM looks at the entire life cycle of papers when creating their products. She also reiterated that “data is data” and “science should be irrefutable.”

    Michiel Reerink, international affairs director at Alliance One International (AOI) and managing director at AOI GmbH, addressed the agricultural side of sustainability, discussing how AOI works with farmers in Malawi to ensure they are using sustainable wood sources and are able to generate additional sources of income by growing crops like groundnuts. Sustainability is about the farmer relationship, he said, noting that it is not an isolated action but requires the whole supply chain to be involved.

    As the conversation progressed, Krasojevic noted three key aspects in thinking about sustainability and how to implement sustainable practices: taking decisions in a balanced way; taking a multi-stakeholder view; and looking at how the company impacts the external world and how the external world impacts the company. In her view, sustainability is embedded in “each and every business function” and is “circular.”

    The panel also discussed how sustainability has changed, noting that younger talent has strong expectations regarding sustainable practices and that it’s important to have standardized frameworks, like those of the United Nations’ Sustainable Development Goals (SDGs), that allow everyone to “speak the same language.” Standardization allows for something concrete rather than an “abstract story.”

    Much was said about the SDGs, with an emphasis on industry and consumers taking part in discussions and engagement. Patwardhan expressed that more of the SDGs should be discussed and engaged with by industry. The question was also posed as to whether the voices of the customer, the citizen and the smoker are saying the same thing. Ultimately, the panel seemed to agree that communication is important in achieving sustainability. Reerink noted that in many countries, companies are not allowed to communicate the sustainability of their products to consumers. Communication with consumers is extremely important, however, and misinformation regarding nicotine and tobacco products needs to be addressed, he noted.

    Sustainability is the new norm, according to the panel, and it drives innovation and a sense of purpose for companies. The ongoing question is how does the industry transform itself to be more responsible to the consumers and broader society? “Let’s not be reactive to everything that’s thrown at us,” Patwardhan said, referring to the industry at large. “If we are reactive, only we are to blame for the eventual outcomes. If we are proactive, there are benefits to be for the broader society.”

  • Keynote: Eve Wang

    Keynote: Eve Wang

    Eve Wang, executive director of Smoore International and vice president of Smoore Technology, gave a keynote speech on balancing innovation and social responsibility.

    Wang began by discussing the vapor industry as a whole, noting that the industry is young at only 20 years old. Smoore, she said, has been an industry player for 17 years.

    “We are at a very critical path for the vapor industry,” she said. The vapor industry has grown rapidly over the past 20 years. The first decade saw rapid growth while the following 10 years were characterized by diversification and sophistication along with greater regulation. Products became more compact and portable, usability improved, and open systems evolved into pod mods.

    Wang cited Frost and Sullivan data from March of this year, which showed that as of last year, the vapor industry was worth $52 billion, nearly double what it was in 2018. “There is no doubt the market is fast growing with huge potential,” said Wang. 

    With growth comes media attention, as Wang noted, highlighting headlines that called for bans and restrictions, overwhelmingly regarding disposables. Smoore, Wang explained, is tackling the issue by improving atomization efficiency and power efficiency. Atomization efficiency involves improving the utilization of e-liquid while power efficiency means increasing energy density and reducing battery size.

    “Do we have answers to all the challenges?” she asked. “I’m afraid it’s too early to tell.” She urged the industry to keep innovating and for every player to take their responsibility seriously.

    “As long as the conversation goes on, we are confident that together we can make the best outcome.”