Blog - Tobacco Reporter

Juul and Altria to Pay $60.5 Million in Minnesota Deal

Juul Labs and Altria Group will pay more than $60 million to settle Minnesota litigation relating to Juul’s marketing practices, according to Law360.

Minnesota Attorney General Keith Ellison sued Juul in 2019, alleging its marketing was deliberately targeted to minors and that the company failed to adequately verify customers’ ages, as required by law.

In April, the parties announced a settlement without disclosing the terms pending public filing of the papers.

Under the terms of the consent judgment filed with the Hennepin County District Court, Juul and Altria—a one-time Juul investor—will jointly pay $60.5 million to the state over an eight-year period. Altria will foot $5 million of the bill, according to the agreement.

The deal is front-loaded and will require the companies to pay nearly 60 percent of the settlement in less than one year, according to the Attorney General’s office.

The agreement also prohibits Juul from marketing or selling to children and young adults, restricts the company’s ability to sponsor certain events and use outdoor advertising in the state, prevents it from distributing product samples and requires that it accurately disclose the nicotine content of its products, according to the judgment.

The deal with Minnesota follows a $438.5 million settlement with more than 30 states and territories in September, a $255 million deal in December to end economic loss claims in multidistrict litigation and a $23.8 million deal in March to resolve the city of Chicago’s suit, among others.

And Juul last month agreed to pay $462 million to settle claims with California, Colorado, Illinois, Massachusetts, New Mexico, New York and Washington, D.C., over youth marketing claims.

May 19, 2023

FDA Denies Marketing of 250+ E-liquids

The U.S. Food and Drug Administration on May 18 issued marketing denial orders to Mothers Milk WTA for more than 250 flavored and tobacco-flavored e-liquids.

After completing initial acceptance review and subsequently proceeding to and completing a substantive scientific review of the company’s premarket tobacco product applications (PMTAs), the FDA determined that the applications lacked sufficient evidence to show the products are appropriate for the protection of public health.

For example, the applications did not provide sufficient evidence to show comparative health risk data relative to other tobacco products on the U.S. market, information assessing the abuse liability of the new products, or that the new products could be manufactured consistently.

“One of our most important responsibilities is to ensure new tobacco products undergo scientifically rigorous premarket review,” said Matthew Farrelly, director of the Office of Science within the FDA’s Center for Tobacco Products, in a statement. “We remain committed to evaluating these applications based on a public health standard that considers the risks and benefits of the tobacco product to the population as a whole.”

To date, the agency has received premarket tobacco applications for more than 26 million deemed products, the majority of which are e-cigarettes. The agency says it has made determinations on 99 percent of these applications. This includes more than 1 million applications for non-tobacco nicotine products, including those containing synthetic nicotine, after Congress clarified FDA’s authority to regulate these products in April 2022.

Further, FDA has authorized 23 tobacco-flavored e-cigarette products and devices, which are the only e-cigarettes that currently may be lawfully sold or distributed in the U.S. FDA has also denied marketing applications for millions of products that did not meet the requirements in the law.

May 18, 2023

Altria Holds 2023 Annual Meeting

Altria Group held its 2023 annual meeting of shareholders on May 18. During the meeting, CEO Billy Gifford provided brief remarks and addressed shareholder questions.

During the meeting, shareholders elected to a one-year term each of the 12 nominees for Altria’s board of directors (board) named in the company’s 2023 proxy statement; ratified the selection of PricewaterhouseCoopers as Altria’s independent registered public accounting firm for 2023; approved, on an advisory basis, the compensation of the Altria’s named executive officers (NEOs); approved, on an advisory basis, that future advisory votes on the compensation of Altria’s NEOs should be held annually; and rejected two shareholder proposals.

Following the annual meeting, Altria’s board declared a regular quarterly dividend of $0.94 per share, payable on July 10, 2023, to shareholders of record as of June 15, 2023.

May 18, 2023

FDA to Seize Illegal Vapes

The U.S. Food and Drug Administration has issued “Import Alert 98-06” that states the regulatory agency will detain new tobacco products such as e-cigarettes without marketing authorization at the border.

The companies impacted would include all importers, manufacturers and transporters of vaping product brands such as ELFBAR, EBDESIGN, Eonsmoke, Esco Bar and Stik that are on the agency’s “Red List.”

The alert covers China, South Korea and the United States.

“Divisions may detain, without physical examination, the tobacco products identified on the Red List of this Import Alert. If the division is not sure whether a tobacco product is the same product as one identified on the Red List, the division should consult with the Center for Tobacco Products (CTP)” the alert states. “CTP concurrence is required to add a product to the Red List.”

In order to remove a firm’s product from the Red List, companies must provide information to the FDA that adequately demonstrates that the firm has resolved the conditions that gave rise to the appearance of the violation.

“The purpose of this is so that the Agency will have confidence that future shipments/entries will be in compliance with the Federal Food Drug and Cosmetic Act (FD&C Act). For further guidance on removal from detention without physical examination, refer to FDAs Regulatory Procedures Manual (RPM), Chapter 9-8, ‘Detention without Physical Examination (DWPE),’” the alert states.

The FDA states that the import alert is to prevent the sale of potentially illegal goods in America; Releasing agency resources to inspect other goods; provide uniform coverage across the country; shift the blame back to the importer to ensure that products imported into the United States comply with FDA laws and regulations, according to the agency.

In June 2009, the Family Smoking Prevention and Tobacco Control Act gave the FDA the authority to regulate tobacco products, recognizing that it is the primary federal regulator for the manufacture, marketing, and distribution of cigarettes, cigarette tobacco, and smokeless tobacco.

The designation rule, published in the Federal Register on May 10, 2016, and effective August 8, 2016, extends FDA’s authority to designated tobacco products, such as e-cigarettes, cigars, hookahs, and pipe tobacco, as well as their components and parts, but not their accessories.

May 18, 2023

STG Reports Modest Sales Increase

Scandinavian Tobacco Group (STG) reported net sales of DKK1.96 billion ($285.53 million) in the first quarter of 2023, up 1.3 percent from the comparable 2022 period. EBITDA before special items was DKK474 million with an EBITDA margin of 24.1 percent.

During the quarter, STG completed the acquisition of Alec Bradley, a leading player in the U.S. handmade cigar category. In April 2023, following the close of the quarter, the company announced the acquisition of XQS, a brand active in Sweden within the next-generation product category space.

While still struggling with uncertainties relating to consumer behavior, the company expects year-on-year impacts from inflation to decline over the coming quarters. “Consumer demand for handmade cigars in the U.S. in the quarter is still perceived as resilient, although volume declines remained above its structural decline trend as overflow from the exceptionally strong two years during the pandemic trails off,” the company wrote in a statement.

“STG remains on track to deliver on the 2023 guidance with results for the first quarter being up against strong comparisons in 2022,” said CEO Niels Frederiksen. “We have stabilized our production issues, but we are still recovering from this impact as well as cost inflation into 2023, affecting margins negatively. The group is making good progress on our ambition to grow the size of the company with two transactions announced within the last few months.”

May 18, 2023

Bill Threatens Menthol and Nicotine Plans

The U.S. House Committee on Appropriations may spoil the Food and Drug Administration’s plans to ban flavored cigars, ban menthol cigarettes and limit nicotine levels in cigarettes, reports Halfwheel.

On May 17, the committee, which is responsible for allocating funds to various government entities, including the FDA and the Department of Agriculture, unveiled the draft of the Agriculture, Rural Development, Food And Drug Administration, And Related Agencies Bill.

The proposed language says that FDA cannot use any of the money Congress allocates for it to ban menthol or set nicotine levels, effectively preventing the agency from carrying out the regulations.

The relevant passages are:

SEC 768. None of the funds provided by this Act or provided from any accounts in the Treasury of the United States derived by the collection of fees available to the agencies funded by this Act, may be used by the Secretary of Health and Human Services to finalize, issue, implement, administer, or enforce any rule, regulation, or order setting a tobacco product standard that mandates a maximum nicotine level for cigarettes.

And:

SEC 769. None of the funds provided by this Act, or provided from any accounts in the Treasury of the United States derived by the collection of fees available to the agencies funded by this Act, may be used by the Secretary of Health and Human Services to finalize, issue, or implement any rule, regulation, notice of proposed rule- making, or order setting any tobacco product standard that would prohibit menthol as a characterizing flavor in cigarettes or prohibit characterizing flavors in all cigars and their components and parts.

Anti-tobacco activists were aghast. “This bill is a special interest gift to the tobacco industry that would result in more kids addicted to tobacco and more lives lost, especially Black lives,” wrote Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, in a statement. “These shameful provisions give the tobacco industry everything it wants from Congress in exchange for its campaign contributions.”

The bill is in its early stages and is likely to undergo many modifications.

May 18, 2023

TPSAC to Discuss Proposed Manufacturing Rule

The Tobacco Products Scientific Advisory Committee (TPSAC) will hold a meeting to discuss the Requirements for Tobacco Product Manufacturing Practice (TPMPs) proposed rule on May 18, 2023, from 9 a.m. to 2 p.m.

The proposed rule is open for public comment until Sept. 6, 2023.

The TPSAC meeting will be available via a free webcast. Electronic or written comments on the meeting needed to be submitted by May 11 for consideration by the committee.

More information about the meeting is available at the FDA’s website.

May 17, 2023

Labour: Generational Ban Upon Election

The U.K. will embrace a New Zealand-style generational tobacco ban if the Labour Party wins the next elections, reports the Daily Mail, citing a BBC interview with Shadow Secretary of State for Health and Social Care Wes Streeting.

In 2008, New Zealand passed legislation banning the sale of cigarettes to anyone born after 2008. The Act also slashed the number of outlets able to sell cigarettes and cut nicotine in cigarettes to nonaddictive levels.

Interviewed by BBC Radio 4, Streeting said he was keen to adopt a plan that would be workable if Labour won the next election.

“The question for me on the New Zealand-style smoking ban isn’t whether it’s desirable because I think in policy terms, and in terms of public opinion, interestingly, I think there is an appetite and a policy driver there to do it,” he said.

Ministers have previously set an objective for England to be smoke-free by 2030. An independent review by Javed Khan, ordered by former Health Secretary Sajid Javid, was published in August and recommended a series of actions to help eradicate smoking in England.

Khan warned that, without further action, England will miss the 2030 target by at least seven years, and the poorest areas in society will not meet it until 2044.

Smoking rates in the U.K. have fallen from about half of the population in the 1970s to around just 15 percent now.

May 17, 2023

Youth Confused About Nicotine Sources: Study

A study conducted by University of North Carolina researchers and published in Tobacco Control found widespread uncertainty and misperceptions about the sources of nicotine in e-cigarettes among youth.

“An important contribution from this study is that adolescents don’t understand where nicotine in e-cigarettes comes from,” said first author Sarah Kowitt, assistant professor at UNC Family Medicine and UNC Lineberger Comprehensive Cancer Center, in a statement. “If youth don’t think e-cigarettes are tobacco products like cigarettes, that could increase the appeal of these products. The more youth associate e-cigarettes with cigarettes, the less youth like them.”

The study also found that while some youth were aware of e-cigarettes that contain synthetic or “tobacco-free” nicotine, most youth were unaware. Most importantly, Kowitt said that the experimental portion of the study revealed that describing synthetic nicotine as “tobacco-free nicotine” increased intentions to purchase e-cigarettes among youth who use e-cigarettes.

If youth don’t think e-cigarettes are tobacco products like cigarettes, that could increase the appeal of these products.

Sarah Kowitt, assistant professor, UNC Family Medicine and UNC Lineberger Comprehensive Cancer Center

“To me, the big takeaway from our study is that the language that is used [to] describe e-cigarettes—on packaging and advertising—shapes adolescent users’ views of the products and their intentions to use them,” said senior author Seth Noar, professor at the UNC Hussman School of Journalism and Media and UNC Lineberger. “The industry has increasingly used the term ‘tobacco-free nicotine’ to describe synthetic nicotine products, and our data strongly suggest that this term may be misleading to youth in ways that increase the appeal of these addictive products.”

The study is the first to examine how youth understand e-cigarettes with synthetic nicotine. Its goal is to inform efforts by governments and regulatory agencies, including the U.S. Food and Drug Administration, to more effectively regulate the language used to describe synthetic nicotine products.

May 17, 2023

RLX Reeling From Illicit Competition

RLX Technology reported net revenues of RMB188.9 million ($27.5 million) for the first quarter of 2023, down from RMB1.71 billion in the same period of 2022. Gross margin was 24.2 percent during the quarter, compared with 38.3 percent in the comparable 2022 period. GAAP net loss was RMB56.3 million, compared with GAAP net income of RMB687.1 million in the same period of 2022. Non-GAAP net income totaled RMB183.6 million, down from RMB361.8 million in the same period of 2022.

RLX Technology attributed its struggles to fierce competition from illicit products. “We experienced an incredibly challenging first quarter as illegal-flavored products caused users’ slow shift to products that meet the national standards and drove our total revenues down to RMB188.9 million. Our gross margin declined as we incurred the full effect of the new excise tax in the first quarter,” said RLX Technology Chief Financial Officer Chao Lu in a statement.

“We are pleased that market conditions have improved, following the regulators’ strict actions to combat illegal products since March 2023. As a result, our sales are showing signs of recovery. Looking ahead, we will continue improving our operational efficiency and believe our profitability will gradually recover. Our resilient business model and solid cash position will support us as we navigate the market dynamics, enabling us to deliver sustainable value to our stakeholders as the industry regains momentum.”

According to RLX Technology co-founder, CEO and Board Chair Ying (Kate) Wang, the company remained focused on optimizing its product offerings under the new regulatory framework during the first quarter.

“While we strive to develop diversified, new, approved products that cater to users’ various demands, the prevalence of illegal products has posed near-term challenges to our sales and disrupted the recovery pace of the industry as a whole.

“The increasing efforts put forth by the regulators to crack down on illegal products have been encouraging, and we are hopeful that these will be effective in supporting the creation of fair and orderly market conditions, prompting a return to sustainable growth for law-abiding companies such as RLX Technology.

“If illegal products can be pushed out of the market, we believe adult users will gradually adapt to products that meet national standards. As a trusted e-vapor brand for adult smokers, we remain committed to providing compliant, superior products that meet our users’ needs as we continue exploring growth opportunities in the evolving industry.”

May 17, 2023