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  • Jacinto Hernandez to Join Altria Board

    Jacinto Hernandez to Join Altria Board

    Photo: Altria Group

    Jacinto “Jase” Hernandez will join Altria’s board of directors on Nov. 1, 2022.

    “Jase brings a significant and deep understanding of the tobacco landscape following his years as an investment analyst covering the U.S. tobacco industry,” said Kathryn McQuade, independent board chair, in a statement. “Our board believes that his industry expertise and financial background will help further advance Altria’s focus on ‘moving beyond smoking’ in pursuit of its vision.”

    Hernandez served as a partner and investment analyst for Capital Group and its subsidiary, Capital World Investors. He joined the Capital Group companies in August 2000 and retired in June 2022 after having spent 22 years covering a variety of industries, including U.S. tobacco, helping lead the research portfolio for one of the largest growth mutual funds in the world and serving in key leadership roles. Hernandez is a director of Pioneer Natural Resources Co.

    He will serve as a member of the finance and innovation committees.

    In addition, W. Leo Kiely III, a director since 2011, will retire from service on the board following completion of his current term.

    “We thank Leo for his many contributions in his more than a decade of service to Altria,” said McQuade.

  • Board Supports PMI’s Revised Offer

    Board Supports PMI’s Revised Offer

    Photo: Swedish Match

    Swedish Match’s board of directors has advised shareholders to accept Philip Morris International’s revised offer for the company.

    In May, PMI bid about $16 billion for Swedish Match. Swedish Match’s board of directors recommended shareholders accept the offer, but some investors, including Elliott Management Corp., objected, saying the bid undervalues their firm.

    Earlier this month, PMI increased the price of its bid to SEK116 ($10.34) per share from the SEK106 per share offered in May.

    The offer represents a premium of 52.5 percent compared to the closing share price of SEK76.06 on May 9, 2022 (the last day of trading prior to market speculation regarding a potential public offer for the company), a premium of 52.9 percent compared to the volume-weighted average trading price of SEK75.86 for the shares during the last 30 trading days ended on May 9, and a premium of 60.4 percent compared to the volume-weighted average trading price of SEK72.33 for the shares during the last 90 trading days ended on May 9.

    The resolution to support PMI’s revised offer was supported by all Swedish Match board members except Pär-Ola Olausson, who believes that Swedish Match has the competence and the experience to remain independent in the long-term and that the terms of the revised offer do not reflect the long-term fundamental value of the company, according to a company statement.

    The acceptance deadline for PMI’s offer is Nov. 4, 2022.

  • Activist Investor Urges Overhaul at KT&G

    Activist Investor Urges Overhaul at KT&G

    Photo: KT&G

    A Singapore-based activist investment firm is calling on KT&G to spin off its ginseng business and focus on smoking alternatives, reports The Wall Street Journal.

    Singapore-based Flashlight Capital Partners has acquired a stake of about 1 percent in the South Korean tobacco conglomerate and is pushing for heat-not-burn products to account for at least half of KT&G’s total tobacco revenue by 2027.

    The investment firm also wants KT&G to separate its ginseng business from its core tobacco business to unlock the former’s value and expand it globally. “From our perspective, it defies logic that a ginseng business is owned by a tobacco company,” Flashlight Capital wrote in a letter to KT&G shareholders.

    The investment firm is pushing for KT&G to divest noncore businesses, such as its real estate development arm, the letter said. It wants the company to triple the size of its share buyback program and improve on environmental, social and corporate governance matters.

    Despite recent gains, the company’s share price is close to where it was 15 years ago, according to Flashlight Capital, which also notes that KT&G trades at a discount to its peers and the broader market.

    Previously known as Korea Tobacco and Ginseng, KT&G is one of South Korea’s largest tobacco sellers, with a market capitalization equivalent to about $8.5 billion, according to FactSet.

    The company was established in 1883 as a state-run tobacco manufacturer and privatized in 2002. KT&G is now an international company with the equivalent of $3.6 billion in sales.

    A KT&G spokesman said the company has been closely communicating with shareholders and that it values their relevant comments. “We will continue to work on maximizing shareholder value by implementing shareholder return policies,” the spokesman added.

  • Switzerland Proposes E-Cigarette Taxes

    Switzerland Proposes E-Cigarette Taxes

    Photo: Comugnero Silvana

    The Swiss government has proposed new taxes for electronic cigarettes, reports SWI.

    Under the plan, reusable cigarettes would be subject to a levy of CHF0.20 ($0.20) per milliliter of liquid, and disposable e-cigarettes would attract a tax of CHF1 per milliliter of liquid regardless of the nicotine content.

    The higher tax rate for single use e-cigarettes is intended to deter underage consumption.

    The proposal is forecast to bring in around CHF13.8 million in extra tax revenues per year.

    Earlier this year, voters supported a ballot to limit advertising for all tobacco products that may be seen by young people.

  • VLN Debuts in “Four Corners” States

    VLN Debuts in “Four Corners” States

    Photo: 22nd Century Group

    22nd Century Group is launching its VLN reduced-nicotine content in the “Four Corners” states—Arizona, Utah and New Mexico. The company will leverage both existing partners and new distribution networks. VLN was previously introduced in Colorado and Illinois.

    “With the addition of three more states, we are moving ahead with our plans to rapidly make our innovative products available to a much larger portion of the adult smoker population in the United States,” said John J. Miller, president of 22nd Century’s tobacco business, in a statement.

    “This is a massive market in need of new solutions to help adult smokers smoke less. Every 1 percent share of the U.S. market equates to approximately $800 million in sales at the register, which is about $500 million in revenue to a premium cigarette manufacturer.

    “These four states will demonstrate our scalable and repeatable state launch blueprint for VLN, which we are now leveraging to rapidly put our product in front of an ever-growing population of adult smokers looking for a way to smoke less.

    “Additionally, we have the benefit of favorable MRTP excise tax structures for tobacco products sold in Utah and New Mexico, similar to the beneficial programs in Colorado, that can assist us in getting the word out to adults who can benefit from our products.

    22nd Century Group’s proprietary VLN cigarettes smoke, smell and taste like a cigarette but contain approximately 95 percent less nicotine than conventional cigarettes, a level shown to be nonaddictive, according to 22nd Century Group.

  • Turning Point Reports Quarterly Results

    Turning Point Reports Quarterly Results

    Photo: crizzystudio

    Turning Point Brands (TPB) reported net sales of $107.8 million for the third quarter ended Sept. 30, 2022, down 1.9 percent.

    Net sales for Zig-Zag and Stoker’s products increased 23.3 percent and 10 percent, respectively, while net sales for new-generation products declined by 40.3 percent. Gross profit decreased 2.9 percent to $52.7 million and net income decreased 14.3 percent to $11.5 million.

    “Zig-Zag and Stoker’s segments demonstrated strong double-digit growth during the quarter despite a challenging economic backdrop with inflationary pressures continuing to impact consumers,” said TPB President and CEO Graham Purdy in a statement.

    “Zig-Zag benefitted from solid growth in the U.S. papers and Canadian businesses during the quarter and the successful launch of CLIPPER lighters.

    “Meanwhile, Stoker’s MST experienced continued share gains driven by consumer trade-down to the value category. NewGen sales decreased slightly compared to the previous quarter, and the segment remained profitable as we monitor ongoing regulatory developments.

    “We continued to return capital to our shareholders during the quarter while maintaining a strong cash balance that provides us with the ability to navigate the current financing environment. While our competitive position remains strong and we outperformed our markets during the quarter, it is prudent to adjust our outlook for the year in light of the current economic environment.”

  • Judge Halts Corporate Communications Decree

    Judge Halts Corporate Communications Decree

    Photo: Tobacco Reporter archive

    A court in Uruguay has issued an injunction preventing the implementation of a decree that would have allowed tobacco companies to print information on cigarette sticks and to include inserts in tobacco packs.

    Public health campaigners had criticized the decree as undermining Uruguay’s plain tobacco packaging law.

    After President Lacalle Pou issued the decree, health campaigners filed a constitutional lawsuit to reverse it. The judge ruled that the decree jeopardized children’s rights and infringed on Uruguay’s international obligations to health and human rights laws.

    Anti-smoking activists welcomed the ruling. “We applaud the tireless advocates in Uruguay who fought this measure in court and won,” wrote Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, in a statement.

    “While the Lacalle Pou administration has shown an alarming willingness to cave to the interests of Big Tobacco, the public health community in Uruguay remains a steadfast guardian of the country’s renowned tobacco control laws.

    “Uruguay’s actions should serve as a reminder to advocates and governments around the world to be ever vigilant of Big Tobacco companies as they seek to undo decades of progress in driving down rates of tobacco use.”

  • FDA Rejects First Menthol Product PMTAs

    FDA Rejects First Menthol Product PMTAs

    The U.S. Food and Drug Administration has issued marketing denial orders (MDOs) for several menthol-flavored vaping products marketed by Logic Technology Development. The products include the Logic Pro Menthol e-Liquid Package and Logic Power Menthol e-Liquid Package. It’s the first time the FDA has issued MDOs for menthol products after receiving a scientific review.

    The move seems inline with the regulatory agency’s goal to ban menthol flavors from tobacco products. The FDA also isn’t expected to approve any flavored vaping product other than tobacco.

    “Ensuring new tobacco products undergo premarket evaluation is a critical part of the FDA’s work to reduce tobacco-related disease and death,” said Brian King, director of the FDA’s Center for Tobacco Products (CTP), in a release. “We remain committed to evaluating new tobacco products based on a public health standard that considers the risks and benefits of the tobacco product to the population as a whole.”

    Gregory Conley, director of legislative and external affairs for the American Vapor Manufacturers Association, told Tobacco Reporter that the latest move by the FDA to ban menthol vaping flavors is reminiscent of the agency’s “fatal flaw” review of PMTAs that resulted in millions of denials. The term “fatal flaw” was used by the FDA for PMTA submissions that didn’t have specific studies. The term has been at the center of nearly all lawsuits filed against the FDA for its handling of the PMTA process.

    “The dysfunction at the FDA knows no bounds. For the last year-plus, the FDA has sat back deferred decision making on menthol vaping products,” Conley said. “Lest anyone believe that FDA was hard at work coming up with ways to achieve balance, today they revealed that their big plan for menthol vaping products is to follow the exact same ‘fatal flaw’ review process that has led to dozens of lawsuits being filed against the agency.”

    The agency stated that after reviewing the company’s premarket tobacco product applications (PMTAs), the FDA determined that the applications “lacked sufficient evidence to demonstrate that permitting the marketing of the products would be appropriate for the protection of the public health (APPH), the applicable standard legally required by the 2009 Family Smoking Prevention and Tobacco Control Act.”

    The FDA stated that the evidence provided within Logic’s denied PMTAs did not demonstrate that menthol-flavored e-cigarettes are more effective in promoting “complete switching or significant cigarette use reduction” relative to tobacco-flavored e-cigarettes.

    Logic must now decide if it will resubmit its applications or submit new applications to address the deficiencies for the products that are subject to the MDOs. However, these acts could prove futile since the FDA states that for non-tobacco-flavored e-cigarettes, including menthol-flavored e-cigarettes, “existing evidence demonstrates a known and substantial risk” with regard to youth appeal, uptake and use.

    “The FDA conducts a rigorous, scientific review of submitted premarket tobacco product applications, evaluating the data for each product to determine if it meets the public health standard,” said King. “In this case, the applicant did not provide sufficient scientific evidence to show that the potential benefit to adult smokers outweighs the risks to youth.”

    A recently accepted manuscript of an article set for publication in Nicotine & Tobacco Research found that flavored vaping and other tobacco sales restrictions in California did not affect youth e-cigarette use.

    The MDO letter that Logic received today is not limited to the two products named above, according to the agency. In general, the FDA publicly names only products that the applicant is marketing to avoid potential disclosure of confidential commercial information.

    Any products subject to an MDO may not be offered for sale or distributed in the United States, or the FDA may take enforcement action. These products cannot be legally introduced into interstate commerce in the U.S. without risking FDA enforcement. In March, the FDA authorized several tobacco-flavored e-cigarette products from the company under the Logic Vapeleaf, Logic Power and Logic Pro brands, including devices. 

    In addition to ensuring that Logic complies with this order, the FDA intends to ensure compliance by distributors and retailers. Specifically, the FDA notes that all new tobacco products on the market without the “statutorily required premarket authorization” are marketed unlawfully and their distribution or sale is subject to enforcement action.

    Recently, the U.S. Department of Justice filed complaints for permanent injunctions in federal district courts against six e-cigarette manufacturers on behalf of the FDA. The cases represent the first time the FDA has initiated injunction proceedings to enforce the Federal Food, Drug, and Cosmetic (FD&C) Act’s premarket review requirements for new tobacco products.

    Retailers should contact Logic with any questions about products in their inventory. 

  • Essentra Sells Filters Businesses

    Essentra Sells Filters Businesses

    Photo: Essentra

    Essentra has sold its filters and packaging businesses and appointed a new CEO.

    In a statement released Oct. 3, the company said it had disposed Essentra Filter Holdings to Frank Acquisition Four, which is part of Centaury Management and owned by the investment office of the Markus family.

    The deal, which is expected to complete Jan. 31, 2023, values the filters business at approximately £262.1 million ($301 million). For the year ended Dec. 31, 2021, filters delivered adjusted operating profit of £28.2 million.

    Essentra’s packaging division was sold to the Mayr-Melnhof Group for £312 million. The sale to Mayr-Melnhof excluded Essentra’s Indian packaging business, which represents less than 1 percent of the group revenues and was purchased by BBM Bommidala.

    Paul Forman will step down as CEO on Dec. 31, 2022. He will be succeeded by Scott Fawcett, currently the managing director of Essentra’s components division. Fawcett will join the board on Jan. 1, 2023.

    The sale of the filter business follows a strategic review launched in October 2021.

    “The sale of filters marks the final step of our journey to become a pure-play components business,” said Forman. “Essentra has a bright future as a leading global manufacturer and distributor of components with a clear strategy and significant opportunities to accelerate growth and expand market share.

    “This transaction strengthens Essentra’s balance sheet and enables the group to return a meaningful portion of the proceeds to shareholders whilst maintaining the flexibility to invest in organic and inorganic growth.”

  • EU Commission OKs Swedish Match Deal

    EU Commission OKs Swedish Match Deal

    Photo: Destina

    The European Commission has approved the proposed acquisition of Swedish Match by Philip Morris International.

    In a statement on its website, the Commission noted that Swedish Match holds a de facto monopoly on distribution of tobacco and nicotine products in Sweden through its subsidiary SMD Logistics.

    The Commission’s preliminary investigation showed that SMD Logistics has a dominant position in the supply of combustible tobacco, smoke-free and related products in Sweden.

    The Commission found that the transaction could have led to foreclosure effects in Sweden, given that SMD is the only distributor of combustible tobacco, smoke-free and related products in Sweden. It did not find competition concerns in other markets in which the parties compete, including the manufacture and supply of snus in Sweden and Norway and of nicotine pouches in Sweden and Slovenia, as sufficient alternative suppliers would remain active following the transaction.

    To address the Commission’s preliminary competition concerns, PMI offered to divest Swedish Match’s logistics arm, SMD Logistics.

    The commitments consist of the structural divestiture of a stand-alone business, which fully removes the vertical links between the manufacture of tobacco and nicotine products and their distribution in Sweden. This will enable a purchaser to run the divested business as a viable competitive force in the market on a lasting basis.

    The Commission said it will closely monitor the divestment process, including the choice of a suitable purchaser for the divested business that will have to be approved by the Commission.

    Following the market test, the Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns.

    Earlier, PMI’s proposed acquisition received a green light from authorities in the United States and Brazil.

    “We are pleased to have received all necessary regulatory approvals and believe the best and final price in our revised offer for Swedish Match provides very compelling value for the shareholders of both Swedish Match and PMI,” said PMI CEO Jacek Olczak in a statement.

    “The revised offer retains a 90 percent acceptance condition, which is critical to capture the full potential of the combination. Should the offer fail, we are well prepared to proceed autonomously to develop IQOS and the rest of our smoke-free portfolio in the U.S.”