Blog - Tobacco Reporter

U.S. Health Warnings Date Pushed Back Again

A U.S. court has postponed the effective date of the Food and Drug Administration’s graphic cigarette health warning regulation from Oct. 6, 2023, to Nov. 6, 2023, reports Convenience Store News. The ruling represents at least the 10th judge-ordered delay.

Issued on Nov. 7, the court order also pushes back the preferred filing deadline for manufacturers and retailers to submit cigarette health warning rotational plans to the FDA by 31 days, according to the National Association of Tobacco Outlets (NATO).

Each manufacturer and retailer that creates its own cigarette advertisements is required to file a plan with the FDA that sets forth the schedule for rotating the eleven graphic cigarette health warnings on cigarette advertisements. The preferred filing deadline for cigarette health warning rotational plans should now be Jan. 6, 2023, NATO said.

The FDA released its final rule requiring new graphic warnings for cigarettes in March 2020. The rule calls for labels that feature some of the lesser known health risks of smoking, such as diabetes. The graphic warnings must cover the top 50 percent of the front and rear panels of packages as well as at least 20 percent of the top of advertisements.

In addition, the warnings must be randomly and equally displayed and distributed on cigarette packages and rotated quarterly in cigarette advertisements.

In April and May 2020, cigarette manufacturers and retailers sued the FDA, arguing that the graphic warning requirements amount to governmental anti-smoking advocacy because the government has never forced makers of a legal product to use their own advertising to spread an emotionally charged message urging adults not to use their products.

In a more recent challenge, tobacco companies argued that the deadline was too onerous due to the impact of the Covid-19 pandemic. They also pointed to the risk that they would lose their investments in new packaging if the graphic health warning requirement were to be thrown out in court.

In March 2021, the Texas District Court granted a motion by the plaintiffs to postpone the effective date of the final rule to April 14, 2022. The move was followed by additional postponements.

November 15, 2022

BAT Invests in Charlotte’s Web

BAT is investing £48.2 million ($57.4 million) in Charlotte’s Web Holdings. Based in Colorado, USA, and listed on the Toronto Stock Exchange, Charlotte’s Web offers hemp extract wellness products. Its product formats include tinctures, capsules, chews and topicals.

“The appeal of Charlotte’s Web is clear to us: a wide portfolio of high-quality products, strong brand equity, an extensive retail presence and robust B2C e-commerce platform serving a loyal U.S. consumer base and a track record of in-depth scientific research,” said BAT Chief Growth Officer Kingsley Wheaton in a statement.

“Our investment in Charlotte’s Web represents another step for BAT in our exploration beyond tobacco and nicotine.”

“This investment will provide Charlotte’s Web with funding that we anticipate will help unlock deeper and broader research and development that is key to our continued innovation, global footprint and the advancement of our intellectual property portfolio,” said Jacques Tortoroli, CEO of Charlotte’s Web.

November 15, 2022

Korea to Crack Down on E-liquid Tax Evaders

South Korea plans to crack down on traders who try to evade taxes on e-liquids by falsely claiming that their products contain synthetic nicotine rather than tobacco-derived nicotine, reports The Korea Bizwire.

On Nov. 10, the Korea Customs Service announced it has developed a highly accurate method to identify whether the nicotine contained in e-liquid is extracted from tobacco leaves or created in a laboratory.

This method uses derivatization technology to increase the detection sensitivity by a factor of 30.

Classified as cigarettes under tax laws, e-liquids containing natural nicotine are subject to an inland duty of KRW1,799 ($1.32) per mL.

By contrast, e-cigarettes containing synthetic nicotine are classified as manufactured goods and are therefore exempt from cigarette consumption taxes.

November 14, 2022

Iranian Tobacco Mulls Investment in Zimbabwe

The Iranian Tobacco Co. wants to invest in Zimbabwe to reduce the cost associated with buying tobacco through middlemen, reports The Sunday Mail. Among the areas the Iranians are targeting are irrigation, curing and mechanization. They also want to contract with farmers and set up factories in Zimbabwe.

The investments were discussed during a visit to Tehran by a delegation led by Zimbabwe First Lady Auxillia Mnangagwa.

“We get our needs through agents, and prices go higher for us and also causing Zimbabwean farmers to have little profit,” said Iran’s vice president of commerce and economy, Hamid Gharesheikh, during the meeting.

“We want to get companies to work with directly in Zimbabwe and do away with middlemen. We are under sanctions, and it’s difficult for us to import from other Western countries, but with Zimbabwe, we have a better understanding and for that, our cooperation will be helpful to both of us. We can also supply you with equipment such as tractors and implements for production. We can also supply dryers for curing and processing,” he said.

The proposed cooperation dovetails with Mnangagwa’s passion to economically empower Zimbabwe’s citizenry, especially women and youths, in the effort to attain upper middle-income status for the country by 2030.

During the meeting, Gharesheikh said Iran would prioritize women in its investments.

November 13, 2022

Morocco to Increase Waterpipe Taxes

Morocco is preparing to increase taxes on waterpipes, reports Morocco World News.

The country’s Finance and Economic Development Committee approved the new taxes on Nov. 9. Following the increase, smokers would pay MAD675 ($63) per kg of shisha smoking material.

The approval comes after a government amendment to the Finance Bill of 2023 extending the tax base to include shisha without tobacco and electronic cigarettes.

Officials said the measure “aims to preserve the health of consumers, especially young adults, and to protect them against the negative effects of consumption and addiction to these products.”

The statement further explains that the imports of tobacco-free shisha are not subject to taxes, although they carry the same health risks as tobacco-based shisha.

The decision to raise the tax is based on World Health Organization research indicating that smoking products containing a mixture of fruits and herbs without tobacco pose a similar risk to tobacco products.

The WHO recommends subjecting such products to the same restrictions and taxes as tobacco products.

According to the Moroccan government, the European Commission classifies herbal mixtures, aromatic herbs or fruits as smoking products.

November 13, 2022

Pyxus Sales up by Third

Pyxus International reported sales and other operating revenues of $508.3 million for the three months ended Sept. 30, 2022, up 28.9 percent in the comparable 2021 period. Operating margin increased $21.6 million to $27.1 million. Net loss improved by $8.2 million to $1.5 million. Adjusted EBITDA increased 63 percent to $42.2 million.

“We are pleased with the results achieved during the first half of fiscal 2023, particularly our efforts to reduce supply chain complexities and increase operational efficiencies,” said Pyxus President and CEO Pieter Sikkel in statement.

“These efforts resulted in more normalized shipments in certain markets compared to the prior year. During the quarter, we increased sales and other operating revenues by $114.1 million, and operating margin improved by $21.6 million primarily due to increased demand and more normalized timing of shipments from Africa, Asia and South America.

“This enabled the company to utilize cash generated from increased sales in the quarter to refinance the Delayed Draw Term Loan Facility, repay a portion of the revolving loan facilities and fully fund the U.S. defined benefit pension plan.

“As of Sept. 30, 2022, our inventory increased $87.7 million compared to the prior year primarily due to higher green tobacco prices and processing costs in Africa and South America and delayed shipments from North America. Our processed tobacco inventory continues to be more than 90 percent committed to specific customers. The overall increase in inventory and our committed inventory levels for processed tobacco position us to meet near-term demand.

“The prevailing La Nina weather patterns continue to adversely affect the global supply of tobacco. Through our efforts to accelerate buying activities in certain key markets, investments we have made across the business, and engaging with customers in transparent dialogue regarding the impacts of La Nina and inflation on our business, we purchased sufficient volume to meet near-term customer demand and maintained our gross profit as a percentage of sales despite historic inflation.

“As we approach the second half of fiscal 2023, we are closely monitoring the market for crop inputs like fertilizer and taking steps to mitigate the near-term risk of supply shortages where possible. We continue to expect fiscal 2023 sales to be between $1.75 billion and $1.95 billion and adjusted EBITDA to be between $130 million and $160 million.

“We remain focused on driving stakeholder value as we accelerate our contributions toward a net-zero future and were recently awarded a Golden Leaf Award in the Best ESG Program category for our efforts to promote sustainable fuel production helping to mitigate deforestation. We received positive feedback from customers on our environmental, social and governance framework, specifically our strategic alignment with our customers’ targets, and look forward to increasing collaboration so that together we can grow a better world.”

November 12, 2022

LG Chem Beats Exploding Battery Lawsuit

LG Chem has defeated a lawsuit in Ohio over an exploding e-cigarette battery after a federal judge ruled he has no jurisdiction to oversee the case, reports Law360.

Paul Straight sued the South Korean chemicals company after an e-cigarette purchased at a Vapor Station store in Ohio exploded and burned through his jeans and left thigh. He sustained second-degree and third-degree burns to his thighs and left wrist and now limps as a result of his injuries, according to his lawsuit.

LG Chem maintained it did not authorize Vapor Station to sell single batteries. Rather, they were meant to be used in battery packs for power tools and other products. The company also argued it did not make, sell or distribute the batteries in Ohio.

The judge did not buy Straight’s assertion that the company’s other business in the state was enough for the judge to exercise specific jurisdiction.

“LG Chem in fact has established that it neither earned revenue from the sale or distribution of 18650 cells in Ohio nor advertised or solicited business in Ohio with respect to 18650 cells,” Judge James L. Graham of the Southern District of Ohio wrote.

The case is Paul Straight v. LG Chem Ltd. et al., case number 2:20-cv-06551.

November 12, 2022

California Sued Following Flavor Poll

Tobacco companies filed a lawsuit against California in federal court over the state’s ban on flavored tobacco one day after voters backed the ban in a Nov. 8 referendum, reports the Courthouse News Service.

Though more than half the state’s ballots have yet to be counted, media outlets have declared that the referendum will pass. Unless a judge agrees to intervene, the ban is set to go into effect no later than Dec. 21, 2022.

In their suit, the tobacco companies argue that the Family Smoking Prevention and Tobacco Control Act (TCA) of 2009 allows states and municipalities to regulate tobacco products but not to ban their use or sale.

“The ban falls under the TCA’s express preemption clause, which preempts ‘any [state] requirement’ that is ‘different from, or in addition to,’ a federal requirement about a tobacco product standard,” the suit reads. “A flavor ban is a paradigmatic tobacco product standard.”

In 2020, California lawmakers passed a ban on all flavored nicotine products except hookah, loose leaf tobacco (for pipes) and premium cigars. Menthol products are also covered by the legislation.

Opponents of the ban collected more than 1 million signatures and forced the state to hold a referendum on the ban. Originally scheduled to take effect Jan. 1, 2021, the legislation was then suspended until the Nov. 8 vote.

Tobacco companies already sued California over the flavor ban in 2021. But a federal judge dismissed the case, telling the plaintiffs to wait for the voters to weigh in before suing.

November 11, 2022

Juul Secures Funding to Stay in Business

Juul Labs has secured a cash infusion that will keep the e-cigarette maker in business while it appeals the U.S. Food and Drug Administration’s marketing denial order (MDO) related to its vapor products, reports The Wall Street Journal.

Juul Labs reportedly has stopped bankruptcy preparations. As part of a reorganization, the company plans to lay off 400 employees and reduce its operating budget by up to 40 percent.

The financing is the first piece of a bailout package under discussion with two early Juul investors, Nick Pritzker and Riaz Valani, who were Juul’s largest shareholders before Altria Group bought its Juul stake for $12.8 billion.

A pioneer in the vaping business, Juul Labs has gone from dominating the U.S. e-cigarette market to fighting for its survival in a relatively short time.

Following its initial success, the company quickly came under regulatory scrutiny over its marketing practices. Critics blame Juul Labs for contributing to an “epidemic” of underage vaping.

Thousands of lawsuits have been filed against Juul over the past several years, alleging that the company marketed its e-cigarettes to children. Juul has said it never marketed to underage users.

In September, Juul Labs agreed to pay nearly $440 million to settle a two-year investigation by 33 U.S. states into the marketing of its vaping products.

Juul’s e-cigarettes were briefly banned in the U.S. in late June after the FDA concluded that the company had failed to show that the sale of its products would be appropriate for public health. But following an appeal, the health regulator put the ban on hold and agreed to an additional review of Juul’s marketing application.

In October, Juul published the details of its MDO appeal. In late September, Juul shareholder Altria Group exercised the option to be released from its noncompete deal with the e-cigarette maker.

November 10, 2022

Youth Tobacco Survey Results Released

More than one in 10 U.S. middle school and high school students (3.08 million) had used a tobacco product during the past 30 days in 2022, according to data from the 2022 National Youth Tobacco Survey (NYTS) released by the U.S. Food and Drug Administration and Centers for Disease Control and Prevention in the Morbidity and Mortality Weekly Report. This figure included 16.5 percent of high school students and 4.5 percent of middle school students.

Approximately 3.7 percent (1 million) of all students reported currently smoking any combustible tobacco product. Current use of at least two tobacco products was reported by 3.5 percent (960,000).

The most commonly used type of product were e-cigarettes (9.4 percent), followed by cigars (1.9 percent) and cigarettes (1.6 percent). More than 2.5 million middle school and high school students currently used e-cigarettes.

“It’s clear we’ve made commendable progress in reducing cigarette smoking among our nation’s youth. However, with an ever-changing tobacco product landscape, there’s still more work to be done,” said Brian King, director of the FDA’s Center for Tobacco Products. “We must continue to tackle all forms of tobacco product use among youth, including meaningfully addressing the notable disparities that continue to persist.”

Additionally, the 2022 NYTS findings suggest ongoing disparities in tobacco product use—both overall and across population groups. For example, current use of any tobacco product was higher among non-Hispanic American Indian or Alaska Native students (13.5 percent), those identifying as lesbian, gay or bisexual (16 percent), transgender (16.6 percent), and those experiencing severe psychological distress (12.5 percent). Non-Hispanic Black students reported the highest percentage of combustible tobacco product use (5.7 percent), including cigar use (3.3 percent).

The NYTS is a nationally representative survey of U.S. middle school (grades 6–8) and high school (grades 9–12) students that focuses exclusively on tobacco product use and associated factors and remains critical to informing the FDA’s tobacco regulatory activities in the United States. The FDA and the CDC have been collaborating on the implementation of the NYTS questionnaire and release of data since 2011.

November 10, 2022