ITG Brands assumed liability for tobacco settlement payments to Florida when it acquired four Reynolds American brands in 2015, a Delaware judge ruled, according to AP. As a result, ITG must compensate Reynolds American Inc. for losses incurred.
ITG bought the Kool, Winston, Salem and Maverick brands in 2014. Before the sale closed, R.J. Reynolds Tobacco Co. was making payments under a preexisting settlement agreement to reimburse Florida for smoking-related healthcare costs. After the deal closed, Reynolds stopped making payments for the four brands.
The purchase agreement required that ITG use reasonable best efforts to join the Florida settlement and make payments to the state for the brands it acquired from Reynolds. However, ITG has not joined the settlement agreement or made any payments.
Florida sued Reynolds and ITG, which ended with a judgment requiring Reynolds to continue paying on the settlement agreement unless and until ITG joins the agreement.
“That judgment on Reynolds amounts to over $170 million to date and tens of millions of dollars more each year into perpetuity,” noted Vice Chancellor Lori Will. The “unambiguous terms” of the asset purchase agreement support Reynolds’ arguments that ITG agreed to assume the liability imposed by the Florida judgment and must indemnify Reynolds, she concluded.
Philip Morris International has no intention to drop its bid for Swedish Match, CEO Jacek Olczak told Reuters. In fact, he believes the $16 billion offer is “even more attractive” now given that the global macro-economic environment has changed since the original bid.
In May, PMI offered to buy the Stockholm-based company to help accelerate its move to cigarette alternatives. Swedish Match is best known for its oral tobacco products, including snus and the Zyn tobacco-free nicotine pouches that have taken the U.S. market by storm.
By Swedish law, 90 percent of Swedish Match shareholders need to approve the offer before Oct. 21, but some have come out against the $16 billion offer, saying it undervalues the company.
One of the holdouts, Elliot Management Corp., recently increased its stake in Swedish Match to 7.25 percent from 5.5 percent. The activist investor is believed to be planning to oppose the deal under its current terms. Elliott’s increased stake means the offer will fail if another 2.75 percent of shareholders take a similar view.
Shareholder Framtiden Partnerships, which owns 1 percent of Swedish Match also believes PMI’s offer is too low.
Olczak indicated that if fewer than 90 percent of Swedish Match shareholders approve the bid, PMI could simply become a majority shareholder. He said he regularly met with investors of both companies but declined to comment on whether PMI would increase its offer.
The acceptance period for the offer was initially set to expire on Sept. 30, 2022, but was later extended to Oct. 21, 2022, as the bid awaits approval from the European Commission.
The U.S. International Trade Commission (ITC) should have consulted more with the Food and Drug Administration before banning IQOS imports, lawyers for Philip Morris International argued before an appeals court panel on Oct. 3, according to Reuters.
In September 2021, the ITC upheld an initial determination from May 2021 that PMI’s IQOS device infringes on two patents owned by BAT subsidiary Reynolds American Inc. (RAI). The agency then instituted an import ban and a cease-and-desist order preventing IQOS consumables and devices from being sold in the U.S.
PMI has challenged the import ban in court, arguing among other things that the ban deprives American smokers of nicotine products that are less unhealthy than cigarettes.
The case is part of a global patent dispute between RAI’s parent company BAT and tobacco giant Altria Group, which separated from PMI in 2008 and is the exclusive distributor of IQOS in the United States.
A North Carolina jury awarded Altria $95 million last month on claims that RAI’s Vuse e-cigarettes infringed its patents. In a separate case over RAI’s Vuse line, PMI won more than $10 million from a Virginia jury.
RAI sued Philip Morris at the ITC in 2020. Its related patent case against PMI in Virginia is on hold.
In July 2020, the FDA granted IQOS modified-risk orders, allowing Altria and PMI to tell consumers that the product generates lower levels of harmful chemicals than traditional cigarettes, among other claims.
The U.K. Vaping Industry Association (UKVIA) welcomed the first vaping evidence review published by the Office for Health Improvement and Disparities (OHID).
The latest vaping review builds on evidence collected by its predecessor, Public Health England (PHE), and further highlights the role that vaping can play in improving public health.
“It’s good to see that the experts involved in this latest review stand by the estimates that vaping is ‘at least 95 percent less harmful’ than combustible tobacco and that it ‘poses only a small fraction of the risks of smoking,’” said UKVIA Director General John Dunne in a statement.
“This figure was first revealed by the then PHE in 2015 in what was at the time described as a landmark review, and the statement that vaping is substantially less harmful than smoking on the back of this statistic continues to be cited by all the leading public health organizations in the U.K. today.
“Particularly welcoming is the evidence that indicates significantly lower relative exposure from vaping compared to smoking in biomarkers that are associated with the risk of cancer, respiratory conditions, cardiovascular conditions and other health conditions’ which lead to tens of thousands of deaths every year, not to mention the high levels of those suffering from debilitating smoking-related illnesses.”
Dunne also welcomed the review’s focus on youth vaping, which he said is currently at unacceptable levels.
“Our own Youth Access Prevention taskforce is working tirelessly with Trading Standards, the retail sector and brand owners to prevent youth access to vaping. We have recently sent the Department for Health and Social Care a number of recommendations, which are designed to cut the sale of vapes to minors off at the source. These include the introduction of a retail licensing or approved retailer and distributor scheme; increased penalties of at least £10,000 per instance for traders who flout U.K. law; and the introduction of a national test purchasing scheme to ensure all retail operations are performing to high standards when it comes to preventing youth access to e-cigarettes.”
Cigarette paper manufacturers are reconfiguring production processes to reduce their environmental impact.
By Stefanie Rossel
The effect of papermaking on the environment is considerable: According to Wikipedia, the pulp and paper industry is the world’s fifth-largest consumer of energy, accounting for 4 percent of global energy use. The sector uses more water than any other industry; producing 1 ton of paper requires an estimated 300 tons to 400 tons of water. Other issues include deforestation, greenhouse gas emissions, harmful chemicals and wastewater.
Driven by greater environmental awareness and stricter regulations, paper manufacturers have been moving toward more sustainable production practices. Tobacco Reporter spoke to leading players in the cigarette paper business about their strategies to reduce the environmental footprint of their operations.
Photo: BMJ
Reduce, Reuse and Innovate
Liem Khe Fung
Based in Indonesia, BMJ is the world’s No. 3 cigarette paper producer, supplying about 10 percent of global requirements. BMJ Innovation Center Director Liem Khe Fung is convinced that without a sustainability strategy, a company won’t survive the next 10 years to 15 years. Therefore, BMJ has adopted a strategy of “reduce, reuse and innovate.”
“First, we reduce energy consumption,” explains Liem. “Second, we reuse or recycle water from the production line to minimize the use of water from the river. We also select the chemicals used in the production carefully to minimize their impacts to the environment. Finally, we intend to replace plastic-based materials with paper/pulp-based materials, for example, replacing plastic[-based] or metalized-based packaging with paper-based packaging that is safe for the environment yet has the same functionalities.”
Paper machines consume huge amounts of energy. To reduce that consumption, BMJ replaced energy-hungry machine parts, such as the motors that drive the rolls, with more efficient parts. By generating and feeding exactly the right amount of steam to the drying drums, BMJ reduced waste. The company also captured part of the carbon dioxide (CO2) emissions from its coal boiler and used them to produce calcium carbonate (CaCO3), a key chemical in papermaking. According to Liem, using CaCO3 in liquid form saves much energy because it eliminates the need to transform the chemical into a powder for transportation.
Such actions have enabled BMJ to reduce its energy consumption by about 15 percent in just a few years.
Papermaking also requires lots of clean water, an increasingly scarce resource. Water accounts for up to 99.9 percent of the material mixture in the web-making process. Water is also used to generate steam to dry the web or paper. To reduce water consumption, BMJ modified its No. 3 paper machine to recycle water back into the production process several times before sending it to wastewater treatment.
Currently, BMJ derives 20 percent of its water requirements from recycled water. The company aims to use 50 percent recycled water by the end of 2023.
Looking ahead, BMJ hopes to install renewable energy systems, such as solar panels, by 2023. “We also would like to replace some of the coal used in our boiler with biomass,” says Liem.
Papermaking requires large amounts of energy and water. (Photo: Jose Luis Stephens)
Own Your Power
Vincent Li
Creating an in-house green energy supply is also at the heart of Hengfeng Paper’s sustainability strategy. With 21 production lines and an annual production of 230,000 tons, the Chinese manufacturer of cigarette paper, plug wrap and tipping base is an industry giant.
The company, which celebrates its 70th anniversary this year, recently published a carbon footprint status and emission reduction action plan designed to meet government requirements. In September 2020, President Xi Jinping announced that as part of the country’s 14th five-year plan, China would strive for peak CO2 emissions by 2030 and carbon neutrality by 2060.
Due to its level of development, China’s primary energy demand is expected to increase to 6 billion tons of standard coal by 2030. The government aims to increase the proportion of power generated by clean energy sources to 59 percent by 2030 and 86 percent by 2050 while boosting the proportion of electricity generated by clean energy sources to 48 percent by 2030 and 83 percent by 2050.
To help China meet these objectives, Hengfeng plans to slash its carbon emissions by more than a third in eight years. The company will focus its efforts on improving the efficiency of power and steam acquisition, as a carbon footprint analysis identified these activities as the major contributors to the company’s global warming potential.
Among other initiatives, Hengfeng plans to build a 10 MW photovoltaic power plant. The company has already signed cooperation agreements with partners and is currently preparing for construction, according to Vincent Li, sales manager at Hengfeng Paper’s Export Department II. Upon completion, the facility will generate up to 1,000 kWh, which will be fully used for paper production.
To recover energy, Hengfeng will deploy cogeneration technology, which involves the thermodynamically efficient use of fuel. “In traditional power production, some of the energy must be discarded as waste heat, but in cogeneration, some of this heat is put to use,” explains Li.
“Hengfeng makes full use of low-pressure steam after power generation for paper drying to achieve the purpose of maximizing energy utilization,” he says. The company fully recovers and utilizes the heat of the condensed water generated by the paper web drying process. It also plans to install high efficiency heads on the water pipe for washing. “We will promote high-pressure cleaning of the Fourdrinier* sections, thus improv[ing] the cleaning efficiency and sav[ing] the washing water by mobile spray and increasing the spray pressure,” adds Li.
Hengfeng has also been working on reducing its carbon footprint in CaCO3. “Hengyuan biochemical company, the calcium carbonate supplier [for] Hengfeng, introduced German process technology in 2017 and introduced the flue gas of Hengfeng’s thermal power plant into the reactor through an overhead pipeline,” says Li. “It uses quicklime and carbon dioxide in the flue gas to generate light calcium carbonate, comprehensively utilizes the carbon dioxide in the flue gas and reduces the carbon dioxide emissions. The annual comprehensive utilization of carbon dioxide in the flue gas is about 22,000 tons.”
To reduce fresh water consumption, Hengfeng has expanded the volume of its storage tank and increased the share of recycled water, among other measures. “We also introduce, popularize and apply new water-saving technologies and carry out a water-saving inspection every month to ensure that water-saving targets are achieved,” says Li.
SWM’s Quimperlé facility in Brittany, France. (Photo: SWM)
A ‘Thinner’ Impact
Marc Bettoli
SWM, a provider of engineered fine papers with expertise in natural fiber-based solutions, has launched a new initiative called “Thinpact” that regroups its different actions across its engineered paper division.
The company aims to set an example for the industry by researching and developing sustainable processes and solutions while being authentic and transparent about the process.
For the 2020–2030 period, SWM wants to reduce the CO2 emissions of its engineered papers business unit by 40 percent and its water withdrawal volumes by 25 percent.
“Reducing our impact is a complex process to which SWM is fully committed,” says SWM ESG Manager Marc Bettoli. “We decided to act step by step, starting with energy and waste. The first step for the reduction of carbon emissions is a program launched on Scope 1 and Scope 2—direct and energy-related—emissions. We have designed a sufficiency plan in order to get the right setting on paper machines. For instance, the drying temperature is set differently depending on the reference produced on the machine. We have also developed a plan to run the most efficient assets for the needed usage. For instance, we choose a pump with the best power, yield or technology, or we recover all possible heat from steam. The third step is the use of renewable sources of energy. For instance, we will add renewable electricity in the power mix.”
SWM has reduced its CO2 intensity—that is, the CO2 equivalent emissions per metric ton of goods produced, Scopes 1 and 2—by 11 percent between 2020 and 2021. At its largest site, Quimperle in France, the company has saved 3 percent of energy consumption year to date.
Waste reduction is also on SWM’s agenda. At Quimperle, the company plans to reduce landfill waste by 30 percent in the first year of a pilot program through internal incentives and education, waste assessment and waste valorization.
In addition to Quimperle, SWM has two other paper mills in France. This summer, France experienced the impact of climate change firsthand through a historic drought.
At the time of writing, the company’s French sites had not yet been impacted by water scarcity. “We are monitoring water levels on all sites with environmental managers at the sites, and we are in close contact with administration to [make] decisions if needed, especially in times of crisis,” says Bettoli. “We have implemented water recycling modes that were prepared for a long time. With the specific program on water management in order to reach or exceed our minus 25 percent goal for 2030, we will be prepared for upcoming historic droughts.”
Some of SWM’s energy comes from biomass. In Le Mans, for example, a biomass boiler produces steam. “We have developed a plan to roll out biomass boilers on other papermaking sites by 2030,” says Bettoli. “We are currently studying possibilities to add renewable electricity in our power mix, with the ‘Virtual Power Purchase Agreement’ approach.”
The company has also installed several energy recovery processes in its mills. The Quimperle plant, for example, both produces and burns black liquor, a byproduct of pulp processing, for energy recovery. SWM uses heat exchangers to recover energy losses of air and hot water and heat from production processes to heat its offices and buildings. It has also implemented hood closures and automatic controls to limit losses such as exhausted air.
By reusing excess water from the paper machines for dilution in the stock preparation area, the company reduces water consumption. For that purpose, SWM has implemented a fiber recovery system.
Bettoli says the company is also reshaping product design to support the development of new products that have a lower overall impact. “This approach is included in our R&D processes,” he says. “We have developed an eco-scorecard, and we are looking forward to collaborating with the industry to reduce the impact of our activities together. One recent example is the Evolute filter media product range, which is paper for filters to replace standard acetate within filters.”
*Modern papermaking machines are based on the principles of the Fourdrinier Machine, which uses a moving woven mesh to create a continuous paper web by filtering out the fibers held in a paper stock and producing a continuously moving wet mat of fiber. This is dried in the machine to produce a strong paper web.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
Harm reduction activists worry about New Zealand’s plan to phase out tobacco use.
By Stefanie Rossel
Imagine it’s 2039. You’re at one of a few remaining tobacconist stores with a former classmate, both trying to buy some combustible cigarettes. But as it happens, you were born on New Year’s Day 2009 and your friend on New Year’s Eve 2008. An ID check lets him acquire the desired smokes, but you are not allowed to buy the products—for the duration of your life.
This is a situation New Zealanders will soon be facing. In January, New Zealand unveiled its Smoke-Free Aotearoa 2025 Action Plan, an amendment of the country’s Smokefree Environments Act (1990), which seeks to take the country’s already low current smoking prevalence of just under 10 percent down to 5 percent or below within the next three years.
The proposal’s most spectacular element is a generational tobacco ban: Starting in 2023, anyone born on or after Jan. 1, 2009, would be barred for life from purchasing combustible cigarettes under the new rules. Someone aged 14 when the law entered into effect would hence never be able to legally purchase tobacco. In a statement, Ayesha Verrall, the country’s associate health minister, said the government wants to make sure young people never start smoking. While it would still take decades to phase out tobacco products completely, the generation currently at school would feel the effect of the legislation very soon.
In late July, the bill passed the first reading in Parliament. It is now being reviewed by the Parliament’s public health select committee and is expected to be adopted in December. The regulation would be a world first, and implementation is likely; Prime Minister Jacinda Ardern’s Labour Party is governing with an absolute majority.
Nancy Loucas
Reactions to the proposal have been divided, according to Nancy Loucas, co-founder of Aotearoa Vapers Community Advocacy (AVCA). The association agrees with the “smoke-free generation” in principle but remains concerned that it could be an overreach. “Our youth smoking rate is already at 1.3 percent, so many are saying it’s unnecessary and overkill,” she says. “There are concerns [that] an older sibling giving someone from the smoke-free generation [SFG] tobacco may be criminalized, and that is not acceptable. Others are saying it’s a possible human rights violation because if someone from the SFG comes of age and can drink, etc., but not buy tobacco, how can the government prevent a legal adult from a legal consumer product? The reaction has been much more negative than the government expected, I would say.”
Marewa Glover
Marewa Glover, director of the Centre of Research Excellence: Indigenous Sovereignty and Smoking, describes the strategy as “virtue signaling.” “The negative consequences of previous ‘smoke-free’ legislation are already resulting in an uptick in young people committing robberies for tobacco and being charged and imprisoned for such crimes,” she says. “Youth mental health and preventing youth suicide are a higher priority for increased intervention. The negative consequences of the proposed legislation risks will be worsening that crisis. The law will create an unnecessarily larger bureaucracy, increased enforcement activity, and more people will be diverted into the justice system. It also will set a dangerous precedent. Young people are not taking up smoking now. It is no longer considered ‘cool.’ The rationale for preventing the ‘rite of passage,’ as stated by the minister in her interview on June 21, 2022, with the editor of the Tobacco Control journal, is therefore outdated and flawed.”
The proposal not only discriminates against age. Legal experts have indicated that the generational ban will particularly target Maori and Pacific Islanders, among whom smoking prevalence is disproportionately high. According to Health New Zealand, the Maori smoking rate was 31.4 percent in 2019–2020. At 32 percent, Maori women constitute New Zealand’s highest smoking rate. According to critics, the generational tobacco ban could end up stigmatizing certain communities. “That is a very real possibility,” confirms Loucas. “The Maori and Pacifica communities are already disadvantaged, and the last thing they need is more stigma and discrimination.”
Glover, who has been working closely with Maori smokers for years, says New Zealand’s adoption of government Ministry of Health campaigns to encourage people who smoke to quit or switch to vaping is working particularly well for Maori. “There is no need for another drastic punitive law to be passed. The negative consequences already mentioned will worsen other outcomes for Maori, e.g., associated with the increase in black market activity.”
Rapid Withdrawal
Proponents say the goal of a smoke-free generation is achievable and realistic whereas smokers’ rights advocates consider the plan an attack on personal freedoms, a prohibition that will not work. Others fear it might backfire and fuel the already burgeoning illicit cigarette market, which is estimated to account for around 10 percent of New Zealand’s total tobacco market. Loucas believes the illicit market is much higher because the official numbers capture only imports while leaving out the growers and sellers in the country. “The gangs will take over as they have with everything else the government ‘bans’ if the law is punitive,” she says. “Bans don’t work. They never have and never will. The market, especially the gray and black market, will always rise to meet the need.”
The two other components of New Zealand’s Action Plan also have the potential to boost the black market: Starting in 2024, the number of legal retail outlets will be reduced from about 8,000 to fewer than 500. Cigarettes will no longer be available at kiosks, gas stations or supermarkets, with sales limited to licensed tobacco retailers. From 2025, the country will mandate the sale of very low-nicotine cigarettes. Currently, a 90 percent to 95 percent nicotine reduction to nonaddictive levels is being discussed. With a sense of understatement, Glover describes a nicotine yield of below 0.05 mg per gram as “subfunctional.”
Almost overnight, New Zealand’s government will make its citizens quit cold turkey. In contrast to the World Health Organization’s anti-tobacco harm reduction stance, though, the proposed law includes a massive broadening of addiction therapy offers. Vaping, which was regulated in 2020, will remain legal. “Vaping has worked so far in the last year to cut the number of people who smoke down drastically,” says Loucas. “I think we stay the course. What is missing is a public education campaign that was slated to start upon legalization but was sidetracked because of Covid. That education plan needs to be rolled out immediately to stop the disinformation campaign from a select few NGOs [nongovernmental organizations] who are anti-nicotine.”
Having passed the generational tobacco ban upon first reading in July, New Zealand lawmakers are likely to endorse the legislation in December. (Photo: asanojunki0110)
Legal Issues
With its tobacco control plans, New Zealand enters uncharted territory. While the tobacco-free generation was first discussed in 2010, it was never implemented anywhere on a nationwide scale. Bhutan banned tobacco sales and cultivation in 2010, but the measure backfired, with smugglers taking the place of legal vendors. In 2021, the Himalayan kingdom lifted the sales ban.
Mandatory very low-nicotine cigarettes, an objective also pursued by the U.S. Food and Drug Administration, might run into legal challenges as well, as AVCA points out. Like the generational tobacco ban, such a measure might prove to violate human rights on the basis that adults have the right to make informed choices. Vaping advocates believe there’s insufficient longitudinal research to prove that very low-nicotine cigarettes help people quit smoking. Further, the move could also see New Zealanders heading to the black market or growing their own tobacco.
The question of whether the planned measures are proportional is justified. New Zealand has been a model student as far as the implementation of tobacco control measures is concerned. From the 1970s, the country has used the full range of tobacco control instruments, including smoke-free laws, advertising bans and standardized cigarette packaging. Due to high taxation, New Zealand cigarette prices are the second-highest in the world after Australia’s. A pack of 20 Marlboro cigarettes retails at around nzd37 ($22.69). Smoking rates have dropped drastically over the past decades. With those lighting up accounting for less than 10 percent of the population, the country has roughly 450,000 smokers left.
A Blueprint for Others?
The world is watching as New Zealand embarks on its smoke-free experiment. Shortly after New Zealand had revealed its Action Plan, Singapore’s health authorities started debating whether the city state should follow suit by gradually raising the smoking age until it covers the entire population. However, Singapore is unlikely to copy New Zealand’s embrace of vaping as an alternative to smoking, as vape products are banned in the city state. Singapore has been fiercely anti-tobacco since the 1980s, with measures having become progressively stricter over the years. The country’s smoking prevalence presently stands at 10 percent.
Also in January, Malaysia announced it would ban the use, possession and sale of cigarettes and vape products for those born after 2007. The bill proposes a fine for offenders and also empowers enforcement officers to open without a warrant any baggage or container for inspection. The draft law was met with resistance from several sides. The parliamentary select committee on health called for the plan to be postponed by three years, arguing that the period should be used to study the possible need to enact separate legislation for combustible and noncombustible tobacco products.
In Malaysia, too, there are concerns about black market sales. Critics fear a generational tobacco ban would further invigorate the country’s illicit cigarette market, which is proportionally already the largest in the world, accounting for about 60 percent of the country’s total tobacco market. In August, the bill was sent back to the parliamentary select committee for further scrutiny. The regulation may be further delayed or even abandoned as Malaysia’s Parliament is expected to be dissolved in late October after the tabling of the budget.
Outside the Asia-Pacific region, Denmark said it wanted to introduce New Zealand-style measures, including a generational ban that would prohibit anyone born in or after 2010 to buy tobacco products.
“Bans and prohibition do not work,” Loucas emphasizes. “They create more harm, and that is the last thing any public health promoter wants as their legacy. In countries that are willing to accept tobacco harm reduction on the basis of science and evidence, they can (and should) see similar decreases in smoking relative to population, such as New Zealand has. But it requires risk-proportionate regulations and effective and compassionate enforcement.”
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
Zimbabwe’s attempt to diversify into cannabis is proving more challenging than some anticipated.
By Daisy Jeremani
Zimbabwe announced its approval for cannabis growing for medicinal and industrial use in April 2018 amid much hope for an immediate economic impact.
Finance Minister Mthuli Ncube projected export revenues of up to usd1.2 billion in the first year of growing, processing and exporting the crop and its products. The forecast is almost at par with what gold, the southern African country’s most lucrative export, brings in—and higher than the amount it generates from tobacco, its current No. 1 agricultural export. Cannabis was, too, touted as a diversification route for tobacco growers amid declining demand for the golden leaf.
However, experts have cautioned that Zimbabwe may not realize the benefits as rapidly as authorities initially projected. Forty-two months since the government issued the first licenses, only 15 out of the 57 companies have started work, hampered by a plethora of challenges. Chief among them: lack of financing and expertise.
Speaking to Tobacco Reporter just after her organization, Zimbabwe Industrial Hemp Trust (ZIHT), hosted a cannabis roundtable under the theme “Unpacking the Challenges and Potential of Cannabis as a Medicine” in Harare, the capital city, on Sept. 7, 2022, Zorodzai Maroveke said a lot of work still needs to be done for the country to realize gains from the crop.
A key proponent of legal cannabis production, Maroveke said most licensees lack guaranteed off-take agreements. An unstable market has not helped matters, she added, as prices have kept fluctuating since Zimbabwe became Africa’s second nation after Lesotho to legalize cannabis for medicinal and industrial use.
“An unstable market has been a major challenge for investors to move forward with this project in Zimbabwe and also the issue of funding. Most banks are not willing to finance cannabis because they still don’t understand it,” said the ZIHT founder and CEO.
Another obstacle for license holders is that they have to import expertise as this is a new frontier for the country. Recruiting the right skills is expensive. The cannabis regulatory framework, which she described as very strict, has also hampered the speed at which the industry is progressing.
Maroveke said the cost implications of growing medicinal cannabis are high, citing the European Union’s good manufacturing practices (GMP), which force producers to set up facilities of a high standard of hygiene and security and hire well-trained personnel.
“You will find that for a very small project, maybe even a hectare project, one would potentially pump out not less than usd1million,” said Maroveke.
So if one is to expand, there is a need for more funding, not considering money that must be paid for the GMP compliance auditors as well as inputs, like seeds, which are not only expensive but are also imported.
Though industrial hemp is generally cheaper to produce than medicinal cannabis, the cost depends on its type, she noted. If it is botanical, which is grain hemp for the CBD flower, one should be prepared to part with at least usd200 for a 5 ha project. The market determines the standards and quality that the farmer has to put in.
“So if you’re going to do hemp for fiber and grain, it’s obviously going to be cheaper; you’re looking at usd3,000–usd4,000 a hectare. But Zimbabwe’s hemp and grain industry hasn’t developed to that extent, so we don’t have many activities in those particular subsectors of industrial hemp,” she said.
Tobacco is likely to remain Zimbabwe’s No. 1 agricultural export for the foreseeable future. (Photo: Cavendish Lloyd)
The Sept. 8 roundtable was meant to find, bridge and plug the knowledge gap not only among health professionals but also other experts along the value chain. It is against that backdrop that a top Zimbabwean pharmaceutical supplier, New Avakash International, awarded scholarships to 100 health personnel to undergo training to make them more conversant with cannabis.
At the moment, local varieties are at the research stage. Due to the dictates of the market, buyers direct farmers toward the genetics they want, which at this stage are all imported. As a result, roundtable participants called for more investment in research and development and the development of local growing and processing expertise. As the industry tries to find its place, Maroveke said the government should support it through tax breaks and other incentives for cannabis value addition to be accelerated.
She said Zimbabwe will only realize the gains from cannabis once production kicks off and the export markets are stable and guaranteed.
Former Zimbabwe Tobacco Research Board (TRB) CEO Dahlia Garwe noted that the country leapt in headfirst without conducting proper market research.
“We were supposed to look at what kind of varieties we should be growing and where exactly the material will end. We have a lot of cases where people grew cannabis, but they don’t know what to do with it,” she said.
Garwe noted that the costs involved in setting up facilities for the processing of the herb and for a basic setup are as high as usd400,000. For a facility that is compliant with all the necessary health requirements, the costs can be about usd3 million.
With regards to research that is underway, she said experts are looking for locally adapted germplasm, with the TRB going around the country to identify varieties adapted to the local environment. After that, they would breed local varieties and material from elsewhere to come up with varieties that are most suitable for Zimbabwe.
“That is ongoing work. It will obviously take a few years before we get to a point where we say we have locally adapted varieties,” she said.
However, this is not to say varieties developed elsewhere can’t do well in Zimbabwe, “but that’s where the research comes in, where you’re actually evaluating varieties coming from elsewhere and you see whether they actually work or not.”
Speaking while commissioning a usd27 million medicinal cannabis project by Swiss Bioceuticals in May 2022, Zimbabwean President Emmerson Mnangagwa expressed frustration over the slow investment by licensees.
“It is disappointing that since 2018, only 15 out of 57 entities issued with cannabis licenses are operational,” he said. “Such licenses should not be held for speculative purposes, and those not using them risk government invoking the ‘use it or lose it’ principle.”
Former Tobacco Industry and Marketing Board chairperson Monica Chinamasa said farmers are still waiting for the ongoing research on varieties that are suitable for the local climate.
“We are still waiting for the TRB to guide us on this matter,” she said.
The EU requires GMP and good agricultural collection practices certificates to be in place before a cannabis producer can venture into that business. The financial implications for applying for the certification are huge for some Zimbabwean investors, said Munyaradzi Shamhudzarir of Voedsel Cannabis, one of the few Zimbabwe-owned companies to have planted cannabis.
“The process of getting these certifications is also very long—at least three years before you can complete all the audits and get certification,” he said.
The twin strategies of migration away from combustible nicotine products and diversification into new businesses underpin the tobacco industry transformation. Why is there so much opposition?
By Clive Bates
How should a rational and dispassionate public health advocate think about tobacco companies? How should tobacco companies think about public health?
The simple and lazy answer is that they are sworn enemies in a permanent and irreconcilable conflict. This idea has now been immortalized as a guiding principle by the World Health Organization. The “scream test” devised by Australian anti-tobacco campaigners was a crude forerunner of the WHO’s principle: “If a new policy gets no reaction from the tobacco industry, it rarely has an impact, but if the industry screams blue murder, the impact will be large.” If the industry hates it, it must be good for public health.
But what if there are policies, practices and messages that are good for the tobacco industry and public health? Or bad for both? One of the accusations frequently thrown at public health advocates who favor tobacco harm reduction is that they are doing the bidding of Big Tobacco. No one likes to be accused of that. But implicit in that accusation is either the assumption that tobacco harm reduction cannot be good for both or worse, that it is more important to hurt the tobacco industry than to serve public health. We see this playing out in the industry’s twin-track efforts to transform by migration and diversification: migration into noncombustible nicotine products and diversification into non-nicotine businesses in which they have natural commercial advantages.
These issues loom large in the transition strategies of tobacco companies, which range across a continuum from “not bothered; we like the business as it is” to “this is the competitive play of the 21st century, and we’re all in.” In my view, the transition strategies of the companies will be highly beneficial for both public health and the companies that successfully transform. Transition involves giant companies moving out of the merchant-of-death business and into something closer to selling mild and popular recreational stimulants. For public health reasons, I would be happy if tobacco companies made handsome profits from a diversified business far less reliant on cigarettes. Yet their efforts to attempt this attract strident opposition at every turn.
Why? I think it is worth unpacking this opposition a little.
First, is the continued sale of cigarettes just too much to bear? How can public health welcome transformation when the companies involved are still hooking kids, selling trillions of cigarettes and killing millions of people? Here, public health advocates must understand the nature of the market and a corporation. Every country has a lawful market for cigarettes. Commercial tobacco sales are permitted, regulated and taxed by governments. There is also a demand for cigarettes, with over a billion smokers consuming over 5 trillion cigarettes annually. This demand will inevitably be matched by supply, and the suppliers are, by definition, the tobacco industry. We should treat this as a given not an act of evil—a fact of life that we may not like that much but that constitutes the reality in which we try to secure public health gains. I am all for putting pressure on the cigarette trade through tobacco control measures, but these are the prerogative of governments. We should expect companies to compete vigorously for market share within the parameters set by policy and law. That should not be a shock; it is what companies do. Public health advocacy should be focused on influencing the regulatory, fiscal and communications environment in which tobacco companies operate and challenging abusive business practices. Other than gratifying righteousness, it serves little purpose to condemn tobacco companies for what they are and must be. What matters is how this can change.
Second, should we only trust the tobacco industry when they pull out of cigarettes? There have been numerous calls for companies to stop selling cigarettes. The problem is that the advocates of this idea believe the companies should just do it unilaterally. Public health colleagues need a better grasp of shareholders and fiduciary duties. The companies cannot simply squeeze or shut down a lucrative earnings flow to their shareholders. The management would be fired, the company taken over or the cigarette assets sold as a going concern with no public health benefit. Ironically, the companies, to varying degrees, do have viable exit strategies for cigarettes—migration of the nicotine business to noncombustibles and diversification to “adjacent” industries such as plant biotechnology and vaccines, inhalation technologies and recreational stimulants. This strategy to exit the cigarette trade meets an essential requirement; if successful, it can work well for shareholders. The irony is that public health campaigners lament the slow progress in phasing out cigarettes. Yet, at the same time, they oppose every element of the only commercially viable strategy to bring it about: migration and diversification.
Third, is tobacco harm reduction just the “nicotine maintenance strategy of Big Tobacco”? The concern is that diversification is merely a cunning ruse to escape the inevitable demise of the tobacco industry and the nicotine market. Here, public health advocates need to think more carefully about the product and where it is heading. I believe there is a far more robust long-term market for nicotine than for smoking. That’s because nicotine use is popular among many for its impacts on stress, anxiety, concentration and pleasurable sensations. And nicotine itself is not that harmful. The main reason people have stopped using nicotine over several decades is the health impacts of smoking and the pressures from policies and taxation to address the health impacts of smoking. The early stages of migration to noncombustibles have been welcomed by many as a harm reduction option for smokers. But in the longer term, the noncombustible products represent the basis for a nicotine market that operates within the normal boundaries of acceptable risk. This may open a frightening vista for some in public health. Nicotine products with minimal harm create weird new challenges that we have yet to fully grasp. The deterrence effects from the harms of smoking are lost, the case for taxes and regulation to control use is diminished, the designation of nicotine as an addictive agent no longer applies and the whole purpose of the vast complex of tobacco control interests is lost. There is only a case for tobacco control if there are serious harms. Otherwise, it becomes a moralistic war on drugs enterprise.
Fourth, is diversification just an exercise in reputation laundering? Much tobacco control activism now relies on “denormalizing” the industry and, by inference, whatever the industry touches. Tobacco companies can deploy their human resources, facilities, assets and intellectual property to branch out into new businesses for which they have inbuilt advantages. Shocking venom and energy have gone into attacking companies and their staff for some of their efforts to develop or acquire pharmaceutical businesses, invest in vaccine production, exploit their plant biotechnology expertise, enter new markets for personal well-being recreational drugs or even provide ventilators to struggling hospitals. It is bizarre. What is achieved by preventing companies from moving into new businesses that reduce the dependence on cigarettes? This can only be explained by a fear that the industry will reform itself into a more normal business and that arguments grounded in denormalization will fail. The arguments from tobacco control are peculiarly aesthetic—it just looks wrong for a tobacco company to make drugs to treat chronic obstructive pulmonary disease (COPD) or provide Covid-19 vaccines. But why is this so wrong? What are the ethics of opposing the development and deployment of a vaccine or COPD treatment if these would otherwise be successful in the market?
Finally, will migration and diversification be additional and not replace cigarettes? Maybe Big Tobacco is building even bigger, more voracious businesses? Here, public health advocates need to grasp what shapes a market. Ultimately, that is up to consumers and what they are inclined to buy. But in a market like this, policymakers and communicators have a role. For example, they can make taxation and regulation proportionate to risk. They can communicate candidly about risks. They can have better insights into unintended consequences or test and reject assumptions that fail to hold water in real life. Some companies may grow bigger through migration and diversification or even acquire a larger share of the cigarette business—that is how competition works. What matters for public health is not what individual companies are doing, though it matters greatly to the companies. What counts is the migration of the whole market to reduced-harm products instead of cigarettes, which is strongly affected by public health policies and communications. If the companies also diversify to keep their shareholders engaged and exploit their advantages during a transition, what exactly is wrong with that?
In public health, we need to stop our warrior rhetoric and think harder about the world as it really works and what will change it for the better.
Clive Bates is the director of Counterfactual Consulting and the former director of Action on Smoking and Health (U.K.).
After the win of its merits case against the FDA, Kaival Brands and Bidi Vapor are back on track.
By Stefanie Rossel
The year 2022 has been both challenging and exciting for Kaival Brands Innovations Group. The Melbourne, Florida, USA-based company is the exclusive distributor of products manufactured by Bidi Vapor, which is best known for its Bidi Stick vape pen, a disposable electronic nicotine-delivery system (ENDS).
In September 2021, Bidi Vapor received a marketing denial order (MDO) from the U.S. Food and Drug Administration for its nontobacco-flavored Bidi Sticks. The company had submitted premarket tobacco product applications (PMTAs) for the product’s nine flavor varieties plus a tobacco and a menthol variant.
In response to Bidi Vapor’s petition for review, the FDA stayed the MDO until December 2021, after which the order was again stayed by the 11th Circuit Court of Appeals. On Aug. 23, 2022, Bidi Vapor won its merits case against the FDA. Granting Bidi Vapor’s petition for review, the 11th Circuit ruled that the MDO was “arbitrary and capricious,” primarily because the FDA failed to consider the relevant marketing and sales access restriction plans included in Bidi Vapor’s PMTAs.
Eric Mosser
At the time of writing, the FDA had yet to announce how it would move forward following the 11th Circuit’s decision. “FDA could seek to appeal the decision by requesting ‘en banc’ review, or a review by the entire 11th Circuit,” explains Eric Mosser, president and chief operating officer of Kaival Brands Innovations Group. “Or they might even try to petition the Supreme Court to review the decision. Regardless, we anticipate being able to continue selling and marketing our flavored products for the duration of any potential appeal, subject to FDA enforcement discretion. It is also possible FDA will simply follow the court’s instructions and review Bidi’s nontobacco PMTAs instead of trying to appeal.”
Flavors, insists Mosser, are a critical matter of public health, and Kaival is adamantly opposed to illegal underage use of tobacco and vape products. “The company has focused on limiting access via contracts with partners prioritizing retailers’ age verification policies, secret shopper audits, repackaging devices to better align with FDA guidance, no use of social media or influencers and no consumer-facing advertising,” he says. “The company even discontinued its online direct sales to consumers—while we had state-of-the-art verification practices, company leaders realized online access was a way that underage youth in general were gaining access to vaping products and decided to eliminate that potential for the Bidi Sticks.”
According to the most recent National Youth Tobacco Survey, Bidi Vapor was not among the top brands that appeal to youth. In 2021, among students who currently used e-cigarettes, Puff Bar was the most commonly reported usual brand (26.8 percent) followed by Vuse (10.5 percent), Smok (8.6 percent), Juul (6.8 percent) and Suorin (2.1 percent).
Niraj Patel
Victory for Vaping
The 11th Circuit’s decision is a victory not just for Bidi Vapor and Kaival Brands but for the entire vaping and tobacco harm reduction industry, according to Mosser—especially for those companies who have been rigorously following the FDA guidelines in their attempts to obtain market authorization. “We at Kaival Brands have done so on the belief that the FDA will follow the science and allow solid evidence to guide their decisions. If that is the case, then the company is on solid ground, and we are hopeful FDA will ultimately agree that our products, including our nontobacco flavored products, are appropriate for the protection of the public health.”
The PMTA for the company’s tobacco-flavored Classic Bidi Stick is currently undergoing Phase III scientific review. There is no timeline for this process, says Niraj Patel, chief science and regulatory officer for Kaival Brands Innovations Group and president and CEO of Bidi Vapor. The Arctic Bidi Stick, which Bidi Vapor maintains is a menthol product, was characterized as a flavored product by the FDA and subjected to the MDO that was vacated. “Barring an appeal, we anticipate that FDA will soon begin the scientific review of the Arctic Bidi Stick PMTA along with our other nontobacco-flavored products,” says Patel.
Patel founded both companies. With a wholesale distribution network of more than 54,000 stores across the United States, Kaival Brands helped Bidi Sticks, which entered the market prior to 2016 under a different brand name and with limited success, to become the fastest-growing and now No. 1 disposable vape brand in the U.S. market. Despite the MDO, the Bidi Stick is still the bestselling disposable ENDS product based on retail sales for the 52-week period ending on Aug. 27, 2022, Nielsen data shows, according to the companies.
Kaival Brands, which commenced business operations in March 2020, generated a cumulative $100 million in revenues in less than a year. In July 2021, Kaival Brands’ stock began trading on the Nasdaq. In April 2022, the company announced the expansion of additional wholesale and retail accounts, a move expected to increase the reach of Bidi Sticks by about 28,000 stores and to make up for the losses the company experienced in the wake of the MDO.
Difficult Times
In fiscal year 2021, which Patel described as “very challenging,” Kaival Brands reported a net loss of $9 million compared to net income of approximately $3.8 million for fiscal year 2020. In a press release, Patel said the MDO had caused “irreparable harm to both Bidi Vapor and Kaival Brands.”
The greatest revenue loss occurred in the last two quarters of fiscal year 2021, between the lifting of the FDA’s administrative stay and the ordering of the judicial stay, when the company was unable to market its Bidi Sticks. Revenues for fiscal year 2021 were approximately $58.8 million compared to $64.3 million in the prior fiscal year. Kaival Brands’ revenues decreased by approximately $15.7 million in the second quarter of fiscal year 2022 compared to the same period of fiscal year 2021, but revenues rose 11 percent compared with the first quarter of 2022, suggesting further recovery.
The 2021 year also presented challenges to Kaival Brands’ attempted foray into the modern oral nicotine market, a category that is still a niche but that has recently grown dramatically. The global nicotine pouches market size was valued at $1.5 billion in 2021. Grand View Research expects it to increase at a compound annual growth rate (CAGR) of 35.7 percent from 2022 to 2030.
Bidi Vapor had planned to introduce its Bidi Pouch in February 2021, but due to the Covid-19 pandemic, the launch had to be postponed. In September 2021, the company said in a press release that the launch would be further delayed while the company reformulated the product to utilize tobacco-derived nicotine and sought FDA marketing authorization. The company had originally envisioned the pouch to contain synthetic nicotine but pivoted following concerns about the legality of nontobacco-derived nicotine.
Congress subsequently changed the definition of a “tobacco product” to include synthetic nicotine products, with the FDA requiring manufacturers of nontobacco nicotine products to submit PMTAs by May 14, 2022. As of July 13, 2022, any new synthetic nicotine product that has not received premarket authorization from the FDA cannot be legally marketed. “We did not launch our nicotine pouch product,” Patel says. “Due to concerns with synthetic nicotine, we decided to focus on tobacco-derived nicotine and will launch in the U.S. only after we obtain FDA PMTA marketing authorization.”
Cooperating with PMI
In June 2022, Patel handed over the management of Kaival Brands to Eric Mosser. The leadership change had always been a part of the plan, according to Mosser. “I was preparing for the leadership role, which was set to occur as soon as plans for international expansion solidified. International distribution came sooner than later once Philip Morris International decided to license technology from Bidi Vapor and now also has distribution rights in certain markets outside the United States.”
Two weeks earlier, Kaival Brands’ newly created wholly owned subsidiary, Kaival Brands International, had entered into a licensing agreement with Philip Morris Products (PMP), a wholly owned affiliate of PMI. The agreement grants to PMP a license of certain intellectual property rights relating to Bidi Vapor’s premium ENDS device, the Bidi Stick, as well as potentially newly developed devices to permit PMP to manufacture, promote, sell and distribute such ENDS devices and newly developed devices in international markets outside of the U.S. Patel called the agreement a major milestone in Kaival Brands’ efforts to expand the global sales and distribution of the Bidi Stick.
Kaival Brands, in turn, announced the launch of Veeba, PMI’s first disposable e-cigarette utilizing Bidi Vapor’s intellectual property, in Canada in late July. PMI’s new product is now the lowest-priced disposable vape on the Canadian market. Mosser says he anticipates revenues through royalties paid by PMP, pursuant to the licensing agreement, in the fourth fiscal quarter. “I see Kaival Brands reclaiming its previous revenue growth trajectory and expanding into additional market segments with new innovative products that we exclusively distribute or own, not only here in the U.S. but also in profitable global markets.”
Disposable e-cigarettes are a growth market. According to report from Future Market Insights, the global disposable e-cigarette market size is expected to be valued at $6.34 billion in 2022. The overall demand for disposable e-cigarettes is projected to grow at a CAGR of 11.2 percent between 2022 and 2032, totaling around $ 18.32 billion by 2032.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
How effective must a product be in helping adult smokers quit to overcome the theorized level of harm to youth?
By Neil McKeganey
If there is one thing that you can say about the U.S. Food and Drug Administration’s premarket tobacco product application (PMTA) process, it is that it is exceedingly data heavy. E-cigarette manufacturers’ submissions under the PMTA process can run to the thousands of pages, reporting the results of research costing millions of dollars. To receive a marketing authorization, e-cigarette manufacturers have to be able to show that their product is “appropriate for the protection of the public health” (APPH).
The APPH standard has become something of a modern-day mantra in the world of tobacco regulation, but what exactly does it mean? While nobody would accuse the FDA of excessive clarity in its communications with industry, this much is clear—in the simplest of terms, manufacturers need to be able to show that their product is helping adult smokers to quit, or at least to substantially reduce their smoking, and that their products are not being used by nonsmokers. This, in a nutshell, is what the FDA means when it talks about the importance of assessing the net public health impact of new tobacco products—the capacity to assess the likely overall impact of a new tobacco product on the nation’s health.
The kind of evidence that manufacturers are required to present under the PMTA process ranges from longitudinal customer studies collecting data from consumers of their products over weeks or months to assess how those products are impacting on the individual’s smoking behavior. Alongside such customer studies are the randomized control trials that monitor changes in smokers’ behavior when they are using the new tobacco product under control conditions. The randomized trials are probably the sort of things most manufacturers have heard of before even if they have not carried them out. These studies are often presented as the gold standard in research evaluating the impact of a new drug. The shortcoming with the control trial design, though, is that it tells you about the impact of your product under controlled conditions; it does not tell you how people will use your product in their real life.
The results of these studies can be presented to the FDA along with studies showing which population groups are currently using the new tobacco product and which ones are likely to start using the new tobacco product if it were approved. This is where the PMTA process starts to get more mysterious. One of the key groups that the FDA wants to know about is young people. With recent studies showing that more than one in 10 young people in the U.S. are using e-cigarettes, the FDA has repeatedly stressed that in deciding whether a manufacturer’s product is going to be judged as APPH, it needs to balance the impact of the product on adult smokers and young people. When the former FDA commissioner stated in 2018 that the “offramp” to adult smoking must not be achieved at the cost of the on-ramp to youth vaping, he was making it clear that the FDA would be prepared to deny approval to a new tobacco product that might be helping adult smokers to quit if at the same time it was being used by youth or likely to be used by youth.
In a scenario where youth use of a new tobacco product can become a deal breaker for a company seeking regulatory approval for their new tobacco product, it is clear that the FDA is placing greater weight on youth vaping prevention than on adult smoking cessation. For many people, the greater value placed on youth vaping prevention may seem entirely fair—but the question at the heart of all this is by how much is the FDA valuing youth vaping prevention over adult smoking cessation? The answer to that question, or more accurately, the failure of the FDA to answer that question, is the mystery at the heart of the PMTA process. An e-cigarette manufacturer may be able to present stellar data to the FDA showing the benefit of their product in helping adult smokers to quit and still receive a marketing denial order on the basis that in the view of the FDA, the product poses too great a risk to youth.
In interpreting the results of the empirical studies that manufacturers may have carried out, the FDA is trying to model the likely impact of the product on the total population—adults and youth. Modeling, though, is a mysterious process in which you try to anticipate what you think might happen in the future under various assumed conditions in the present. Some years ago, the National Academies of Science Engineering and Medicine carried out a modeling exercise to try to quantify the impact of e-cigarettes on population health in the U.S. This was a limited exercise carried out under precisely stated assumptions about how effective e-cigarettes might be in helping smokers to quit and how harmful they may be compared to combustible cigarettes. In contrast to such transparency, the FDA has never specified how it is weighing youth harm prevention against adult smoking cessation. As a result, e-cigarette manufacturers will never know how effective their product needs to be in helping adult smokers quit to overcome the theorized level of harm to youth to be judged APPH.
Neil McKeganey is the director of the Center for Substance Use Research in Glasgow, Scotland.
