Japan Tobacco on Thursday announced it was considering selling its Russian operations after suspending investment and marketing activities in the country last month following Moscow’s invasion of Ukraine.
The statement by JT, market leader in Russia, came after it said in March it would continue manufacturing in the country, where it has four factories and 4,000 employees.
That announcement drew criticism after many global brands pulled out over the invasion of Ukraine and governments, including Japan, levied heavy sanctions against Moscow. Russia calls its action in Ukraine a “special operation,” according to Reuters.
Japan Tobacco’s move to explore a sale of its Russia operations makes it the last major international cigarette-maker to speak publicly about potentially leaving Russia, the world’s fourth-biggest cigarette market.
Marlboro owner Philip Morris, the No.2 biggest player in the country, said last month that it plans to scale down manufacturing operations in Russia and that it is working on options to exit the market.
BAT Ukraine has resumed manufacturing operations at the Pryluky tobacco factory in Ukraine as of April 25, reports InterFax Ukraine.
The company has reportedly decided to resume manufacturing at the factory in phases after making a thorough risk and threat analysis.
The operations at the Pryluky factory comply with all applicable security and safety requirements, curfew and other restrictions proper to martial law, according to BAT.
BAT Ukraine is monitoring the security and safety situation in Pryluky and the Chernihiv region and plans to adapt activities as the situation changes.
The Independent European Vape Alliance (IEVA) has launched a new campaign aimed at educating smokers about the harm reduction potential of vaping compared to smoking combustible cigarettes.
Tobacco consumption is the single largest avoidable health risk and the most significant cause of premature death in the EU, responsible for nearly 700,000 deaths every year, according to the European Commission. Around 50 percent of smokers die prematurely.
Independent studies have shown that the switch to vaping is often an effective way to stop smoking completely, according to the IEVA.
“The developments in New Zealand and the U.K. are examples of progressive and enlightened public health policies. Political and public health leaders should take a close look at these results. Vaping can make a significant contribution to reducing smoking rates,” said Dustin Dahlmann, president of the IEVA, in a statement.
The European awareness campaign will take place over the coming weeks via the social media channels of the international members of the IEVA.
Nepal has banned the import of tobacco, cars, alcohol and other luxury items and shortened its workweek to conserve its dwindling supply of foreign exchange, according to the South China Morning Post.
Under the ban, only emergency vehicles can be imported, and imports of alcohol or tobacco products, large-engine motorcycles and mobile phones costing more than $600 are prohibited. Import of toys, playing cards, diamonds and other “nonessential” goods are also banned.
The ban is in effect until mid-July, which marks the end of the Himalayan nation’s financial year.
According to officials, without the ban, foreign currency reserves necessary to import goods will only last a few more months.
Nepal’s main sources of foreign currency are tourism, remittances from overseas workers and foreign aid.
The ban on menthol cigarettes is closer to becoming a reality. After years of discussion, the U.S. Food and Drug Administration has instituted a proposed rule to place a ban on menthol combustible cigarettes and flavored cigars. Whether the menthol ban will also cover next-generation tobacco products, such as e-cigarettes, has not yet been clarified.
“The authority to adopt tobacco product standards is one of the most powerful tools Congress gave the FDA and the actions we are proposing can help significantly reduce youth initiation and increase the chances that current smokers quit. It is clear that these efforts will help save lives,” said FDA Commissioner Robert M. Califf. “Through the rulemaking process, there’s an important opportunity for the public to make their voices heard and help shape the FDA’s ongoing efforts to improve public health.”
When finalized, the FDA states that the proposed menthol product standard will:
reduce the appeal of cigarettes, particularly to youth and young adults, decreasing the likelihood that nonusers who would otherwise experiment with menthol cigarettes would progress to regular smoking; and
improve the health and reduce the mortality risk of current menthol cigarette smokers by decreasing cigarette consumption and increasing the likelihood of cessation.
According to the FDA, the proposed product standards are based on clear science and evidence establishing the addictiveness and harm of the products. Many organizations were quick to condemn the regulatory agency for proposing the rule that is opposed by all major law enforcement, civil rights and criminal justice reform organizations. Opponents of the menthol ban say that banning menthol products will do nothing to reduce combustible cigarette smoking rates but will lead to an increase in people purchasing products on the black market.
“This misguided proposal will have disastrous impacts on public health and public safety. It will do nothing to reduce smoking rates and instead make the United States less safe.” said Tim Andrews, director of Consumer Issues for Americans for Tax Reform (ATR). “It is unfortunate that as violent crime rates rise across the country, the FDA chooses to divert valuable police resources to pursue an unnecessary ban on menthol products.”
Andrews argues that a menthol ban exposes “vulnerable members of minority communities to conflict with law enforcement, and their purchases could also fund sophisticated international criminal syndicates.” According to the U.S. Department of State, illicit tobacco’s links to funding terrorist organizations already present a “serious threat” to national security. “This policy would worsen the problem while also depriving state governments of excise revenue, putting state government programs at risk,” says Andrews.
Richard Marianos, a senior law enforcement consultant who has served more than 27 years at the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and who is now a consultant and adjunct lecturer at Georgetown University, says that in many markets, such as Asia, companies are creating products to make mentholated cigarettes, because those types of products are not covered by the rule.
“They flavor packets you just slide into a pack of cigarettes. You buy your cigarettes, you put that in there and by the time you get home, the whole pack is mentholated. They also have these– it’s like a little Tic Tac box with a round, small, little mint … but what it does is you put it into the filter, shake, crush and now it’s a menthol cigarette,” said Marianos. “Are we eventually going to be asking border protection to now start looking for minty flavor packets or Tic Tac boxes when they have to concentrate on biological and nuclear threats? When you overlook public safety surrounding this matter, you’re creating an unhealthy situation, not just for smokers, but anybody who’s out there.”
Marianos says that a menthol ban will create a greater level of diversion and criminal activity with high-value targets overseas, it’ll bring more organized crime into the United States. It’ll also create a greater market for border countries to begin manufacturing menthol and bring it into the United States.
“There was one investigation in particular, I remember, where the individual said on a wire that once they banned menthol cigarettes in the United States, you can pave the roads in gold because of the boost in sales of black market and DIY menthol cigarettes,” he said. “Prohibition doesn’t work. Your quality of police work goes down; they can’t concentrate on violent crime as much and it creates a greater wedge between themselves and the community.”
Guy Bentley
Guy Bentley, director of Consumer Freedom Research for the Reason Foundation, said that similar bans have had minimal effects on tobacco consumption in other countries such as Canada and the U.K., adding that a menthol ban is likely to lead to more policing in minority communities, more incarceration, boost black market sales and undermine criminal justice reforms in the U.S.
Bentley explained that a recent study funded by the Norwegian Cancer Society in partnership with the Polish Health Ministry found that in Poland – the EU state with the largest pre-ban menthol share – found “mixed evidence” that the ban is working as intended.
Bentley argues the FDA and Biden administration should apply a harm reduction model, educating the public about safer alternatives to conventional cigarettes and the latest smoking cessation options. Andrews concurs with Bentley, adding that the proposed rulemaking will inevitably lead to further growth of illicit markets, put members of minority communities in danger and divert law enforcement resources away from real crime.
“It ignores best practice expert recommendations on how to reduce smoking rates through proven harm reduction technologies, is a disaster for public health, and will make all Americans less safe,” Andrews said. “If the Biden Administration truly cared about the American people, they would junk this anti-science and genuinely harmful proposal immediately.”
Beginning May 4, 2022, the public can provide comments on these proposed rules, which the FDA will review as it considers future action. The agency also will convene public listening sessions on June 13 and June 15 to expand direct engagement with the public, including affected communities.
The public will have the opportunity to submit either electronic or written comments directly to the dockets on the proposed rules through July 5, 2022. Once all the comments have been reviewed and considered, the FDA will decide whether to issue final product standards.
The FDA also states that it cannot and will not enforce against individual consumers for possession or use of menthol cigarettes or flavored cigars. If the proposed rules are finalized and implemented, FDA enforcement will only address manufacturers, distributors, wholesalers, importers and retailers who violate the rules.
The U.S. Food and Drug Administration today announced a plan to ban the sale of menthol cigarettes in the United States. Menthols account for about one-third of the U.S. cigarette market.
The agency expects that taking menthol cigarettes off the market will reduce smoking levels and lower the number of young people taking up the habit.
“The proposed rules would help prevent children from becoming the next generation of smokers and help adult smokers quit,” said U.S. Health and Human Services Secretary Xavier Becerra in a statement. “Additionally, the proposed rules represent an important step to advance health equity by significantly reducing tobacco-related health disparities.”
With the FDA plan, the U.S. is following in the footsteps of Canada and the European Union, which banned menthol cigarettes in 2017 and 2020, respectively. Menthol is the only cigarette flavor that wasn’t banned under the 2009 Family Smoking Prevention and Tobacco Control Act, which gave the FDA authority over tobacco products.
In 2019, there were more than 18.5 million current menthol cigarette smokers ages 12 and older in the U.S., with particularly high rates of use by youth, young adults and African American and other racial and ethnic groups, according to the FDA. The agency cited modeling studies suggesting that there would be a 15 percent reduction in smoking within 40 years if menthol cigarettes were no longer available in the U.S. These studies also estimate that 324,000 to 654,000 smoking attributable deaths overall (92,000 to 238,000 among African Americans) would be avoided over the course of 40 years.
Health advocates oppose menthol because the ingredient’s “cooling” effect makes it easier to start smoking and harder to quit. The health consequences have disproportionally fallen on Black smokers, 85 percent of whom use menthols.
Critics have cautioned that a menthol ban could have unintended consequences. For example, Guy Bentley, director of consumer freedom at the Reason Foundation, warned of increased black market sales and more incarceration. The desired public health gains, he wrote, could also be achieved by applying the harm reduction model to tobacco policy.
Along with its menthol ban, the FDA also announced product standards to prohibit all characterizing flavors (other than tobacco) in cigars.
“Characterizing flavors in cigars, such as strawberry, grape, cocoa and fruit punch, increase appeal and make cigars easier to use, particularly among youth and young adults,” the FDA wrote in its announcement. “More than a half million youth in the U.S. use flavored cigars, and in recent years, more young people tried a cigar every day than tried a cigarette.”
Beginning May 4, the public can provide comments on these proposed rules. The FDA also will convene public listening sessions on June 13 and June 15.
Myanmar has postponed the implementation of standardized tobacco packaging until April 2023, following a lobbying campaign by opponents of the measure, reports Eco-Business. The law was originally set to take effect on April 10, 2022.
The new packaging regulations require the outer surfaces of tobacco product packages to be a standardized dull dark brown, flat, smooth and devoid of any attractive designs or decorative elements.
Health advocated criticized the delay.
“Instead of postponing its implementation by 12 months, the government should have penalized tobacco companies for not complying by the April 10 deadline,” said Ulysses Dorotheo, executive director of the Southeast Asia Tobacco Control Alliance.
“Only the tobacco industry will profit from this bad decision while the government and people of Myanmar will suffer more diseases, healthcare costs, deaths and their related socioeconomic burden,” added Dorotheo.
Fortuna Cigar House (FCH) could become the new owner of Imperial Brands’ Russian business, according to an Interfax report citing the Kommersant newspaper.
Following Russia’s military invasion of Ukraine, several tobacco companies said they would scale back their operations in Russia. On April 20, Imperial Brands announced the transfer of its Russian business to local investors, subject to finalization of the registration of the transaction with local authorities. The company estimates a noncash write-off of around £225 million ($279.86) for this transaction.
Founded in Odessa in 1999, FCH has been operating in Russia since 2011 as a joint venture with the distributor Megapolis, which was previously associated with Russian tobacco mogul Igor Kesaev. The company sells cigars, tobacco, smoking accessories and materials and equipment. It also has its own retail outlet.
According to SPARK-Interfax, 50.01 percent of FCH belongs to Megapolis, and 49.99 percent belongs to BVG Cigar House Fortuna of Cyprus. In 2021, FCH posted revenue of RUR4.09 billion ($67.12 million) and a net profit of RUR404 million.
In March, Imperial Brands said it was suspending operations in Russia, including production at its factory in Volgograd, as well as sales and marketing. The company then began talks with a Russian legal entity on transferring the business.
Imperial Brands operates in Russia through Imperial Tobacco Volga, the production entity, and Imperial Tobacco Sales and Marketing. The company has held around 5.5 percent of the Russian tobacco market, according to business analysts cited by Kommersant.
Tobacco analysts Maxim Korolyov told Kommersant that Imperial Brands’ products will likely continue to be produced in Russia under a temporary license.
The JT Group reported revenues of ¥581.5 billion ($4.45 billion) in the first quarter of 2022, up 6.2 percent over that reported in the first quarter of 2021. Adjusted operating was ¥194.9 billion during the quarter, 9.4 percent more than in the comparable 2021 quarter. The JT Group posted an operating profit of ¥178.4 billion and a profit of ¥124.1 billion in the quarter, up 11.4 percent and 9.1 percent, respectively, over the 2021 quarter.
“Following the combination of the tobacco businesses this year, the JT Group delivered strong results with adjusted operating profit at constant FX increasing by 4.5 percent,” said JT Group CEO Masamichi Terabatake in a statement. “However, several uncertainties remain, such as the changing operating environment in Russia, the rapidly evolving operational costs and a very volatile inflation. Considering these factors, as of the first quarter, we have decided not to revise the full year guidance.
On March 10, the JT Group announced the suspension of new investments and marketing activities in Russia. The company is currently evaluating various options for its Russia business, including potentially transferring its ownership.
Russia is one of the JT Group’s largest markets. The company has four factories and employs nearly 4,000 people in the country. Terabatake said the company remains committed to its employees in Russia, including to secure their employment.
“We will continue to closely monitor the situation and prioritize the safety of our employees and their families by extending all possible support to affected people. We will take all necessary decisions to address the changing situation in accordance with the group’s management principle, which is to pursue the 4S model.”
Under the 4S model, the JT Group strives to fulfill its responsibilities to consumers, shareholders, employees and the wider society.
Altria Group reported its 2022 first-quarter business results and reaffirmed its guidance for 2022 full-year adjusted diluted earnings per share (EPS).
“We are off to a strong start to the year and believe our businesses are on track to deliver against their full-year plans. Our tobacco businesses performed well in a challenging macroeconomic environment, and we continued to make progress toward our vision to responsibly lead the transition of adult smokers to a smoke-free future,” said Billy Gifford, Altria’s CEO, in a statement.
“We reaffirm our guidance to deliver 2022 full-year adjusted diluted EPS in a range of $4.79 to $4.93. This range represents an adjusted diluted EPS growth rate of 4 percent to 7 percent from a $4.61 base in 2021. We continue to expect that adjusted diluted EPS growth will be weighted toward the second half of the year.”
Net revenues decreased 2.4 percent to $5.9 billion, primarily driven by the sale of the company’s wine business in October 2021. Excluding the wine segment, net revenues were essentially unchanged. Revenues net of excise taxes decreased 1.3 percent to $4.8 billion.
A conference call to discuss results with the investment community and the news media was held today at 9 a.m. Eastern Time.
Japan Tobacco on Thursday announced it was considering selling its Russian operations after suspending investment and marketing activities in the country last month following Moscow’s invasion of Ukraine.
