Blog - Tobacco Reporter

Altria Buys Poda’s Assets and Properties

Altria Client Services will pay $100.5 million for assets and properties used in Poda Holdings’ business of developing, manufacturing and marketing multisubstrate heated capsule technology, according to a Poda press release. The deal includes the owners’ associated patents and the company’s license of certain of those patents pursuant to an amended and restated royalties agreement dated April 12, 2019.

“This agreement represents a significant milestone for Poda and its employees,” said Ryan Selby, Poda’s CEO, director and chairman of the company’s board of directors. “Our teams have worked diligently on this technology since the company’s inception, and we believe these agreements maximize its value for the company and its shareholders.”

Poda’s multisubstrate heated capsule technology uses proprietary biodegradable single-use capsules. The design of the technology prevents cross-contamination between the heating devices and the capsules, which eliminates cleaning requirements and provides users with a convenient and enjoyable experience, according to Poda Holdings.

This agreement represents a significant milestone for Poda and its employees.

Ryan Selby, CEO, director and chairman, Poda Holdings

Poda’s technology is fully patented in Canada and is patent pending in over 60 additional countries, covering almost 70 percent of the global population.

Tobacco Reporter profiled Poda Holdings in January 2022 (see “Making its Mark”).

Altria Client Services’ parent company, Altria Group, currently holds a license to distribute Philip Morris International’s IQOS HnB product in the United States. That product, however, has been subject to an import ban in the wake of an intellectual property dispute with BAT.

Analysts have also speculated on the likelihood of the IQOS distribution deal being renewed when it expires in 2024. PMI and Altria currently disagree about whether Altria has thus far met the milestones to earn the renewal option for an additional five-year deal.

May 16, 2022

WHO Accuses Industry of ‘Greenwashing’

The World Health Organization is urging governments worldwide to ban tobacco industry “greenwashing”—the touting of sustainability credentials as a way to distract from the health and environmental impacts of smoking.

In a new report, the health groups detail efforts by the tobacco industry to improve its image.

“This kind of activity gives the impression that the tobacco industry is socially and environmentally responsible,” the report’s authors warn. “Yet this industry is causing an incalculable toll on health to smokers, non-smokers and farmers. And not only is tobacco harming humans, it is also damaging the environment.”

Tobacco companies frequently tout their environmental credentials, and their efforts have been recognized by independent organizations. Most multinationals feature prominently on CDP’s prestigious A list, for example. CDP is a not-for-profit charity that runs a global disclosure system for investors, companies, cities and regions to manage their environmental impacts. Its process is acknowledged as the gold standard of corporate environmental transparency.

Tobacco companies also rank highly on the Dow Jones Sustainability Indices, a global sustainability benchmark that tracks the stock performance of the world’s leading companies in terms of economic, environmental and social criteria.

Critics contend that ESG rankings and accreditations rarely consider a company’s end-product or service, in this case, ignoring the fact that tobacco products are harmful to human health, according to the report.

The report says there are more than 600 different ways to assess corporate ESG activity and there are no global, standardized disclosure requirements for companies to follow, which means businesses can edit sustainability data to promote a favorable outcome.

The authors of the greenwashing reports urge organizations to avoid partnerships with cigarette companies engaged in environmental activities that could promote the industry as an environmental partner.

The WHO/STOP report also highlights the ecological impact of the tobacco industry. Annually, 32 million tons of tobacco leaf is grown globally to produce 6 trillion cigarettes, according to its authors. It takes about 22 billion tons of water to grow the global crop, often in places where water is limited, they argue.

The report estimates that nearly 1.5 billion acres of global forest have been lost to tobacco farming since the 1970s. Electronic cigarettes, meanwhile, introduce plastic, nicotine salts, heavy metals, lead, mercury and lithium-ion batteries into the environment.

May 16, 2022

22nd Century Acquires GVB Biopharma

22nd Century Group has acquired GVB Biopharma. As a contract development and manufacturing organization, GVB is believed to be one of the largest providers of hemp-derived active ingredients for the pharmaceutical and consumer goods industries worldwide based on total tonnage.

GVB’s strengths complement 22nd Century’s existing upstream and downstream value chains, which includes expertise in cannabinoid receptor science with CannaMetrix, plant research and proprietary genetics through its KeyGene partnership, breeding expertise with Extractas, and cultivation capabilities at Needle Rock Farms.

GVB expects 2022 revenue of approximately $48 million, a 58 percent increase year-over-year, gross margin in excess of 44 percent and positive cash flow. Upon closing, the transaction is expected to more than double 22nd Century’s revenue, be immediately accretive to adjusted EBITDA, and generate positive cash flow from the acquired assets in the near term.

“GVB represents a transformational acquisition for 22nd Century that will enable us to rapidly grow our hemp/cannabis franchise,” said James A. Mish, chief executive officer of 22nd Century Group, in a statement.

“GVB is one of the largest CBD suppliers globally, possessing innovative, vertically integrated cannabinoid product manufacturing technologies driving industry leading scale and cost efficiency. In addition to immediately expanding our hemp/cannabis franchise capabilities, GVB represents an opportunity to double our revenue and internalize a comprehensive contract manufacturing and extraction platform which can be used to directly and exclusively monetize our differentiated and proprietary hemp/cannabis plant genetics and intellectual property. We are enthusiastic to begin working with the highly regarded and very experienced management team at GVB.”

“We are excited to combine with 22nd Century group, pairing our production and manufacturing capabilities together with the best hemp/cannabis plant science in the world,” said Phillip Swindells, chief executive officer at GVB. “Since 2017, we have built a loyal customer base and continue to add new, rapidly growing customers as demand in our industry accelerates. We sold more than five billion doses of CBD in 2021, and we look forward to further scaling our business as a part of 22nd Century’s comprehensive platform.”

GVB operates three U.S. manufacturing facilities in Oregon and Nevada, including a 30,000-square-feet hemp ingredient manufacturing facility in Central Oregon, a 40,000 square-feet white-label, finished product manufacturing facility in Las Vegas, and an industrial-scale hemp extraction facility in Prineville, Oregon.

May 16, 2022

KT&G Posts Strong Results in First Quarter

KT&G’s sales and operating profit soared by 11.5 percent and 10 percent, respectively, to reach KRW844.8 billion ($665 million) and KRW272.6 billion in the first quarter of 2022, according to a company earnings release. Performance was driven by KT&G’s flourishing overseas business, with robust sales of its heat-not-burn (HNB) tobacco products.

“Our sales expansion of HNB products in both domestic and overseas markets, along with increasing export volume of our traditional tobacco products, led to the growth of the company’s total revenue,” a KT&G official was quoted as saying by The Korea Times.

KT&G sold about 9.54 billion cigarettes in Korea in the first quarter of this year, 0.9 percent less than in the same period last year. However, its market share increased by 1.2 percentage points to 65.7 percent. In the HNB sector, the company’s products accounted for 45.1 percent of the domestic market.

KT&G’s overseas volume of combustible cigarettes jumped 43.8 percent to 11.5 billion, thanks to strong sales in the Middle East and Asia Pacific regions.

May 14, 2022

Marketing Orders for Vuse Vibe and Vuse Ciro

The U.S. Food and Drug Administration on May 12 gave R.J. Reynolds Vapor Co. (RJRVC) permission to continue marketing the original-flavor varieties of its Vuse Vibe and Vuse Ciro products. In October 2021, the FDA authorized the marketing of Vuse Solo original flavor.

“These authorizations represent the broadest portfolio of market authorizations provided to any company in the U.S for premarket tobacco product applications (PMTA),” said David O’Reilly, director of scientific research at RJRVC’s parent company, BAT, in a statement. “Continued focus on science and innovation has supported the robust submissions, which have enabled FDA to evaluate and authorize the marketing of these products.

“We are proud of the work undertaken by the team to achieve this significant regulatory milestone and are confident in the quality of our applications.”

While approving the original-flavor varieties, the FDA denied RJRVC’s applications for the marketing of Vuse-branded products with other flavors. Those flavored vapor products are not currently marketed or sold in the U.S., according to BAT. The company says it is reviewing the FDA’s decision on those applications to determine next steps.

RJRVC’s application to market menthol-flavored Vuse products remains under FDA review and those products can remain on market pending a decision from the agency.

May 12, 2022

PMTA Deadline Approaching

Manufacturers of nontobacco nicotine (NTN) products on the market as of April 14, 2022, that wish to continue to market their products are required to submit a premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration by May 14, 2022.

The May 14 deadline is only for applicants submitting electronically, as required by the FDA. Applicants can, however, request a waiver from the FDA to submit a PMTA in a different format. An application submitted in hard copy must be received by the FDA no later than 4 p.m. Eastern Daylight Time on Friday, May 13.

The FDA received from the U.S. District Court of Maryland a 14-day extension to file the first PMTA status reports required by the court’s revised remedial order on April 29.

“The extension request is supported by good cause. Compiling the information needed for the status report has required considerable time and effort, and defendants have been working with plaintiffs to resolve any ambiguities about which applications will be covered in the status report,” the motion states.

The new law additionally provides that an NTN product with a tobacco-derived “previous version” that received a negative action on a PMTA from the FDA, such as a refuse-to-file or marketing denial order, may not continue to be marketed after May 14, 2022, without receiving a marketing granted order from the FDA.

Such products must be removed from the market, even if a new PMTA is submitted, until the marketing granted order is received, according to the agency. Products on the market after July 13, 2022, without an FDA marketing granted order are in violation of section 910 of the Food, Drug and Cosmetic Act and may be subject to FDA enforcement.

For products not on the market on April 14, 2022, a PMTA must be submitted to the FDA and marketing authorization must be received before the product can be sold in the United States.

May 12, 2022

Innokin Launches Lota Vaporizer

Innokin Technology has launched Lota, it’s new sub-brand of vaporizers, according to a company press release.

Innokin is partnering with Aquios Labs for the Lota. Aquios Labs is a new technology firm that enables water-based e-liquid.

Lota will initially launch with a portfolio of three water-based devices, each with their own position for specific global markets and consumer needs: the Lota Enviro, F600 and Prefilled Pod Kit, according to a company press release.

“Innokin has always believed in embracing new technology,” said George Xia, Innokin’s co-founder. “When first introduced to Aquios Labs, our product development team was impressed with the unique advantages of water-based vaping. Through this exciting partnership, Innokin is proud to launch the Lota brand, offering high-performance water-based vaping in our continued quest of tobacco harm reduction across the globe.”

May 12, 2022

Zimbabwe: Decline in New Tobacco Growers

The number of new tobacco growers in Zimbabwe for the 2021–2022 season has declined by 50 percent compared to the previous year, according to a report in The Herald.

According to the Tobacco Industry and Marketing Board (TIMB), 756 of the new registered farmers are from the communal sector, 244 are A1 farmers, 38 are from the small-scale commercial sector and 56 are from the A2 sector.

Meanwell Gudu, TIMB chief executive, attributed the decline in new registrations to viability issues. “The decline witnessed in terms of registration of new tobacco growers can be attributed to viability issues. The cost of production is going up and the growing demand of the U.S. dollar component in the operations,” he said. “Even farm laborers now demand payment in foreign currency. So without development funding, it becomes a challenge for new tobacco farmers to register.”

Meanwhile, average prices for tobacco exports have marginally increased this year.

“There [are] increased exports, which is a clear reflection of the opening up of the economy post-Covid-19 lockdowns, and there are improvements in logistics,” Gudu said.

So far, Zimbabwe has exported tobacco worth $307.8 million this season compared to $222.2 million in the same period last year.

May 12, 2022

PMI Reaches Gender Balance Goal

Philip Morris International has reached its global company-wide target to improve gender balance, ensuring at least 40 percent female representation in managerial roles by 2022, according to a company press release.

Jacek Olczak, CEO at PMI, commented, “I am immensely proud of PMI’s vision, commitment and achievement in ensuring equal opportunities are given to all in the workplace, irrespective of gender. Meeting this target demonstrates that our inclusion and diversity strategy is working. Diverse profiles, backgrounds and perspectives allow us to make better and more considered decisions as well as contribute to better and more sustainable performance. I firmly believe that a culture of fairness, inclusion and diversity [is] crucial to PMI’s progress in achieving a smoke-free future and will continue to benefit the company as we become more reflective of our consumer base.”

“What gets measured really does get done,” said Silke Muenster, chief diversity officer. “This was a whole company effort requiring everyone to take responsibility. I am delighted that we have met our target on time but recognize that we still have a long way to go on our diversity, equity and inclusion journey. With this in mind, we have our next gender representation target: 35 percent of women in senior roles by 2025.

“Having a truly diverse workforce is an essential part of our goal to achieve a smoke-free future. I am very proud of the progress we have made to date, and I am confident about achieving more in the future.”

PMI has also been recertified as a global EQUAL-SALARY organization for the second time since 2019 by the independent EQUAL-SALARY Foundation. The recertification verifies that PMI continues to pay female and male employees equally for equal work in the more than 90 markets where PMI operates.

The EQUAL-SALARY Foundation is an independent, nonprofit organization based in Switzerland. The EQUAL-SALARY certification verifies that organizations have sustainable policies and practices to ensure that they pay their male and female employees equally for equal work.

May 12, 2022

Swedish Match Accepts PMI’s $16 Billion Offer

Swedish Match’s board of directors has accepted Philip Morris International’s offer of SEK161.2 billion ($16.14 billion), according to The Wall Street Journal. The deal is subject to shareholder approval.

PMI hosted a live audio webcast today to discuss the offer. An archived copy of the webcast will be available at www.pmi.com/investors until 5 p.m. ET on June 9, 2022.

“We are pleased to announce this exciting next step in Philip Morris International’s and Swedish Match’s trajectory toward a smoke-free future,” said PMI CEO Jacek Olczak in a statement. “Underpinned by compelling strategic and financial rationale, this combination would create a global smoke-free champion—strengthened by complementary geographic footprints, commercial capabilities and product portfolios—and open up significant platforms for growth in the U.S. and internationally.

“Swedish Match’s dedicated employees and management have steadfastly pursued the company’s vision of a world without cigarettes while delivering very strong results. We look forward to building upon this success and joining forces to accelerate our shared smoke-free mission.”

In 2016, PMI announced its new mission to replace cigarettes with science-based, less harmful alternatives as soon as possible, and the company says it has made considerable progress toward that goal. While in 2015, essentially all of PMI’s net revenues came from cigarettes, last year nearly 30 percent came from smoke-free products. By 2025, PMI aims to be a predominantly smoke-free company, with more than half of its net revenues coming from such products. PMI says it has built world-class scientific assessment capabilities, notably in the areas of preclinical systems toxicology, clinical and behavioral research as well as postmarket studies.

Underpinned by compelling strategic and financial rationale, this combination would create a global smoke-free champion.

Jacek Olczak , CEO, PMI

Swedish Match embarked on its smoke-free journey two decades ago, starting with its decision to divest its cigarette business. PMI says it values how Swedish Match has relentlessly pursued tobacco harm reduction through its range of smoke-free products; received authorizations for its products via strict regulatory pathways in the U.S.; and reshaped the public health environment in countries such as Sweden and Norway.

“As PMI continues to evolve its business for the long term, it believes that the two companies would be a perfect pairing of strategic vision, culture and enterprise,” PMI wrote in a press note. “Together, the companies would be able to create a global, science-led smoke-free champion, combining expertise in heated tobacco and oral nicotine—including multiple MRTP [modified-risk tobacco product] authorizations—as well as PMI’s emerging presence in e-vapor products, to switch more adult smokers to better alternatives than the two could achieve as separate companies. Swedish Match would lead the combined company’s oral nicotine business.”

Financial analysts confirmed the deal has strategic merit, citing Swedish Match’s access to the lucrative U.S. market. Cigarette sales have been declining almost unabated for years because of the health hazards and the stigma attached to smoking. Meanwhile, “modern oral” products, such as nicotine pouches and lozenges, are driving growth in the oral tobacco category, which includes traditional chewing tobacco and moist snuff. Swedish Match’s Zyn pouch leads the U.S. modern oral category with a volume market share of 64 percent in 2021.

According to PMI, the combination would immediately enhance PMI’s already strong growth profile and support additional opportunities in the U.S. and internationally over time. It is also expected to be accretive to adjusted diluted earnings per share before any synergies and excluding transaction-related costs as well as the amortization of acquired intangibles. Swedish Match’s operating cash flow comprises meaningful U.S. dollar net income, thereby improving PMI’s currency profile.

From January through March 2022, Swedish Match’s sales and operating profit from product segments increased on the back of continued strong momentum for the U.S. smoke-free business, according to the company’s interim report.

Group sales increased by 10 percent to SEK4.89 billion ($492.05 million). In local currencies, sales increased by 2 percent for the first quarter.

Operating profit from product segments increased to SEK2.12 billion. In local currencies, operating profit from product segments decreased by 7 percent for the first quarter.

Profit after tax amounted to SEK1.49 billion.

PMI says it intends to preserve and develop Swedish Match’s operational presence in Sweden, where much of the company’s skills base is located, as well as in Richmond, Virginia, the site of the head office for Swedish Match’s U.S. Division. PMI has no plans to divest Swedish Match’s Lights business.

May 11, 2022