Category: News This Week

Smuggling Investigation Yields €1 Million Cash

Photo: Europol
An international law enforcement operation coordinated by Europol and Eurojust with the involvement of three countries has resulted in the arrest of 12 suspects, including the masterminds, belonging to a Russian-speaking organized crime group involved in the illegal cigarette trade. The arrests took place in Belgium and France and included the leaders of the criminal organization.
Between May 4 and May 5, some 28 premises belonging to the crime gang were searched in Belgium, France and the Netherlands, according to a Europol press note. The investigators seized more than €1 million in cash alongside 11 vehicles and hundreds of counterfeit cigarette cartridges. The necessary supplies to make 1.8 million cigarette packages were also discovered at one of the searched locations. Two of the individuals arrested in Belgium are awaiting surrender to the French authorities under a European arrest warrant.
This international sweep followed a complex investigation initiated in July 2020 by the Belgian Federal Judicial Police of Leuven in close cooperation with Belgian Customs, the French Gendarmerie, French Judicial Customs, and the Dutch Fiscal Information and Investigation Service, with international activities coordinated by Europol and Eurojust. This operation was carried out in the framework of the European Multidisciplinary Platform Against Criminal Threats
The criminal syndicate, composed mainly of Chechen nationals, was involved in the large-scale production and distribution of counterfeit cigarettes. It is believed that this organized crime group is responsible for the distribution of at least 100 million cigarettes since the autumn of 2020, with an estimated value of more than €45 million.
The counterfeit cigarettes were stored in warehouses in Tienen, Belgium, before being subsequently distributed among buyers from France, Germany, the Netherlands and the United Kingdom.
May 9, 2021
Growth Expected in Folding Carton Market

Photo: Taco Tuinstra
The folding carton market in North America is expected to grow by $2.68 billion, registering a compound annual growth rate of about 5 percent during 2021–2025, according to a new Technavio report.
The rise in the number of Covid-19 cases led to the shutdown of several manufacturing units, including the manufacturing plants of folding cartons in North America. Also, the disruptions in the supply chain caused by the pandemic limited the availability of raw materials and workforce in the market. However, the increasing demand from the healthcare and food and beverages industries for packaging and transporting a wide range of products is expected to reduce the impact caused by the pandemic on the market in 2021.
The market is expected to be driven by factors such as the increasing use of eco-friendly materials in packaging, the emergence of specialized folding cartons and the growth in the retail segment and e-commerce in North America.

May 7, 2021
No PMI Cigarettes in Japan Within 10 Years

Photo: beeboys
Philip Morris International (PMI) plans to stop selling cigarettes in Japan within 10 years.
In an interview with Nikkei, Jacek Olczak, who took over as the company’s CEO on May 5, predicted that Japan will become a smoke-free society within 10 years. PMI expects to gradually pull out of combustible tobacco products elsewhere over the next 10 to 15 years, and Olczak said he wants the transition to happen first in Japan.
According to Olczak, the company will be focusing on its heat-not-burn (HnB) products instead. In 2016, PMI began selling its IQOS HnB device nationwide in Japan. The company held a 70 percent share of Japan’s market for such products in 2019, according to Euromonitor International—far ahead of its rivals Japan Tobacco, with 10 percent, and British American Tobacco, with 20 percent.
Smokeless tobacco, which includes HnB and e-cigarettes, made up 11 percent of Philip Morris’ total shipments of 704.6 billion cigarettes in 2020, up 3 percentage points from 2019. The global market for combustible cigarettes has shrunk by just under 10 percent over the past four years.
Smokeless tobacco products are currently sold in 66 countries and regions, and Olczak said he wants to increase that to 100 percent by 2025.
Nearly 30 percent of all Japanese tobacco sales are now heated products. Part of their success is due to the country’s ban on e-cigarettes sales and its comparatively accommodative regulatory framework.
When Japan last year prohibited smoking in restaurants, it made an exception for HnB products, which can be consumed while eating or drinking if certain conditions are met, such as having ventilation equipment in place.
In 2019, tobacco companies sold 118.1 billion cigarettes in Japan, around one-third of the peak in 1996.

Jacek Olczak
Olczak said Philip Morris would introduce devices that use new technologies and consider expanding the functionality of heated devices. In addition to providing an age verification function to prevent minors from smoking, the company will also begin developing an application to help smokers manage their health.
Philip Morris’ sales for the fiscal year ended December 2020 totaled $28.6 billion, down 4 percent from the previous year, while its net profit reached $8 billion, up 12 percent.
May 7, 2021
Dutch Investigate PMI Over Smoke-Free ‘Ad’

Photo: Arkadiusz Fajer
The Dutch food safety body NVWA is investigating a campaign by Philip Morris International (PMI) to promote smoke-free alternatives, reports DutchNews.
PMI has launched a new website for the products and promoted it with a page advert in the Telegraaf at the weekend. In that advert, the company said Dutch smokers have the right to information about smoke-free alternatives.
While not mentioning the products by name, the advertisement does include the company’s brand name. Advertising tobacco products is illegal in the Netherlands.
The NVWA investigation follows complaints by anti-smoking groups. If found to have broken the ban, PMI could be fined up to €450,000 ($546,010).
May 7, 2021
Vector Group Reports Strong Earnings

Photo: MIND AND I
Vector Group announced financial results for the three months ended March 31, 2021.
“Vector achieved strong earnings performance in the first quarter in our tobacco and real estate businesses, a testament to our team’s hard work and our commitment to creating long-term stockholder value,” said Howard M. Lorber, president and CEO of Vector Group, in a statement.
“Our Liggett subsidiary continues to successfully execute its market strategy, and our Douglas Elliman real estate business saw continued and robust closed sales activity.”
The company reported consolidated revenues of $543.8 million, up 19.6 percent compared to the prior year period. Reported net income was $32 million. Adjusted net income was $45.3 million. Reported operating income was $90.2 million, up $95.1 million over the prior year period.
Tobacco segment operating income was $81.6 million, up 18 percent over the prior year period.
Adjusted EBITDA was $94.3 million, up 57 percent. Tobacco segment adjusted EBITDA was $80.6 million, up 13 percent.
May 7, 2021
Indonesia: Profits Plunge After Tax Hike

Photo: Taco Tuinstra
The profits of Indonesia’s two biggest cigarette manufacturers dropped significantly following a cigarette excise tax hike, reports The Jakarta Post.
Gudang Garam and Sampoerna saw their net profits decline 28.62 percent year-on-year to IDR1.74 trillion ($120.6 million) and 22.13 percent to IDR2.58 trillion, respectively, in the first quarter of the year.
The two companies’ net profits were hit by rising excise costs on top of weak cigarette demand. The finance ministry raised cigarette excises by around 12.5 percent starting in February after raising them 23 percent last year to deter smoking and raise state revenue.
However, the hike applied to only machine-made cigarettes and not to hand-rolled cigarettes.
Most of tobacco companies’ sales volume in Indonesia comes from machine-made clove cigarettes.
May 7, 2021
Indian Farmers Worried About Tobacco Prices

Photo: Tobacco Reporter archive
Tobacco farmers in Andhra Pradesh are concerned about declining tobacco prices, reports The Hindu.
When the auctions opened, buyers were offering more than INR180 ($2.44) per kg for bright grade varieties in the country’s most prominent tobacco-growing province. Now, the same varieties are fetching INR170 per kg at best, a group of farmers at the Vellampalli auction platform said.
To date, only 7.26 million kg have been traded against an estimated production of more than 70 million kg in the traditional tobacco-growing areas under the purview of the Southern Light Soils (SLS) and the Southern Black Soil (SBS) auction platforms. Tobacco production was also impacted by unseasonal rains in the Nellore and Prakasam districts.
In SBS auction platforms, the average price realized for the 3.55 million kg marketed so far has dropped to INR170.95 kg now. In SLS auction platforms, the 3.71 million kg marketed to date fetched an average price of INR173.30 per kg, according to the Tobacco Board.
Vellampalli II Tobacco Growers’ Association President N. Chimpriya called for intervention by the State Trading Corp., pointing to the foreign exchange traditionally earned by the tobacco sector.
Last year, Indian tobacco farmers incurred significant losses due to a prolonged Covid-19 lockdown. Tobacco growers fear disruption this year, too, as India struggles with a steep surge in infections.
May 6, 2021
22nd Century Reports ‘Exciting’ First Quarter

Photo: snowing12
22nd Century Group reported net sales revenue of $6.8 million for the first quarter of 2021 compared to $7.1 million in the 2020 first quarter.
Gross profit improved by $360,000 to $647 thousand; gross profit margin improved by 540 basis points. Gross profit margin improved year-over-year for the fifth consecutive quarter.
Net loss for the first quarter of 2021 was $5 million compared to $4 million in the same quarter last year. The change in net loss was driven by investment in anticipation of a modified-risk tobacco product (MRTP) designation of 22nd Century’s VLN cigarettes.
Adjusted earnings before interest, taxes, depreciation and amortization for the first quarter of 2021 was a $4.4 million loss compared to a $3.2 million loss for the first quarter of 2020.
In a press release, the company said its financial position is strong, with cash, cash equivalents and short-term investment securities totaling $30.9 million at the end of the first quarter of 2021.
“Our 2021 is off to an exciting start as we anticipate achieving multiple key milestones that will dramatically expand our commercial opportunities in both our tobacco and hemp/cannabis franchises,” said James A. Mish, CEO of 22nd Century Group.
“I remain highly confident in our MRTP authorization. We continue to steadily increase our advocacy activities at both the federal and state levels to achieve MRTP authorization in support of this critical public health issue. In addition to our primary VLN launch strategy to go to market within 90 days of authorization, we remain willing to license our technology to every cigarette manufacturer to help them join us in our efforts to reduce the harm caused by smoking and to protect future generations from ever becoming addicted to cigarettes.”
May 6, 2021
STG Raises Guidance After Strong Quarter

Photo: STG
For the first quarter of 2021, Scandinavian Tobacco Group (STG) delivered a stronger than expected organic growth in net sales and earnings before interest, taxes, depreciation and amortization (EBITDA). The results were driven by a continued high demand in handmade cigars in the U.S., synergies from the integration of Agio Cigars and the transformational program Fueling the Growth, according to STG. Additionally, the results were positively impacted by timing of orders between quarters.
Net sales were DKK1.88 billion ($304.53 million), reflecting with 12.5 percent organic growth. EBITDA before special items was DKK527 million, with 49.1 percent organic growth. The EBITDA margin was 28 percent compared with 18.5 percent in the comparable 2020 quarter.
The integration of Agio Cigars is ahead of plan, according to STG, which has revised expected cost savings upward.
“Demand and consumer behavior remain positively impacted by the Covid-19 pandemic with high consumption of handmade cigars and smoking tobacco products in the U.S.,” the company wrote in a press release. “The integration of Agio Cigars is running ahead of schedule and is now expected to deliver about DKK100 million in synergies for the year and about DKK250 million run-rate by the end of 2022. The combined market shares for machine-rolled cigars in key European markets continue to develop satisfactorily.”

Despite the continued challenges and uncertainty created by the Covid-19 pandemic, our business continues to do well.
Niels Frederiksen, CEO, STG
At the same time, STG noted that Covid-19 is creating significant uncertainty in the second half of the year. “Consumption of handmade cigars and purchasing patterns between online and brick-and-mortar retail stores in the U.S. cannot be forecasted with the normal level of accuracy,” the company stated. “Both are factors with significant impact on the group’s performance. Consequently, a range is introduced for the expected organic EBITDA performance as well as the cash flow before acquisitions.
For 2021, the company now expects organic EBITDA growth in the range of 12 percent to 18 percent, up 7 percent over the earlier forecast.
“Despite the continued challenges and uncertainty created by the Covid-19 pandemic, our business continues to do well,” said STG CEO Niels Frederiksen. “For the first quarter of the year, we can present strong growth in both net sales and EBITDA. I am particularly pleased to see that numerous initiatives across the organization are resulting in strong net sales, growing market shares as well as increased operational performance and efficiency.”
May 6, 2021
PMI appoints Jacek Olczak as CEO

Jacek Olczak (Photo: PMI)
Philip Morris International (PMI) appointed Jacek Olczak as CEO following the company’s 2021 annual shareholders meeting on May 5. Most recently the company’s chief operating officer, Olczak was also elected to the board of directors. Andre Calantzopoulos, who served as PMI’s CEO from 2013, was appointed executive chairman of the board prior to the meeting. Lucio Noto stepped down from his role as interim chairman of the board and was reelected to the board of directors.
In accepting his appointment as CEO, Olczak committed to accelerating PMI’s smoke-free transformation, announced in 2016. The company says it is focused on developing, scientifically substantiating and responsibly commercializing smoke-free products that are less harmful than smoking, with the aim of replacing cigarettes as soon as possible.
“I am humbled and excited to lead PMI as we accelerate our transformation into a smoke-free company,” said Olczak in a statement. “PMI is an industry leader in scientific innovation, and our ambition is that more than half of our net revenues will come from smoke-free products in 2025. Our evolving portfolio will drive our long-term future. We will lean into our scientific research and expertise, using our collective skills and imagination to innovate beyond our existing portfolio and explore new areas of business development.”
We will lean into our scientific research and expertise, using our collective skills and imagination to innovate beyond our existing portfolio.
Jacek Olczak, CEO, PMI
Olczak began his career with PMI in 1993. He started in finance and general management positions across Europe, including as managing director of PMI’s markets in Poland and Germany and as president of the European Union region, before being appointed chief financial officer in 2012. He held that position until 2018, when he became PMI’s chief operating officer. He holds a master’s degree in economics from the University of Lodz, Poland.
Olczak has been a vital driver of PMI’s smoke-free transformation, which moved into its commercialization phase with the launch of IQOS in Nagoya, Japan, in 2014. Under his oversight as chief operating officer, PMI increased the portion of its net revenues derived from smoke-free products to 28 percent in the first quarter of 2021. Further, the company grew the geographical coverage of its smoke-free products from zero to 66 markets in key cities or nationwide as of March 31, 2021. And Olczak led PMI’s commercial transformation, successfully developing it from a primarily business-to-business company to an increasingly business-to-consumer company.

Jacek is ideally placed to deliver PMI’s smoke-free vision in his new role as CEO.
Andre Calantzopoulos, executive chairman, PMI
“Jacek is ideally placed to deliver PMI’s smoke-free vision in his new role as CEO,” said Calantzopoulos. “His passion for the company and our employees underpins his drive for results, as does his deep knowledge of our products, systems, values and investors. I believe he is the ideal leader to ensure our business’ continued growth and deliver shareholder value. I look forward to continuing to work with him in my new capacity as executive chairman of the board.”
Approximately 85 percent of the shares entitled to vote were represented at the meeting in person or by proxy. The shareholders elected 13 nominees for director; approved, on an advisory basis, the compensation of named executive officers; and ratified the selection of PricewaterhouseCoopers as independent auditors.
May 6, 2021