Category: News This Week

  • MRTP for General Snus

    MRTP for General Snus

    Photo: Swedish Match

    The U.S. Food and Drug Administration (FDA) has authorized Swedish Match U.S. division’s amended modified-risk tobacco product (MRTP) applications for eight varieties of General Snus, making it the first tobacco product to secure the modified-risk designation and right to market the product as a less harmful alternative to cigarettes.

    “Today’s decision is a huge accomplishment for public health in the U.S. and another step toward realizing our vision of a world without cigarettes,” said Gerry Roerty, vice president and general counsel for Swedish Match.

    “There are nearly 35 million adult smokers in the U.S., all of which have been led to believe the only way to reduce tobacco risk is complete abstinence. We now have the opportunity and responsibility to inform cigarette users who cannot abstain that General Snus can be a risk-reducing alternative. If that’s enough to make even a percentage of them switch, we’ve made progress.”

    The modified-risk status classifies General Snus as a tobacco product that is sold or distributed for use to reduce harm or the risk of tobacco-related disease associated with commercially marketed tobacco products. The FDA also cleared Swedish Match’s claim that using General Snus instead of cigarettes puts users at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema and chronic bronchitis.

    In a statement, Swedish Match said the authorized claim allows it to begin working to reduce misperceptions related to the risk of General Snus. According to the National Young Adult Health Survey, only 10 percent of respondents believed snus was less risky than cigarettes.

    Snus has already been tied to progressing the reduction of cigarette use in other countries. In Sweden, widespread use of snus in place of cigarettes is believed to have helped the country achieve the lowest lung and oral cancer rates in men in Europe. In Norway, snus rates among young women increased to 13 percent since its legalization in 2002. Smoking rates among young women dropped from 30 percent in 2001 to 1 percent in almost the exact same time span.

    In announcing the first-ever modified-risk orders for a tobacco product, the FDA said its decision does not mean General Snus is safe or “FDA approved.” Acting FDA Commissioner Ned Sharpless said, “While we are authorizing these specific modified-risk tobacco products, it’s important for the public to understand that all tobacco products—including these—pose risk.”

    The market authorization is valid for five years and requires Swedish Match to conduct postmarket studies to determine the impact of MRTPs on consumer perception, behavior and health.

    Bonnie Herzog of Wells Fargo Securities described the ability to make a modified-risk claim in tobacco/nicotine as a game changer—”not just from a consumer perception point of view but also in terms of potential tax favorability down the line since it’s logical that a tobacco product that is less harmful to public health should be taxed less onerously than a higher risk product,” she wrote.

    “We view this as very good news for the broader tobacco/nicotine industry as it demonstrates the FDA’s commitment to a ‘continuum of risk’ strategy and provides a viable pathway/process for manufacturers,” she added.

  • Ban Needs Fixing

    Ban Needs Fixing

    A Massachusetts judge on Monday said he would bar the state from enforcing its ban on nicotine vapor product sales unless several defects are addressed.

    While declining to immediately halt the ban as requested by the Vapor Technology Association (VTA), Suffolk County Superior Court Judge Douglas Wilkins said the state must redo the ban and solicit public comment.

    VTA Executive Director Tony Abboud said his organization regretted the ruling and would seek to block the ban, which the group has called an “existential threat” to the state’s $331 million nicotine vapor products sector.

    In its lawsuit challenging the ban, the VTA argued that Baker’s emergency order was an unconstitutional overreach and was arbitrary as it claimed to target youth vaping and the outbreak by banning all sales to anyone in the state regardless of age.

    Baker’s administration has until Oct. 28 to reissue the ban and provide vape shops and members of the public an opportunity to comment.

  • ‘Undermining’ Plain Packs

    ‘Undermining’ Plain Packs

    Tobacco companies have been undermining U.K. plain packaging laws with subtle marketing techniques, according to a report published in BMJ Open. The techniques ensure cigarettes continue to stand out from rival products without breaching regulations.

    Philip Morris International, for example, added beveled edges and a new “pro-seal” closing mechanism to packets of its bestselling Marlboro brand. This made packs “appear more premium and recognizable compared to other brands,” the researchers claimed.

    Tobacco companies have also responded to a ban on taste descriptors by replacing them with names based on color. The researchers said that banning terms such as “smooth” and “light” was meant to dispel the myth that certain types of cigarette are less dangerous but that by teaching customers color codes linked to the old descriptions, “misperceptions are likely to endure.”

    One of the lawmakers who pioneered the legislation said ministers should consider tightening up the rules to eliminate loopholes detailed in the report.

    The U.K. plain packaging law took effect in 2016.

  • Erdogan Rules Out E-cigs

    Erdogan Rules Out E-cigs

    Turkish President Tayyip Erdogan has ordered his trade minister “never” to allow e-cigarettes.

    “They asked us for a place and permission to produce these [e-cigarettes.] We didn’t give it to them and we will not,” he said, without saying which firm or firms he was referring to. “They want to invest in Turkey …. Go and make your investment elsewhere.”

    Erdogan said that tobacco companies were “getting rich by poisoning” people.

    Around 27 percent of Turkey’s population aged over 15 years smoked cigarettes in 2016, according to World Health Organization data, down from around 31 percent in 2010.

    While vaping is not illegal in Turkey, purchasing or distributing e-cigarettes is. Despite this, many people procure e-cigarettes through online distributors, which also provide the liquid to put in the machines.

  • TC Speaks on Weak Earnings

    TC Speaks on Weak Earnings

    Inferior leaf quality and inaccurate forecasting by authorities contributed to the low prices prevailing during the 2019 Malawi tobacco selling season, reports The Times of Malawi, citing the Tobacco Commission (TC).

    Malawi sold 165.7 million kg of tobacco this year, earning $237 million at an average price of $1.43 per kg in 2019.

    The traded volumes, realization and average price attained were all lower than those attained last year when Malawi sold 202 million kg and earned about $337.5 million at an average price of $1.67 per kg.

    Initial crop estimates had indicated that Malawi would produce around 206 million hectares of tobacco, but the country produced only 165.7 million, according to the TC.

    TC CEO Kaisi Sadala said the overestimated production figure could have created the impression to buyers that the country had plenty of tobacco, thereby affecting pricing.

    Sadala said authorities would address the problem to avoid a repeat of the situation.

    The government has issued more than 50,000 tobacco growing licenses for the 2019–2020 season.

  • STG Closes Lane Facility

    STG Closes Lane Facility

    Scandinavian Tobacco Group is closing its Lane facility in Tucker, Georgia, USA, and moving production to facilities in Denmark and the Dominican Republic. The closure will reduce the group’s number of production facilities to 11 from 12.

    The Tucker facility manufactures pipe tobacco, fine-cut tobacco and little cigars, the markets of which have been declining.

    The closure of the Tucker facility will adjust the capacity to current and projected volumes and is expected to improve the group’s overall annual cost structure by more than DKK20 million ($2.99 million) when fully implemented by the end of 2020. The transfer of production is expected to incur investments of about DKK30 million.

    In a statement, the company said the closure would not impact its 2019 financial guidance, except for special items. Special costs related to the closure are expected of about DKK120 million and will be expensed in 2019.

  • Juul Ends Flavor Sales

    Juul Ends Flavor Sales

    Juul Labs has suspended the sale of nontobacco, non-menthol-based flavors in the U.S., pending review of these products by the Food and Drug Administration (FDA).

    Thursday’s move, which ends online sales, means Juul’s mango, fruit, creme and cucumber nicotine pod flavors will no longer be available for sale anywhere in the United States. The company last year pulled those flavors from retail stores but continued to sell them on its website with what the company said were “strict age-verification controls.”

    In a statement, Juul Labs said it believes the FDA’s premarket tobacco product application (PMTA) process and its “appropriate for the protection of the public health” standard are the best ways to assess the role its products can play in helping adult smokers move away from combustible cigarettes while also being kept out of the hands of youth.

    “We must reset the vapor category by earning the trust of society and working cooperatively with regulators, policymakers and stakeholders to combat underage use while providing an alternative to adult smokers,” said Juul Labs’ recently appointed CEO, K.C. Crosthwaite

    “As we evaluate what products to submit for PMTA, we will continue to develop scientific evidence to support the use of these flavored products, coupled with strict measures to combat underage use, as we believe these products can play an important role in helping adult smokers move away from combustible cigarettes,” Juul Labs stated.

    The move follows heavy criticism of Juul’s marketing practices. The company accounts for more than 70 percent of U.S. e-cigarette sales, according to Nielsen, and critics say it has been the primary driver behind the recent surge of youth vaping in the U.S.

    According to new data from the 2019 National Youth Tobacco Survey, e-cigarette use among high school students nationwide increased to 27.5 percent in 2019 compared with 11.7 percent in 2017 and 20.8 percent in 2018. Altogether, 5 million middle school students and high school students now use e-cigarettes.

    Earlier, Juul Labs suspended all broadcast, print and digital product advertising in the U.S. and ceased active support of Proposition C, a ballot initiative to overturn San Francisco’s ban on e-cigarettes that have not been reviewed by the FDA.

    The company also announced it would refrain from lobbying the administration on its draft flavor guidance and will fully support and comply with the final policy when effective.

     

     

  • PMI Reports Results

    PMI Reports Results

    Andre Calantzopoulos

    Philip Morris International (PMI) reported net revenues of $7.64 billion in the third quarter of 2019, up 1.8 percent over those reported in the 2018 third quarter. Operating income was $2.79 billion, down 11.7 percent from that in the comparable 2018 quarter.

    PMI shipped 199.5 billion cigarettes and heated tobacco units (HTUs) in the third quarter, compared with 203.72 billion in the 2018 quarter.

    The number of shipped cigarettes declined to 183.52 billion in the 2019 third quarter from 195.07 billion in the 2018 third quarter.

    The number of shipped HTUs increased to 15.99 billion from 8.65 billion from quarter to quarter.

    “Our third quarter results continued to reflect strong underlying business performance and include the better-than-anticipated timing of pricing and costs compared to our previously communicated assumptions for the quarter,” said PMI CEO Andre Calantzopoulos.

    “The exciting global growth of our heated tobacco products drove our resilient total shipment performance, despite certain timing issues related to our combustible portfolio. The quality of our execution across the business drove growth against each of the key metrics of net revenues, operating income, margin, as well as earnings per share—both in the quarter and year-to-date—on a currency-neutral, adjusted like-for-like basis.

    “Importantly, IQOS was introduced in the U.S. this quarter, where it is currently the only FDA-authorized heat-not-burn product.”

    The third quarter results also reflected charge of approximately $0.20 per share related to an excise tax and value added tax audit in Russia.

    “As we expected, Q3 results were well ahead of consensus,” said Bonnie Herzog of Wells Fargo Securities. “HTU shipments were stronger than we expected, up 84.8 percent led by Italy, Russia, Ukraine and Japan.”

    Pamela Kaufman of Morgan Stanley expected investors to react favorably to PMI’s third-quarter results, which she said reaffirmed IQOS’ positive momentum and PMI’s solid underlying fundamentals.

  • Tobacco top earner

    Tobacco top earner

    Despite declining cigarette sales, tobacco is the third most profitable business in the United States, according to a ranking compiled by Comparisun.

    With an average profit margin of 31.42 percent, tobacco is outranked only by transportation (railroads), with an average profit margin of 50.93 percent, and real estate (41.23 percent).

    Remarkably, the booming electronics and software industries rank among the least profitable businesses in the U.S, with average profit margins of -4.07 percent and 1.88 percent respectively.

  • Temporary reprieve

    Temporary reprieve

    Thailand’s excise department will temporarily reduce a tobacco tax from THB0.10 ($0.003) to THB0.03 per gram for one year, starting Jan. 1, 2020.

    The move follows complaints from tobacco farmers that the THB0.10 rate, which was introduced on May 7, was taking a toll on their incomes.

    Earlier, the excise department postponed a 40 percent tax hike by one year to Oct. 1, 2020.

    The temporary tax cut applies only to farmers who produce fine-cut tobacco and those with an annual production up to 12,000 kg

    Thailand has 10,450 tobacco growers, of whom 15 have production capacity of more than 12,000 kg a year.

    The May 7 tax hike was intended to narrow the price gap between factory-made and hand-rolled cigarettes, after many smokers switched to rolling their own tobacco.