Category: Featured

Revenue Service Urged to Step up Enforcement

Photo: syahrir
The South African Revenue Service (SARS) is failing to use all the tools at its disposal to combat the illicit cigarette trade that is depriving the country of billions of rand in desperately needed taxes, British American Tobacco South Africa (BATSA) wrote in a press release.
On the day that independent research revealed tax-evading cigarettes are now on sale in almost half of stores nationwide, SARS Commissioner Ed Kieswetter appeared to admit defeat when he told MPs the illegal tobacco trade was a problem “significantly bigger than SARS.”
In response, BATSA General Manager Johnny Moloto said: “SARS has the power to tackle the manufacturers of illicit cigarettes and dramatically reduce the huge losses to our fiscus,” said BATSA General Manager Johnny Moloto. “But, for some reason, they are unwilling or unable to act.
“Production Counter Rules were instituted more than a year ago and this should mean all manufacturers are accountable for every cigarette they make. Yet SARS does not seem to be adequately enforcing their policy that would ensure these regulations are being followed.
“SARS published draft CCTV camera rules for public comments two months ago. In light of the commissioner’s own admission, we are calling on SARS to implement these rules as of January 2022 instead of June 2022 to strengthen the control of local production.
“All manufacturers should demonstrate that they follow the Production Counter Rules or explain what they are trying to hide.”
“SARS officials told MPs on Tuesday that the biggest problem is not smuggling, but illicit cigarettes being produced in this country,” said Moloto.
“They know the problem, and they should know who is responsible. Instead of throwing up their hands in despair, they should follow the money and catch the criminals who are siphoning billions out of our beleaguered economy.”
November 11, 2021
‘Vapor Tax Would Lead to More Smokers’

Photo: New Africa
Guy Bentley
The nicotine tax in the U.S. Build Back Better Plan bill will negatively affect public health and hurt lower- and middle-class Americans, according to Guy Bentley, director of consumer freedom research at the Reason Foundation.
The current version of ever-changing proposal would introduce a new tax on e-cigarettes and other smoking alternatives, which research suggests are dramatically safer options for smokers.
A 6 milligram nicotine/30 milliliter bottle of e-liquid, for example, would be taxed at a rate of $5.01 under the proposal. A typical pack of e-liquid pods would be taxed at $4.59. The federal tax on cigarettes is $1.01 per pack. Thus, e-cigarettes would be taxed more than regular cigarettes, and dramatically more so in states that already levy their own high e-cigarette taxes.
Writing on the Reason Foundation’s website, Bentley cites Michael Pesko of Georgia State University, who estimates the new tax on nicotine alternatives would cause 2.7 million more daily adult smokers, 530,000 more teen smokers and 29,000 more prenatal smokers. (Pesko recently shared some of his concerns in a letter to Congress).
This is because e-cigarettes are substitutes, not complements to combustible cigarettes, and millions of American ex-smokers have used these products to get off smoking traditional cigarettes.
Bentley says the tax is also highly regressive and would violate President Biden’s campaign promise not to raise taxes on people earning less than $400,000 a year. According to a recent Gallup poll, Americans with an annual household income of less than $40,000 are significantly more likely to vape than higher-income groups.
“With more than 15 million adult vapers now in America, many of whom attribute their ability to quit or reduce smoking traditional cigarettes to their use of e-cigarettes, it’s baffling House Democrats would consider targeting this group with a huge tax increase that could push many of them back to smoking and worsen public health,” wrote Bentley.
November 11, 2021
‘Pro-Tobacco’ Remarks Draw Ire in Philippines

Teodoro Locsin Jr.
(Photo: Philippine Department of Foreign Affairs)
The Philippines Department of Health has distanced itself from the statements made by the Philippine delegation at the ninth Conference of the Parties (COP9) to the World Health Organization’s Framework Convention on Tobacco Control (FCTC), reports CNN Philippines.
During the opening of the conference on Nov. 8, Foreign Affairs Secretary Teodoro Locsin Jr. said tobacco is a source of bad health but acknowledged that it “is also a source of good through taxation.”
“Tobacco tax laws fund our poverty reduction, universal health care and Covid-19 recovery programs They underscore the importance of tobacco use and funding of the state’s most important activities,” said Locsin.
The foreign affairs secretary also noted that the tobacco industry is making progress in moving away from harmful products by introducing “products with similar satisfaction but with far less harm.”
The health department said the statements made by the Philippine delegation negate the FCTC principles and undermine the progress the Philippines has made to curb tobacco use.
It also said that it was misleading to praise the tobacco industry’s role in raising tax revenues. In 2011, the cost of tobacco-related diseases was estimated at PHP177 billion ($3.54 billion) annually, the agency noted. This was seven times higher than the PHP25.9 billion collected in taxes from tobacco products.
Tobacco Harm Reduction advocates have praised the Philippines for rebuffing outside forces seeking to derail its tobacco-control policies.
November 11, 2021
Olczak: PMI-Altria Merger off the Table

Jacek Olczak (Photo: PMI)
Philip Morris International is no longer pursuing a merger with Altria Group, reports Financial Times.
At the Financial Times Global Dealmaking Summit on Nov. 9 PMI CEO Jacek Olczak said that the “chapter with Altria is closed,” the newspaper reported.
PMI was spun off as a separate publicly traded company from Altria in 2008. Altria operates in the United States and PMI operates in non-U.S. markets.
Industry analysts and observers have speculated for years that the two companies might eventually reunite as they both look to diversify their product lines and offset slow declines in cigarette sales.
The two companies said in August 2019 that they were discussing a possible all-stock “merger of equals.” However, those negotiations ended a month later without any deal.
At the time, Howard Willard, then Altria’s chairman and CEO, said, “While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement.”
During the recent Global Tobacco & Nicotine Forum in London, analysts said reunification of the companies was unlikely because of PMI’s public commitment to derive more than 50 percent of its net revenues from smoke-free products by 2025. Because Altria currently receives a smaller share of its earnings from such offerings than does PMI, it would be harder for the combined entity to meet PMI’s target, they noted. What’s more, many PMI investors like the fact that they can currently choose whether or not they want exposure to the uncertain U.S. market—an option that would no longer be available after any merger.
Altria holds exclusive rights to sell PMI’s IQOS tobacco-heating device in the U.S. However, the U.S. International Trade Commission ruled in late September that Altria and Philip Morris International must halt imports and sales of IQOS because it infringes two patents held by R.J. Reynolds Tobacco Co. The decision is under administrative review and could be overturned.
November 11, 2021
Pyxus Reports Second Quarter Results

Pieter Sikkel (Photo: Pyxus International)
Pyxus International reported sales and other operating revenues of $394.2 million for the second quarter of 2021, up 30.3 percent from the same period in 2020.
Gross profit as a percent of sales increased to 13.2 percent from 11.8 percent. The company reported a net loss of $9.7 million in the second quarter, compared with net income of $105.9 million for comparable 2020 period.
Adjusted EBITDA increased 32.8 percent to $25.9 million for the quarter.
“We continue to be pleased with the growing momentum of our business,” said Pieter Sikkel, president and CEO of Pyxus, in a statement. “Our new operational and capital structures, supported by our sustainability strategy, are proving to be points of differentiation with our customers, and we are seeing increased demand for our leaf products and growth in market share.
“The leaf business continues to be impacted by Covid-related shipping constraints, including vessel and equipment availability, port congestion and rising freight costs. We are taking proactive steps to mitigate these challenges, including taking steps to accelerate shipments, exploring new ports for product export, and working closely with customers to determine if there are ways to expedite the process flow for their operations.
“With regards to e-liquids, while the regulation and enforcement activities in the e-liquids industry are continuing to mature, we await Premarket Tobacco Product Application (PMTA) approval notification for our pending applications for Humble Juice Co. and Twelfth State Brands and, if our PMTAs are approved, we look forward to the post-PMTA market opportunities.
“Despite Covid-related shipping constraints that face many industries, the first half of fiscal 2022 reflects improved demand, increased leaf volumes, and improved operational performance. As we leverage the savings from fiscal 2021 restructuring initiatives, we continue to expect fiscal 2022 sales to be between $1.65 billion and $1.8 billion, SG&A expense to be between $140 million and $145 million (excluding non-recurring items and potential changes in foreign currency exchange rates), and adjusted EBITDA to be between $150 million and $170 million. The strengthening of our business in a sustainable manner remains a priority as our global team works together to achieve our purpose of growing a better world.”
November 11, 2021
Tropical Oasis: Costa Rica’s La Casa del Habano

Photo: Timothy Donahue
Cigars have been selling at a steady pace through the pandemic at Costa Rica’s home for Cuban cigars.
By Timothy S. Donahue
Cuban cigar sales at the La Casa del Habano (LCDH) in Costa Rica grew in 2020 compared to the previous year. The shop’s manager, Beatriz Ramirez, said sales in 2021 are now on pace to surpass 2020. “People have had more time to enjoy quality cigars,” she told Tobacco Reporter during a recent visit to the country’s capital, San Jose. “We were concerned at the beginning when businesses began to close because of Covid-19, but our sales remained steady and even surpassed 2019.”
Located just down the street from the U.S. Embassy (approximately 250 feet east), Costa Rica’s LCDH franchise opened its doors in 2011. The shop is owned by the Cruz Canela Group, which is the exclusive distributor of Habanos S.A. in Costa Rica and Nicaragua. The shop is operated by general manager Luis Garcia Cruz (who happened to be out of the country on business during our visit). Ramirez explained that the shop is an old, classic-style former home in the popular neighborhood of Rohmoser (Pavas).

Inside the doors are two large classic Cohiba branded humidors just before the doorway to the shop’s large humidor filled with several popular Habanos brands and vitolas, including Cohiba, Montecristo, Partagas, Romeo y Julieta, H. Upmann, Hoyo de Monterrey, Trinidad, Bolivar, Ramon Allones, La Gloria Cubana, Punch, Fonseca and several others. Just across the hall from the humidor is the checkout area with several glass display cases. The room also has a small spiral staircase that leads to offices upstairs.
“La Casa del Habano provides all of our customers the comfort and personal attention that should be expected from Habanos and LCDH,” said Ramirez. “Here you can find the largest selection of Habanos throughout Costa Rica as well as accessories, such as cutters, lighters, ashtrays and even some very beautiful humidors.” There is also a book on the history of Habanos as well as hats and other merchandise for sale.
LCDH is more of a home away from home for cigar smokers than your typical cigar shop. The Costa Rican shop has two separate lounge areas for customers to conduct a business meeting, relax with the daily paper or swap stories of worldly adventures with other visitors. Just past the humidor is a room set in an imitate space for smoking, furnished with relaxing lounge chairs and a large comfortable couch.

“We try to offer a variety of space for the comfort of our guests. We have had celebrities, politicians and many leaders in the community come together here to conduct business or to just socialize,” explains Ramirez. “We also provide many services beyond our excellent cigars to make our clients comfortable and welcome in the best environment for enjoying Cuban cigars from Habanos.”
A short hallway that houses two large H. Upmann branded humidors then opens into a larger room with several tables and couches with a bar in the corner that offers liquor, wine, beer, amazing coffee and even some Costa Rican chocolates. Guests are encouraged to order food from one of the many surrounding restaurants and have it delivered to LCDH to enjoy. The walls of LCDH are adorned with several works of art depicting both Cuban and Costa Rican life. There is also a small outdoor courtyard for clients to enjoy.

Habanos released an exclusive regional edition cigar in Costa Rica in 2020. Called the Pura Vida (a statement that describes several things in Costa Rica and has been adopted as the country’s motto), the San Luis Ray is a Magnum 54 and measures in at 54 x 120 mm (4 3/4 inches). Only 6,000 of the 10-stick boxes were produced. The cigar is medium bodied with a honey and floral start, with hints of vanilla and creaminess throughout. We also sampled the Hoyo de Monterrey Epicure No. 1. The Coronas Gordas measures 143 mm in length by a 46 ring gauge (46 x 143 mm). The cigar began with strong notes of cedar and followed with notes of toasted cinnamon, nutmeg, mint and a touch of sweetness.
Costa Ricans (Ticos) use the term “Pura Vida” to say almost everything from hello to goodbye to everything’s great or even just so-so. It’s all about the tone. Pura Vida is the way Ticos live. If ever visiting in Costa Rica, LCDH in San Jose is a necessary stop. The quality of cigars and customer service are unparalleled in the region. More than that, LCDH embodies all that is Pura Vida.
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

November 11, 2021
‘Medical Licensing Realistic Only For Tobacco Companies’

Photo: goodmanphoto
The U.K.’s Medicines and Healthcare Products Regulatory Agency’s (MHRA) recent update to its guidelines to make vapor devices available via medical prescriptions may favor the traditional tobacco industry, reports ECigIntelligence, citing experts.
According to Christopher Snowden of the Institute of Economic Affairs, it’s likely that only tobacco companies will succeed in gaining licensing for their products.
Robert West, professor of health psychology and director of tobacco studies at the University College London, stated that he is not confident “any e-cigarette manufacturer independent of the tobacco industry will have the resources to overcome these hurdles.”
“This could very easily lead to a situation where tobacco company e-cigarettes can be prescribed while others cannot,” West said.
“I am worried that the MHRA may have missed an opportunity here and has not made the process simple enough to generate more successful applications,” said Clive Bates, director of The Counterfactual. He expressed concern that the agency has made the licensing process too complicated by asking for information that is “either unnecessary or too difficult to produce cost effectively.”
Another concern is consistent dosing—many feel that in order to remain consistent with dosing, closed systems will be favored over open systems, where consumers can control the strength of nicotine.
“It would be essential for the MHRA to evaluate the device and liquid together. That favors sealed disposable units and pod-based systems,” said Bates.
Once a company submits a marketing authorization application, the standard timeline is 150 days plus any time needed by the company to answer questions that arise, according to the MHRA. The pathway has been available since 2013 but was “expensive and time-consuming.”
November 10, 2021
Ukraine Urged to Delay Tax Rate Convergence

Photo: Ivan Semenovych
Ukraine’s leading cigarette manufacturers have called on the government to postpone the date by which the country’s tobacco excise tax must match those in the EU from 2025 to 2030, citing out-of-control growth of illicit tobacco sales, reports Ukraine Open for Business.
According to the Kantar Ukraine research institute, the black market jumped from 1 percent of all tobacco sales in 2016 to 18.1 percent in August 2021 as the country is increasing its tobacco excise taxes to the EU level of €90 per 1,000 cigarettes by 2025.
The current rate is €48.4 per 1,000 cigarettes.
Ukraine’s total legal cigarette market is now estimated at 32.7 billion units, which is 18 percent less than in 2020 and more than 40 percent less than its volume in 2018.
“We propose to expand the schedule for increasing excise taxes on tobacco products until 2030, providing for an annual increase in rates at the level of 10 percent [instead of the current 20 percent]. This will stabilize the situation in the tobacco market,” said Rastislav Cernak, CEO of Imperial Tobacco Ukraine.
He also proposed to “freeze” the increase in the excise tax on heated-tobacco products for three years, until 2024. “This approach will give the consumer more time to adjust to higher prices and deprive the illegal market of the potential for growth,” said Cernak.
Philip Morris International hinted it would consider manufacturing tobacco-heating products in Ukraine if the state creates the appropriate conditions.
Local manufacture of such products could generate more than UAH6 billion ($229.5 million) in investments and UAH4 billion in additional income, according to some estimates.
November 10, 2021
PMI Makes Case for IQOS at FDA

Photo: Lightfield Studios
Philip Morris International met with the U.S. Food and Drug Administration on Nov. 5 to present its argument for why the multinational and Altria Group should be allowed to import and sell the IQOS tobacco-heating device in the U.S., reports CNBC.
According to a CNBC source, PMI told the FDA that IQOS is unique in its ability to transition smokers away from combustible cigarettes, which the company says are more harmful to health than tobacco-heating devices.
In late September, the International Trade Commission ruled that IQOS infringed on two of Reynolds’ patents. The Biden administration is conducting an administrative review until Nov. 29 to decide if the sale and import of the cigarette alternative will be banned.
During the FDA meeting, PMI reportedly argued that the ITC overstepped its bounds, given that the FDA is in charge of regulating which tobacco products can be sold.
The U.S. Trade Representative will make a recommendation to President Joe Biden after listening to input from a number of agencies, including the FDA, which regulates tobacco products.
If the administration sides with R.J. Reynolds in the dispute, IQOS could be off of U.S. shelves for months as it waits for a decision on a separate claim from Reynolds with the U.S. Patent and Trademark Office.
PMI has successfully defended similar cases in the U.K. and elsewhere. BAT has already pursued litigation over IQOS in Poland, the Czech Republic, Bulgaria, Romania and Greece and through the European Patent Office.
In the worst-case scenario for Altria and Philip Morris, the two companies would have to go back to the drawing board, moving production to the U.S. or changing up the design enough to avoid patent infringement claims.
November 10, 2021
Report: Plain Packaging Gaining Momentum

Image: CCS
Tobacco plain packaging continues to gain momentum worldwide, according to a new report released by the Canadian Cancer Society (CCS) in conjunction with the ninth session of the Conference of the Parties to the World Health Organization Framework Convention on Tobacco Control, Nov. 8–13. The FCTC recommends member states to consider plain packaging.
Titled Cigarette Package Health Warnings: International Status Report, the CCS study reveals that 21 countries and territories have currently adopted plain packaging compared with nine in 2018. An additional 14 countries are working to implement the measure.
“There is a strong, unstoppable global trend for countries to implement plain packaging,” says Rob Cunningham, senior policy analyst at CCS, in a statement. “Australia was the first country to implement plain packaging in 2012, and now the pace of implementation is accelerating. These developments are very encouraging as plain packaging is a key measure to protect youth and to reduce tobacco use.”
Plain packaging includes health warnings on packages and prohibits tobacco company branding such as colors, logos and design elements. It also requires the brand name to be a standard font size, style and location on the package and the brand portion of each package to be the same color, such as an unattractive brown. Finally, the package format is standardized. Plain packaging regulations put an end to packaging being used for product promotion, increase the effectiveness of package warnings, curb package deception and decrease tobacco use.
Plain packaging has been implemented in Australia (2012), France (2016), the United Kingdom (2016), Norway (2017), Ireland (2017), New Zealand (2018), Saudi Arabia (2019), Turkey (2019), Thailand (2019), Canada (2019), Uruguay (2019), Slovenia (2020), Belgium (2020), Israel (2020), Singapore (2020), the Netherlands (2020), Denmark (2021) and Guernsey (2021) and will be implemented in Hungary (2022), Jersey (2022) and Myanmar (2022).
Plain packaging has been implemented in practice in three countries where packages are imported from a country with plain packaging: Monaco (from France), Cook Islands (from New Zealand) and Niue (from Australia). Plain packaging is under formal consideration in at least 14 countries: Armenia, Chile, Costa Rica, Finland, Georgia, Iran, Malaysia, Mauritius, Mexico, Nepal, South Korea, South Africa, Spain and Sri Lanka.
The number of countries requiring plain packaging is expected to increase even further because of the World Trade Organization (WTO) appeal decision on June 9, 2020, that Australia’s plain packaging requirements are consistent with the WTO’s international trade agreements.
The case followed an unsuccessful legal challenge to plain packaging by the tobacco industry.
There is a strong, unstoppable global trend for countries to implement plain packaging.
Rob Cunningham, senior policy analyst, Canadian Cancer Society
The CCS report also reveals growing momentum for graphic health warnings. It found that 134 countries and territories now require pictorial health warnings on cigarette packages, up from 117 in 2018. This represents 70 percent of the world’s population. Canada was the first country to require pictorial health warnings in 2001.
“There is unrelenting international momentum for countries to use graphic pictures on cigarette packages to show the lethal health effects of smoking,” says Cunningham. “It is extremely positive for global public health that more than 130 countries and territories have required picture health warnings and have increased warning size and that so many are moving toward plain packaging,” says Cunningham. “The international trend will reduce global tobacco industry sales and will save lives lost to cancer and other tobacco-related diseases.”
In total, 122 countries and territories have required warnings to cover at least 50 percent of the package front and back (on average), up from 107 in 2018 and 24 in 2008. There are now 71 countries and territories with a size of at least 65 percent (on average) of the package front and back, and 10 with at least 85 percent.
November 10, 2021