The premium cigar industry recently declared victory in the fight against oversight by the U.S. Food and Drug Administration. Celebrations may have been premature.
The lawsuit was filed by the Cigar Association of America, the Cigar Rights of America (CRA) and the Premium Cigar Association. The case focused in part on the rulemaking process, which requires the FDA to inform the public about upcoming regulations and solicit feedback on those proposed rules.
In last month’s decision in Cigar Association of America et al. v. United States Food and Drug Administration, Judge Amit P. Mehta made a sweeping, albeit expected, ruling that granted relief to the three cigar industry trade groups that sued the regulatory agency in 2016 on behalf of the premium cigar industry.
The news confirms industry fears that warning labels, premarket tobacco product application (PMTA) review of cigars and other limitations that have impeded the ability of cigarmakers are still a possibility.
Recently, the FDA acknowledged the decision and one of its impacts, telling cigar companies that it did not plan to assess user fees for “premium cigars” sold during Q4 FY23.
The Department of Justice, which represents FDA on legal matters, had 60 days to appeal the ruling. It’s unclear whether the agency will ask a court for a stay, which could reenact the deeming regulations for “premium cigars” as the appeal process works itself out.
Reynolds American Inc., the BAT Group’s U.S. subsidiary, broke ground on the WaterHub at the Reynolds Operations Center in Tobaccoville, North Carolina. The WaterHub is an advanced water recycling facility and product of a subsidiary of NextEra Energy Resources. Several city and state leaders, NextEra Energy Resources and Reynolds representatives and others involved in the WaterHub project gathered Thursday as Reynolds demonstrated progress on its commitment to excellence in environmental stewardship with the project’s official groundbreaking celebration.
Once construction is complete, the WaterHub is expected to reclaim more than 60 million gallons of water per year, equivalent to the annual water supply of approximately 550 average U.S. households. This installation aims to reduce Reynolds’ environmental footprint and conserve water in Forsyth County’s Yadkin Pee Dee River Basin.
“Through the WaterHub, we expect to reduce water withdrawn at the Reynolds Operations Center by over 40 percent, which in turn would reduce the water withdrawn across our global operations sites by approximately 6 percent,” said Bernd Meyer, executive vice president of operations at the Reynolds organization, in a statement. “We are doing our part in preserving precious natural resources, and today celebrates a significant investment and long-term commitment to environmental sustainability.”
The WaterHub at the Reynolds Operations Center will be one of the few projects of its size in the U.S. using advanced water reclamation technologies, allowing Reynolds’ operating facilities to reduce their dependence on potable water for factory utility operations.
“At NextEra Energy Resources, we are dedicated to offering innovative solutions that help businesses like Reynolds in achieving their sustainability and environmental responsibility objectives,” said Gary Morris, vice president of distributed generation for NextEra Energy Resources. “The WaterHub not only actively conserves water resources but also bolsters operational resilience.”
This project complements Reynolds’ work to use water efficiently across its operations facilities. The American Snuff Company facility in Clarksville, Tennessee, and R.J. Reynolds Tobacco Company Whitaker Park site in Winston-Salem, North Carolina, both recently earned Alliance for Water Stewardship (AWS) Certification. Reynolds’ Operations Center in Tobaccoville earned this AWS designation in 2022.
“The more things change, the more they stay the same,” is an expression that has been around for almost two centuries, and it speaks to the fact that the small picture(s) of life may change, but the larger one does not. The vape industry and all the challenges and changes that have happened in the past decade are totally contrary to that famous saying.
A decade ago, the vape industry was the epidemy of the Wild, Wild West, full of vape shops springing up on every corner, and any/everyone creating e-liquids in their bathtubs at home. Regulation and competition changed all that and brought some semblance of “orderliness” to the market, but as state and federal regulations bombarded the industry, and with the FDA creating onerous and unattainable guidelines, the vape space has truly become one of survival.
I recently attended a vape event in Phoenix which brought together several dozen top manufacturers, distributors, and buyers, and universally everyone lamented the same concern: business is down.
Why is business down?
The reasons are many, including strict regulations, and now, even more enforcement of those regulations, but overall, the cause was much simpler. The huge COVID-19 rebound in 2020-22 put more money in consumers’ pockets and more time on their hands. Those issues combined created an artificial bubble that many thought would last. But time has passed. Add in the inflation that has pushed up food and other cost of living expenses, and some former necessities are now becoming unaffordable luxuries.
“It’s a balancing act between the addictive nature of some nicotine products and the limitations of buyer’s budgets,” said Jamie Reed with Simple Vape Supply from Orange County California. “I’ve been in the industry for over ten years, and this is evolution in its purest form and based around ’survival of the fittest.’”
Simple manufactures and distributes over 100 different assortments of nicotine cartridges, including disposables, including various iterations of CBD, Delta-8 and Kratom.
“It’s interesting,” Reed added. “When I got hired, I was told that there was an ‘expiration date,’ and we all knew that this industry might not last, and that the cream would rise (to the top). We planned to be one of those surviving companies, and we’ve been able to adapt to the times.”
Her company, along with many that are still around, were mostly run by rebels, radicals, and envelope pushers; and many have in fact changed accordingly, but some have merely learned how to “play the game” and outwardly appear to be toeing the line, but the reality may be different.
“We were aware that the COVID blip was a one-time event. People were home, they had government money to spend, and no one was checking in on them or requiring any urine tests. The Delta (8,10) boom really added to that, and everyone jumped on that bandwagon,” she said excitedly.
That line of CBD was an example of how the industry has and continues to push back. The FDA says you can’t do this, so the industry says, “F-you, then we’ll do that.”
With regulation eliminating or reducing product selection, almost any industry will do the same thing: adapt; repurpose, or reposition.
Of the dozens of people I spoke with at the event, the numbers (from shop owners and manufacturers) were pretty consistent, and most of them were down 20 to 30 percent. Many were saying that purchase sizes were lower than normal and a typical ten-thousand-dollar order was now half that. They saw some shops closing, but most were working on smaller revenues.
Manager J-K Thorne holds some of the flavored products that are no longer available at Wild Impulse vape shop. (Shane Hennessey/CBC)
Meanwhile, on the other side of the equation, vape liquid manufacturers who are trying to “play the game” right and submitting premarket tobacco product applications (PMTAs) to the U.S. Food and Drug Administration are frustrated at the amount of time it takes and how much money is being thrown into a (seemingly) dark hole.
I spoke with one of the owners of a large vape manufacturing business and distribution company in Idaho, and he shared some facts and figures about their process of trying to make their products “legal.” Legal, in the eyes of the FDA, has caused his company to squander over $5 million in the past few years trying to get authorization.
Mike Larsen is a detailed and focused vape guy who has been in the industry for over a decade and is with Lotus Vaping Technology, which started in 2011. As a partner and director of sales, he is on the front line of everything the company does to stay legal and compliant and is riding the roller coaster ride on a daily basis.
“Disposables have really changed the game,” he said, “and they have reduced the role of vape shops where people used to come for education and guidance. Consolidations and closures have also reduced the shop numbers by 30 to 40 percent, and now you have larger conglomerates doing the work of the multitude of shops.”
We spoke about a possible flavor ban nationally, and he said he was skeptical.
“The PMTA process has already reduced or eliminated flavors, so it may not be necessary to go to that length. There have been between six and seven million submissions by thousands of companies, and so far, just 23 have been approved. I know of a few companies that submitted over a million applications themselves. And here’s the irony: everyone approved has been a Big Tobacco company, and they make up just a fraction of the total vaping market.”
The second irony on top of that, is that those so-called approved products are ones that no one wants.
We talked about whether those approvals were fair or were the result of favoritism and bias, and he smiled since we both knew the answer.
“When you look at the PMTA process and the rigid requirements, it seems pretty obvious that they were written to the advantage of the larger, established companies, and the “small guy” had very little chance in this skewed game. You can’t even budget for something like this,” he continued. “The original filing costs over a million dollars, and I know several companies that have put another ten million in, only to get denied. Who has deep pockets like that? In 2016 I could have named over 150 liquid companies doing good business; today I can name about three dozen.”
And that is why the number of companies manufacturing tobacco and vape products is half what it was and is getting smaller every year. The FDA changes the rules of the game continually.
“There’s something happening here, but what it is ain’t exactly clear,” is the beginning line of a song that speaks to changes going on in society. That song by Buffalo Springfield may have nothing to do with vape, but the message says the same thing: there is something happening here although it may be clearer than we realize. We all knew this would happen; it was predicted a decade ago.
In the vape space, the more things change…the more things change.
Norm Bour is the founder of VapeMentors and works with vape businesses worldwide. He can be reached at norm@VapeMentors.com.
The retailers selling illegal flavored disposable vapes are under scrutiny. The U.S. Food and Drug Administration issued complaints for civil money penalties (CMPs) against 22 retailers for the illegal sale of Elf Bar/EB Design.
The FDA previously warned each retailer in the form of a warning letter to stop selling unauthorized tobacco products, according to the agency. During follow-up inspections, the FDA observed the retailers had not corrected the violations, which resulted in the civil money penalty actions.
“The FDA has been abundantly clear that we are committed to using the full scope of our authorities, as appropriate, to hold those who break the law accountable,” said Brian King, director of the FDA’s Center for Tobacco Products (CTP). “These retailers were duly warned of what could happen if they failed to correct their violations. They chose inaction and will now face the consequences.”
The complaints seek the maximum civil money penalty of $19,192 for a single violation from each retailer. While the FDA has issued civil money penalty complaints to retailers for selling unauthorized tobacco products in the past, this is the first time the agency is seeking CMPs for the maximum amount against retailers for selling illegal flavored disposable vapes.
The retailers can pay the penalty, enter into a settlement agreement, request an extension of time to file an answer to the complaint or file an answer and request a hearing. Those that do not take action within 30 days after receiving the complaint risk a default order imposing the full penalty amount.
Courtesy: US FDA
In addition to the CMP complaints, today the FDA announced an additional 168 warning letters to brick-and-mortar retailers for illegally selling Elf Bar/EB Design products. These warning letters were the result of a coordinated nationwide retailer inspection effort conducted throughout the month of August, according to the agency.
Warning letter recipients have 15 working days to respond with the steps they have taken to correct the violation and ensure compliance with the law. Failure to promptly correct the violations can result in additional FDA actions such as injunction, seizure or civil money penalties.
“We continue to monitor closely all those in the supply chain, including retailers, for compliance with federal law,” said Ann Simoneau, director of the Office of Compliance and Enforcement in the CTP. “This includes follow-up inspections and surveillance of those who have received a warning letter, and taking additional action, as appropriate, to enforce the law.”
The Cigar Association of America (CAA) has released a report showing that U.S. imports of premium cigars from January-July 2023 are down 3.4 percent compared to the record pace that was set in 2022.
Through the end of July, CAA estimates the U.S. imported 252.81 million cigars, compared to 261.63 million in the same period during the year before.
While the numbers are down compared to last year, the trend line for the first seven months of the year is actually closer to 2022 than the Q1 numbers. More importantly, the numbers are still significantly above pre-Covid-19 levels, reports Halfwheel.
On a month-by-month basis, imports rose in four of the seven months, though March and April were down a combined 11.7 million cigars, or 14.41 percent compared to 2022. Addittionally, there were 6.5 million more cigars imported in May and July, or 8.33 percent over last year.
Nicaragua remains the dominant supplier of premium cigars to the U.S., accounting for roughly 55 percent of imports through the first seven months, according to CAA. However, those imports are down 4.2 percent compared to last year.
The CAA breaks down individual imports from seven countries and all were down except the Dominican Republic, which the group estimates has shipped 3.37 million more cigars compared to the same period last year, an increase of 4.8 percent.
Reynolds American Inc. announced the opening of the recently expanded American Snuff Company (ASC) operations facility in Clarksville, Tennessee. The investment in the facility will position the company for future growth and has already added over 70 roles to the facility’s workforce, with plans to add more in the coming months.
ASC celebrated the newly enhanced space with a ribbon-cutting ceremony on Tuesday, Sept. 26, 2023. ASC’s significant investment in the property will increase certain production capabilities, optimize existing processes and allow for the installation of additional processing and packaging lines.
“American Snuff Company has a long history of operations in Clarksville, and we are proud to further invest in our workforce and production capabilities at the site,” said David Waterfield, president and CEO of Reynolds, in a statement. “This expansion and considerable investment reflect our focus on delivering long-term, sustainable growth for the future of our business.”
The site will further accommodate research and development and create capacity for additional shipping, receiving and tobacco curing. Additionally, the expanded site will include modernized quality labs, maintenance shops and employee areas.
The Clarksville site expansion follows a strategic review of Reynolds’ U.S. operations that spanned several years. Historically, the facility used processed tobacco from regional farmers before being sent to other ASC factories for production. This move will bring processing and finished goods production under one roof.
ASC Clarksville is the Reynolds organization’s second-largest production facility in the U.S.
The last cigarette-making factory in France is set to close by the end of the year, according to the site’s owner, reports The Straits Times.
The Manufacture Corse des Tabacs (Macotab) is located in Corsica, and it manufactures cigarettes for Philip Morris, which recently ended the contract.
The factory is owned by SEITA, the former French monopoly. Now, around 30 employees work at the factory, down from 143 in the 1980s.
In 2019, SEITA closed France’s tobacco processing factory located in the traditional growing region of the Dordogne.
Legislation to reduce smoking and its related health issues has led to reductions in cigarette sales. Majority of European tobacco product production takes place in Germany and Poland.
The proposed U.S. Care for Moms Act would support the maternal health workforce, promote access to prenatal and postpartum care and provide resources to mothers as well as increase the excise tax on tobacco products, according to CSP.
The National Association of Tobacco Outlets (NATO) outlined the tobacco-related proposals in the act: increasing tax on cigarettes from $1.01 to $2.02 per pack; implementing a new e-cigarette tax that would equalize the tax on cigarettes; increasing the tax on moist snuff from $0.11 per 1.2 oz tin to $2.02 per can; doubling the tax on small cigars from $50.33 to $100.66; implementing a new weight-based tax methodology on large cigars; doubling the tax on roll-your-own; and equalizing the tax on chewing tobacco and pipe tobacco to tax them like cigarettes.
Similar tax legislation has failed in past congressional sessions, according to the NATO.
The Care for Moms Act also includes provisions to establish a state-based perinatal quality collaborative grant program, establish regional centers of excellence to tackle implicit bias and promote cultural competence among health professionals, support federal efforts to grow and diversify the doula workforce and extend Medicaid coverage for postpartum mothers in all 50 states.
Greenbutts, a science-driven leader in biodegradable filter technology, has entered into a strategic agreement with H.I.E. Handelsgesellschaft mbH effective Sept. 15, 2023, according to a press release. H.I.E. Handelsgesellschaft mbH is appointed as Greenbutts’ exclusive distributor for Poland in the European Union.
Tadas Lisauskas, CEO of Greenbutts, said, “We are confident that our partnership with H.I.E. Handelsgesellschaft mbH will provide Greenbutts customers in Poland with an outstanding quality and exceptional customer service. We seek to achieve strong supply chains by providing them with Greenbutts biodegradable filter rods and filter substrate, offering an expanded range of innovative filter material and local stock for quicker deliveries.”
Marc Sohns, managing director of H.I.E., added that “As the industry is facing transition by single-use plastic legislation and strengthening environmental commitments in the European Union, we are very pleased to partner with Greenbutts to offer our customers a certified biodegradable filter solution. We will ramp up our supply chain of sustainable substrate in 2024 for our clients in Poland and be in a position to provide them supply and support for the Greenbutts material. The Greenbutts partnership will continue to expand the H.I.E. product offerings to supply the materials that our customers need to be successful.”
Kaival Brands Innovations Group, parent to Bidi Vapor, received its first royalty payments from Philip Morris International for marketing Bidi Vapor products in multiple countries.
In a press release, Kaival Brands announced that PMI achieved a record level of monthly sales in July for its Bidi products that are marketed by PMI under the names VEEBA and VEEV NOW.
Eric Mosser, CEO and president of Kaival Brands, said he was pleased to see the positive trajectory of sales and royalties to the company.
“We are proud to work with Philip Morris and remain steadfast in our commitment to the responsible commercialization of better alternatives to cigarettes for adults who would otherwise continue smoking,” he said.
