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  • TIMB Urges Sustainable Crop Growth

    TIMB Urges Sustainable Crop Growth

    Photo: Taco Tuinstra

    Zimbabwe is on track to export $1.5 billion worth of tobacco, according to Tobacco Industry & Marketing Board (TIMB) Acting CEO Emmanuel Matsvaire.

    In an interview with The Zimbabwe Independent, Matsvaire shared his views on the challenges and opportunities facing the country’s tobacco sector.

    To date, Zimbabwe has exported about 105 million kg of tobacco at an average of $5.04 per kg, compared to 93 million kg exported during the same period last year at an average price of $4.62 per kg.

    The Far East remains the top destination for Zimbabwean tobacco, according to Matsvaire, making up about 41 percent of total exports. The region also has the highest average export price due to high quality tobacco that goes here.

    Out of the 295.5 million kg of tobacco sold this season, the TIMB estimate that about 5 million kg have been side-marketed, which is less than 2 percent of the total crop.

    The regulators has worked hard to fight the practice, according to Matsvaire. “We have brought in a new compliance framework. We have also established a new department that ensures that compliance is up to date. We also have an inspectorate department and field officers on the ground,” he told The Zimbabwe Independent.

    Matsvaire stressed the importance of matching production to demand, and of adhering to proper production practices. “We need to ensure that there is a balance between price and what is produced, and quality as well as quantity,” he said. “We do not wish to increase volumes without good quality. We ensure that we are also growing sustainably using the right sources of energy and labor. We do not need to use children in growing tobacco. We also need to ensure that our environment is safe. Our growth has to be sustainable growth.”

  • Zimbabwe Crafting Funding Scheme

    Zimbabwe Crafting Funding Scheme

    Photo: stringerphoto

    The Tobacco Industry and Marketing Board (TIMB) and Zimbabwean banks are jointly working on a scheme to provide funding to farmers, reports The Sunday Mail, citing a senior official.

    As part of its Tobacco Value Chain Transformation Plan, which seeks to retain more value from the industry in Zimbabwe, the government seeks to increase local funding for production of the crop.

    Currently, about 90 percent of tobacco production is financed through offshore loans under contract schemes.

    The offshore pre-financing arrangement means tobacco merchants bring into the country part of export proceeds in the form of inputs. After exports, the bulk of the proceeds are used to pay offshore loans. Critics have suggested the cost of inputs have been highly inflated in some cases.

    Smallholder growers struggle to access finance because they lack security. The proposed model seeks to enable growers to access the loans even without collateral, TIMB acting chief executive Emmanuel Matsvaire said in an interview Aug. 31.

    Last month, the Reserve Bank of Zimbabwe scrapped the requirement compelling merchants to source offshore financing to fund production and buying green leaf from farmers.

  • Critics: €12 Cigarettes “Too Lenient”

    Critics: €12 Cigarettes “Too Lenient”

    Photo: OceanProd

    A French plan to raise the price of cigarettes to €12 ($12.94) per pack is “too lenient,” according to critics, reports Euractiv.

    Speaking on the RMC station on Aug. 28, spokesman Olivier Véran said the government could raise the price of cigarettes to €12 per pack from the start of 2024.

    But according to the French Alliance Against Tobacco (ACT), a lobby group that brings together anti-tobacco organizations, this measure is not up to the public health challenge.

    “Only a strong and sustained policy will enable us to achieve an effective and lasting reduction in the prevalence of smoking in our country,” said ACT president Loïc Josseran, whose organization wants a pack of 20 cigarettes to cost €16 by 2027.

    The ACT would also like to see an increase in the price of other tobacco products, such as roll-your-own tobacco, to discourage smokers of so-called conventional cigarettes from switching to these products.

    According to the World Health Organization, on average, a 10 percent price increase reduces consumption by 5-8 percent in low- and middle-income countries and by about 4 percent in high-income countries.

    After falling significantly between 2016 and 2019, daily smoking has stabilized since 2019. There are nearly 12 million smokers in France, according to data published by Santé publique France in 2022.

  • Ukraine Restricts Duty-Free Tobacco Sales

    Ukraine Restricts Duty-Free Tobacco Sales

    Ukraine has restricted the duty-free sales of cigarettes and alcohol, reports Interfax.

    The law, which signed into law by President Volodymyr Zelenskyy on Sept. 1, 2023, prohibits goods that fall under a certain categories of the Ukrainian Classification of Commodities from being registered as duty-free commodities until the country lifts the martial law that has been in effect since Russia’s invasion.

    The measure is intended to tackle illegal trade in tobacco products. Despite restrictions on foreign travel after the breakout of hostilities in early 2022, the number of cigarette packs purchased near borders rose sharply compared with those sold at other outlets, causing the Ukraine to miss out on substantial tax earnings.

    An ad hoc investigative commission created at the urging of the State Tax Service in May 2023, suggested stricter controls on tobacco manufacturers and exporters.

     

  • Court Poised to Rebuff Land Claim Cutoff

    Court Poised to Rebuff Land Claim Cutoff

    Photo: alexlmx

    Brazil’s Supreme Court is likely to rule against attempts by the country’s farm lobby to limit land claims by indigenous peoples to areas they occupied before 1988, according to Reuters.

    The case stems from a dispute in Santa Catarina state where the government rejected a land claim by the Xokleng people, who were evicted by tobacco farmers from what was their ancestral land.

    Congress has pushed ahead with bills allowing indigenous reservations only on land that was occupied by native communities when Brazil passed its constitution in 1988. The lower house passed a bill last month and its backers want the Senate to follow suit before the Supreme Court rules on the issue.

    On Aug. 31, Justice Cristiano Zanin cast a crucial vote that all but ensures the 1988 cut-off date will be rejected by the court. Zanin said indigenous communities that were not present on their lands in 1988 may have been forced to leave.

  • FDA Urged to Prioritize Harm Reduction

    FDA Urged to Prioritize Harm Reduction

    Photo: New Africa

    The R Street Institute is urging the U.S. Food and Drug Administration to prioritize harm reduction in its approach to tobacco regulation.

    In a letter to FDA Center for Tobacco Products’ (CTP) Director Brian King, the organization suggested the agency should evaluate its past achievements, define its mission statement clearly and develop a science-based tobacco and nicotine policy. Additionally, it recommended applying product standards consistently across all tobacco and nicotine products.

    The R Street Institute expressed concerns that the FDA’s proposed strategic goals may not address more immediate issues that could have a significant impact on public health. The group argued that the CTP should reflect on its initial goals and whether they have been achieved, such as setting clear standards for tobacco/nicotine products and effective enforcement processes.

    The comments also stressed the importance of communicating the strengths and weaknesses of past CTP goals, defining the mission statement with clear measurables, and establishing evidence-based policy goals for tobacco harm reduction. The R Street Institute advocated for transparent and consistent education on tobacco harm reduction.

    Lastly, the group urged the CTP to close gaps and loopholes in regulating tobacco and nicotine products, ensuring that all products are held to the same scientifically determined standards.

    The R Street Institute is a nonpartisan organization dedicated to limited government.

  • Court Upholds IP Damages for Republic

    Court Upholds IP Damages for Republic

    The U.S. Court of Appeals for the Eleventh Circuit on Aug. 22 upheld a multimillion dollar verdict against Diamond Wholesale and its owner, Raj Solomon, for infringing trademarks owned by Top Tobacco, Republic Technologies and Republic Tobacco, reports IPWatchdog.

    In March 2022, a jury in the U.S. District Court of Georgia awarded Top Tobacco $11 million in damages against the wholesale company and its owner. Diamond Wholesale appealed the ruling, arguing that the district curt erred in excluding evidence, including witness testimony and invoices, that would have proven the retailer and its owner believed it was purchasing the counterfeit product from a legitimate seller, Star Importers, and that their infringement could therefore not have been intentional.

    However, the Eleventh Circuit ruled that a “showing of intent or bad faith is unnecessary to establish a violation.”

    Earlier this year, federal jurors in Atlanta awarded Republic Brands $2.3 million in statutory damages in a case about counterfeit tobacco rolling papers against Star Importers and ZCell & Novelties.

  • CoEHAR Concerned About South African Bill

    CoEHAR Concerned About South African Bill

    The Center of Excellence for the acceleration of Harm Reduction (CoEHAR) has urged the South African government to use risk-proportionate regulation in its tobacco control efforts.

    In a reply to a public consultation on the Tobacco and Electronic Nicotine Delivery Systems Control Bill, CoEHAR raised concerns that the current draft will restrict less risky options for people who would benefit from using these products to quit smoking.

    “The primary goal of the South Africa tobacco policy should be to prevent and control tobacco- related excess mortality and morbidity. In practice, this means reducing smoking as deeply and rapidly as possible,” wrote Riccardo Polosa and Giovanni Li Volti on behalf of the CoEHAR in their letter.

    “Tobacco harm reduction provides a fast-acting, market-based strategy for reducing smoking and eliminating most smoking-related risks. The regulation of combustion- smoke-tar-free products should always be considered as part of a regulatory system that covers all the nicotine delivery products. The aim should be to encourage the migration from high-risk to low-risk products and support positive behavior change. Regulators should take great care to avoid the perverse consequences of prohibitions and use risk-proportionate regulation instead.”

    Based in Catania, Italy, CoEHAR is a multidisciplinary center focused on the study of tobacco harm reduction.

  • A Leap Forward for Public Health?

    A Leap Forward for Public Health?

    Image: waldemarus

    China’s new rules on vape manufacturing will help tackle illicit trade only if they are properly enforced.

    By Ian M. Fearon

    The vape industry is in the midst of a growing crisis and facing an existential threat. This may seem like a pessimistic, and perhaps provocative, statement, but without those within the industry taking action to change course, the lives of the billion smokers across the globe could be placed at an increased risk.

    The vape industry has always been controversial, although wrongly so. After all, nobody in their right mind doubts that when cigarettes are substituted with e-cigarettes, there are huge gains for both individual and population health. Despite this, those in “tobacco control” have become, and will remain, steadfastly resolute in their desire to remove vapes from markets across the world. While their motives are not abundantly clear, they certainly don’t appear to mesh with a desire to improve global health and may instead represent a nicotine prohibitionist standpoint. But their work is adding to the growing likelihood that vapes could be banished across the world. Or, as is currently the case in Australia, confined to prescriptions issued by physicians and not as freely available as, well, cigarettes.

    Perhaps the biggest single threat to the vape industry is the mass marketing of both illegal and illicit products across the world. Wherever you look, in the United States and Canada, across Europe, in Australia and New Zealand, and pretty much any other global market in which vapes are sold, illegal products are abundant. They are causing problems by being made available to youth with scant regard for the impact this may have on public health and on the future of a lifesaving industry. In the U.K., recent assessments of vapor from illegal and illicit vapes have found them to contain high levels of poisonous metals, such as lead, or contain levels of nicotine higher than those allowed under U.K. regulatory law. And a recent investigation found evidence of the production of counterfeit products with inadequate manufacturing quality control and unhygienic product testing processes. The illicit trade is hugely damaging to the legitimate industry and makes the work of vape prohibitionists in tobacco control so much easier.

    One way of stemming the flow of potentially dangerous illicit products is to act at the source. China is acknowledged as the birthplace of the modern e-cigarette, following the pioneering work of the Chinese pharmacist, Hon Lik, in the early 2000s. Chinese companies are also by far the world’s biggest e-cigarette manufacturers, with production coming mainly from the estimated 1,000 factories located in China’s Silicon Valley, Shenzhen. Recent figures show that Chinese e-cigarette manufacturing is growing at record levels, with $5.5 billion worth of vapes manufactured in the country in the first half of this year, up by almost 30 percent compared with the first half of 2022. Between $300 million and $400 million worth of these are imported each month into the U.S. and the U.K., the largest export destinations for Chinese e-cigarettes. Remarkably, $20 million worth are exported each month to Australia, a marketplace in which e-cigarettes are legal only on prescription. In that country, the end result will undoubtedly be greater restrictions on vaping, perhaps even for authorized prescription products, and many other countries are considering similar actions.

    Regulating the expanse and diversity of Chinese vape manufacturing is not an easy task, but doing so would have a profound impact globally as it could make a huge dent in the supply of illicit vapes across the world. Recently, the Chinese State Tobacco Monopoly Administration (STMA) issued guidelines that may promise to clean up Chinese vape manufacturing. These guidelines are lengthy and complex but focus on a single area: the establishment of quality management systems in vape manufacturing facilities. To comply, manufacturers must, at least, implement quality and safety standards, assess and control their e-cigarette production, properly train their personnel, ensure manufacturing and distribution traceability, and complete export registrations and declarations. Products must not only be manufactured under stringent conditions, but they are also required to meet any relevant legal requirements in their export destination. And importantly, manufacturers must halt production if any safety issues arise or are brought to their attention in order to prevent and reduce harm. According to the guidelines, governments and other international organizations can report issues to Chinese authorities and have their concerns addressed.

    The biggest question on everyone’s lips has to be this one: Will the STMA guidelines be enforced—and how? If we look at the status quo, regulations elsewhere are being ignored by many manufacturers and distributors of illicit vaping products, putting profit first and public health second. In the U.S., the Food and Drug Administration issues a constant stream of warning letters threatening enforcement action. But much like the fairground game whack-a-mole, as soon as one company or vape source has action taken against it, another one takes its place. The FDA’s finite resources cannot tackle this constant evolution. In the U.K., despite the scale of the vape black market, a recent assessment of enforcement actions showed that even when action is taken against distributors of illicit and potentially dangerous vapes, local Trading Standards teams have issued fines lower in aggregate than the maximum allowed by law of £2,500 ($3,181). The situation is analogous to the illicit cigarette trade of years past in which the potential financial gains far outweighed the likely punishment.

    The question then becomes: Will the new STMA guidelines change the supply and distribution of illicit vapes, or, as has been the case in other jurisdictions, will the guidelines be weakly enforced? This concern, that the new guidelines will be meaningless and unenforced, is shared by the U.S. Smoke-Free Alternatives Trade Association (SFATA). When asked for their views on the new guidelines, SFATA President and CEO April Meyers suggested that while the new guidelines could theoretically increase the quality of vapor products coming out of China, she was unwilling to place any bets on such an outcome. Citing the scope and complexity of the political landscape in China, Meyers doubts that protecting the youth of other nations is at the top of regulators’ minds in Beijing, especially when there is so much money involved. Such a view is understandable given that the guidelines are suggesting that the Chinese government can fix enforcement issues elsewhere in the world.

    Without doubt, the new Chinese guidelines are a positive step. The guidelines recognize the public health issues regarding the manufacturing and distribution of illicit vapes and offer a potential mechanism through which this damaging illegal trade can be eroded. But without strict enforcement, and instead relying on manufacturers to interpret the guidelines, implement appropriate quality control procedures, and to self-police, the guidelines may do little to alter the current status quo.

    It’s a major irony that those companies already committed both to lawful distribution of vapor products and to the improvement of public health are facing action from regulators in the form of flavor bans and other restrictions while the illicit trade carries on regardless. The industry needs guidelines and product standards, but what it needs more than that is stricter enforcement. And stricter enforcement should include better approaches to identify and prevent illicit products from crossing borders, not just identifying them at the point of manufacture. This applies not just in China but everywhere in the world where vapor products can be sold. The existence of lifesaving consumer vapor products is at stake and, perhaps more importantly, so is public health. With the new Chinese guidelines, we are moving in the right direction. But without proper enforcement, we may carry on, in public health terms, walking backward.

    Ian M. Fearon is chief scientific officer at McKinney Regulatory Science Advisors.
  • Under the Gun

    Under the Gun

    Photo: Avrora Tobacco

    Sanctions, fraud and the rising popularity of vaping weigh down Russia’s traditional tobacco market.

    Contributed

    The Russian tobacco industry is facing multiple challenges, spanning from uncertainty around the future of foreign factories in the country to flourishing illegal trade.

    In 2022, Russia manufactured 222 billion cigarettes, 7 percent down compared with the previous year, the Russian state statistical service Rosstat estimated. This dynamic partly reflects the harsh problems Russian factories encountered last year as Western sanctions disrupted logistics. On the other hand, the figures also show that the industry managed to bounce back in the second half of the year.

    In January 2022 to June 2022, Russia saw a nearly 15 percent slump in cigarette production while the steepest decline of around 25 percent was observed in May.

    There is no consensus about what the key factor was in driving Russian cigarette production down last year. Sergey Ryabukhin, first deputy chairman of the financial committee of the Federal Council, blamed a surge in sales of counterfeit tobacco products. He expressed confidence that a batch of new laws tightening regulation on the market could solve this issue.

    Indeed, independent studies showed that the share of counterfeit cigarettes on the Russian market had been steadily growing over the past few years, exceeding 12 percent in 2022. An opinion poll conducted by the think tank Ipsos revealed that as many as 49 percent of smokers would be prepared to purchase a pack of counterfeit cigarettes.

    A Booming Niche

    Not everyone, however, agrees that counterfeit is to blame for a decline in cigarette production last year. Pavel Shapkin, chairman of the National Union for consumer rights protection, links the trend with a meteoric rise in the popularity of e-cigarettes. Over the past three years, sales in this segment skyrocketed by a factor of 50, reaching 67 million pieces. Shapkin explained that Russians massively switched from conventional tobacco products to e-cigarettes.

    In 2022, Russia saw a 32 percent jump, to 16,900, in the number of stores selling vapes and e-cigarettes compared with the previous year, the Russian mapping service 2GIS calculated. E-cigarette retail has even exceeded conventional tobacco retail: In this segment, the number of outlets was estimated at 14,600, also higher than in the previous year.

    These figures, however, are about to lose their meaning soon. Conventional tobacco retailers are massively expanding their range with e-cigarettes to catch up with the trend, Anton Belyikh, general director of the DNA Realty consulting firm, explained. Selling e-cigarettes in Russia has become so profitable that players forget about the rules of fair competition and pay no attention to renting costs when launching new outlets, Belyikh said.

    It is not clear whether the rise in e-cigarette consumption hampers sales in the Russian tobacco market. The Russian Institute of public opinion surveys calculated that the number of smokers has not changed noticeably during the last five years. On average, every third respondent surveyed in the big cities identifies themself as a smoker.

    In January 2023, the Russian State Duma, the lower chamber of the federal parliament, discussed the idea of banning e-cigarettes in the country. Sergey Leonov, a member of the State Duma, shared the results of a study indicating that 99 percent of e-cigarettes and 68 percent of liquids for their refilling were not matching any quality standards. He also cited several examples of e-cigarettes exploding in the hands of consumers, causing severe injuries.

    The Russian Healthcare Ministry backed the proposal to prohibit selling e-cigarettes in the country, referring to harmful and potentially harmful ingredients that these products contain. The discussions, however, have not led to any concrete steps, and e-cigarettes are still available at virtually every shopping center in Russia.

    The PMI Izhora factory in Russia

    No Exodus

    In February 2023, BAT, which sells the Lucky Strike, Kent and Java brands in Russia, announced a decision to exit the Russian market by the end of the year. BAT’s then CEO, Jack Bowles, told the Financial Times that the timeline was not guaranteed and that finalizing the terms could be delayed until 2024.

    BAT sought to transfer control over its Russian tobacco factories to a consortium of local distributors, though certain details of the deal remain unknown. So far, only Imperial Brands has pulled out from Russia completely. In July 2022, BAT calculated that withdrawal from Russia would cost it £957 million ($1.2 billion).

    Other leading Western firms are not rushing to sever their ties with Russia. Philip Morris International (PMI) rolled out plans to quit the country in early 2022 but hasn’t done so yet. Japan Tobacco International, which accounts for 40 percent of sales in the Russian cigarette market, suspended investments but remains present in the country.

    After temporary supply disruptions in the second quarter of 2022, imports also bounced back. In the first quarter of 2023, Russia nearly doubled cigarette import to 70 million packs. Surprisingly, Germany appeared to be among the leading sources, boosting export to Russia to 42 million packs against 19 million packs in the first quarter of 2022. Bulgarian cigarette export to Russia jumped tenfold while Korea triples its sales to Russia, a Russian government agency estimated.

    The growth in imports is driven primarily by wealthy Russians, who are prepared to abandon popular brands produced in Russia in order to buy products that they consider to be of higher quality, explained Maxim Korolev, editor-in-chief of the Russian Tabaco publication. For example, the products of one of the oldest and largest tobacco factories in Germany, Von Eiken, are popular among Russians, Korolev said. South Korea, in turn, exports Esse cigarettes to the country.

    While importers ramp up export, foreign owners of Russian factories might have lost their chance to exit the country.

    The Russian government has recently seized control over the property of beer manufacturer Carlsberg and dairy firm Danone, both of which had been working to quit the country in the previous months.

    Citing local lawyers and analysts, Russian Forbes interpreted this as a beginning of a new chapter in the sanction standoff.

    Vladimir Poklad, spokesperson of the local consulting firm Delovoy Profile, told the publication that the government consolidates control over the assets of the companies willing to exit Russia to ensure the return of the Russian financial assets seized overseas.

    In 2022, the Russian government demanded foreign firms leaving the country to seek permission from a government commission on foreign investments and sell their assets at a 50 percent discount to market price. This year, this might not be enough.

    Illicit trade remains a challenge in many of the former Soviet repulbics (Photo: Segodnya)

    Investments Amid the Hostilities

    In neighboring Ukraine, sales on the domestic cigarette market plummeted by nearly 20 percent in 2022, primarily owing to unprecedented immigration as roughly 7 million fled the country. Besides, a large part of the territory is currently controlled by Russian forces, and whatever cigarette consumption exists out there, it is no longer included in the official statistical data.

    PMI used to be the largest player in the Ukrainian cigarette market. In 2020, it accounted for 29.96 percent of sales followed by BAT with 19.46 percent, JTI with 17.45 percent and Imperial Tobacco with 8.78 percent. Last year, however, the balance of power on the market supposedly changed after PMI suspended the operation of a factory in the Kharkiv region following a missile strike.

    “The damage is not critical. Production can be resumed. However, no such decision was made because the threat of further shelling remains substantial,” said Maxim Barabash, head of PMI Ukraine.

    “The production cannot be repeatedly launched and stopped depending on the situation in the region. It is technically easy to resume production. But this means putting the lives of 300 [workers to] 400 workers at great risk. And we cannot do this,” Barabash added.

    The Kharkiv factory boasted a designed production capacity of around 40 billion cigarettes. To compensate for that loss, PMI embarked on a bold project of investing $30 million into a new factory in Western Ukraine, far away from the battlefield. In August 2022, PMI started manufacturing cigarettes at an Imperial Tobacco factory in the Kyiv region.

    The new factory should manufacture 7 billion units of cigarettes per year, though there is no clarity as to when and where it is going to be launched.

    Aside from the hostilities, Ukraine keeps suffering from illegal sales. Barabash said that Ukraine annually raises the excise rate on tobacco products by 20 percent, but the losses that the national budget suffers from the illicit trade only grow. In 2022, the country lost EUR600 million ($658.8 million) in taxes to the black cigarette market. This year, the figure is expected to climb to EUR720 million.

    The only thing Ukraine needs to take down the counterfeit cigarette manufacturers is political will. Barabash said that in the EU countries, the problem primarily arises from smuggling, while in Ukraine, borders are closed now, and the illegal production comes from local underground factories and workshops “that everybody knows about.”

    It is unclear why the authorities are not cracking down on these operations, especially since this would help fill the strained national budget with money.