Blog - Tobacco Reporter

KT&G: Half of Sales from Abroad by 2027

KT&G Corp. aims to earn over half of its sales from overseas businesses in 2027, the company told participants in an investor event.

The South Korean cigarette manufacturer targets sales of KRW10 trillion ($8.1 billion) by that year compared with an estimated annual sales of KRW5.9 trillion for 2022. Last year, KT&G likely earned about one-third of its sales from overseas operations.

In addition to focusing on its combustible cigarette business, the company will reinforce its next-generation product (NGP) businesses, which include heat-not-burn (HnB) products and health functional food products, KT&G Senior Executive Vice President Bang Kyung-man was quoted a saying by the Yonhap News Agency.

“We will invest KRW4 trillion to build new overseas production facilities and expand existing ones in the next five years to meet growing demand for NGPs, like HnB products,” he said.

The company is also considering building a new factory, either in Kazakhstan or eastern Europe, Bang said. To raise the necessary capital, the company plans to sell unused property and borrow money from banks, he said.

KT&G has exported its HnB products to more than 30 countries since 2020 when it signed an agreement with Philip Morris International for the commercialization of KT&G’s smoke-free products outside of South Korea.

KT&G currently earns 90 percent of its revenues from cigarette sales and 10 percent from HnB products. The company has four tobacco manufacturing plants—one each in South Korea, Russia, Turkey and Indonesia—with a combined capacity of 13.6 billion cigarettes a year.

January 26, 2023

Three Heating Products Authorized in the U.S.

The U.S. Food and Drug Administration has authorized the marketing of three new tobacco-flavored heated-tobacco products included in Philip Morris Products’ supplemental premarket tobacco product applications (PMTAs). The products receiving marketing granted orders are Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks and Marlboro Amber HeatSticks, each of which is used with the IQOS tobacco-heating device.

Based on the FDA’s review of the supplemental PMTAs, the agency determined that the marketing of these products should be authorized because, among other things, the net population-level benefits to adult smokers outweigh the risks to youth.

In 2019, the FDA authorized the marketing of IQOS and several other Marlboro HeatSticks products through the PMTA pathway. Philip Morris pursued marketing authorization for these new Marlboro HeatSticks by submitting supplemental PMTAs for modified versions and line extensions of the tobacco-flavored product for which the company had previously received a marketing granted order. A supplemental PMTA can be submitted in situations where an applicant is seeking authorization for a new tobacco product that is a modified version of a tobacco product for which they have already received a marketing granted order.

Following the FDA’s rigorous scientific evaluation of the applications, the agency determined that Marlboro Sienna HeatSticks, Marlboro Bronze HeatSticks and Marlboro Amber HeatSticks are comparable to the previously authorized tobacco-flavored product. Like the previously authorized products, the FDA has placed stringent marketing restrictions on the new products in an effort to prevent youth access and exposure.

January 26, 2023

Indonesia Mulls Ban on E-Cigarettes

Indonesia may ban cigarettes if they are found to be harmful to public health, reports Antara News.

Speaking at the University of Indonesia in Jakarta on Jan. 26, Vice President Ma’ruf Amin stated that thorough assessment of the effects of e-cigarettes on public health would be conducted before the government takes its decision.

If e-cigarettes are found to be safe for public health, the government will consider how to tax the products, he noted.

Earlier, the government proposed to strengthen health warnings on tobacco packaging, restrict advertising and prohibit the sale of single cigarettes, among other measures.

January 26, 2023

UKVIA Publishes Annual Report

The U.K. Vaping Industry Association (UKVIA) has published its 2022 annual report.

Among the highlights of 2022 was the launch of the UKVIA-commissioned Economic Impact Report from the Centre for Economics and Business Research, which—for the first time—detailed the national and regional contribution that the U.K. vape industry made to the economy, according to the UKVIA.

“Our industry is under scrutiny like never before, and we must tackle the big issues, such as underage vaping, the environmental impact of disposable devices and the massive influx of fake and illegal imports,” said John Dunne, director general of the UKVIA. “Any one of these issues has the potential to see regulators clamp down hard on vaping, and the fact that they are all happening at once demonstrates that it is crucial that we get our house in order without delay.”

January 26, 2023

CAPHRA Comments on Proposal to Tighten Vaping Restrictions

The Coalition of Asia Pacific Tobacco Harm Reduction Advocates (CAPHRA) has submitted comments on New Zealand’s Proposals for the Smoked Tobacco Regulatory Regime. The proposals include tightening current restrictions on vaping product safety requirements and packaging and reducing nicotine levels in disposable vapes as well as restricting the location of specialist vape retailers.

“Whilst we have absolutely no issues with restrictions around primary and secondary schools and Kura, we do have issue with adult community locations, such as universities, and other tertiary facilities,” said Nancy Loucas, executive coordinator of the CAPHRA.

“Specialist vape retailers provide a service that is not available in general retailers. It is a disservice to adults who smoke in Aotearoa, New Zealand, to restrict their access to specialist shops and guidance.”

“The main issue, however, is that the regulations, as they are, work perfectly well,” said the CAPHRA in reference to the other proposed restrictions. “The issues are public education and enforcement. The regulations, as they are written, are working at getting citizens to make the switch from combustible tobacco to less harmful vaping.”

The comment period closes on March 15.

January 26, 2023

Juul in Talks With Tobacco Companies

Juul Labs is in talks with leading cigarette manufacturers about a partnership, alliance or sale of its business, reports The Wall Street Journal.

Juul executives have had separate discussions with Philip Morris International, Japan Tobacco and Altria Group, according to the newspaper.

The talks are at an early stage and might not result in a sale of partnership, The Wall Street Journal’s sources pointed out. Altria, which owns one-third of Juul, valued the vaping company at $1 billion in October.

Once the undisputed leader of the U.S. vape market, Juul reached the brink of bankruptcy last year after the Food and Drug Administration denied its marketing applications and ordered the company to remove its products from the market.

The order has been stayed pending appeal but the still-unresolved dispute made it difficult for Juul to raise money to cover its legal liabilities. In December, Juul agreed to pay $1.7 billion in a broad legal settlement covering more than 5,000 lawsuits accusing the company of marketing its products to teens and children. Juul denies targeting underage consumers.

To pay for the deal, Juul secured an equity investment from a group including two Juul directors. The settlement and financing put Juul on firmer ground and allowed the company to begin talks with potential strategic partners.

On Sept. 30, Altria announced it was ending its noncompete agreement with Juul. The decision gave Juul the freedom to sell itself—or a significant stake—to one of Altria’s competitors.

Altria can’t buy Juul outright because of antitrust concerns: The Federal Trade Commission is seeking to unwind Altria’s 2018 investment in Juul. Altria and Japan Tobacco in October formed a partnership to develop and sell heated-tobacco devices in the U.S. and other new tobacco products abroad.

If the FDA ultimately halts Juul’s sales, Juul could seek U.S. authorization for a newer version of its vaporizer that has been released in Canada and the U.K. Juul also has other products under development.

January 26, 2023

Taiwan Set to Ban Nicotine Vapes

Taiwan is set to become the next Asian country to ban nicotine vaping products, reports Filter.

The Tobacco Hazards Prevention Act cleared the legislative floor earlier this month and now awaits presidential approval, which is expected because President Tsai Ing-wen is a member of the party that proposed the act.

Taiwan seems to be following behind Japan, which banned nicotine vapes but allows heated-tobacco products. India and Thailand have also banned vapes.

Taiwan’s ban will include use of e-cigarettes, and violators will face penalties of up to $330.

“The issue did not have enough public discussion, and the approach to harm reduction should be more thoroughly debated,” said Simon Lee, the Taiwan policy fellow at the Consumer Choice Center, a global consumer advocacy group in Washington. “For instance, we have seen misinformation, especially with regard to nicotine, circulating among anti-tobacco activists. It is beyond reasonable doubt that Taiwan’s consumers deserve a much better outcome.”

January 25, 2023

Reynolds to Appeal Menthol MDOs

BAT will appeal the U.S. Food and Drug Administration’s marketing denial orders for its Vuse Vibe Tank Menthol 3.0 percent and Vuse Ciro Cartridge Menthol 1.5 percent, the company announced in a statement.

On Jan. 24, the FDA denied marketing applications for two menthol refills used in Vuse Vibe and Vuse Ciro vaporizers, which are sold in the U.S. by BAT subsidiary R.J. Reynolds. According to the agency, Reynolds’ applications presented insufficient evidence to show that the potential benefit to adult smokers outweighs the risks of youth initiation and use.

“Reynolds intends to seek a stay of enforcement immediately and will pursue other appropriate avenues to allow Vuse to continue offering its innovative products to adult nicotine consumers age 21-plus without interruption,” the company said.

“We believe that menthol vapor products are critical to helping adult smokers migrate away from combustible cigarettes. FDA’s decision, if allowed to go into effect, will harm, not benefit, public health.

“We remain confident in the quality of all of Reynolds’ applications, and we believe that there is ample evidence for FDA to determine that the marketing of these products is appropriate for the protection of public health.”

Anti-tobacco campaigners countered that menthol e-cigarettes appeal to underage consumers. “Existing evidence demonstrates that nontobacco-flavored e-cigarettes, including menthol flavored e-cigarettes, have a known and substantial risk with regard to youth appeal, uptake and use; in contrast, data indicate tobacco-flavored e-cigarettes do not have the same appeal to youth and therefore do not pose the same degree of risk,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, in a statement.

Morgan Stanley said it expected the rejected products to remain on the U.S. market for the duration of BAT’s appeal, with minimal impact on the company’s operations. “Longer term, should today’s denial order reflect a broader effort by the FDA to ban menthol e-cigarettes, BAT’s U.S. cigarette business could benefit given its menthol mix as it might discourage some smokers from quitting or switching to reduced-risk products,” the bank wrote in a note to investors. Reynolds’ Newport brand represents about 40 percent of BAT’s U.S. cigarette dollar sales, according to Morgan Stanley.

The Jan. 24 rejection of the Vuse refills underscores the FDA’s ongoing reluctance to approve menthol e-cigarette flavors. To date, the agency has approved only tobacco-flavored e-cigarettes.

However, the FDA has granted both a premarket tobacco product application and modified-risk tobacco product designation to IQOS’ menthol variant, which may eventually leave Philip Morris International’s heat-not-burn product as one of the few menthol reduced-risk alternatives on the market.

The FDA is targeting publishing a final rule to ban menthol cigarettes in August 2023, but considering expected industry litigation, final implementation could be five to six years away, according to Morgan Stanley.

January 25, 2023

In Memoriam: Kay O’Neill

Tobacco Reporter will be celebrating its 150th anniversary next year, and, understandably, no one today was present for its beginning. However, for Tobacco Reporter’s “modern era”—that is, when its headquarters moved to Raleigh, North Carolina, USA, in 1982—the magazine has been fortunate to enjoy an extraordinarily consistent existence in terms of its personnel. In fact, though many people have contributed over the years, we can easily point to a small handful who have been fundamental and foundational to the evolution of what Tobacco Reporter has today become. Our Mount Rushmore, if you will.

One of those people, without question, was Evelyn O’Neill. She was better known to the industry, her colleagues and friends simply as Kay. Kay joined Tobacco Reporter in 1991 and served numerous roles for the magazine and its family-like parent companies. On Jan. 17, 2023, after battling illness for far too long, Kay passed away surrounded by her loving family.

In her professional life, Kay did everything you can imagine on the sales side, developing relationships and fostering partnerships around the globe. She eventually earned the title of associate publisher, but to those who worked with her, her most important role was always being the “sales coordinator.” To translate that term, Kay was the buffer between the editors and designers back at the office who cared way too much about when the magazine was scheduled to go to the printer and the salespeople out on the road who were unfamiliar with the concept of deadlines. Kay handled each side with a magical blend of charm, humor and force as only she could, kept the peace and helped everything move forward with the big picture in mind.

As her former colleagues shared stories, it became apparent that Kay was the true definition of dichotomy. On one hand, she was a Carolina girl—that is to say, she came off as small-town country with the beautiful Southern twang in her voice—but she was as sharp and worldly as they came. She was equally comfortable networking with industry executives at five-course dinners as she was sharing a plate of Carolina barbecue with tobacco farmers at local extension meetings.

She wasn’t shy about mincing words and wouldn’t hesitate to kick you in the butt when needed but would protect you like a mother lion in her next breath. Each September, she would travel to one of the world’s great cities as part of the Global Tobacco and Nicotine Forum, staying in lush accommodations, then just a few weeks later, she would be in a giant tent standing over a space heater trying to stay warm as she worked a booth at the fairgrounds for the North Carolina Farm Show. Each of those moments was pure Kay. She was a professional, and she was a friend.

Those who knew her will not only miss her generous personality and infectious laughter but also her ability to disarm the moment and bring perspective. While Kay appreciated the value of hard work, she never lost sight of what truly matters: health, friends and family.

Kay is survived by her husband Mike, her children Laura and Ryan and their spouses, her beloved grandchildren and a group of grateful friends from more than three decades at Tobacco Reporter. She deeply loved all her family and friends, and her legacy will live on through them.

January 24, 2023

FDA Denies Two Vuse Menthol Vapor Products

The U.S. Food and Drug Administration issued marketing denial orders (MDOs) for R.J. Reynolds Vapor Co.’s Vuse Vibe Tank Menthol 3.0 percent and the Vuse Ciro Cartridge Menthol 1.5 percent.

“Consistent with the authorities granted by Congress, the FDA remains committed to evaluating new tobacco product applications based on a public health standard that considers the risks and benefits of the tobacco product to the population as a whole,” said Brian King, director of the FDA’s Center for Tobacco Products. “The applications for these products did not present sufficient scientific evidence to show that the potential benefit to adult smokers outweighs the risks of youth initiation and use.”

“Existing evidence demonstrates that nontobacco-flavored e-cigarettes, including menthol-flavored e-cigarettes, have a known and substantial risk with regard to youth appeal, uptake and use; in contrast, data indicate tobacco-flavored e-cigarettes do not have the same appeal to youth and therefore do not pose the same degree of risk,” the FDA wrote in a statement.

“Given these existing differences in youth risk, applicants need to provide robust evidence to demonstrate that using their menthol-flavored e-cigarette products are likely to promote a complete switch or are likely to significantly reduce combustible cigarette use in adult smokers beyond that facilitated by tobacco-flavored e-cigarette products. Data from the 2022 National Youth Tobacco Survey found that Vuse was the second most common brand youth e-cigarette users reported ‘usually’ using.”

“Today’s decision pertains to the specific application submitted for review by FDA,” said King. “It is the responsibility of the applicant to provide sufficiently robust scientific evidence to demonstrate that the necessary public health standard has been met. In this case, the presented evidence did not meet that standard.”

In assessing the implications of the most recent MDOs for RJRV’s parent company, BAT, Morgan Stanley noted that Vuse Vibe and Vuse Ciro represent only a small portion of BAT’s overall e-cigarette sales in the U.S.

“Should it choose to appeal, we would expect its products to remain on the market as the appeal is ongoing, resulting in minimal/no operating impact,” the investment bank wrote in a note to investors.

Morgan Stanley said the MDO provides another example of the FDA’s ongoing reluctance to approve menthol e-cigarette flavors. To date, the agency has approved only tobacco-flavored e-cigarettes.

The financial institution also noted that the FDA has granted both a premarket tobacco product application and modified-risk tobacco product designation to IQOS’ menthol variant, which may make it one of the few menthol reduced-risk alternatives on the market.

The FDA is targeting publishing a final rule to ban menthol cigarettes in August 2023, but considering expected industry litigation, final implementation could be five to six years away, according to Morgan Stanley.

January 24, 2023