Blog - Tobacco Reporter

Zimbabwe to Wrap up Auction Sales

Zimbabwe expects to wrap up its tobacco auction season July 20 with slightly better prices than last year, reports Xinhua News Agency, citing the Tobacco Industry and Marketing Board (TIMB).

A flue-cured auction mop-up sale will be conducted on Aug. 17, 2022, and depending on the volume of deliveries, the clean-up sale may be continued for more than one day until all delivered tobacco is sold.

The TIMB added that because of significant volumes that are still being received, contract sales will continue until further notice.

Zimbabwe’s 2022 tobacco auction selling season started March 30, 2022.

Tobacco prices have been slightly firmer this year, due to better leaf quality despite the difficult weather conditions experienced during the season.

The opening price this year was $4.60 per kg, compared with $4.30 last year.

Over the course of the selling season, prices remained firm, averaging above $3 per kg compared to an average of $2.80 per kg last year.

As of July 12, farmers had sold 179.4 million kg of golden leaf at an average price of $3.04 per kg.

The bulk of Zimbabwe’s tobacco leaf is sold through contract floors, as only 5 percent of farmers are able to self-finance tobacco leaf production.

Tobacco is Zimbabwe’s second foreign currency earner after gold, with China and South Africa being the major buyers of the country’s golden leaf.

July 17, 2022

Malaysia’s Generational Tobacco Ban Clears Cabinet

Malaysia’s Cabinet has approved the Tobacco and Smoking Control Bill, reports The Star.

“I will be sending [the Bill] to Parliament for this session,” Health Minister Khairy Jamaluddin told reporters during the presentation of a new drug perception study report on July 14.

Among other provisions, the bill calls for a ban on sales of cigarettes, tobacco and vapor products to those born after 2005.

The proposed law is modeled on legislation in New Zealand, which in December 2021 revealed a plan to phase out smoking by gradually raising the smoking age until it covers the entire population.

Presently, some 40.5 percent of men and 20 percent of women smoke in Malaysia.

July 17, 2022

Patent for Biodegradable Filter

Greenbutts has received a Canadian patent for its biodegradable filter tow technology.

The patent adds to Greenbutts’ proprietary technology stack, offering an all-natural, biodegradable and water dispersing cigarette filter. Previously, Greenbutts obtained patent recognition in the United Kingdom and the United States.

“Greenbutts’ mission started 12 years ago, at a time when the phrase ‘single-use plastic’ was not used as often as it is today,” said Greenbutts CEO Tadas Lisauskas in a statement. “Our dedication through extensive R&D with our world-class scientific team is now being recognized on a global scale as governments, industry and consumers are all in alignment with a green, clean future.”

According to Lisauskas, Greenbutts’ biodegradable cigarette filter is compatible not only with traditional combustible smoking products but also with heat-not-burn products. In August 2021, Greenbutts signed an agreement to supply its biodegradable filters to Poda Lifestyle and Wellness.

“This patent has strategic importance to our organization as it comes in full alignment with the Canadian government’s decision to ban the manufacture and importation of harmful single-use plastics, a historic move for North America,” he said. “Our technology is a viable and sustainable alternative to cellulose acetate filters while maintaining the sensory experience, delivering the high-performance filtration capability of a traditional filter.”

“The granting of this new IP by the Canadian Intellectual Property Office is another demonstration that the company is advancing in becoming the most strategic partner to catalyze the tobacco industry to, once and for all, migrate from single-use plastic to a planet friendly, consumer-aligned and government-supported solution,” said Greenbutts’ chief strategy officer, Luis Sanches.

July 17, 2022

Juul Labs Exploring Options, Including Financing

Juul Labs on Friday said it is in the early stages of exploring several options including financing alternatives, as the company deals with lawsuits and a potential ban on sales of its e-cigarettes by U.S. health regulators.

Bloomberg News earlier reported, citing sources, that Juul’s bankers at Centerview Partners are sounding out investors for a possible $400 million first-lien term loan due August 2023.

The proceeds would help refinance an existing term loan, which has around $394 million outstanding and matures on the same date, the report added.

A spokesperson for Juul told Reuters that the company is looking at options to protect its business and to address the “impact of the FDA’s now stayed order so we can continue offering our products to adult consumers who have or are looking to transition away from traditional cigarettes.”

Bloomberg News in its report said Juul was also considering a new $150 million second-lien term loan, which may have an August 2024 maturity, to help pay down some of the first-lien term loan and to increase liquidity, the report said.

Financing proposals for either loan are due July 21, according to the report.

Last month, the Food and Drug Administration (FDA) blocked sales of Juul e-cigarettes and said the applications “lacked sufficient evidence” to show that sale of the products would be appropriate for public health.

However, Juul appealed the agency’s order and earlier this month FDA put on hold its ban saying it would do an additional review of the company’s marketing application.

July 16, 2022

Tobacco Firms Settle Messaging Dispute

Several tobacco companies have reached an agreement in long-running litigation brought by the U.S. Department of Justice (DOJ) and certain public health organizations regarding the communication of tobacco-related messaging at retail locations.

The agreement will require Altria, Philip Morris USA, R.J. Reynolds Tobacco and ITG Brands to supply their contracted stores with court-ordered signs that must be posted for 21 months.

The agreement covers the last remaining dispute from the lawsuit DOJ filed against Altria, Philip Morris USA and R..J Reynolds in the 1990s, according to the National Association of Convenience Stores (NACS).

“This litigation has always put the retailers in a uniquely bad position,” said Doug Kantor, NACS general counsel. “Retailers were not parties to the lawsuit and should not be burdened with a court-ordered remedy, but this negotiated outcome avoids even worse results that DOJ and public health groups were advocating.”

The agreement provides that each store under contract with one of the manufacturers will have to post at least one sign carrying one of 17 different, pre-approved health messages that will be distributed at random to retailers around the country.

Each store will be required to rotate to a new message halfway through the time period required in the agreement. The manufacturers will be required to hire auditors to check whether the signs are properly posted. A summary of the agreement explaining the requirements on retailers as well as answers to frequently asked questions about it can be found here.

A hearing on the proposed agreement will be held in the U.S. District Court for the District of Columbia on July 28 and 29. The court will then decide whether to accept the agreement and enter an order to implement it.

The timing of the requirements for signs to be posted will depend on when the court decides whether to accept the agreement.

July 16, 2022

Trial Board Upholds Validity VPR Patent

The U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) upheld the validity of a VPR Brands patent that is considered one of the first patents for modern electronic nicotine-delivery system (ENDS) products.

The PTAB denied an appeal by Jupiter Research to invalidate VPR’s U.S. Patent 8,205,622 B2. The decision of the PTAB final.

The VPR patent dates to 2009 and includes independent claims covering electronic cigarette products containing an electric airflow sensor, including a sensor comprised of a diaphragm microphone.

The sensor turns the battery on and off, and covers most auto-draw, buttonless e-cigarettes, cigalikes, pod devices and vaporizers using an airflow sensor rather than a button.

According to VPR, the PTAB’s decision clears the way for infringement litigation against Jupiter pending in the District of Arizona.

VPR Brands and its legal representative, SRIPLAW, have started to identify and notify more than 50 of the leading companies using the auto-draw technology. VPR Brands says it intends to vigorously enforce its patent.

“These companies were prioritized, based on sales volume and popularity,” VPR wrote in a press release. “Most recently VPR Brands LP and its legal team, headed by Joel B Rothman of SRIPLAW, have filed litigation against nine of the companies. Additional lawsuits will continue to be filed as necessary to protect the company’s intellectual property rights.”

A majority of the vaping devices sold in the U.S. now utilize an auto-draw/button-less technology. The company is investigating all buttonless vape devices within the nicotine, CBD and cannabis space that initiate vaporization from the user’s airflow inhalation as those types of products would be suspect of infringement.

The company may also seek a buyer for this patent in the future. In August 2013, Imperial Tobacco Group (now ITG Brands) purchased the intellectual property behind the Ruyan e-cigarette, often considered the first modern ENDS product, for $75 million.

July 15, 2022

Indian Cigarette Sales on Track to Surpass Pre-Covid Levels

Indian cigarette sales are set to touch 93 billion sticks this year on the back of a stable tax regime and increased mobility after the ebbing of pandemic restrictions, reports The Financial Express, citing a study by rating agency Crisil.

Covid-19 lockdowns caused cigarette volumes to plunge to 77 billion sticks in 2021 from 90 billion sticks in 2020. As restrictions eased, cigarette sales recovered to 88 billion sticks.

The higher volumes will help cigarette manufacturers cope with the rising cost of inputs, which Crisil expects to shave manufacturers’ gross margins by 100-150 basis points.

Indian cigarette makers use flue-cured Virginia (FCV) tobacco, which is grown mostly in Andhra Pradesh, Telangana and Karnataka. FCV prices have risen 15 percent since last year as cultivation was impacted by untimely rainfall in December 2021 and January 2022.

Meanwhile, prices of paper are estimated to be 10 percent higher this fiscal year on an already-elevated base from 2020. India’s recently enacted ban on single-use plastics has driven up products costs, too, as cigarette manufacturers shift to biodegradable materials.

Between 2013 and 2017, excise duties on cigarettes rose annually at 15.7 percent. In fiscal 2018, the industry saw a further 20 percent hike in taxes as a result of the increase in excise duty and transition to a good and services tax.

Despite such challenges, cigarette manufacturers appear to be in good financial shape.

According to Crisil Associate Director Gopikishan Dongra, tobacco companies are likely to retain around 65 percent operating margins, due to the strong competitive advantage of established manufacturers and high entry barriers such as entrenched distribution channels and restrictions on advertising.

July 14, 2022

First Warning Letters for Synthetic Nicotine

The U.S. Food and Drug Administration on July 13 sent its first warning letters to manufacturers for unlawfully marketing non-tobacco nicotine e-liquid products without the required authorization.

In March, President Joe Biden signed into law a spending bill that gives the FDA authority over synthetic nicotine. The provision took effect in April and gave manufacturers until May 14, 2022, to submit marketing applications to the FDA.

Products did not receive marketing authorization by July 13, 2022, are considered illegal and must be removed from the market.

The recipients of the FDA’s first warnings letters, AZ Swagg Sauce and Electric Smoke Vapor House, have listed a combined total of approximately 10,000 products with FDA. Neither company submitted a premarket application for its non-tobacco nicotine products by the deadline, according to the FDA.

In addition, the FDA issued 107 warning letters to retailers in the last two weeks for illegally selling non-tobacco nicotine products, including certain e-cigarette or e-liquid products, to underage purchasers.

“FDA has been fully committed to actively implementing this critical new law regulating non-tobacco nicotine products since its passage, and the warning letters announced today are just the beginning of our compliance and enforcement actions” said Brian King, director of the FDA’s Center for Tobacco Products, in a statement. “In the coming weeks, we will continue to investigate companies that may be marketing, selling, or distributing non-tobacco nicotine products illegally and will pursue action, as appropriate.”

The FDA says it is currently processing applications for approximately 1 million non-tobacco nicotine products submitted by more than 200 manufacturers by the May 14, 2022, deadline.

“FDA is working diligently to process the substantial number of applications submitted and, as always, will make marketing decisions based on the best available science and will pursue compliance and enforcement actions when warranted,” said King. “We remain fully committed to taking whatever steps are necessary to protect the public health and to provide timely updates on our ongoing progress regulating non-tobacco nicotine products.”

July 14, 2022

Association Calls For Investigation Of MDO’s

The American Vapor Manufacturers Association (AVMA) has asked the U.S. Department of Health and Human Services’ (HHS) Inspector General to investigate whether the Food and Drug Administration’s marketing denial orders for vaping products are driven by political pressure.

The AVMA says it wants the inspector general to help the public learn about FDA Commissioner Robert Califf’s coordination with elected officials, allied activists and reporters as his agency continues its review of premarket tobacco product applications (PMTA).

In a letter sent to HHS Inspector General Christi A. Grimm, AVMA President Amanda Wheeler contends that interference has corrupted FDA’s statutory obligation to properly implement its PMTA review process based solely on scientific, empirically based judgment.

“Manufacturers are routinely meeting the PMTA requirements to scientifically demonstrate how their products are appropriate for the protection of public health,” Wheeler wrote. “Despite compliance, the agency isn’t approving the vape products sought by adults who want to quit smoking. The Office of Inspector General should open the door and hold the FDA accountable to its standards.”

July 14, 2022

Dettelbach Confirmed as ATF Director

The U.S. Senate on Tuesday voted to confirm Steve Dettelbach to serve as director of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

Dettelbach, 56, was confirmed by a 48-46 vote that went largely along party lines.

“Following the passage of the Bipartisan Safer Communities Act, today’s vote is another important sign that both parties can come together to support law enforcement and stand up against the horrific scourge of gun violence,” President Joe Biden said in a statement following the vote.

Prior to landing the job as the head of the ATF, Dettelbach worked as a federal prosecutor for the Justice Department – the ATF’s parent agency.

“Steve understands the importance and urgency of ATF’s mission and I am confident he will lead ATF with integrity, dedication and skill,” U.S. Attorney General Merrick Garland said in a statement.

Tuesday’s vote marked the first time the Senate has confirmed an ATF director since 2013.

July 13, 2022