Blog - Tobacco Reporter

Aspire Withdraws NYSE Listing Application

Shenzhen-based Aspire Global has asked U.S. regulators to withdraw its New York Stock Exchange (NYSE) listing application. The move comes as Beijing clamps down on the growth of vaping companies, mandating pre-approval for initial public offerings and restricting foreign investment.

Aspire filed a withdrawal request to the Securities and Exchange Commission on May 9, without providing a reason for the decision in its filing, according to the South China Morning Post. It had originally planned to sell 15 million shares at $7 to $9 each, and had applied to trade on the Nasdaq exchange under the ticker “ASPG.”

Aspire applied for a Nasdaq listing last June, and updated its draft prospectus in January this year. The company was expected to raise $135 million. Its withdrawal comes as recent rules introduced in China make expansion and distribution more challenging for e-cigarette manufacturers.

Other rules introduced last month include a ban on foreign investors in a sector that once attracted venture capital giants such as Sequoia Capital and IDG. Manufacturers and retailers must also get a license before they can produce and market their products. The government banned online advertising in late 2019, and sales in shops are restricted.

More than half of Aspire Global’s sales in 2021 were generated from Europe, with China and the U.S. accounting for 18.5 percent and 10 percent respectively, according to the company’s draft prospectus. In the U.S., Aspire has been marketing its cannabis vaping product, Ispire, since late 2020. “Our strategy is … directed at increasing our e-cigarette vaporizer technology products and developing our cannabis vaporizer technology products,” the company stated in its draft prospectus.

May 10, 2022

Taat Preparing to Launch in Switzerland

Taat Global Alternatives is preparing to introduce its tobacco-free cigarettes in Switzerland

In a press note, the company announced that it is working with a tobacco distributor with a presence in Zurich and Zug to coordinate a near-term launch of Taat Original, Smooth and Menthol in Switzerland with a primary objective of capitalizing on recent changes to Switzerland’s market landscape causing tobacco brands to be prohibited from advertising in public places.

Although tobacco advertising has long been banned in most Western markets, Switzerland was among the last to allow tobacco product advertisements in public spaces (e.g., on billboards, in movie theaters and at events such as music festivals). On Feb. 13, 2022, voters in Switzerland overwhelmingly approved legislation forbidding tobacco companies from advertising in public spaces.

Taat Global Alternatives has been exploring several launch opportunities throughout Europe, particularly after finalizing the advanced formulation of its Beyond Tobacco product using reconstituted material.

Taat says its advanced Beyond Tobacco formulation yielded excellent feedback from tobacco wholesalers in markets to include Germany, Poland, France and Switzerland. Pending final regulatory approval of the Taat product by Swiss authorities, the company expects Switzerland to be the first new international market to be added for Taat in 2022 following the pending finalization of a distribution agreement and initial purchase order. Switzerland currently has a higher adult smoking rate than the European average at 27 percent, more than double the national rate of 12.5 percent in the United States.

Because Taat’s offerings contains no tobacco, the company expects to enjoy a comparatively high degree of freedom to market the products in Switzerland.

In the United States, Taat has advertised its brand as a better alternative to tobacco cigarettes through methods such as in-store displays at the point of sale as well as sports sponsorships (e.g., a stock car racing team, the entourage of world champion boxer Floyd Mayweather). The company intends to strategically place German-language advertisements as part of its launch plan in Switzerland, with French-language variations for markets in western Switzerland such as Geneva, the country’s second-ranking city by population.

“As the tobacco industry continues to evolve, it is a major part of our playbook to jump on opportunities to do things that tobacco companies cannot do as a way for Taat to gain a competitive advantage. Switzerland was already a target market for a future Taat launch due to its relatively high adult smoking rate of 27 percent and its optimal location in the center of Europe, sharing a border with five other nations.

“However, with Switzerland set to put an end to tobacco advertising based on a vote for new legislation last quarter, we recognized this impending change for the timely opportunity that I believe it to be. We are working closely with a Swiss tobacco distributor who is now in the final stages of obtaining government approval for Taat to be sold in Switzerland, and I am excited for the next steps as we continue to build out our tobacco industry footprint.”

May 9, 2022

Bangkok to Impose Tobacco Tax

According to the Bangkok Metropolitan Administration (BMA), the city will implement its first-ever tobacco tax. The new structure will tax each cigarette up to THB0.10 ($0.003) satang per stick, according to Thaiger.

The Tobacco Tax for Local Maintenance is intended to limit tobacco consumption, and the tax collected will be used “for maintenance of Bangkok city,” according to Suthathip Son-iam, permanent secretary of the BMA.

Other jurisdictions in Thailand already have tobacco taxes in place, and many companies previously warehoused their cigarettes in Bangkok to avoid paying taxes prior to distribution.

“The new tobacco tax can be announced after the city finished amending the Bangkok Administration Act of 1985 to include tax collection and other related clauses under the Plans and Process of Decentralization to Local Government Organization Act of 1999,” according to Son-iam. Previous attempts to amend the act failed.

There is no date for the tax’s introduction as of yet; the Cabinet must approve it first.

May 6, 2022

Hong Kong Police Make First E-Cig Ban Arrests

Hong Kong police arrested two men, who are being held in custody under suspicion of selling and possessing a poison in Part 1 of the Pharmacy and Poisons Regulations as well as selling alternative smoking products, according to a report in the South China Morning Post. The arrests follow the implementation of a new e-cigarette ban.

The new law went into effect last weekend, banning the import, sale and manufacture of electronic cigarettes, heated-tobacco products and herbal cigarettes. Those caught breaking the law are subject to a maximum fine of HKD50,000 ($6,370) and six months’ imprisonment. Under the law, consumers are still allowed to use vaping products.

Police seized 94 boxes of suspected nicotine-containing electronic cigarette cartridges and 74 smoking devices from a mobile retail outlet in Mong Kok.

“The government appeals to smokers to quit smoking as early as possible for their own health and that of others,” said a Department of Health spokesperson.

May 6, 2022

Hausmann Retires From Pyxus International

Carl L. Hausmann intends to retire from the Pyxus International’s board of directors effective as of the 2022 annual shareholders meeting, according to a company press release.

Hausmann was appointed to Pyxus’ board of directors in October 2020 and serves on the environmental, social, governance and nominating committee as well as the audit committee. Additionally, Hausmann served as a member of the board of directors of Pyxus International’s predecessor, Alliance One International, from June 2013 to August 2018.

“On behalf of the board of directors, as well as Pyxus’ management team, we thank Carl for his guidance and many contributions over the years,” said Pyxus President and CEO Pieter Sikkel. “His extensive experience in the agricultural industry, thorough understanding of our operations and support of our ESG framework has been instrumental in establishing the foundation necessary to position Pyxus for success moving forward. It has been a privilege to work with Carl during both of his board appointments, and we wish him all the best in the years to come.”

The board of directors plans to fill Hausmann’s seat with an independent director, though this may not occur until after the company’s 2022 annual shareholders meeting.

May 6, 2022

Litigants Agree on Corrective Statements

The parties to the U.S. government’s long-running racketeering lawsuit against the major tobacco companies have reached an agreement in principle that will require the companies to place “corrective statements” about the health risks of smoking and secondhand smoke in retail outlets that sell cigarettes, according to the Campaign for Tobacco-Free Kids.

Once this agreement is finalized and approved by the court, it will require the tobacco companies to display court-ordered statements detailing the adverse health impacts of smoking near cigarette displays in hundreds of thousands of retail outlets across the country.

On May 4, the parties to the case—the U.S. Department of Justice, the tobacco companies and our six public health groups—filed a joint motion with the U.S. District Court for the District of Columbia that briefly describes the terms of the agreement, which will soon be put in final form and submitted to the court for review and approval.

This agreement will resolve the biggest remaining legal issue in the longstanding tobacco racketeering lawsuit and fully implement the corrective statements U.S. District Judge Gladys Kessler ordered in 2006 when she issued her landmark judgment against the major tobacco companies.

Judge Kessler found that the tobacco companies had violated civil racketeering laws (RICO) and engaged in a decades-long conspiracy to deceive the American public about the health effects of smoking and their marketing to children. To prevent and restrain future RICO violations, Judge Kessler ordered the tobacco companies to publish corrective statements that tell the American public the truth about the adverse health effects of smoking and secondhand smoke.

The corrective statements have previously been published through newspaper and television advertisements and cigarette pack inserts, and they continue to appear on tobacco company websites. However, the tobacco companies and various trade associations representing cigarette retailers have challenged Judge Kessler’s requirement that the corrective statements also be displayed at retail points-of-sale, such as convenience stores and tobacco outlets. The proposed agreement would resolve that issue.

Public health groups welcomed the agreement. “We are pleased to see this important next step taken to ensure that the tobacco industry carries out the court’s order to issue corrective statements after being found guilty of deceiving the American people more than two decades ago,” said Karen E. Knudsen, CEO of the American Cancer Society and the American Cancer Society Cancer Action Network, in a statement.

May 6, 2022

Australia Mulls Higher Minimum Tobacco Age

Australia may raise the minimum age for cigarette purchases, if recommendations from the draft 2022-2030 national tobacco strategy are accepted, reports the Daily Mail.

The current minimum age to buy tobacco products is 18.

The new policy proposal comes as a national survey, conducted by the Cancer Council, revealed that most Australians would support a policy that stops retailers from selling cigarettes completely.

In a recent survey conducted by Cancer Council Victoria, 50.8 percent of participants supported a phase-out, and an overwhelming majority of 61.8 percent said it should happen within the next decade.

Australia is already home to the most expensive cigarettes in the world, with a typical 20-stick pack costing $40. The Australian government rakes in about AUD17 billion ($12.06 billion) in tobacco tax each year. The high prices are believed to have contributed to a significant illicit market for tobacco products. The illegal tobacco trade is worth about $600 million annually, according to Border Force.

In December, New Zealand banned young people from ever being allowed to buy cigarettes in a rolling scheme that aims to make the entire nation smoke-free. People aged 14 and under in 2027 will never be allowed to buy cigarettes in their lifetime under the new law.

May 6, 2022

PMI Holds 2022 Annual Meeting

Philip Morris International held its 2022 annual meeting of shareholders on May 4. André Calantzopoulos, executive chairman of the board, addressed shareholders and answered questions. CEO Jacek Olczak gave the business presentation, which included an overview of PMI’s financial performance and its efforts to support employees impacted by the war in Ukraine, along with an update on the company’s progress in its smoke-free transition and investments in the wellness and healthcare categories.

“The recent months have been an extremely challenging time for many in the PMI family given the war in Ukraine. Our primary concern is for our people and their families, and we are doing everything in our power to help them,” said Olczak in a statement.

“Despite this tragic situation, and the related impacts on our operations in the region and more broadly, the outlook for our business excluding Russia and Ukraine remains strong and our smoke-free ambition remains intact. We are off to a strong start to the year, following an excellent performance in 2021, with robust underlying momentum and a reacceleration in IQOS user growth.

“We continue to prioritize returns to shareholders and have increased the dividend for 14 consecutive years since the 2008 spin. In 2021, we raised the dividend by 4.2% to an annualized rate of $5.00 per common share. In addition, since July 2021, we have repurchased approximately $1 billion in shares as part of our current three-year program.”

Approximately 81 percent of the shares entitled to vote were represented at the meeting in person or by proxy. The shareholders elected 14 nominees for director; approved, on an advisory basis, the compensation of named executive officers; approved the 2022 performance incentive plan; ratified the selection of PricewaterhouseCoopers as independent auditors; and voted against a shareholder proposal. Final voting results will be included in a Form 8-K that PMI will file with the SEC in the coming days.

An archived copy of the webcast of the meeting will be available for approximately one year from the date of the meeting at http://www.virtualshareholdermeeting.com/PMI2022.

May 5, 2022

ALD Group to Launch Biodegradable Vape Next Year

ALD Group Limited (ALD) is set to launch the first biodegradable vaping product worldwide in mid-2023, the company announced at today’s In Focus event. The product will also be 90 percent recyclable (including the packaging, plastic shell, PCBA, mouthpiece and battery).

Currently named the Eco-friendly, Biodegradable Vape Solution (EBVS), the new device will take as little as three months to biodegrade, and was created in response to consumer and market demand.

Founded in 2009 and headquartered in Shenzhen, China, ALD is a high-tech enterprise specializing in electronic atomization technology research and applications. ALD′s business covers electronic nicotine delivery systems, inhaled medical vaporizer and heated tobacco products.

The plastic components in ALD’s eco-friendly vape solutions use innovative biodegradable raw materials like PBS, and the shell and structural parts do not come into contact with e-liquid; addressing the challenge of vaping producers whose single-use plastic pod products cannot be recycled due to the residues left over from e-liquids.

“The innovative factor is that our extensive research showed that in the e-cigarette sector there was currently no ready-made solution for the application of biodegradable materials,” said Eric Ding, founder and president of ALD Group.

“During development, we screened dozens of materials, repeatedly verified product performance and, finally, determined the seven best mixes of materials. Our processes included the verification of material strength, chemical resistance, extractability and degradability.”

The engineering validation and testing evaluation of its new device was completed in mid-2021, and the shelf life and biodegradability testing are expected to be completed in mid-2022.

Tobacco Reporter profiled ALD’s environmental efforts in its May 2022 print edition (see “Combating Waste).

May 5, 2022

22nd Century Reports Quarterly Results

22^nd Century Group reported net sales of $9 million for the first quarter of 2022, up 33 percent from the comparable 2021 quarter. The increase was due to increased contract manufacturing volumes in both filtered cigars and cigarettes, including products for export markets and pricing adjustments.

Gross profit for the first quarter was $500,000, compared to $600,000 million in the prior year first quarter. Gross margin in the first quarter was reduced by lower research cigarette sales volume compared with the prior year, and a Master Settlement Agreement adjustment of $200,000 recorded in the quarter.

Operating loss for the first quarter 2022 was $8.1 million, compared to an operating loss of $5.2 million in the prior year period. Net loss was $8.9 million.

“We are off to an exciting start with our VLN reduced nicotine content cigarette pilot launch at more than 150 Chicagoland Circle K stores,” said James A. Mish, chief executive officer of 22nd Century Group, in a statement.

“The recently proposed menthol cigarette ban by the FDA could leave our VLN Menthol King reduced nicotine cigarettes as the only menthol cigarette on the market, helping adult menthol smokers find an off-ramp from nicotine addiction. Early sales in our Chicago pilot affirm the importance of this approach, with sales of VLN Menthol King already selling ahead of non-menthol in pilot stores. We fully anticipate an even more favorable regulatory environment as the FDA continues to advance the agency’s comprehensive plan, which includes requiring all cigarettes to be ‘minimally or non-addictive,’ a standard our VLN King and VLN® Menthol King cigarettes already meet.”

May 5, 2022