Blog - Tobacco Reporter

SM Pauses Separation of Cigar Business

Swedish Match has suspended the separation of its cigar business until further notice.

On Sept. 14, 2021, Swedish Match announced its intention to spin off its cigar business to shareholders and subsequently list it on a U.S. national securities exchange. The separation was initially expected to be completed in the second half of 2022, at the earliest.

The decision to suspend the separation was driven by regulatory uncertainties, according to Swedish Match.

“While supply chain related challenges have contributed to the financial development of the U.S. cigar business falling short of Swedish Match’s expectations in recent quarters, today’s decision to suspend the spin-off preparations was prompted by regulatory uncertainties facing the cigar business,” the company wrote in a statement.

The U.S. Food and Drug Administration recently denied substantial equivalence (SE) designations for applications corresponding to about 3 percent of Swedish Match’s 2021 cigar volume. According to Swedish Match, it cannot be ruled out that additional SE applications for the cigar assortment will be denied in the first instance as FDA continues to work through remaining applications.

Swedish Match said it plans to appeal the non-SE designations by the FDA by requesting a supervisory review. The company remains confident that it will be given the opportunity to provide the FDA with sufficient data in order to demonstrate that the cigars in question are substantially equivalent to their predicate products insofar that the changes that have taken place do not raise questions of public health.

“Swedish Match is confident that the above-mentioned issues will be resolved or efficiently mitigated in due course,” the company wrote in its statement. “However, the board’s view is that the decision to suspend spin-off preparations until further notice is in the best interests of our shareholders. As the potential impacts from regulatory uncertainties have been clarified, the Swedish Match board expects to resume plans to separate the cigar business.”

March 15, 2022

Zimbabwe to Crack Down on Side Marketing

Zimbabwe’s Tobacco Industry and Marketing Board (TIMB) is cracking down on the side marketing of tobacco leaf during the 2022 selling season, according to The Sunday Mail.

“We have engaged relevant authorities to come up with a Statutory Instrument (SI) on side marketing,” said Saviour Muvirimi, TIMB head of inspectorate. “We also recruited informers in all farming areas in order to receive information on the presence of illegal buyers in communities.”

Police would be brought in to arrest those caught side marketing, according to Muvirimi. “TIMB will be making constant radar sweeps on frequency of sales on grower numbers with the view to identify grower numbers perpetuating side marketing. Respective individuals will be called to explain these sales, and if we are not convinced, we will block and suspend the grower numbers and refer such criminal elements to the Zimbabwe Republic Police for arrest.”

“Farmers who side market tobacco actually play around statistics by adjusting estimates,” he said, adding that the police department would be strict on addressing adjustment of estimates by farmers.

“TIMB will not hesitate to suspend sales and revoke licenses from contractors involved in side marketing. (We will) increase our surveillance patrols in farming communities in order to identify makorokoza’s (dealers) and errant licensed contractors engaging themselves in side marketing,” Muvirimi said.

March 15, 2022

Shenzhen Locks Down Due to HK Covid Surge

China’s health authorities have locked down Shenzhen to prevent the spread of Covid-19 from Hong Kong, which is experiencing a surge of the virus.

Shenzhen is a significant manufacturer of consumer electronics, including vapor hardware, for the global market. The city houses tech powerhouses, such as iPhone manufacturer Foxconn, and more than 170,000 vaping-related businesses. The local vapor industry employs more than 3 million people and supplies more than 90 percent of the vapor hardware used around the world, according to some estimates.

The Shenzhen lockdown will last for at least seven days. All nonessential workers must stay home, adults must take PCR tests and public transportation is being halted.

A lockdown in Shenzhen might further disrupt global supply chains because Shenzhen has one of the world’s largest ports. An outbreak in Shenzhen in late spring of last year held up port operations and caused a steep spike in global shipping rates that helped drive up prices for imported goods in the United States and elsewhere.

According to The New York Times, Hong Kong has reported nearly 3,780 Covid-19 deaths and nearly 700,000 new cases since late January. Shenzhen reported 66 new cases in a population of 17 million on Sunday.

March 14, 2022

Poda to Manufacture in North America

Poda Holdings has signed a purchase agreement with its Chinese manufacturing partner to acquire Poda Pod manufacturing equipment, 15 patent applications related to Poda Pod technology and three Chinese trademarks for approximately CDN3.45 million ($2.7 million).

The manufacturing equipment is comprised of all proprietary custom-built equipment for Poda Pods production capable of producing an estimated 5 million Poda Pods per year. All manufacturing equipment will be shipped to Vancouver, British Columbia. The 15 patent applications were filed in China and represent unique product design and manufacturing methods applicable to the development and large-scale production of Poda Pods.

“Given the general unrest of the geopolitical situation around the globe, the company has determined it will manufacture Poda Pods in North America,” said Poda Holdings CEO Ryan Selby in a statement.

“This will reduce the amount of lag time from manufacturing to customer delivery and will provide a significant reduction in tariffs, allowing the company to be more competitive. The acquisition of the manufacturing equipment and patent applications is an important step in the growth and value of Poda, which the company believes outweighs the resulting delays in production.”

March 14, 2022

China Mulls Ban on Flavored E-Cigarettes

China will ban nontobacco flavors in e-cigarettes if an updated draft of standards for the vaping industry becomes law, reports Shine.

In November 2021, China’s State Council amended the country’s tobacco monopoly law to include vapor products and requested public input on its proposed regulations for the segment.

While the original proposal appeared to permit nontobacco flavors, the new draft, published on March 11, underlines the importance of reducing the appeal of e-cigarettes to youth, stating: “Flavors other than tobacco taste shall not be offered in products.” To be specific, 21 additives, referring to tastes like plum, rose and orange, are removed from the list.

As some U.S. states and European countries already have flavor bans in place, industry experts believe the new regulations may have a greater impact on the domestic market rather than exports.

In an interview with Securities Times, an unnamed industry insider said sales volumes of tobacco-flavored e-cigarettes in the domestic market are dwarfed by other flavors.

The March 11 publication sent stocks of Chinese vapor companies tumbling. Shares of RLX Technology, which had just reported strong revenues for 2021, dropped more than 36 percent and closed at $1.49 on the New York Stock Exchange on Friday.

The updated draft is now available on the State Tobacco Monopoly Administration’s website. The administration is asking for public feedback until March 17.

March 13, 2022

BAT Withdraws from Russia

BAT is withdrawing from Russia, the company announced on its website.

“Building on our announcement of 9th March 2022, we have now completed the review of our presence in Russia. The context is highly complex, exceptionally fast-moving and volatile,” the company said in a statement, referring to the Russian military invasion of Ukraine.

“We have concluded that BAT’s ownership of the business in Russia is no longer sustainable in the current environment,” the company wrote.

“Today, we have initiated the process to rapidly transfer our Russian business in full compliance with international and local laws. Beyond continuing to pay our 2,500 employees, we will do our utmost to safeguard their future employment.

“Upon completion, BAT will no longer have a presence in Russia.

“Following our decision today, and in light of the continuing uncertainty related to Ukraine and Russia and the possible indirect impact on the rest of the group, we consider it prudent to revise our guidance for full-year 2022. We now expect constant currency group revenue growth of 2 percent to 4 percent and mid-single figure constant currency adjusted diluted EPS [earnings per share] growth. In 2021, Ukraine and Russia accounted for 3 percent of group revenue and a slightly lower proportion of adjusted profit from operations.”

BAT faced heavy criticism for an earlier decision to continue operating in Russia. “If you are a member of the board of British American Tobacco, courting popularity was probably never a top personal priority. Even so, the people overseeing a large and widely held FTSE-100 company might still feel obliged to explain why, amid the broad boycott of Russia by multinationals, they think its fine to carry on business in the country roughly as normal,” wrote Nils Pratley in The Guardian.

Earlier, Philip Morris International, Japan Tobacco International and Imperial Brands announced the suspension of their operations in Russia.

March 11, 2022

Reduced-Exposure Claim for IQOS 3

The U.S. Food and Drug Administration has issued a modified-risk granted order authorizing Philip Morris Products to market the IQOS 3 system holder and charger with the following reduced-exposure information:

The IQOS system heats tobacco but does not burn it.
This significantly reduces the production of harmful and potentially harmful chemicals.
Scientific studies have shown that switching completely from conventional cigarettes to the IQOS system significantly reduces your body’s exposure to harmful or potentially harmful chemicals.
This reduced-exposure information is the same as the information previously authorized by FDA in July 2020 for an earlier version of the device.

Today’s action follows the FDA’s review of a new modified-risk tobacco product (MRTP) application submitted by the company for the IQOS 3 system holder and charger. This MRTP application primarily cross-referenced the supplemental premarket tobacco product application for this device, which was authorized for legal sale and distribution in the United States in December 2020, as well as the MRTP application for the previous version of the device.

The IQOS 3 device is similar in design to the previous version (with mainly aesthetic changes), uses the same tobacco source, and the company requested to use the same exposure reduction claim as authorized for the previous version of the device. Given these similarities, FDA largely relied on its past evaluations of the IQOS 3 device and previous version of the device in determining that the IQOS 3 device meets the authorization criteria to be marketed as an MRTP.

Headquartered in Switzerland, Philip Morris is currently banned from importing the product into the United States following an adverse ruling in a patent dispute with BAT’s Reynolds American subsidiary.

In an interview with Bloomberg, PMI CEO Jack Olczak said the company plans to manufacture IQOS in the U.S. to get around the import ban.

March 11, 2022

Huub Vizee Announces Retirement from Delfort

Huub Vizee, based in Austria, will retire from his position as head of regulatory and corporate affairs at Delfort on March 31.

Vizee started at Delfort in Austria as head of regulatory affairs in September 2011. In 2020, he became head of regulatory and corporate affairs. In this role, he dealt with tobacco-related regulatory developments worldwide, advised the R&D department and represented Delfort on the Coresta board of directors.

From 2014 to 2016, Vizee served as vice president of the Coresta board of directors, and from 2016 to 2018, he served as its president. He has been a member of the GTNF advisory board since 2015.

Vizee worked in the tobacco industry for 35 years in areas such as leaf, research, engineering, quality assurance, product development and corporate affairs.

Prior to joining Delfort in September 2011, he worked for Van Nelle, Douwe Egberts and Imperial Tobacco, where his last position was head of group regulatory development. In this role, he was responsible for leading Imperial Tobacco’s regulatory engagement as an active participant on a global, regional and market level. Vizee also represented Imperial Tobacco on the boards of the Confederation of European Community Cigarette Manufacturers, the European Cigar Manufacturers Association and Coresta.

According to Vizee, working in the tobacco industry has been interesting, challenging, entertaining and incredibly rewarding. “The best thing about working in the tobacco industry was being [a] member of a large family and having an astonishing network all over the world in which everybody is equal, appreciates each other and where friendships last forever,” he reflects.

Upon retirement, Vizee plans to move back to his native Netherlands.

March 11, 2022

Australia Urged to Include Vaping in Smoking Strategy

Australia is lagging well behind many other countries in the Asia-Pacific region when it comes to successfully tackling smoking through vaping, says the Coalition of Asia Pacific Tobacco Harm Reduction Advocates (CAPHRA).

The CAPHRA’s observation comes as Australia’s Department of Health seeks feedback on its Draft National Smoking Strategy 2022–2030, with public submissions closing on March 24.

“We encourage vapers and supporters of a progressive tobacco harm reduction (THR) approach to have their say. Australians desperate to quit smoking and those keen to stay off deadly cigarettes need all the help they can get,” says Nancy Loucas, executive coordinator of the CAPHRA.

On Oct. 1, 2021, Australia’s Therapeutic Goods Administration expanded its prescription-only model with customs clamping down at the border on personal imports of nicotine vaping liquids from overseas websites.

Not only does Australia’s draft strategy ignore the potential of safer nicotine products, it also lacks ambition, according to Loucas. The strategy aims for a smoking rate of 10 percent or less by 2025 while New Zealand is pursuing a 5 percent smoke-free goal and looks on target to achieve it. “Instead of banning vaping, New Zealand has regulated it, making it tough for minors to access but available to all adults keen to keep off the cancer sticks. New Zealand is seeing its overall smoking rate tumble, yet the Australian government fails to accept that the most effective smoking cessation tool available is staring it in the face,” says Loucas.

“Australia is well down the world rankings when it comes to adopting effective THR policies and is light-years behind the U.S. and U.K. Subsequently, Australia’s overall smoking rate has fallen very little over the past decade, and without reasonable access to vaping, Australia will struggle to even achieve its 10 percent smoking goal,” says Loucas.

March 11, 2022

Taiwan: Stakeholders Debate Policy Proposals

A demonstrative policy debate event on whether e-cigarettes should be regulated was held on March 8, 2022, in Taipei, showing how different public policy viewpoints can be rationally discussed, according to The Taipei Times. The debate was held by the Chinese Debate Promotion Association (CDPA) at the Taipei NGO House.

CDPA Chairman and Founder Chia Pei-te said that the Executive Yuan in January approved a draft amendment to the Tobacco Hazards Prevention Act proposed by the Ministry of Health and Welfare for legislative review. The proposed regulations on emerging tobacco products have sparked discussions, he said.

The amendment would classify emerging tobacco products as “tobacco-like products” and “designated tobacco products.” E-cigarettes would be classified as “tobacco-like products” and be fully banned while heated-tobacco products would be classified as “designated tobacco products” and be subject to regulation.

The reasoning behind banning e-cigarettes includes keeping curious teenagers away from the products, preventing consumers from adding nicotine to e-cigarette e-liquids and lowering the risk of teenage users turning to smoking.

The debate participants went back and forth discussing the pros and cons of regulating e-cigarettes versus banning them, bringing up subjects such as public health, tax revenue options and teenage use.

National Yang Ming Chiao Tung University (NYCU) College of Pharmaceutical Sciences Dean Kang Jaw-jou said that he was moved by opinions for and against e-cigarettes. He said the affirmative side proposed to directly manage e-cigarette use through regulations and an approval system while the opposing side stressed their attitude to life—banning a substance if the public consensus deems it harmful to society.

Many aspects of the topic can be argued, but e-cigarettes can cause negative health effects, and supporters and opponents must clearly present this fact to the public in further discussions, stated Wang Hsiang-tsui, NYCU Faculty of Pharmacy associate professor.

March 11, 2022