Swedish Match reported record sales and operating profit from product segments in the third quarter of 2020.
Sales and operating profit increased for the Smokefree and Cigars segments in both the U.S. and Scandinavia, elevated by Covid-19 related effects on consumer demand and channel shifts.
In local currencies, sales increased by 23 percent for the third quarter. Reported sales increased by 15 percent to SEK4.4 billion ($504 million).
In local currencies, operating profit from product segments increased by 37 percent for the third quarter. Reported operating profit from product segments increased by 28 percent to SEK2.05 billion
Operating profit amounted to SEK2.02 billion for the third quarter.
Profit after tax, which includes a charge of SEK286 million following adverse ruling in a tax case, amounted to SEK1.19 billion for the third quarter.
Lars Dahlgren
“Swedish Match delivered an outstanding performance during the third quarter,” said CEO Lars Dahlgren, CEO of Swedish Match in the company’s quarterly report. “While we estimate that Covid-19 related effects had a notably positive net impact on group earnings, the underlying financial development across our product segments was strong.
“Impressive performance for Zyn in the U.S. continued to be the key contributor to profit growth. For this quarter we also noted a significant upturn in operating profit for our U.S. cigar business, as well as for our Scandinavian smokefree business—even when excluding Covid-19 related positive mix effects from increased domestic volumes in Norway that substituted deliveries to border trade and travel retail outlets.”
Swedish Match reported a strong second quarter, driven largely by sales of its Zyn tobacco-nicotine pouches in the United States.
In local currencies, Swedish Match’s sales increased by 11 percent for the second quarter. Reported sales increased by 11 percent to SEK4.13 billion ($457.18 million).
In local currencies, operating profit from product segments) increased by 19 percent for the second quarter. Reported operating profit from product segments increased by 17 percent to SEK1.7 billion.
Operating profit amounted to SEK1,67 billion for the second quarter. Profit after tax amounted to SEK1,23 billion for the second quarter.
According to Swedish Match, the second quarter financial performance was negatively affected by Covid-19 impacts.
“The strength of the second-quarter performance was largely attributable to the continued success of Zyn in the U.S., with shipments in the first half of the year already exceeding total shipments for 2019,” said Lars Dahlgren, CEO of Swedish Match.
“Shipment volumes for our Scandinavian smokefree business declined in the quarter versus the prior year as deliveries to travel retail and border trade outlets were severely impacted by COVID-19 travel restrictions.”
Unburdened by the legacy of traditional tobacco products, nicotine pouches are starting to catch on in a variety of markets.
By George Gay
Having been asked to look into whether interest in and sales of nicotine pouches have increased in the wake of the Covid-19 pandemic, I have to own up to failure. In my own defense, however, I would suggest that the consumer buzz around these novel products had been getting louder from well before the onset of the virus and that any additional interest caused by the pandemic would probably have been difficult to discern against that background noise.
Having said that, I did find some evidence of increased interest in nicotine pouches brought on, at least in part, by the pandemic. Jason Carignan, president of Dryft Sciences, which offers its Dryft brand of nicotine pouches in the U.S., made some interesting observations about the way that nicotine users had been reacting in the face of Covid-19 and how they might respond in the future. “Consumers are responding well to Dryft’s convenience, simplicity and functionality at a time when wearing masks is more prevalent and remaining indoors is required,” he said as part of a statement issued in response to a number of questions posed by TR. “Online subscriptions are increasingly attractive with deliver-by-mail options, and we’re receiving positive feedback about our different flavors and strengths, as well.
“We are seeing new consumers arrive at Dryft with a desire to choose nicotine without toxins that accompany combustion—yes, that is true. But those consumers are also rethinking how nicotine is viewed in public health circles. They’re seeking fact-based discussion and research. They expect us to be responsive to their feedback. And they want the freedom to responsibly choose from alternatives in a future state that presents completely new nicotine products.”
The Dryft nicotine pouch has been well-received in the marketplace, according to its manufacturer. (Photo: Dryft Sciences)
Don’t inhale
Aside from these remarks, I think there is a robust, common-sense argument to be made for why interest in nicotine pouches might have increased since the start of the pandemic. The initial information made public about Covid-19 concentrated on how the disease attacked the lungs, and so it wouldn’t have been unreasonable for cigarette smokers to have been concerned that their habit might exacerbate the damage done to their health should they contract Covid-19; this might well have led them to cast about for a form of tobacco/nicotine consumption that did not pose the same level of risk as smoking does.
So where would they have headed? Well, I think that most reasonable people would conclude that vaping is hugely less risky than smoking is, but one of the current stumbling blocks here is that vaping too involves inhalation, albeit that in this case the inhalation avoids the toxic products of pyrolysis consumed in smoking. Add to this the fact that most smokers have been exposed to a cacophony of anti-vaping propaganda put out in many cases by people who should know better, and it is probably the case that smokers would look elsewhere for relief during the Covid-19 pandemic.
And what better product than a no-burn, no-inhalation one whose low-risk credentials are backed by a comprehensive body of evidence stretching back decades? The problem here, however, is that snus, for all its advantages, comes with baggage acquired over its long history. It is beset by a back catalogue of negative health-risk reports that, while they might have been disproven, continue to weigh it down and hold it back.
Which brings the smoker to nicotine pouches. These oral products, which contain no tobacco, are new enough not to carry such health-risk baggage and, indeed, it is difficult—but, alas, not impossible—to see where even those with an obsessive interest in stopping people enjoying tobacco or nicotine products could find fault. For instance, Swedish Match’s popular Zyn brand comprises only pharmaceutical-grade nicotine salt along with food-grade ingredients, a type of formulation found in at least some brands made by other manufacturers, according to the company. And whereas the health risk of even food-grade flavors can be brought into question when such flavors are inhaled in smoke or vapor, the consumption of food-grade flavors in nicotine pouches is obviously not open to the same questions.
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No virgins
Of course, manufacturers of tobacco/nicotine products can always be accused of adding flavors to attract young people to their products, but a poll by Ipsos Sweden on behalf of Swedish Match seems to indicate that nicotine pouches are adult products, at least in Sweden, to which the poll was confined. According to the results of the poll, 70 percent of nicotine pouch users are between the ages of 26 and 55—or, as a teenager might put it, between old and ancient. Importantly, too, when it comes to gateway issues, the Ipsos poll throws up evidence that nicotine pouches provide a gateway out of traditional tobacco use. While there is a low level of dual cigarette-and-pouch use, there is a high level of previous cigarette use among pouch users. Only 7 percent of nicotine pouch users have never used a nicotine product before taking up pouch use, and most nicotine pouch users consume only pouches while 14 percent use both pouches and snus, and 9 percent use both pouches and cigarettes.
Dual use often gets bad press, but it can provide an important part in a smoker’s transitioning away from cigarettes or in providing needed relief when she finds herself in a position where she cannot indulge her usual habit. Spokesperson Deborah Perez said that JTI saw its nicotine pouch brand, Nordic Spirit, as responding “to the evolving preferences of adult tobacco and nicotine consumers who are looking for a convenient product that can be used in situations where smoking or vaping is not possible.” And in an email response to TR questions, Imperial Brands, which recently added its nicotine pouch product, ZoneX, to its “asset brands” category, said that it was “assessing opportunities in OND [oral nicotine delivery] as consumers increasingly adopt a multi-category approach to nicotine.”
To keep up with demand for its Zyn brand, Swedish Match recently expanded its Owensboro, Kentucky, USA, production facility by 16,000 square feet. (Photo: Swedish Match)
A smaller footprint
Meanwhile, the Ipsos poll results indicate that 55 percent of pouch users have a university education, and 80 percent are either employed or run their own company. And they also indicated that pouch consumers, who are more likely to live in urban rather than rural areas, consider themselves to be health conscious and believe it is important that the products they buy have only a small impact on the environment.
Certainly, nicotine pouches seem to be able to lay claim to having a small environmental footprint when compared with other tobacco/nicotine products, and, indeed, some other consumer products. But while their environmental credentials are important, their attraction is also visceral. Perez said that JTI’s pouch brand, Nordic Spirit, provided “a steady, long-lasting nicotine delivery.” Nicotine contents range from 9 mg/g for Nordic Spirit Spearmint Intense to 14 mg/g for Nordic Spirit Elderflower, Nordic Spirit Berry Citrus and Nordic Spirit Smooth Mint and 17mg/g for Nordic Spirit Spearmint Intense Strong.
In fact, the attraction of nicotine pouches is both visceral and practical. In the U.K. at least, where retail cigarette prices are high, nicotine pouches seem to be well ahead in the price stakes. According to Perez, Nordic Spirit sells there for £6.50 ($8.15) for a pack of 20 whereas, according to U.K. government figures, the average price of a pack of 20 king-size cigarettes is £11.10.
Given all of the above, it’s not surprising that, just over a year ago in the U.S., Swedish Match went national with Zyn, which it had launched there in 2015; nor that it opened a 16,000-square-foot addition to its production facility in Owensboro, Kentucky, to provide additional capacity to deal with the demand for this brand.
Perez, meanwhile, was able to report that Nordic Spirit, which was developed in Sweden and launched in 2018, has rapidly grown market share and is now available in Austria, the Czech Republic, Denmark, Sweden, Switzerland and the U.K. “While the tobacco-free nicotine pouches category is still in its infancy, we expect that many adult tobacco and nicotine consumers globally will be interested in trying the product, helping the new category to grow significantly over the coming years,” she said.
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But perhaps one of the strongest indications that manufacturers have confidence in the nicotine pouch category came with the announcement by Altria in the middle of May that it had submitted “premarket tobacco product applications to the U.S. Food and Drug Administration for 35 On! products on behalf of Helix Innovations, an Altria joint venture responsible for manufacturing and selling On! nicotine pouches globally.”
“On! products, in seven flavors and five nicotine levels, offer the broadest portfolio of choices in the fast-growing nicotine pouch category for adult tobacco consumers seeking alternatives to traditional tobacco products,” Altria said in its May announcement, which quoted Paige Magness, senior vice president of regulatory affairs for Altria Client Services. “On! nicotine pouches are a key part of our vision to responsibly lead the transition of adult smokers to a noncombustible future,” said Magness. “We believe the supporting science is strong and are committed to working with the agency on these important product submissions.”
It seems reasonable to assume that no manufacturer, no matter how deep its products, would enter the labyrinthine caves of the FDA’s application processes unless it was confident the products it was submitting for review were almost assured of consumer acceptance and market success—or unless it were accompanied by Theseus, of course.
George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.
Europe’s top court on June 18 sent back to a lower court a dispute over immunity in a political scandal involving Swedish smokeless tobacco and millions of dollars in bribes, reports Court House News Service.
The European Court of Justice (EJC) found that a lower court erred in its decision to side with the former head of the European Union’s anti-fraud office, Giovanni Kessler, whose immunity from prosecution had been rescinded by the European Commission following allegations of illegal wiretapping.
The case dates from 2012, when Maltese politician John Dalli either resigned from or was forced out of his post as the European commissioner for health and consumer policy following allegations of bribery.
An investigation by the EU anti-fraud office OLAF found that an associate of Dalli, Silvio Zammit had demanded €60 million ($67 million) from Swedish Match to lift a ban on snus, which is legal in Sweden but outlawed in other EU member states.
Dalli denied he had any knowledge of the bribe. He brought several complaints about his resignation controversy to the court in 2015, which he all lost.
During the OLAF probe, investigators allegedly listened in to a conversation with a witness in the investigation. The information wasn’t used in the investigation, but the actions would be a violation of Belgian wiretapping laws.
The case now returns to the General Court for another decision.
Shifts in consumer sentiment are giving some traditional products a remarkable modern edge.
By George Gay
Going back a while, I was regularly told during visits to India that the country’s tobacco consumers would in time move away from traditional products, such as chewing tobacco and bidis, and toward (combustible) cigarettes, which were frequently described as representing the “modern” form of tobacco consumption. Thinking about this now, I suppose a post-modernist would have described such a suggestion as representing the ideology of an elite group trying to establish, in its own interests, the cigarette as the cultural norm. And that post-modernist wouldn’t have been too far from the truth, though she needn’t have worried unduly, especially in relation to the Indian market. Even though globally, though not in India, combustible cigarettes represent far and away the most common form of tobacco consumption today, they are in decline, and, I think, few people would describe them as modern.
The sorts of products that might today be described as modern would be, for instance, heat-not-burn (HnB) devices, which are sleek in form and technically advanced in function, delivering nicotine to the consumer without the need to set fire to the tobacco they contain. But our post-modernist might raise the same objection in relation to these products as she did in relation to the idea that combustible cigarettes were modern. That is, the promotion of HnB products is merely an attempt by the more or less same elite group to establish these devices as the cultural norm, though the group could reasonably argue that, in this case, such promotion is also in the interests of the smoking, and perhaps the wider, population.
But our post-modernist would have a hard job making such a complaint about Oliver Twist, though the question that would arise with this tobacco product is: Is it modern? I would argue that it is modern, though I also know that it isn’t. Let me explain.
To be sure, Oliver Twist, which has been owned by Swedish Match since April 2018 when it bought House of Oliver Twist, does not have the look of a modern product, being devoid of lights, buttons and programmable devices. It is an oral tobacco product that today is manufactured in what is described on the product’s website as a process that uses advanced technology alongside the same types and levels of craftmanship that were employed when it was first produced in 1805. This “spun” tobacco product is described as comprising “tobacco bits,” a phrase that does not seem to have tripped off the tongue of a modern corporate marketing guru, and it is sold in tins that inevitably have a retro look.
But in many important ways, this is a modern product. For instance, it can be used as a harm reduction device. Most people who have studied such things in an objective way agree that the consumption of oral tobacco products is generally less harmful than the consumption of combustible cigarettes, and in the case of some oral products, this becomes far less harmful. These tobacco bits—about 1 cm long and 0.5 cm in diameter—can simply be enjoyed or, as in the case of electronic cigarettes, used to quit smoking. They are discreet in use, so they can be used almost anywhere.
But perhaps one of their greatest claims to modernity is that, in an age of concerns about the environment, their positive credentials are indisputable. The product comprises bits of tobacco made from manually harvested leaves and flavors that are sold in tins. In addition, the product is manufactured in Odense, Denmark, close to its major markets in Scandinavia.
Also underlining Oliver Twist’s claim to modernity must be its seemingly bright future. After all, demand must be an important guide to what is modern. The company said in an emailed reply to questions that the future would see a “growing demand for smokeless tobacco in general and … a growing demand for a quality product like Oliver Twist.” This seems to add up. There is a growing market for oral tobacco in Scandinavia, and Oliver Twist is already sold elsewhere in Europe and the U.S. Restrictions on the use of other tobacco and nicotine products must at least give it a boost in other markets, especially those with a tradition of oral tobacco use.
Mixing tradition and modernity
Oliver Twist
Other tobacco products (OTP), by which, for the purposes of this story, I mean tobacco products that fall outside the cigarette and RYO/MYO categories, tend to have relatively good environmental credentials. Poschl Tabak’s snuff, for instance, comprises only ground tobacco moistened with essential oils of various flavors and paraffin, and one of the keys to the product’s quality is simply time—allowing the moisturized ground tobacco to undergo a cold fermentation process.
So again, this is a centuries-old product that can make claims to modernity through its environmental credentials but also because it is discreet to use, so it transcends most modern anti-tobacco laws.
According to Poschl, snuff is the oldest tobacco consumer product in the world—one that has been popular for many centuries in Asia, Africa, America and particularly in Europe. But, at the same time, Poschl says, its snuff tobaccos—English menthol snuff—are in rising demand, which stakes another claim to its modernity. “Apart from Europe, our focus is directed to Africa where we recently inaugurated our newest subsidiary company, Poschl Tobacco South Africa PTY Ltd., and launched a new product called NKWE,” which was specially developed for that market, the company said in an emailed reply to questions from Tobacco Reporter.
Again, there is a mix of tradition and modernity. Poschl’s classic Bavarian Schmalzler snuff, described as dark in color, medium-fine grained and relatively moist, takes its name from the fact that it used to be refined with clarified butter: Butterschmalz. But, admittedly outside of the OTP category as defined above (and falling outside the German tobacco tax law), Poschl also offers a tobacco-free snuff powder.
Poschl, which is headquartered in Geisenhausen, Germany, also offers the OTP products pipe tobacco and chewing tobacco along with additive-free cigarettes and RYO and MYO tobaccos. Although it already has a presence in about 100 countries, it is in an expansionary mood, believing that the trend toward additive-free tobaccos will continue. “[W]hile the main focus has been on Europe so far, we were recently able to generate new growth in South America and will work to make use of the strong potential of the Asian market in the future,” Poschl said. “We have only been active in the duty-free business for a few years now and delivered to about 100 airports worldwide already last year.”
The slow movement
Pipe tobacco is an interesting OTP in that its environmental credentials are good, especially where it is sold in tins. But it has yet another claim to being modern in that it can be seen as being part of the slow movement. According to Wikipedia, the slow movement began with Carlo Petrini’s protest against the opening of a McDonald’s restaurant in Piazza di Spagna, Rome, in 1986, which initially sparked the creation of the slow food movement. Over time, this developed into a subculture of movements in areas beyond food. Indeed, given the long history of the consumption of pipe tobacco, it could be seen as being part of the slow movement even before anybody realized there was a need for such a thing.
Of course, partly because it is not an organized undertaking, the slow movement is little in the media’s eye, though it is keen on running endless features on how to avoid the rat race. So people are generally still laboring under the impression, put about by those modernists with equity in such matters, that speed is all the go. The aim is to have 5G—whatever that is—available around the world so that even those sitting in the most remote cove can livestream on their smart phones rubbish entertainment in garish colors while doing stress level raising banking, updating their Facebook pages and uploading never-to-be-viewed-again pictures to computer clouds, the maintenance of which is contributing significantly and increasingly to climate change.
Such activities are seen these days as normal while a person sitting stress free in that same cove watching the waves and enjoying a pipeful of tobacco (assuming he was allowed to do so) would be seen as rather odd. But if we are going to solve the world’s problems, it is going to happen through this sort of quiet reflection. Rushing about is the problem not the answer.
Cigars can be seen in a similar light. They come in all sorts of shapes, sizes and packaging, but, generally, I think, they are sound on an environmental level. And, especially the bigger format cigars, like pipe tobacco, they provide space for reflection.
Of course, reflection shouldn’t be an end in itself. If you reflect for hours, you possibly have a decision-making disorder, so it is probably the case that the founder of Joh. Wilh. von Eicken, Johann Wilhelm, had it about right when, according to the company’s website, he decided “to create tobacco products that give people moments of enjoyment and a pronounced sense of joie de vivre.”
Von Eicken offers both pipe tobacco and, since its 1991 takeover of the German tobacco manufacturer Dingelstadt, machine-made small and large cigars as well as cigarettes and RYO/MYO tobacco. It manufactures its products at factories in Lubeck and Dingelstadt, Germany, while offering them on every continent in more than 100 markets.
The company said in an emailed reply to questions that while it was a small player within the global tobacco industry, it had the potential to grow. Asked about the future demand trend of its OTP products, the company said that quality would continue to be important. Quality at a fair price would be the key to success, it said. Furthermore, von Eicken’s customers valued its flexibility in developing products for individual markets.
In this regard, von Eicken has recently launched Pipers Club Cigar, which it describes as being “a completely new approach in the cigar world as this product offers an unbeatable price quality ratio.” In addition, with the recent launch of Chapman Super Slim and King Size Little Cigars, it says it has introduced a flavor hybrid product that is specially designed for Eastern Europe and Asia.
Again, what is on show here are traditional, established products with good claims to being modern, and these are from von Eicken, a company established in Germany in 1770 that is now celebrating its 250th anniversary.
The writer would like to thank the following, listed in alphabetical order, for their help in preparing this story: Thomas Nellemose, area sales manager for the House of Oliver Twist; Rafal Rembowski, head of export for Poschl Tabak; and Peter Witzke, head of export for Joh. Wilh. von Eicken.
George Gay
George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit,have earned him a loyal following among Tobacco Reporter’s readers.
Swedish Match’s volume shipments of snus in Scandinavia during the 12 months to the end of December, at 241.3 million cans, were increased by two percent on those of the year to the end of December 2015, 236.3 million cans.
But despite the volume increase, SM’s share of Sweden’s snus market fell by 1.6 percentage points, from 69.0 percent during 2015 to 67.4 percent during 2016. And it’s share of Norway’s snus market fell by 3.1 percentage points to 53.5 percent.
Meanwhile, SM’s volume shipments of moist snuff on the US market during 2016, at 131.4 million cans was down by one percent on that of 2015, 132.1 million cans.
Also in the US, the company’s volume shipments of cigars in 2016, at 1,472 million, was increased by 17 percent on that of 2015, 1,256 million.
But, during the same period, volume shipments of chewing tobacco, excluding contract manufacturing volumes, at 6,709,000 pounds, was down by nine percent from 7,390,000 lb.
SM’s worldwide shipments of matches during 2016, at 72.0 billion sticks, were down by two percent on those of 2015, 73.1 billion sticks.
During the same period, worldwide shipments of lighters fell by one percent from 402.9 million to 399.2 million.
In announcing its results on Friday, SM said that its sales had increased by six percent to SEK3,957 million during the fourth quarter and by seven percent to SEK15,551 million during the full year. In local currencies, sales had increased by three percent during the fourth quarter and by seven percent during the full year.
Basic earnings per share amounted to SEK3.61 during the fourth quarter and to SEK27.38 during the full year.
“I am pleased to report a year of solid growth, with higher sales in all of our product areas and strong operating profit growth,” said CEO Lars Dahlgren.
“We expanded our efforts in the smokeless arena and continued on the path toward our vision of a world without cigarettes.
“We delivered very strong cash returns to our shareholders, with both our regular dividend and two payments of special dividends stemming from our sell-downs of shareholdings in Scandinavian Tobacco Group.
“This past year we have been faced with notable regulatory changes, impacting both 2016 and future periods. We remain committed to being a vocal proponent of the benefits of harm reduction in the tobacco industry and will face these regulatory changes from a position of strength.”
In response to a study linking snus to diabetes, Swedish Match issued the following statement:
“Today, a scientific study was published that has gotten media attention. The study, Smokeless tobacco (snus) is associated with an increased risk of type 2 diabetes: results from five pooled cohorts, says that snus consumption [increases the risk] for diabetes (type 2).
The study says that among those who consumed fewer than five cans of snus per week there was no increased risk, but among those who consumed five-six cans per week there was an increased risk of 40 percent, a risk that increased to 70 percent with a consumption level of seven cans or more per week.
“The collective scientific documentation regarding snus and diabetes shows that there are six recently published studies that [don’t] show an increased risk, but in this one study, there is an increased risk for those using more than five cans of snus each week.
“The latter study is based on material from the county of Västerbotten, and it is unclear why that particular study [differs] from all the rest in its conclusions. It is possible that the difference exists because [the study] hasn’t [adjusted] for other known factors, such as food consumption, lifestyle habits and obesity.
‘When six studies say one thing and there comes a seventh saying something different, I think that you should be cautious in drawing any conclusions,’ says, Lars-Erik Rutqvist, head of scientific affairs, Swedish Match.”
‘The only study that shows a correlation is from Västerbotten and it only represents one cohort (group of people), and I would leave open for the possibility that there may be other explanations to diabetes than consumption of snus. This study does not change [my] or Swedish Match’s current assessment of the collected scientific research which has been done on this subject.’”
Even as it suffers setbacks, Swedish Match’s MRTP application offers a path for other tobacco companies to follow.
By Timothy S. Donahue
Developing less risky alternatives to cigarettes is all the rage nowadays. Nearly every tobacco company has an alternative tobacco product that aims to be safer than smoking. However, only one company can be first in gaining approval from the U.S. Food and Drug Administration (FDA) to make the claim publicly.
Despite recent setbacks, Swedish Match (SM) remains far ahead of the pack. In June 2014, the firm filed a modified-risk tobacco product (MRTP) application for its General snus brand. It was the first such application to ever be accepted for review by the FDA. Snus is a moist tobacco product placed under the upper lip that does not involve spitting or chewing. In mid-December 2016, the FDA finally responded to the 135,000-page document. The regulatory agency decided to defer any decisions on whether to allow the company to claim the products cause less harm than cigarettes or whether to allow removal of a warning that the products may cause mouth cancer.
In another first, the FDA stated that it believed the SM application “could be amended to support issuance of modified risk orders.” However, it also informed the company that it would not be able to remove a warning that the products may cause gum disease and tooth loss. SM intends to meet with the FDA (a 45-day response deadline places a possible meeting in mid-February, although no date could be confirmed as of this writing), according to Jim Solyst, vice president for federal regulatory affairs for SM. The FDA requires SM fully address all remaining concerns within two years.
“What we will do is certainly have a conversation with the FDA, but the exact nature of those discussions have yet to be determined. We are more than willing to keep this process going, to respond to the letters we’ve received and the document they put out,” said Solyst. “We would need some additional information, some clarification as to what would be the path forward. Yes, we will have discussions. We believe it’s in all parties’ best interests that we keep this dialogue going.”
One challenge facing SM is that the FDA’s “conversations” with tobacco companies are not necessarily of the type that most people associate with that word. They are more like a dialogue through documents. When a tobacco company meets with the FDA’s Center for Tobacco Products (CTP), it’s a listening session where a company presents, the FDA listens, and at some point later the FDA makes a decision that is often unclear and more often without explanation. “The burden has always been on us, the applicant, to propose something,” says Solyst. “Then they comment on it.”
Risk reduction quantified
Jim Solyst
The actions on the MRTP applications have no impact on SM’s premarket tobacco product application (PMTA) authorizations issued for eight of its General snus products in November 2015. SM was the first—and, so far, only—tobacco company to receive product approvals under the PMTA process. In its PMTA, SM proposed that General snus should be considered to be protective of the public health, and the FDA agreed. In its response, the agency determined that the General snus products are protective of the public health and contain significantly lower levels of harmful constituents compared with over 97 percent of the smokeless products on the U.S. market.
“They even went further than we did,” says Solyst. “They quantified the risk reduction.” The MRTP response, however, was different. “The FDA stated that ‘No, this is not quite what we need. We’re not willing to remove the warning labels, and we want you to do your consumer perception in a different way.’ Going forward, part of our conversation with them would be, well, ‘Which way is that?’ Yes, it’s been a difficult process. They aren’t very clear on their expectations.”
Understanding the industry interest and complexity of its decision, the FDA did attempt to explain its scientific review process and what was considered in the actions taken against SM in its MRTP application. In a note on its website, the FDA states that to pursue an MRTP order, a company, among other things, is required to establish that submitted modified-risk data for a product is supported by scientific evidence that shows “the product (as actually used by consumers) can significantly reduce the harm and risk of tobacco-related disease to individual tobacco users, as well as benefit the health of the population.”
In its MRTP applications, SM proposed to remove two warning statements required of smokeless tobacco products by the FDA: one stating that the product can cause gum disease and tooth loss, and the other stating the product can cause mouth cancer. In reviewing these requests, the FDA determined that “removing the warning statement about gum disease and tooth loss would imply that using these snus products cannot cause gum disease and tooth loss, as compared to other smokeless tobacco products,” according to its statement. Similarly, the FDA determined that removing the warning statement about mouth cancer would imply that using these snus products cannot cause mouth cancer. “Based on the available scientific evidence, we determined that the applicant’s proposal to remove this warning should be denied,” wrote the FDA. “There is sufficient evidence that the use of these products increases the risk of mouth cancer in users compared to nonusers.”
However, the FDA did state that evidence provided by SM may support other claims, such as a claim about the “reduced risk of mouth cancer provided on the product labeling, in advertising, or otherwise outside of a health warning. That claim would need to be carefully worded and adequately tested with consumers to ensure satisfaction of the MRTP requirements, including consumer comprehension.”
The FDA’s use of the word “imply,” however, is confusing. Is the agency attempting to determine how the general public may or may not interpret a statement without doing any reasonable research? Is the research of the wording a responsibility of the applicant? Solyst says he’s not sure. It’s hard to guess as to the FDA’s intent. “We believe that what they’re basically saying is that because there are the existing warning labels, they’re not going to remove them. They don’t address this specifically, but if you look back at the 2015 decision, the inference would be that had there not been a warning label at all, that’d be a different story,” says Solyst. “Because there is already a warning label, they’re not inclined to remove it no matter how much evidence we present.”
Public interpretation
Further muddying the waters, SM also asked to revise a third warning statement to say that General snus products present “substantially lower risks to health than cigarettes.” This seemed fair considering the FDA’s PMTA response that General snus products were 97 percent safer than similar products. Even the FDA’s review of the submitted scientific evidence for the MRTP concluded that “General snus products, as used by consumers in Sweden and Norway, may pose substantially lower health risks to individual smokers who switch completely to these products for some health outcomes, such as lung cancer or chronic obstructive pulmonary disease.”
Conversely, the FDA again claims that there is insufficient scientific evidence to support the claim, as would be implied by a generalized statement about health risks as compared to smoking. “However, as with the evidence related to mouth cancer, the evidence on relative health risks provided by Swedish Match may support a different explicit claim, such as one outside of a health warning providing information concerning the differences in specific health risks, if the claim is carefully constructed, and adequately tested,” wrote the FDA.
Why the FDA is trying to speculate at public interpretation is anyone’s guess. The agency may be losing sight of the bigger picture by being so vague and secretive. “We think that telling smokers that these products are 97 percent safer than similar products is the key message; this message is getting lost,” says Solyst, adding that maybe the FDA wants SM to take more of a relative risk approach. “Should our claims be that this product is significantly less risky than other products? That very well could be what they’re saying. The main message is, to us, that they’re not going to remove the current labels, but that doesn’t mean they wouldn’t consider other marketing claims. They seem to want us to continue this process. They gave us options, and one of those options was to present different claims. That’s why we need more information from them. What exactly do they mean by that; what evidence would be necessary to go that route?”
Spread the word
Looking back at its PMTA approval, Solyst says another frustration with the FDA is that the CTP didn’t really attempt to get the word out to the industry surrounding the significance of the first PMTA issued. The CTP decision was of global, and possibly even historical, significance. It was the first time any public health regulatory agency had made such a decision (allowing a new, safer tobacco product on the market). “We would have liked to have seen the FDA make more of it. Maybe they will, in the future, but that has been the frustration, which is: We agree with the decision; we just wish it was better known among tobacco users,” Solyst says. “We understand that this is an ongoing process, and we’re not discouraged. We think we have a harm reduction product that has already received one very positive decision from the FDA [in the PMTA], and we expect to continue this process and secure the first MRTP.”
While continuing and completing the MRTP is important to SM and its vision of a “world without cigarettes,” Solyst says the story is much bigger. As a leader in tobacco harm reduction and the only company to successfully navigate the PMTA course, SM has an obligation to the industry to establish the process of navigating the MRTP minefield. “We’re the only company who’s gotten this far. We feel we have to try to understand what exactly it is that they want. We’re not just acting as a company or as a product, but as a leader in the industry,” he says. “We feel this obligation to demonstrate how this [MRTP] can be done, and that it should be able to be done in an efficient manner. We felt the same way about the PMTA process. Now that we’re the only one with a PMTA, and we think we will do future PMTAs, we have that obligation to set a standard and continue the fight.”
Defence lawyers of Sliema restaurateur Silvio Zammit yesterday pressed the police’s witness Gayle Kimberley on whether she was the one who came up with the €60 million figure at the heart of the Dalligate scandal.
Kimberley denied it categorically, but lawyer Edward Gatt insisted on the point, reminding the young lawyer that she was testifying under oath, according to a story in The Malta Times.
He then went back to a note that Kimberley had prepared for Zammit with a series of questions for the former European Commissioner John Dalli and asked why she had written down that Swedish Match made a turnover of €500 million, half of which was profit.
She said that the figure was suggested by Swedish Match, adding that the intention was to relay the message to Dalli that the company was actually a modest trader in the tobacco industry.
However, at this point, Dr Gatt and his colleague Kris Busietta pressed further saying that she had mentioned that figure because she was later going to ask for €50 million to lift the ban through her contacts with Dalli. She later suggested changing it to €60 million “so it would not be a round figure”, according to the lawyer.
Kimberley also rejected this but the lawyer again reminded her that she was testifying under oath, adding that she had plans to use the money to set up a lobbying office in Brussels and buy property in Sliema with her former lover Iosif Galea. Kimberley also denied this.
Shortly after this, Gatt stopped the cross-examination, saying he would continue at a later date because he needed time to review a lot of material, which the defence was analyzing, suggesting that they had material which was not available to the police or OLAF. Earlier, in fact, Gatt pointed out that Kimberley sent most of her emails through her phone. Nonetheless, when asked she said that neither OLAF nor the police had seized her phone, despite seizing her work and home computers.
Swedish Match says that it has not lied nor altered its story during meetings about the resignation of the former EU Commissioner for Health and Consumer Affairs.
John Dalli resigned in October, shortly before the commission unveiled its proposed revisions to the Tobacco Products Directive.
According to a story in Malta Today, the transparency watchdog Corporate Europe Observatory (CEO) has submmitted a complaint to the transparency register secretariat against Swedish Match for allegedly violating the EU’s code of conduct for lobbyists. The complaint by CEO alleges also that Swedish Match lied to MEPs about ‘Dalligate’.
According to the story, Swedish Match’s public affairs director Johan Gabrielsson admitted to Green MEP José Bove that his company was asked to tell MEPs a misleading version of events of an attempt to solicit a bribe from it, ostensibly to reverse an EU ban on the sale of snus, which Swedish Match produces.
Asked about these allegations, Johan Wredberg, a spokesperson with Swedish Match’s public affairs department, stated in an email to TR that, in line with its commitment to cooperate with all the stakeholders seeking the truth in this matter, the company had welcomed and accepted several requests for meetings. “During those meetings we have never lied, nor altered our story,” Wredberg said. “We can only relate to our first-hand experience, which we have communicated in a transparent and consistent manner.”
Wredberg said that a Maltese police investigation was currently in progress and that, despite a sincere effort from its side to be cooperative, any and all information the company had shared with certain stakeholders had been twisted and used in a media campaign whose purpose was, to it, unclear.
Wredberg said Swedish Match did not see the benefits of such an approach, but rather saw it as one that could potentially obstruct the judicial process.
Swedish Match trusted that the truth regarding all of these events would be clarified once the Maltese police investigation was completed, Wredberg added.
