Tag: United States

Graphic Warnings Postponed to July 2022

Images: FDA
The U.S. Food and Drug Administration has delayed the effective date by which cigarette manufacturers will be required to print graphic health warnings on their products by three months to July 13, 2022, reports The Winston-Salem Journal.
It is at least the fourth delay for the graphic warning labels when counting previously set launch dates of June 18, 2021, Oct. 16, 2021, Jan. 14, 2022, and April 14, 2022.
The FDA released its final rule requiring new graphic warnings for cigarettes in March 2020. The rule calls for labels that feature some of the lesser known health risks of smoking, such as diabetes. The graphic warnings must cover the top 50 percent of the front and rear panels of packages as well as at least 20 percent of the top of advertisements.
In April and May 2020, cigarette manufacturers and retailers sued the FDA, arguing that the graphic warning requirements amount to governmental anti-smoking advocacy because the government has never forced makers of a legal product to use their own advertising to spread an emotionally charged message urging adults not to use their products.
In a more recent challenge, tobacco companies argued that the deadline was too onerous due to the impact of the Covid-19 pandemic. They also pointed to the risk that they would lose their investments in new packaging if the graphic health warning requirement were to be thrown out in court.
“These expenditures of resources for the purpose of meeting the rule’s requirements constitute irreparable harm because plaintiffs cannot recover money damages should the rule and/or the graphic warning requirement in the Tobacco Control Act be invalidated,” the companies said in a legal filing.
In March 2021, a district court judge in Texas granted a motion by the plaintiffs to postpone the effective date of the final rule to April 14, 2022. In May 2021, the court pushed back the final rule by an additional 90 days.
This is the Food and Drug Administration’s second attempt to enact graphic health warnings under the 2009 Family Smoking Prevention and Tobacco Control Act. The first rule was struck down by the federal court in the District of Columbia as a violation of the First Amendment.
July 11, 2021
Sales Resume Historical Drop as U.S. Reopens

Photo: Africa Studio
U.S. demand for combustible cigarettes declined 11.3 percent year over year, resuming their historical rate of decline following a temporary increase during 2020, reports The Winston-Salem Journal, citing the most recent Nielsen survey of convenience stores. The report lists total nicotine volumes down 9.4 percent for the same period.
In the early months of the Covid-19 pandemic, U.S. smokers increased their cigarette purchases in response to stay-at-home orders. This year has seen a return to more typical shopping conditions.
Philip Morris USA traditional cigarette volumes fell 9.5 percent year over year while Reynolds had an overall 9.2 percent decrease and ITG Brands was down 6.3 percent.
Tobacco manufacturers have been able to offset much of the recent volume declines through a series of per-pack list price increases in recent months.
For example, R.J. Reynolds Tobacco Co. will increase the list price of certain brands by $0.14 per pack on July 5, according to a report by Goldman Sachs analyst Bonnie Herzog.
Meanwhile, sales of electronic cigarettes were down 4.9 percent.
Sales overall have slumped since February 2020 when the Food and Drug Administration implemented its latest round of heightened regulations on the products.
Those restrictions required manufacturers of cartridge-based e-cigarettes to stop making, distributing and selling “unauthorized flavorings” by Feb. 6 or risk enforcement actions.
With a share of 49.5 percent, Juul remains market leader, followed by Vuse (33.5 percent), NJoy (4.5 percent) and Blu eCigs (3.1 percent), according to Nielsen.
July 4, 2021
PMI Campaigns Against Black Market Trade

Photo: Tobacco Reporter archive
Philip Morris International (PMI) has launched a public education initiative titled United to Safeguard America from Illegal Trade to combat black market trade. Supported by a coalition of national and state private and public sector partners, the campaign will provide local officials, law enforcement and thought leaders with information and training programs to help tackle illegal trade and raise public awareness of the depth of the problem as well as the severe consequences inflicted on states and municipalities by black market profiteers.
The campaign will run through 2021 in eight states facing critical illegal trade issues: Arizona, California, Florida, Illinois, Louisiana, Michigan, Pennsylvania and Texas.
The coalition’s membership is made up of brand enforcement leaders and other organizations, including Levi Strauss & Co., Procter & Gamble Co. and the U.S. Chamber of Commerce.
“Illegal trade is a major problem that fuels serious organized criminal networks and damages our economy. No matter the commodity, these criminals will seize any opportunity to exploit markets and communities to bolster their nefarious activities,” said Martin King, CEO of PMI America. “PMI is pleased to be joined by so many cross-sector partners who are leading the fight against illegal trade and the black market criminals profiting at the expense of Americans’ security.”

Illegal trade is a major problem that fuels serious organized criminal networks and damages our economy.
Martin King, CEO, PMI America
Counterfeit and smuggled goods pose serious threats in many states, according to PMI. “The situation has only been exacerbated by the Covid-19 pandemic, with criminals seizing on opportunities to traffic all types of counterfeit and illegal products, including highly demanded personal protective equipment. Since January 2020, online counterfeited goods have jumped nearly 40 percent,” the company wrote in a press release.
“In today’s hyper-connected world, it’s only through open dialogue, cooperation and the sharing of best practices between parties in the public and private sectors as well as civil society that we can continuously improve and advance efforts against illegal trade and the criminal networks benefiting from it.”
June 9, 2021
U.S. House Votes to Decriminalize Marijuana

Photo: forcal35 from Pixabay
The U.S. House of Representatives approved a bill decriminalizing marijuana at the federal level on Friday.
Dubbed the Marijuana Opportunity Reinvestment and Expungement Act, the bill removes cannabis from the list of federally controlled substances and facilitates canceling low-level federal convictions and arrests related to marijuana.
Among other provisions, the bill calls for an excise tax on cannabis sales and directs the money to be targeted to communities adversely affected by the so-called war on drugs.
The bill specifically adds incentives for minority-owned businesses to help them enter the cannabis market, which has exploded in recent years given the relaxation in controls in some places within the United States.
While the legislation is not expected to pass in the Republican-controlled Senate, marijuana has been gaining acceptance in many jurisdictions.
In a series of ballot initiatives accompanying the recent U.S. presidential election, several states already legalized marijuana. In early December, the United Nations reclassified cannabis as a less dangerous drug.
Further legalization of marijuana could open new opportunities for tobacco farmers faced with declining demand for their crops.
In 2018, U.S. Congress legalized hemp with less than 0.3 percent THC, the psychoactive component in cannabis, in all 50 states. Since then, some tobacco farmers have either shifted to growing hemp or added it to their repertoire as an additional income source. Some major tobacco companies have taken stakes in the cannabis industry in recent years. Altria Group, for example, purchased a stake in Cronos Group, a leading global cannabinoid company, headquartered in Toronto, Canada. Pyxus International, the parent company of leaf tobacco merchant Alliance One International, purchased a 40 percent share in Criticality, an integrated industrial hemp company.
The global industrial hemp market size is expected to reach $15.26 billion by 2027, exhibiting a revenue-based compound annual growth rate (CAGR) of 15.8 percent over the forecast period, according to Grand View Research. Additionally, according to Global Market Insights, the cannabidiol (CBD) market exceeded $2.8 billion in 2019 and is set to grow at around 52.7 percent CAGR between 2020 and 2026, with the global market valuation for CBD crossing $89 billion by 2026.
The opportunities presented by legal marijuana extend also to suppliers of the tobacco industry. For example. German tobacco machinery maker Hauni recently developed equipment or cannabis processing.
December 5, 2020
EU to Impose Tariffs on American Tobacco

Photo USTC
The EU is set to impose new tariffs on American tobacco this week.
In response to a fight over how much aid is given to airplane manufacturers, the EU had indicated about a month ago that it would seek approval from the World Trade Organization for retaliatory tariffs against the United States.
The new tariffs will include a 25 percent tax on American agricultural goods; on that list are “tobacco, nuts and seeds, spirits, sauces, soups and syrups, self-propelled shovel loaders, tractors and proteins,” according to The Wall Street Journal.
The EU is the world’s second-largest importer of U.S. tobacco.
Though the trade war has focused on aviation, American agriculture has been seen by the EU and by China as a particularly vulnerable sector to hit, both for its importance to the American economy and because farmers are generally seen as part of President Donald Trump’s base.
American tobacco farmers are already suffering from tariffs imposed by China as part of an ongoing trade dispute.
EU leaders are reportedly optimistic that President-Elect Joe Biden’s incoming administration will be more amenable to ending the trade wars than the current administration, but with American tariffs on European Airbus planes already in place, the EU felt it had no choice but to institute tariffs of its own.
November 11, 2020
Several U.S. States Legalize Marijuana

Photo: Tobacco Reporter archive
Marijuana has been legalized in New Jersey, Arizona, South Dakota, Mississippi and Montana in a series of ballot initiatives accompanying the U.S. presidential election.
On Nov. 4, 2020, the majority of New Jersey and Arizona residents voted to approve constitutional amendments that would legalize marijuana for people over the age of 21. Since both states already allow marijuana for medical use, the next steps for New Jersey and Arizona would be to establish rules for regulation to implement the new policy and establish permits for vendors. According to a New Jersey analysis, “the cannabis market could generate around $126 million a year” for the state’s economy.
Voters in South Dakota approved marijuana for medical use. South Dakota has a second ballot measure that would legalize recreational marijuana, but on Nov. 10 the votes were still being counted. Mississippi voters approved an initiative to establish a medical marijuana program for patients with debilitating conditions. Voters in Montana voted for two initiatives to legalize, regulate and tax recreational marijuana for adults 21 and older, according to the Great Falls Tribune.
Eleven other states (Washington, Oregon, California, Nevada, Colorado, Michigan, Illinois, Maine, Vermont, Massachusetts and Alaska) and the District of Columbia already allowed legal recreational marijuana use prior to Election Day.
The global industrial hemp market size is expected to reach $15.26 billion by 2027, exhibiting a revenue-based compound annual growth rate (CAGR) of 15.8 percent over the forecast period, according to Grand View Research. Additionally, according to Global Market Insights, the cannabidiol (CBD) market exceeded $2.8 billion in 2019 and is set to grow at around 52.7 percent CAGR between 2020 and 2026, with the global market valuation for CBD crossing $89 billion by 2026.
November 11, 2020
Fewer Young Americans Vaping

Photo: Aliaksandr Barouski – Dreamstime.com
The U.S. Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC) have released new data from the 2020 National Youth Tobacco Survey (NYTS) showing a decline in youth use of e-cigarettes but an increase in use of disposable products.
Compared to 2019, the number of youth using e-cigarettes is down 1.8 million. However, the number of youth using disposable e-cigarettes has risen: 26.5 percent of high school users are using disposables, up from 2.4 percent in 2019, and 15.2 percent of middle school users are using disposables, up from 3 percent last year.
The use of flavored products is also high—more than eight out of 10 surveyed youth reported using flavored products. Fruit, mint, candy and menthol were the most commonly reported.
This is the first year the NYTS has distinguished between mint and menthol. Previously, products were identified in the survey as “mint/menthol.”
“After two years of disturbing increases in youth e-cigarette use, we are encouraged by the overall significant decline reported in 2020,” said FDA Commissioner Stephen Hahn. “This is good news; however, the FDA remains very concerned about the 3.6 million U.S. youth who currently use e-cigarettes and we acknowledge there is work that still needs to be done to curb youth use”
October 27, 2020
BAT-Led Price Hike Hints at Strength U.S. Market

Photo: CarolRobert – Dreamstime.com
British American Tobacco (BAT) announced an average cigarette list price hike of $0.13 per pack, according to Goldman Sachs. The move reflects a price increase of between 2 percent and 3 percent.
According to the investment bank, it is the first time in recent history that BAT and its subsidiary, RAI, have led a price increase in the U.S. The price increase is BAT’s third this year.
Morgan Stanley said BAT’s move underscores the strength of the U.S. cigarette market. “U.S. cigarette fundamentals have been unusually strong throughout 2020, with industry volumes declining 2.5 percent in 2020 year-to-date within measured channels and MO [Altria Group] estimating the industry will decline by 2 percent to 3.5 percent year-on-year in 2020, the best performance since 2016,” the financial firm wrote in an statement.
“Unlike the last several years in which a higher rate of volume declines necessitated greater pricing, we believe manufacturers are being opportunistic in taking pricing this year given the strength of the category. BAT’s pricing decisions may also be influenced by its confidence in its U.S. brand portfolio, fundamentals outside of the U.S., and RRP [reduced-risk products] investments.”
Pricing is a critical driver of revenue and earnings growth in the tobacco industry, particularly as manufacturers realize almost three times the leverage on earnings from a point of pricing than a point of volume, according to Goldman Sachs.
The bank expects other cigarette manufacturers to follow with similar price increases soon.
“We had been expecting a price increase since several of our wholesaler contacts had informed us that they had started loading recently in anticipation of an increase,” the investment bank wrote in a note to investors.
“Given that this price increase is not effective until after 9/28, we expect more loading by the trade (both wholesalers and retailers) in the next couple of weeks, which should have a clear positive impact on Q3 volumes.”
September 15, 2020
Cigarettes Selling Better Than Expected

Photo: Joan Parker from Pixabay
Cigarette sales continue to perform better than expected despite a slight decline in recent weeks.

The U.S. sales volume for traditional cigarettes was down 2.1 percent for the four-week period that ended Aug. 22, according to the latest Nielsen survey of convenience stores. By comparison, the sales volume was down 0.8 percent in a four-week period in May.

The recent decline in cigarette sales is likely linked to a June list price hike by the leading tobacco manufacturers. Philip Morris USA raised its list price by $0.11 a pack for several brands. R.J. Reynolds Tobacco Co. and ITG Brands raised their prices by a similar amount.

Despite the recent acceleration in the contraction of cigarette volumes, the rate of decline is considerably lower than it was last year.

David Sweanor
“The Nielsen data continues to show the decline in cigarette sales moderating to a pace that is only about a quarter of the rate of contraction in the second quarter of last year—before the much-enhanced attacks on vaping,” David Sweanor, an adjunct law professor at the University of Ottawa, was quoted as saying by The Winston-Salem Journal.

“This is fascinating as there is very strong evidence that current tobacco control policies are leading directly to higher rates of smoking than would have otherwise been the case.”

Meanwhile, sales of electronic cigarettes declined 17.4 percent for the four-week period. The category has struggled since the Food and Drug Administration (FDA) tightened regulations on Feb. 6.

The FDA regulations have depressed the demand for closed pod cartridges.

Traditional cigarettes had $60.27 billion in sales at convenience stores over the past 52 weeks, representing 80 percent of all U.S. tobacco sales, according to the Nielsen report.

Moist snuff and chewing tobacco were at $7.59 billion and 10 percent while electronic cigarettes were at $3.72 billion and 5 percent and cigars at $3.63 billion and 5 percent.

When the first round of stay-at-home orders were issued by numerous governors in mid-March to slow the spread of the Covid-19 virus, the sales volume of traditional cigarettes rose 1.1 percent for the week that ended March 22.
September 3, 2020
Eyes on the Ball

Photo: PMI
Even as cigarette dollar sales increase during the Covid-19 pandemic, IQOS expansion remains Altria’s primary focus.
By Timothy S. Donahue
Covid-19 has slowed the traditional decline of U.S. cigarette sales. With less opportunity to spend on travel and entertainment, consumers have had more money to purchase tobacco products, according to Billy Gifford, CEO of Altria Group. Since the start of pandemic lockdowns in mid-March, traditional cigarette sales have increased over the same period last year, breaking a longstanding trend.
During Altria’s second-quarter earnings call, Gifford said that the cigarette category has proved resilient during the pandemic. Based on year-to-date industry volume performance, the largest U.S. cigarette manufacturer has adjusted its estimated 2020 volume decline rate to a range of 2 percent to 3.5 percent, down from its previous estimate of 4 percent to 6 percent. The company also increased its annual dividend by 2.4 percent, saying it had more clarity on the pandemic’s effects on consumer demand. It is the company’s 51st consecutive annual dividend increase.
“Remember, last year, the cigarette category peaked its decline at 6 percent, then it receded to 5.5 percent in the third, and then down to 4.5 percent in the fourth,” Gifford said. “So a little bit tougher comparisons were also included in that forecast. But it’s a fluid environment and it’s something that we’ll continue to monitor.” Altria’s forecast was lower than its prior outlook, which was withdrawn due to the uncertainties around the pandemic’s economic impact.

Advertisement
Cigarette sales have seen a series of ebbs and flows through the first half of 2020. When some U.S. state governors began issuing stay-at-home orders in mid-March, combustible cigarette sales volume rose 1.1 percent for the week that ended March 22, according to Nielsen. Those sales were likely generated by consumer stockpiling, according to Gifford. For the four-week period that ended May 16, Nielsen reported only a 0.2 percent decline in sales volume for traditional cigarettes. Comparatively, sales volumes in 2019 fell 8.8 percent over the previous year (2018) in the four weeks to March 23, according to Nielsen data.
Bonnie Herzog
Bonnie Herzog, managing director at Goldman Sachs, stated in an email that the cigarette category is now holding steady. All channel cigarette dollar sales growth was up 3.1 percent for the two weeks ending on July 25. “Higher pricing more than offset a deceleration in cigarette volume, which was down 2 percent during the same time,” she said.
The pandemic is not the only factor driving increases in cigarette sales. Gifford says restrictions on e-cigarette flavors and the Sept. 9 deadline for premarket tobacco product applications (PMTA) to the U.S. Food and Drug Administration (FDA) have come together to create a perfect storm that is driving vapers back to combustible cigarettes.
Gifford told listeners that Marlboro’s second-quarter retail share for the overall cigarette category was 42.8 percent, down six-tenths versus the year-ago period. In April, Altria reported that older smokers who had switched to e-cigarettes were turning back to traditional cigarettes because of negative news coverage and regulatory crackdowns on vaping.
“As you’ll recall, earlier this year we noted an increase in the number of adult smokers aged 50-plus who moved from the e-vapor category back into cigarettes benefiting volumes from Marlboro and the cigarette category,” he said. “This demographic has a greater tendency to purchase discount brands than younger adult smokers, which increased the discount segment share at the start of the year. We believe the effect of this dynamic will have a lingering impact on Marlboro’s year-over-year retail share comparisons through 2020 … when you think about that, it’s a bit early on to tease out the exact impact from both of those, but that’s something that we’ll continue to monitor as we move forward.”

Altria’s headquarters in Richmond, Virginia, USA
Photo: Altria Group
Looking toward the second half of 2020, Altria has high hopes for its IQOS heat-not-burn device. On July 7, the FDA issued exposure modification orders to IQOS. Gifford said he was pleased with the FDA authorization to market IQOS as a modified-risk tobacco product (MRTP) with a reduced-exposure claim. The FDA’s decision includes the device’s holder and charger as well as Marlboro HeatSticks, Marlboro Smooth Menthol HeatSticks and Marlboro Fresh Menthol HeatSticks.
IQOS is the first next-generation product to receive an MRTP. In a statement, the agency concluded that the available scientific evidence demonstrates that IQOS is expected to benefit the health of the population as a whole, taking into account both users of tobacco products and persons who do not currently use tobacco products.
According to the FDA website, a reduced-risk claim authorization would generally allow a company to say a product is less harmful than combustible cigarettes. However, according to the FDA, the current reduced-exposure claim authorization allows the manufacturer to only state that IQOS heats rather than burns tobacco and significantly reduces the production of harmful and potentially harmful chemicals. The decision follows a review of the extensive scientific evidence package Philip Morris International (PMI) submitted to the FDA in December 2016 to support its MRTP applications.
IQOS is produced by PMI and marketed in the U.S. by Philip Morris USA (PM USA), a subsidiary of Altria Group. Gifford said PM USA is making the necessary preparations to communicate the reduced-exposure claim to adult smokers, which includes developing new marketing assets and submitting them to the FDA in advance of being used.
“We’re looking forward to communicating with adult smokers the additional benefits of switching to IQOS. We’re excited to get back on track with our IQOS rollout and our future expansion plans to accelerate adult smoker conversion,” he said. “As many parts of the country began lifting restrictions in June, PM USA reopened the Atlanta and Richmond IQOS boutiques and just last week launched IQOS in its third lead market by opening a boutique in the SouthPark mall in Charlotte.”

Advertisement
Over the next 18 months, PM USA plans to launch IQOS in four new markets with large adult smoker populations and expand the availability of IQOS devices through retail partnerships, explained Gifford. PM USA also plans to expand its HeatStick distribution to the surrounding geographies in all seven IQOS markets. He said the commercialization approach for IQOS is designed to maximize the organic growth potential of the device by focusing first on the densely populated metro areas and then expanding outward as the user base grows.
“In Charlotte, PM USA launched a more disruptive retail fixture that communicates the benefits of real tobacco, no ash and less odor and expects to begin HeatStick distribution to retail stores in the next few weeks. By the end of August, we expect HeatSticks to be in a total of 700 retail stores across the three lead markets,” he said. “PM USA will continue to leverage its IQOS retail ecosystem, including IQOS mobile, pop-up and kiosk retail formats, which allows for more strategic and agile marketing plans. We’re making several digital enhancements to the IQOS website too.”
The IQOS website now includes virtual tutorials, and a new expert video chat functionality will be available this fall, according to Gifford. These digital enhancements and “the ability to have devices delivered to smokers in lead markets with the proper age verification” will provide smokers with a variety of options to “learn about and access IQOS,” said Gifford, adding that PM USA expects to use its “first-mover advantage” to expand IQOS responsibly.
“Our commercialization strategy is based on the learnings from our IQOS lead markets and PMI’s international results paired with our desire to continue avoiding use by unintended audiences. We believe that a sustained focus on the consumer journey from awareness to conversion is the key to achieving our vision,” Gifford said. “Word of mouth among IQOS users and their fellow adult smokers has been a critical factor to the global success of IQOS.”

Advertisement
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

September 1, 2020