Tag: United States

Opportunity missed
US Congressional leaders reached a budget compromise on an omnibus revenue bill that allowed them to avoid a government shutdown but excluded language that would have changed the predicate date applying to Food and Drug Administration regulation of vapor products, according to the Reason Foundation.
‘Democratic leadership identified the change to the predicate date for vapor products as a “poison pill” and vowed to oppose any budget deal and force a government shutdown if the provision was included, said the foundation’s Nicotine, Vapor and Harm Reduction Newsletter.
‘On May 3, the FDA announced that it will defer enforcement of all future compliance deadlines under the rules published in May 2016 affecting e-cigarettes and cigars by three months. The communication from the Center for Tobacco Products specifically stated the following: “This extension will allow new leadership at the FDA and the Department of Health and Human Services additional time to more fully consider issues raised by the final rule that are now the subject of multiple lawsuits in federal court”.’
Meanwhile, The Heartland Institute said that when Congress passed the $1.1 trillion omnibus spending bill, ‘notably absent was the Cole-Bishop amendment, which would have reversed a terrible regulatory decision by the Food and Drug Administration’.
‘In May 2016, the FDA’s “deeming regulations” required all e-cigarette products brought to market since February 2007 to apply for approval by the federal government,’ it said in a press note. ‘The rule, though being phased in over three years, essentially makes every vaping product in America illegal until manufacturers get government approval for every product – which would cost manufacturers more than $300,000 per product.
‘The amendment by Reps. Tom Cole (R-OK) and Sanford Bishop (D-GA) – long-expected to be a part of the budget bill – would have amended the deeming regulations to apply only to e-cigarette products introduced after the “predicate date” of the rule (2016), not retroactively to 2007.’
May 8, 2017
Farm worker abuses alleged
Leaders of the Farm Labor Organizing Committee (FLOC) reportedly challenged British American Tobacco during its Annual General Meeting (AGM) in London last week over what FLOC described as human rights abuses on BAT contract farms.
In a note on its website, FLOC said that BAT, which was planning to pay US$49 billion to acquire the rest of Reynolds American, was asked about its failure ‘to be transparent and take concrete action despite numerous reports detailing human rights abuses’ on its contract farms.
This year was said to have marked the seventh year that FLOC had attended the shareholders meeting.
‘During the 2014 AGM, BAT chairman Richard Burrows claimed that there were no labor or human rights violations in the BAT supply chain,’ the note said.
‘Since then, independent research groups including SwedWatch and Human Rights Watch have published reports detailing serious human rights abuses on BAT contract farms in Bangladesh and Indonesia respectively, echoing what FLOC has been reporting for years from the fields of North Carolina.
‘In BAT’s own corporate audit report, they admitted instances of worker death by heat stroke, workers being sprayed by pesticides, and poor housing conditions, among other issues.’
After the meeting, FLOC leaders were said to have met directly with BAT executives to discuss the issues and ‘real solutions’ in more depth.
But FLOC said that while BAT had stated that it had wanted to work with FLOC to resolve issues in the BAT supply chain, human rights violations would continue until BAT agreed ‘to guarantee freedom of association and implement a practical mechanism that allows farmworkers to denounce abuses and act as their own auditors!’
The note is at: http://www.floc.com/wordpress/floc-speaks-out-against-abuses-in-bat-supply-chain/
May 5, 2017
RAI declares dividend
The board of directors of Reynolds American Inc. yesterday declared a quarterly cash dividend on the company’s common stock of $0.51 per share.
The dividend will be payable on July 3, to shareholders of record on June 12.
In declaring the dividend, RAI said it was the 52nd consecutive quarterly cash dividend since RAI had become a public company on July 30, 2004.
In addition, the board elected Susan M. Cameron non-executive chairman, effective as of May 1.
Cameron has served as executive chairman since January 1, after retiring as RAI’s president and CEO.
May 5, 2017
RAI’s cigarette volume down
Reynolds American Inc’s cigarette volume during the first quarter to the end of March, at 19.2 billion was down by 4.4 percent on that of the first quarter of last year, 20.1 billion.
Within the total RAI volume, RJR Tobacco’s cigarette volume fell by 5.0 percent from 18.8 billion to 17.9 billion, with drive brand volume down by 4.5 percent from 17.4 billion to 16.6 billion, and ‘other’ brand volume down by 11.5 percent from 1.4 billion to 1.3 billion.
Drive-brand volume included Newport’s 7.9 billion, down by 2.9 percent from 8.1 billion; Camel’s 4.5 billion, down by 6.0 percent from 4.8 billion; and Pall Mall’s 4.3 billion, down by 5.7 percent from 4.5 billion.
Also within the total RAI volume, Santa Fe’s cigarette volume, comprising sales of Natural American Spirit, were increased by 5.4 percent from 1.2 billion to 1.3 billion.
The cigarette market share of RAI’s operating companies during the quarter to the end of March, at 34.5 percent, was down by 0.1 of a percentage point on that of the first quarter of 2016.
Newport’s share of the market was increased by 0.1 of a percentage point from 14.0 percent to 14.1 percent. Camel’s share was unchanged at 8.2 percent, while Pall Mall’s share dropped 0.2 of a percentage point to 7.7 percent.
Natural American Spirit’s share increased by 0.2 of a percentage point to 2.3 percent.
RAI announced also results for American Snuff, where moist snuff volume during the three months to the end of March, at 126.7 million cans, was increased by 4.4 percent on that of the first three months of last year, 121.4 million cans.
Sales of Grizzly were increased by 4.5 percent from 111.3 million to 116.3 million cans, while sales of other brands were up by 3.6 percent from 10.0 million to 10.4 million cans.
American Snuff’s share of the retail market was up by 1.0 percentage point to 34.5 percent, with Grizzly’s share up by 1.0 percentage point to 31.8 percent and ‘other’ brands’ share unchanged at 2.6 percent.
RAI’s reported operating income during the first quarter of 2017, at $1,326 million, was down by 78.4 percent on that of the first quarter of last year, $6,142 million, while adjusted operating income was increased by 2.0 percent to $1,346 million.
Reported net income was down by 78.1 percent to $780 million, while adjusted net income was up by 10.3 percent to $795 million.
Reported net income per diluted share was down by 77.9 percent to $0.55, while adjusted net income per diluted share was increased by 12.0 percent to $0.56.
“Reynolds American has made a strong start to the year, marked by a double-digit increase in first quarter adjusted earnings, MRTP [modified risk tobacco product] application submissions to the FDA for Camel Snus and continued progress in leading the US vapor category,” said Debra A. Crew, president and CEO of RAI, in commenting on the first-quarter results.
“Our operating companies delivered solid performance behind their drive-brand portfolio during the quarter, and they have great strategies in place to continue this positive momentum in the year ahead…
“R.J. Reynolds Vapor Company’s … expansion of VUSE VIBE, a high-volume cartridge and closed-tank system with a rechargeable battery, has progressed very well and VIBE is now available in more than 30,000 retail outlets in the US. The VUSE family of vapor products is the clear US market leader, and has been instrumental in RJR Vapor’s ongoing mission to redefine the vapor category.”
RAI said that it expected the proposed acquisition of RAI by BAT, RAI’s largest shareholder, to close during the third quarter of 2017, subject to shareholder and other approvals and customary closing conditions.
May 4, 2017
PM USA’s volume down
PM USA’s domestic cigarette shipment volume during the three months to the end of March, at 28,727 million, was down by 2.7 percent on that of the first quarter of 2016, 29,539 million.
In reporting its first-quarter results, Altria – of which PM USA is its cigarette division – said that the fall in cigarette shipments was driven primarily by the industry’s rate of decline, partially offset by trade inventory movements. ‘When adjusted for trade inventory movements and other factors, PM USA estimates that its domestic cigarettes shipment volume decreased by approximately three percent, in line with its estimate for total industry cigarette volumes,’ Altria said.
Within PM USA’s total shipments, Marlboro volume was down by 2.6 percent to 24,695 million, while the volume of the company’s other premium brands fell by 4.2 percent to 1,450 million. Sales of discount brands fell by 3.1 percent to 2,582 million.
PM USA’s cigarette market share during the three months to the end of March, at 51.0 percent, was down by 0.1 of a percentage point on that of the first quarter of 2016.
Marlboro’s share fell by 0.2 of a percentage point to 43.6 percent, while the share of the company’s other premium brands fell by 0.1 of a percentage point to 2.7 percent. The share of PM USA’s discount brands increased by 0.2 of a percentage point to 4.7 per cent.
Altria’s first quarter results, reported yesterday, included also those of Middleton and USSTC.
Middleton’s domestic cigar shipment volume during the three months to the end of March, at 367 million, was up by 12.2 percent on that of the first quarter of 2016, 327 million. Shipment volume of the company’s Black & Mild brand was increased by 14.5 percent to 363 million, while that of its other brands fell from 10 million to four million.
USSTC’s domestic market shipment volume of smokeless products during the three months to the end of March, at 198.5 million cans and packs, was down by 5.0 percent on that of the first quarter of 2016, 206.1 million.
Copenhagen’s shipment volume fell by 0.2 percent to 124.5 million, and Skoal’s volume was down by 13.8 percent to 55.6 million. The shipment volume of other brands fell by 6.5 percent to 15.7 million.
The decrease in smokeless volumes was said to have been caused primarily by a voluntary recall of some of USSTC’s products. The company estimated that, overall, the smokeless product category volume grew by about two percent during the past six months.
USSTC’s retail market share during the three months to the end of March, at 53.5 percent, was down by 0.7 of a percentage point from that of the first quarter of 2016.
Copenhagen’s market share increased by 1.2 percentage points to 33.0 percent, while Skoal’s share fell by 1.6 percentage points to 17.3 percent. Other brands’ market share fell by 0.3 of a percentage point to 3.2 percent.
In announcing the results, Marty Barrington, Altria’s chairman, CEO and president, said that Altria was off to a solid start in 2017, despite some short-term headwinds.
“We grew first-quarter adjusted diluted earnings per share by 1.4 percent against a difficult comparison in the year-ago quarter when we grew adjusted diluted EPS more than 14 percent,” he said.
“The smokeable products segment continued to generate strong results, which offset lower equity earnings from our beer investment and the effect of the voluntary product recall in the smokeless products segment.
“Our business fundamentals remain strong and we believe we are well-positioned for the rest of the year.
“Thus, we are reaffirming our 2017 full-year adjusted diluted EPS growth guidance of 7.5 percent to 9.5 percent. We continue to expect adjusted diluted EPS growth to be weighted to the second half.”
May 3, 2017
High nicotine strategy
The 22nd Century Group said yesterday that the US Food and Drug Administration had granted it authorization to conduct a clinical trial on its Brand B low tar-to-nicotine ratio cigarettes.
In a press note, the company, which has recently been promoting its low-nicotine cigarettes as potential harm reduction tools, said the trial was ‘designed to confirm that as smokers make the adjustment to a higher nicotine cigarette, they take in less smoke because the nicotine is more readily available’.
‘According to the Centers for Disease Control and Prevention …, 32 percent of smokers (nearly 12 million) do not wish to quit smoking,’ the company said. ‘For these smokers, 22nd Century is developing its Brand B low tar-to-nicotine ratio cigarettes as a reduced exposure product candidate.
‘The Company intends to submit a Modified Risk Tobacco Product (MRTP) application to the FDA for Brand B.
‘Independent surveys have shown that even though 30-50 percent of American smokers are not committed to quitting, 90 percent of these smokers would be willing to try a potentially reduced exposure tobacco product. For this reason, 22nd Century believes the company’s proprietary Brand B product has enormous market potential.
“Our initial clinical trial investigating the effects of Brand B’s design-objective – the reduced delivery of smoke components, other than nicotine – is a measurable step forward in the development of our company’s mission,” Dr. Michael Moynihan, vice president of Research & Development, was quoted as saying.
May 2, 2017
US vapor bill introduced
Duncan Hunter, a member of the US House of Representatives, has introduced the Cigarette Smoking Reduction and Electronic Vapor Alternatives Act that, if passed, would amend the Food and Drug Administration’s deeming regulations by separating vapor products from tobacco products, according to a story in the San Diego Union-Tribune relayed by the TMA.
In addition, the act would formally incorporate the concept of ‘harm reduction’ into the FDA’s mission by requiring the agency to support nicotine-delivery products.
And while the FDA would still have regulatory authority over the industry, provisions such as pre-market tobacco applications, modified risk assessments and qualification systems would be replaced with the American E-Liquid Manufacturing Standards Association requirements.
Hunter was quoted as saying that by introducing these standards the bill would make vaping safer. He said that under the proposals e-liquids, atomizers and coils would all have standards.
The vapor industry has argued that the current FDA certifications would cost hundreds of thousands of dollars per individual product, putting small and medium-sized vaping companies out of business.
Gregory Conley, president of the American Vaping Association, said that though he liked the bill’s intent, the Cole-Bishop amendment, which would exempt nearly all existing vaping products from the FDA’s deeming rules, was a better option.
May 2, 2017
PMI to webcast meeting
Philip Morris International is due to host a live audio webcast of its 2017 annual meeting of shareholders at www.pmi.com/2017annualmeeting from 09.00 Eastern Time on May 3.
During the meeting, Louis C. Camilleri, chairman of the board, will address shareholders and answer questions.
André Calantzopoulos, CEO, will give the business presentation.
The audio webcast, which will be in listen-only mode, may be accessed also on iOS or Android devices by downloading PMI’s free Investor Relations Mobile Application at www.pmi.com/irapp.
An archived copy of the webcast will be available until 17.00 on June 1 at www.pmi.com/2017annualmeeting, where the presentation slides and script also will be available.
April 27, 2017
Sacking veiled in vapor
Photo by tedeytan
The US Surgeon General Vivek Murthy has been fired by President Donald Trump’s administration, according to a story in The Hill.
In a statement, the Department of Health and Human Services said Murthy, who was appointed by President Barack Obama’s administration in 2014, had been asked to resign, and that he would be replaced temporarily by Rear Admiral Sylvia Trent-Adams, the current deputy Surgeon General.
‘Today [Friday, April 21], Dr. Murthy, the leader of the US Public Health Service Commissioned Corps, was asked to resign from his duties as Surgeon General after assisting in a smooth transition into the new Trump Administration,’ the statement said.
‘Dr. Murthy has been relieved of his duties as Surgeon General and will continue to serve as a member of the Commissioned Corps.’
The statement said that Health and Human Services Secretary Tom Price “thanks him for his dedicated service to the nation”.
Citing a New York Times story, The Hill reported that Murthy’s sudden departure had surprised employees at HHS.
The Hill pointed out, however, that Murthy had called gun violence a health threat to the US, which had won him opposition from the National Rifle Association.
Elsewhere, press reports speculated that his sacking might have been in part prompted by his support for vaccinations, and/or for his opposition to electronic cigarettes.
April 24, 2017
Tax at root of cigarette smuggling
Photo by Got Credit
Cigarettes that are smuggled into New York, US, account for about 57 percent of the state’s consumption, according to a piece by Joseph Henchman and Scott Drenkard published on the Tax Foundation website and citing a report by the Mackinac Center for Public Policy.
Henchman and Drenkard list the key findings as:
- Large differentials in cigarette taxes across states create incentives for black market sales.
- Smuggled cigarettes make up substantial portions of cigarette consumption in many states, and greater than 25 percent of consumption in twelve states.
- The highest inbound cigarette smuggling rates are in New York (56.9 percent), Arizona (51.5 percent), New Mexico (48.1 percent), Washington (48 percent), and Wisconsin (34.6 percent).
- The highest outbound smuggling rates are in New Hampshire (24.2 percent), Wyoming (22.3 percent), Idaho (21.3 percent), Virginia (21.1 percent), and Delaware (20.9 percent).
- Cigarette tax rates increased in 30 states and the District of Columbia between 2006 and 2012.
The authors say that policy responses have included banning common carrier delivery of cigarettes, greater law enforcement activity on interstate roads, differential tax rates near low-tax jurisdictions, and cracking down on tribal reservations that sell tax-free cigarettes.
However, they say, the underlying problem remains: high cigarette taxes that amount to a ‘price prohibition’ of the product in many US states.
The Tax Foundation piece is at: https://taxfoundation.org/cigarette-taxes-and-cigarette-smuggling-state/
The Tax Foundation report can be downloaded at: https://files.taxfoundation.org/legacy/docs/FF421.pdf.
April 21, 2017