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Manitoba increases tax on cigarettes

Cigarettes Generic Lg_100517With the tabling of it’s most recent budget, Manitoba is increasing  tobacco-related taxes.

The tax on a carton of cigarettes is to rise by $1 on July 1.

The move is designed to help offset the reduction of PST, which was also announced in the new budget, released March 20.

Overall, the Progressive Conservative government plans to keep a tight leash on spending in 2020-2021, as it deals with the COVID-19 crisis and rising healthcare costs.


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Altria CEO Willard steps aside after COVID-19 diagnosis

UnknownAltria Group Inc.’s chief executive is handing the reigns to the company’s chief operating officer (CFO) after contracting COVID-19.

According to a filing with the U.S. Securities & Exchange Commission, Altria chairman and CEO Howard Willard is taking a temporary leave of absence after receiving the confirmation. In connection with his leave of absence, the company’s board of directors tapped vice chairman and CFO Billy Gifford to take over Willard’s authority and responsibilities until the CEO returns.

Gifford has served in his roles since May 2018. He has been with Altria and its subsidiaries since 1994.

Altria is also temporarily hitting the pause button on operations at its Philip Morris USA’s (PM USA) Manufacturing Center in Richmond. The company made the move “out of an abundance of caution” after a second PM USA employee tested positive for COVID-19.

The company expects work at the manufacturing center to take a two-week break, although PM USA will continue to monitor the evolving situation.

According to Altria, PM USA has actively implemented business continuity plans and believes it has sufficient finished goods cigarette inventory for approximately two months based on current estimated shipping volume, in addition to current wholesale and retail inventories.

Separately, some John Middleton Co. domestic operations will also be suspended for two weeks due to COVID-19 related supply chain constraints. Middleton believes it has sufficient finished goods cigar inventory for approximately three months based on current estimated shipping volume, in addition to current wholesale and retail inventories.

PM USA and Middleton are wholly owned subsidiaries of Richmond-based Altria.

“We are committed to protecting the safety and well-being of our employees, contractors, their families and the communities where we operate,” Gifford said. “We take the threat of COVID-19 seriously and have been actively implementing plans to minimize business disruptions and their potential impact to our employees, consumers and customers.”

During this temporary two-week suspension of plant operations, PM USA and Middleton will pay employees their regular base wages. PM USA and Middleton will evaluate providing additional pay continuation beyond that timeframe as needed, Altria said.

Altria continues to follow updates from public health authorities and implementing CDC-recommended precautions including travel restrictions, remote working, and social distancing.

Originally published at Convenience Store News. 


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Altria charts path for non-combustible future

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Altria CEO Howard Willard

As cigarette volumes continue to decline, Altria Group Inc. continues its move toward a noncombustible future.

The Richmond, Va.-based tobacco leader’s path forward comes as the industry overall places a stronger focus on harm reduction, with other tobacco products like oral nicotine pouches, vapor products and heat-not-burn tobacco products in the spotlight.

“We believe the foundation for tobacco harm reduction in the U.S. is firmly set. Adult tobacco consumers are increasingly seeking alternatives to combustible products, and we have a federal regulatory framework that has established pathways to bring new tobacco products to market and communicate about their relative risks,” said Altria Group chairman and CEO Howard Willard.

“We recognize the importance of this opportunity and over the next 10 years, our vision is to responsibly lead the transition of adult smokers to a noncombustible future,” he added.

According to the chief executive, Altria will implement several strategies to make that vision a reality. This includes:

  • Leading the industry in operating responsibly and preventing underage use of adult products;
  • Developing and expanding its portfolio of noncombustible products authorized by the Food and Drug Administration (FDA) and actively converting adult smokers to them;
  • Maximizing the profitability of its combustible products, while appropriately balancing investments in its Marlboro brand and funding the growth of its noncombustible portfolio; and
  • Seizing leadership in the external environment through communications, engagement, science-based policy and regulatory solutions.

Willard’s comments came during Altria’s presentation at the Consumer Analyst Group of New York conference, held in Boca Raton on Feb. 19.

“We believe adult smokers are looking for alternatives to cigarettes beyond just the e-vapor category. While many adult smokers have used e-vapor products to transition away from cigarettes, third-party research indicates that approximately 40 percent of current U.S. adult smokers have tried, but ultimately rejected e-vapor products,” Willard noted.

“When you combine this data with the current challenges in the e-vapor market, we believe this is the opportune time to expand IQOS and on!,” he explained. “We believe that these products could be satisfying alternatives for adult smokers who have rejected e-vapor, and we’re excited about our commercialization plans for these brands.”

Altria’s wholly owned subsidiaries include Philip Morris USA Inc., U.S. Smokeless Tobacco Co. LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Ste. Michelle Wine Estates Ltd. and Philip Morris Capital Corp.

Altria also owns an 80% interest in Helix Innovations LLC, and holds equity investments in Anheuser-Busch InBev SA/NV, JUUL Labs Inc., and Cronos Group Inc.

Originally published by Convenience Store News.


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Judge extends order suspending legal proceedings against three tobacco companies

Ccentral_eNews_tobaccoAn Ontario court has extended an order suspending legal proceedings against three major tobacco companies as they try to negotiate a settlement with their creditors.

Ontario Superior Court Justice Thomas McEwen told a Toronto court this morning there would be “no prejudice to any stakeholder” from extending the stay to Sept. 30.

The extension was requested by the companies – JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. – and was not opposed by any of the parties. The stay was previously set to expire March 2020.

A lawyer for Imperial Tobacco said the longer timeline is necessary for the mediation efforts to progress, and noted “significant developments” have already taken place.

The order to suspend legal proceedings against the three tobacco giants was first granted nearly a year ago after the companies lost an appeal in a landmark class-action lawsuit in Quebec.

The stay is meant to preserve the status quo while the companies work out a global settlement with the class-action members and several other creditors, including a number of provincial governments seeking to recover smoking-related health-care costs.

A lawyer representing the Quebec plaintiffs said that while they consented to the extension, “the urgency has not abated” when it comes to reaching a settlement.

“People are continuing to die at an alarming rate,” as a result of smoking-related health issues, Mark Meland said.

He said a deal should be ready the next time the case comes before the court. “We believe that a resolution can be achieved well before Sept. 30,” he said.

Rob Cunningham, who represents the Canadian Cancer Society, raised concerns outside court over the secrecy surrounding the mediation process. The talks are confidential and the organization was not given permission to participate in them.

Cunningham said there is currently no way to know whether public health concerns are being discussed as part of the settlement.

“What are the measures there to prevent the tobacco industry in the future from repeating the wrongful behaviour of the past?” he said. “There needs to be effective mechanisms to prevent the wrongful activities of tobacco companies that have been very damaging for public health. And so that’s essential as part of any settlement agreement.”


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Nova Scotia to regulate nicotine levels in e cigarettes in proposed legislation

shutterstock_766102951Proposed legislative changes in Nova Scotia would give the province regulatory authority over the nicotine content of tobacco and electronic cigarettes.

Health Minister Randy Delorey says the move is aimed at protecting youth from potentially hazardous nicotine levels and builds on a ban he announced on flavoured vaping products in December.

Nova Scotia was the first province in Canada to ban flavours, and Delorey says the details of the nicotine regulations will be established at a later date.

Delorey says another change would broaden the definition of tobacco to include types of tobacco-free nicotine products.

Nova Scotia’s ban on flavoured e-cigarettes takes effect April 1.

Under Nova Scotia’s current law, vaping products cannot be sold to anyone under 19.

In Tuesday’s spring budget, the province’s Liberal government said that as of Sept. 15, it will tax vaping liquids at about 50 cents per millilitre and 20% of the retail value of all vaping devices. The annual take is expected to be about $4.3 million.

Many typical vaping devices hold slightly less than a millilitre of fuel, meaning the tax on a package of four would total about $1.50.

 


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Marlboro maker slammed by Juul investment, takes $4B charge

Unknown-1The company that makes Marlboro cigarettes saw in late 2018 the opportunity to offset declining tobacco sales with a $13 billion investment in Juul, the e-cigarette maker.

That investment has come at a tremendous cost, the latest a $4.1 billion hit announced Thursday by Altria as legal cases against the company continue to mount. That follows a $4.5 billion writedown in October, when Altria slashed the value of its investment in Juul Labs by a third.

Since October, the company said the number of legal cases against Juul have spiked 80%. A wave of vaping illnesses and deaths have raised concerns about the products. The outbreak of vaping-related lung injuries continues, but new cases are on the decline.

More than 2,500 cases of vaping illness have been reported by all 50 states. There have been 54 deaths and more deaths are under investigation.

Tobacco companies like Philip Morris International are attempting to develop new technologies that could serve as an alternative to traditional tobacco use.

Smoking has been declining for more than five decades. Some 42% of U.S. adults smoked in the early 1960s. That was down to 14% in the latest report from the Centers for Disease Control and Prevention.

Efforts to capitalize on new technologies such as e-cigarettes is crucial for for companies like Altria, which took a 35% stake in Juul at the end of 2018. But few saw the risks involved.

The Richmond, Virginia, company on Thursday reported that it had swung to a loss in the fourth quarter from the associated costs, citing burgeoning legal cases that it expects to grow.

It also announced revised terms for its investment in Juul. Juul will restructure its board to include two directors designated by Altria, three independent directors, the Juul CEO and three directors designated by Juul stockholders other than Altria. The board restructuring will take place once Juul receives antitrust clearance from the Federal Trade Commission. Juul will add a nominating committee and a litigation oversight committee to its existing compensation and audit committees once it receives antitrust clearance.

Altria Group Inc. now expects no earnings contributions from Juul through 2022, and it’s lowering its adjusted earnings growth forecast for 2020 through 2022 to between 4% and 7%. It previously had forecast 5% to 8% growth.

For 2020, Altria anticipates adjusted earnings of $4.39 to $4.51 per share. Analysts polled by FactSet predict $4.45 per share.

Shares fell slightly before the market opened.

 


The OCSA shares 9 tips to help c-store adjust to plain packaging

cigarette-1642232_1920-1024x783By now many convenience stores will have started to receive some of their higher volume cigarettes and tobacco products in the new plain packaging. These have arrived while much of the previous stock remains on the shelf, causing confusion.

Retailers have until February 7, 2020 to sell through their slower moving coloured products and the following checklist will assist you in identifying product lineups and new requirements as you reconfigured your tobacco section to ensure speed of service, staff awareness and ease of reordering going forward.

This transition will not be easy as you will have an array of sales people from all the various tobacco companies coaching or influencing you to favour their concepts. Some easy ideas for all retailers to follow can be:

1) train staff as new products arrive in the areas of placement for ease of service.

2) sell through all coloured packaging first and rotate the plain in behind.

3) explain to your customers the change while assuring them that the colours are as fresh as the plain (ask for patience)

4) decide on the best set up for your tobacco section (ie. alphabetical or dedicated flaps for each major product) and minimize the influences to continually change the shelf by tobacco reps.

5) track your sales/inventory closely. This is a good time to re-evaluate which products are most popular as many consumers may move to the cheaper products on the shelf when there is no difference in packaging.

6) ensure you have reviewed your security needs and procedures for the handling of plain packaging from receiving an order, inventory counts and replenishment through proper rotation.

7) work with your local tobacco representatives on product returns and product issues and swap out slower formats as you define the shelves.

8) be patient as this will be somewhat of an operational frustration of the business and spend time with employees to insure they have an understanding of this change

9) be mindful of underground sellers and don’t be influenced to purchase coloured packaging from anyone or compromise your tobacco business with anyone.

Originally published by the Ontario Convenience Stores Association


U.S. endorses tobacco pouches as less risky than cigarettes

For the first time, U.S. health regulators have judged a type of smokeless tobacco to be less harmful than cigarettes, a decision that could open the door to other less risky options for smokers.

The milestone announcement last month makes Swedish Match tobacco pouches the first so-called reduced-risk tobacco product ever sanctioned by the Food and Drug Administration.

FDA regulators stressed that their decision does not mean the pouches are safe, just less harmful, and that all tobacco products pose risks. The pouches will still bear mandatory government warnings that they can cause mouth cancer, gum disease and tooth loss.

But the company will be able to advertise its tobacco pouches as posing a lower risk of lung cancer, bronchitis, heart disease and other diseases than cigarettes.

The pouches of ground tobacco, called snus—Swedish for snuff and pronounced “snoose”—have been popular in Scandinavian countries for decades but are a tiny part of the U.S. tobacco market.

Users stick the teabag-like pouches between their cheek and gum to absorb nicotine. Unlike regular chewing tobacco, the liquid from snus is generally swallowed, rather than spit out. Chewing tobacco is fermented; snus goes through a steamed pasteurization process.

FDA acting commissioner Ned Sharpless said the agency based its decision on long-term, population-level data showing lower levels of lung cancer, emphysema and other smoking-related disease with the use of snus.

Sharpless added that the agency will closely monitor Swedish Match’s marketing efforts to ensure they target adult tobacco users.

“Anyone who does not currently use tobacco products, especially youth, should refrain from doing so,” he said in a statement.

Stockholm-based Swedish Match sells its snus under the brand name, General, in mint, wintergreen and other flavours. They compete against pouches from rivals Altria and R.J. Reynolds. But pouches account for just 5% of the $9.1 billion-dollar U.S. market for chew and other smokeless tobaccoproducts, according to Euromonitor market research firm.

And public health experts questioned whether U.S. smokers would be willing to switch to the niche product.

“Snus products have a bit of a challenge” among smokers who are used to inhaling their nicotine, said Vaughan Rees, director of Harvard University’s Center for Global Tobacco Control.

The U.S. smoking rate has fallen to an all-time low of 14% of adults, or roughly 34 million Americans. But smoking remains the leading cause of preventable disease and death in the U.S., responsible for some 480,000 deaths annually.

The FDA’s decision has been closely watched by both public health experts and tobacco companies.

Public health experts have long hoped that alternatives like the pouches could benefit Americans who are unable or unwilling to quit cigarettes and other traditional tobacco products. Tobacco companies are looking for new products to sell as they face declining cigarette demand due to tax increases, health concerns, smoking bans and social stigma.

The FDA itself also has much at stake in the review of snus and similar tobacco alternatives.

Congress gave the FDA the power to regulate key aspects of the tobacco industry in 2009, including designating new tobacco products as “modified risk,” compared with traditional cigarettes, chew and other products.

But until now, the FDA had never granted permission for any company to make such claims for its products.

The FDA is reviewing several other products vying for “reduced risk” status, including a heat-not-burn cigarette alternative made by Philip Morris International. While electronic cigarettes are generally considered less harmful than the tobacco-and-paper variety, they have not been scientifically reviewed as posing a lower risk.


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Plain cigarette packs to hit shelves as ‘best in the world’ regulations kick in

Screen Shot 2019-11-01 at 10.35.38 AMSmokers will soon see their cigarette packs stripped of logos and distinctive designs as federal rules make drab brown the default colour for tobacco brands.

Plain-packaged cigarettes have started to pop up on shelves as the tobacco industry prepares for Health Canada’s regulations to take effect on Nov. 9, after which retailers will have a 90-day window to offload their remaining inventory.

All packaging will feature the same brown base colour, basic grey text and minimalist layout under the new requirements. The measures will also standardize the size and appearance of cigarettes, cigars and other products inside the packages.

Health experts and advocates say the policy positions Canada at the forefront of a global push to curb the appeal of cigarette brands, particularly among youth, and eliminate packages as pocket-sized promotions for Big Tobacco.

Rob Cunningham, a senior policy analyst at the Canadian Cancer Society, lauded Canada’s plain-packaging regulations as “the best in the world,” having learned from the examples of at least 13 other countries that have adopted similar measures.

Cunningham adds that Canada is leading the charge in eliminating extra-long and “slim” cigarettes, which tend to be marketed to women.

In 2021, slide-and-shell packages will become mandatory in Canada, providing a wider surface area that will display the largest health warnings in the world, he said.

“This measure is going to have an important difference, especially over time,” said Cunningham. “We will have kids who will grow up not exposed to branded packages.”

As regulators have cracked down on many forms of tobacco advertising, packages have become powerful branding tools to appeal to consumers, said University of Waterloo psychology professor Geoffrey Fong.

“The package designs (are) really amazingly glitzy and very attractive, especially to kids,” said Fong, the founder and chief principal investigator of the International Tobacco Control Policy Evaluation Project.

“What we’ve found is that plain packaging has tremendous effects on reducing the appeal of these deadly products.”

Fong said cigarette packages are designed to deceive consumers into thinking some brands are less harmful than others. For example, he said, studies indicate that cigarette packages with light colours and white space are perceived to have lower health risks than dark-toned products.

Fong said there’s evidence suggesting that plain packaging reduces these misconceptions, while making health warnings more salient by eliminating eye-catching distractions.

In his own research, Fong found that less than 29 per cent of Canadian smokers were in favour of plain packaging – a lower level of support than any other “endgame” tobacco measure tested in the 2016 survey.

He interprets this result not as opposition to the policy, but uncertainty about what it will entail, projecting that approval will rise as smokers acclimate to the new norm.

Tobacco manufacturers expect there will be a learning curve as consumers adjust to the new look, and in some cases, new names of their preferred brands.

For example, Belmont Silver will be known as Belmont Select under the new rules for brand names prohibiting references to colours or filter characteristics.

Jeff Gaulin, director of external affairs at Rothmans, Benson & Hedges, said the company has been working to ensure that retailers are aware of the changes by updating the names in its ordering system months in advance, as well as setting up a website for consumers to find out what products will be affected.

“I think things will go pretty smoothly,” said Gaulin. “That said, there will still be some hiccups… There may be shortages, but if there are, I think they’ll be very, very minimal.”

While he said Rothmans, Benson & Hedges doesn’t oppose plain packaging for conventional cigarettes, Imperial Tobacco Canada objects to the policy on several fronts, said head of regulatory affairs Eric Gagnon.

“You’re changing the entire supply chain,” said Gagnon. “It’s not like you just turn a key on and off. You need to change all your artwork, all your equipment, retool all your machines, so obviously, it’s very costly and a very complex operation.”

Gagnon contends that plain packaging doesn’t work and boosts the illicit sale of tobacco products.

Other industry members have mounted similar criticisms, which the World Health Organization has described as “baseless” and “not supported by the evidence.”

Gagnon declined to comment on whether Imperial Tobacco is considering challenging the regulations in court, but Cunningham of the Canadian Cancer Society notes that tobacco companies have been fighting plain packaging in Canada since public-health officials first put forward proposals in 1994.

In the 25 years since, Cunningham said efforts have been bolstered by a growing body of evidence suggesting these policies have had an impact in other countries, and Canada may be next.

“All of these countries wouldn’t be doing this in the face of strong opposition from the tobacco industry if it wouldn’t work,” he said. “It’s a highly effective measure, and that’s why they’ve opposed it for so long, and that’s why we place great emphasis on it.”


Stay of legal proceedings for tobacco companies extended to mid March

An order suspending legal proceedings against three major tobacco companies has been extended until mid-March.

Ontario Superior Court Justice Thomas McEwen agreed to again renew the stay on Wednesday but said he would wait until the next day to set an end date, and release his reasons later.

The order was first granted in March after the companies – JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. – lost an appeal in a multibillion-dollar class-action lawsuit in Quebec.

The stay is meant to maintain the status quo as the companies negotiate a global settlement with their creditors, including the class-action members and several provincial governments seeking to recover smoking-related health-care costs.

The companies told the court they needed a five-month extension so they can continue to operate while they work towards a settlement.

Lawyers representing the Quebec claimants, however, said the stay should only stretch to mid-January so the companies will be motivated to present a proposal.

Mark Meland said Wednesday the companies are no closer to making a settlement offer than they were in March, and it’s not enough to simply take part in mediation.

The companies obtained the stay as part of the creditor protection process after Quebec’s highest court upheld a landmark ruling that ordered them to pay billions in compensation to smokers in two class-action lawsuits.

McEwen also ruled Thursday a motion by the Canadian Cancer Society, which sought to participate in the court case and mediation despite not being one of the companies’ creditors.

The judge said the organization could take part in the court case but not in the mediation. His reasons for that decision will also be released at a later date.