Thee market-share gap between the top-selling U.S. electronic cigarettes remained unchanged with both having a slight decline in the latest Nielsen analysis of convenience store data. The report covers the four-week period ending Dec. 18, according to the Winston-Salem Journal.
Nielsen determined No. 1 Juul was at 37.6 percent, down from 38.2 percent in the previous report.
Meanwhile, the Vuse brand of R.J. Reynolds Vapor Co. had a 33.5 percent market share, down from 34 percent in the previous report. NJoy was at 3 percent, unchanged from the previous report, while Fontem Ventures’ blu eCigs was at 2.3 percent, down from 2.4 percent.
Overall, sales of electronic cigarettes were up 4.8 percent year over year for the latest four-week period, boosted by recent price hikes. Still, e-cigarette 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 foremost required manufacturers of cartridge-based e-cigarettes, such as Juul Labs Inc., Reynolds Vapor, NJoy and Fontem, to stop making, distributing and selling “unauthorized flavorings” in February 2021, or risk enforcement actions.
Goldman Sachs analyst Bonnie Herzog said another factor in the slump is “the impact of e-cigarette market denial orders by the FDA as it continues to work through premarket tobacco applications.”
At its most recent meeting, the Redwood City City Council in California unanimously passed a ban on the sale of flavored vaping and other tobacco products.
Credit: Valeriya Zankovych
The ordinance also prohibits the sale of all electronic cigarettes and electronic smoking devices, and bans all pharmacies from selling tobacco products by way of making them ineligible to obtain a tobacco retailer’s permit.
The ordinance does create an exemption for businesses holding a tobacco retailer’s permit that sell flavored tobacco for on-site hookah consumption, provided the business was operational and licensed as of Nov. 22, 2021. The rules do not allow for the exemption to be transferable or assignable to a subsequent owner of the business.
The city joins eight cities in San Mateo County and many more across the state and nation to ban flavored tobacco products over their health impacts, particularly to young consumers. Burlingame, East Palo Alto, Half Moon Bay, Menlo Park, Portola Valley, San Carlos, San Mateo, and South San Francisco have all passed similar ordinances.
On October 28, 2019, the City Council directed staff to research and draft an ordinance for consideration to ban flavored tobacco and electronic cigarettes (e-cigarettes), modeled after the County of San Mateo’s ordinance.
There is no exception for premium cigars in the ordinance. The ban will go into effect on April 1, 2022. Meanwhile, statewide legislation (SB 793) to ban the sale and distribution of flavored tobacco products is currently on hold pending the result of a ballot measure in the Nov. 8, 2022 election.
On Dec. 23, the FDA authorized the marketing of 22nd Century Group’s VLN King and VLN Menthol King combusted, filtered cigarettes as modified risk tobacco products (MRTP). As part of the MRTP designation, 22nd Century may inform consumers that smoking VLN cigarettes will considerably reduce their exposure to nicotine.
According to Bates, the FDA decision is misguided because the cigarettes retain the tar that is responsible for smoking-related illness. “We have known for a long time that ‘people smoke for the nicotine but die from the tar,’” writes Bates on his blog.
“The only value these products have in public health terms is if smokers don’t use them because they are so unsatisfying, and switch to something with lower risk. If they do use them, they are still exposed to thousands of toxins from smoke,” writes Bates. “However, the purpose of the marketing communication is precisely to encourage people to buy these products.”
If smokers want to reduce their health risks, they are far better advised to switch to a non-combustible vaping or heated tobacco product, according to Bates.
“So for health-conscious smokers, this is a diversion from a strategy that would actually help them. Instead, the authorized claims falsely promote reduced nicotine exposure as a health benefit.”
A growing number of countries are considering embracing legalized marijuana to boost their economies.
By Timothy S. Donahue
Marijuana is a moneymaker. To help combat slowing economies caused by the Covid-19 pandemic, many countries are considering legalizing marijuana. Currently, only Canada, Georgia, Mexico, South Africa and Uruguay, plus 18 U.S. states, two U.S. territories, the District of Columbia and the Australian Capital Territory in Australia have some form of legal marijuana. More recently, Germany, Luxembourg, Costa Rica and the U.S. are working to legalize marijuana on a national level.
In November, the leaders of Germany’s incoming governing parties announced that they had reached a formal agreement to legalize recreational marijuana and “promote broader drug policy harm reduction measures” when they take power. “We are introducing the controlled supply of cannabis to adults for consumption in licensed stores,” the parties said in a 118-page agreement. “This controls the quality [of marijuana], prevents the transfer of contaminated substances and guarantees the protection of minors.”
Currently, the personal possession of marijuana is decriminalized in Germany, and there is a medical cannabis program for residents. However, this proposal seeks to establish a regulated market for adult-use marijuana. The joint government will also review the social impact of legalization four years after implementation, according to the agreement.
“When it comes to alcohol and nicotine prevention, we rely on increased education with a special focus on children, adolescents and pregnant women,” the agreement states. “We are tightening the regulations for marketing and sponsoring for alcohol, nicotine and cannabis. We constantly measure regulations against new scientific findings and use them to align health protection measures.”
Competing with Germany to be first to legalize in Europe is its neighbor Luxembourg. The country’s ministers of justice and homeland security in October unveiled a legalization proposal, which will still require a vote in Parliament but is expected to pass, according to Marijuana Moment. Luxembourg’s rules focus on legalization within a home setting. Parliament is expected to vote on the proposal in early 2022, and the ruling parties are friendly to the reform.
In Mexico, medicinal use of cannabis products became legal in June 2021. World-renowned cannabis attorney Rod Kight says that Mexico is moving along rapidly in the implementation and understanding of the new rules, though a bit chaotically. He said that he expects to see more movement on marijuana laws in the country during its next legislative session.
“Medical cannabis is lawful in Mexico, and regulations were published earlier this year,” he said. “With respect to adult-use cannabis, the Supreme Court ruled that laws prohibiting the personal use and consumption of cannabis are unconstitutional. However, it remains unlawful to engage in commercial cannabis transactions. We anticipate that an adult-use bill will be passed in 2022.”
A top Mexican senator says that there’s agreement among key legislative leaders of multiple parties to prioritize marijuana legalization legislation this session, according to Marijuana Moment. Senate Majority Leader Ricardo Monreal Avila of the ruling MORENA party made the comments following a meeting of the Political Coordination Board. He said that the panel “agreed to prioritize cannabis laws” among other issues like cybersecurity, according to a translation.
During a recent trip to Costa Rica, Vapor Voice visited several stores that sold marijuana components, such as pipes and grinders, but no one was selling the product itself. This is because the rules in Costa Rica are confusing. While technically marijuana is illegal, there are no statutory penalties for the possession and use of marijuana. Selling marijuana, however, is illegal and punishable by up to 10 years in prison and/or fines.
To help combat this confusion and truly embrace the growing number of global marijuana tourists, like Mexico, Costa Rica is considering legalizing recreational marijuana. This would allow marijuana to be purchased in stores and allow the country to tax the product. Last year, Costa Rica’s Congress approved the legalization of marijuana for medicinal purposes despite opposition from conservative groups and President Carlos Alvarado.
Instead of taking up the required second debate, lawmakers sent the bill to the Constitutional Chamber of the Supreme Court for legal review, similar to the route Mexico took toward legalization as well. The second debate is expected early next year and would still require a signature from Alvarado.
The Costa Rican law only allows for the production and processing of cannabis but does not regulate its recreational use. However, the vote represents the most concrete action Costa Rica has taken toward legalizing cannabis products while noting the “significant economic potential” of legalizing the sale of cannabis. “It is a market of billions of dollars, and Costa Rica could be part of it,” said lawmaker Zoila Rosa Volio, who introduced the bill. He said Costa Rica was in a prime position to reap the “benefits of growing and exporting hemp and marijuana plants.”
Kight said that the developments in Costa Rica are encouraging. The approved bill authorizes the production, industrialization and commercialization of medicinal cannabis and hemp. “Under the bill, low-THC hemp and nonintoxicating hemp products are lawful generally, and high-THC cannabis will be approved for medical use,” Kight explains. “President Carlos Alvarado approves of hemp but is an opponent of high-THC cannabis. His office controls the legislative agenda, which means that a final vote on the law may not occur in the short term.”
In the United States, federal regulation of marijuana has been introduced numerous times and always failed. As more states legalize marijuana, however, the federal government is under pressure to decriminalize marijuana and remove it from its listing as a Schedule I drug, which are considered “substances or chemicals [that] are defined as drugs with no currently accepted medical use and a high potential for abuse.” While a large swath of the U.S. has legalized marijuana, it is still a highly debated argument at the federal level.
The most recent attempt to decriminalize marijuana is the States Reform Act, which would deschedule, regulate and tax cannabis products with a novel federal excise tax design—based on quantities and predefined categories, not dissimilar from how the federal government taxes alcohol and tobacco.
Introduced by Representative Nancy Mace, the bill would impose a tax of 3 percent on the removal price (cost when leaving the manufacturer or a bonded warehouse) of cannabis products. That’s significantly lower than the rates suggested in the other bills introduced this year to deschedule and tax cannabis: the MORE Act (8 percent rate) and the Cannabis Administration and Opportunity Act (CAOA, 25 percent rate), according to Ulrik Boesen, an analyst with the Tax Foundation.
“Arguably, the biggest impact on existing cannabis businesses would not be a new federal tax. Today, due to its Schedule I status, cannabis products cannot cross state borders, and as a result, all products must be grown, processed, sold and consumed within state borders,” states Boesen. “Descheduling would create a national market where products grown in Oregon can be processed in Colorado and sold in New York. This would revolutionize markets in states, which, given the federal prohibition, are currently able to discriminate against interstate commerce. Descheduling would mean that state laws can no longer do so as it would violate the Dormant Commerce Clause of the U.S. Constitution.”
Mace’s bill establishes six taxable categories and instructs that the secretary of the treasury can create more if needed:
cannabis flower (454 grams);
cannabis pre-rolls (100 grams);
cannabis extracts (20 grams);
cannabis vape cartridges (10 grams);
edibles (20 units); and
topicals and cosmetic products (20 units).
In a blog post, Boesen states that the creation of categories avoids some larger issues associated with price-based taxation as it guarantees that comparable products are taxed at the same rate regardless of price. “Under a pure price-based tax design, an expensive THC-containing chocolate bar would be taxed at a higher rate than a cheap THC-containing chocolate bar—even if they contain the exact same amount and quality of THC,” he writes. “Taxing the value of the product is not an excise tax’s job—capturing value should be left to sales and income taxes.”
Michelle Minton, a senior fellow at the Competitive Enterprise Institute, said that while it certainly has room for improvement, Mace’s bill is a solid starting point for “truly bipartisan legislation” that could finally end America’s prohibition of marijuana products. The MORE Act, introduced in House in May by Rep. Jerrold Nadler, would also decriminalize marijuana.
Specifically, the MORE Act also removes marijuana from the list of scheduled substances under the Controlled Substances Act and eliminates criminal penalties for an individual who manufactures, distributes or possesses marijuana. However, Minton says that Mace’s bill, unlike the MORE Act, would set a national minimum age for cannabis purchasing at 21.
“This would be enforced in the same way as the national minimum age for buying alcohol: by withholding federal transportation funds to states with a lower minimum age than the federal standard,” she writes in a blog post. “However, Mace’s proposal includes an exemption for states that allow minors to access medicinal cannabis for therapeutic purposes. The SRA bill would also grandfather in state medical cannabis products, allowing them to be sold in interstate commerce without prior federal approval.”
The dangling carrot for countries seeking to legalize marijuana is the amount of potential tax revenue the sales of marijuana can bring. For example, sales of marijuana in Colorado, one of the first U.S. states to legalize recreational marijuana, has resulted in buoyant tax revenues, according to media reports. In 2019, Colorado collected more than $302 million in taxes and fees on medical and recreational marijuana. Sales in the state totaled over $1.7 billion.
Nationwide, marijuana sales in the U.S. were $12.2 billion in 2019 and are projected to increase to $31.1 billion by 2024, according to a report from Arcview Market Research and BDS Analytics. Should marijuana become legal on a federal level, the benefits to the economy could be exceptional: A report from cannabis analytics company New Frontier suggests that federally legalizing marijuana could generate an additional $105.6 billion in aggregate federal tax revenue by 2025. It also predicts the impact of federally legal marijuana at the federal level could generate 1 million jobs by 2025.
Legalizing cannabis could bring Germany annual tax revenues and cost savings of about €4.7 billion ($5.34 billion) and create 27,000 new jobs, according to a survey by the Institute for Competition Economics at the Heinrich Heine University in Duesseldorf and commissioned by the German hemp association. The European market is projected to grow to €3.2 billion by 2025, up from €403 million at the end of 2021, according to the European Cannabis Report by the research firm Prohibition Partners.
Kight says legalization just makes sense. Whether in a large country like the U.S. or smaller countries such as Costa Rica and Mexico, the economic boost that legalized marijuana could bring is an economic gamechanger. “We seem to be at a tipping point for cannabis legalization, which appears inevitable in the U.S., most of Europe, much of Latin America and other parts of the world. The only real questions are when and what the various regulatory regimes will look like,” Kight says. “Countries that legislate quickly and thoughtfully should reap the benefits of increased tax revenue and lower crime rates.”
On January 1, 2022, two new state laws will become effective in Illinois and Oregon and could cause significant disruption to the vapor industry. According to Azim Chowdhury and Taylor D. Johnson, with the Keller and Heckman law firm, The Preventing Youth Vaping Act, will take effect in Illinois and HB 2261, will take effect in Oregon.
Photo: Skypixel | Dreamstime.com
Under the Illinois law, an electronic cigarette is broadly defined as
any device that employs a battery or other mechanism to heat a solution or substance to produce a vapor or aerosol intended for inhalation;
any cartridge or container of a solution or substance intended to be used with or in the device or to refill the device; or
any solution or substance, whether or not it contains nicotine, intended for use in the device
“Critically, SB 0512 considers an electronic cigarette to be adulterated (and prohibited for sale) if, “it is required by 21 U.S.C. 387j(a) to have premarket review and does not have an order in effect under 21 U.S.C. 387j(c)(1)(A)(i) or is in violation of an order under 21 U.S.C. 387j(c)(1)(A).” In other words, if an e-cigarette is required by the federal Family Smoking Prevention and Tobacco Control Act (21 U.S.C. 387j(a)) to have premarket authorization from the U.S. Food and Drug Administration and does not have a Premarket Tobacco Product Application (PMTA) order in effect (or is in violation of such an order), it would be considered adulterated under the Illinois law,” the post states. “Although the law exempts e-cigarettes “first sold prior to August 8, 2016 and for which a premarket tobacco product application was submitted to the U.S. Food and Drug Administration by September 9, 2020” from the adulteration definition, products that are subject to timely submitted PMTAs that FDA has either refused-to-accept, refused-to-file, or have received marketing denial orders from FDA would likely still be considered adulterated by the state (as well as FDA).”
The rules do not apply to synthetic nicotine or CBD products.
In Oregon, the legislation prohibits the shipment of “inhalant delivery systems” to any person in Oregon other than a distributor or a retailer. The legislation effectively prohibits direct-to-consumer (DTC) sales (including online sales) of the vast majority of vapor products in Oregon, according to the blog post.
“Inhalant delivery systems” are defined in the legislation as “a device that can be used to deliver nicotine in the form of a vapor or aerosol to a person inhaling from the device; or a component of a device described in this paragraph or a substance in any form sold for the purpose of being vaporized or aerosolized by a device described in this paragraph, whether the component or substance is sold separately or is not sold separately.”
As such, the legislation would appear to prohibit the DTC sale of most types of vapor products, but likely would not cover non-nicotine closed-system products:
Type of Vapor Product
Subject to Oregon HB 2261 shipment ban?
Bottled e-liquid (with or without nicotine)
Yes – language covers “a substance in any form sold for the purpose of being vaporized or aerosolized by a [inhalant delivery system] device”
Open-system/Open-tank ENDS Device
Yes – language covers “a device that can be used to deliver nicotine in the form of a vapor or aerosol to a person inhaling from the device”
Yes – language cover “or a component of a [inhalant delivery system] device”
Closed-system ENDS (e.g.., pod/cartridge or disposables) pre-filled with nicotine-containing e-liquid
Yes – language covers “a substance in any form sold for the purpose of being vaporized or aerosolized by a [inhalant delivery system] device”
Closed-system ENDS (e.g.., pod/cartridge or disposables) pre-filled with non-nicotine containing e-liquid
No – this type of product (i.e., a pre-filled CBD or THC vapor device) would not fall within meaning of a inhalant delivery system
An e-cigarette is also considered adulterated if (A) it consists in whole or in part of any filthy, putrid, or decomposed substance, or is otherwise contaminated by any added poisonous or deleterious substance that may render the product injurious to health; or (B) it is held or packaged in containers composed, in whole or in part, of any poisonous or deleterious substance that may render the contents injurious to health.
Adult smokers with no plans to quit are more likely to stop smoking if they switch to daily vaping, according to new research led by Roswell Park Comprehensive Cancer Center.
Published in JAMA Network Open, the Roswell Park study used data collected from 2014 to 2019 as part of the Population Assessment of Tobacco and Health Study (PATH). When the researchers focused their analysis on a select group of 1,600 smokers who initially had no plans to quit and were not using e-cigarettes when the study began, they found that those who subsequently vaped daily experienced eightfold higher odds of quitting traditional cigarettes compared to those who didn’t use e-cigarettes at all.
“These findings are paradigm-shifting, because the data suggest that vaping may actually help people who are not actively trying to quit smoking,” says Andrew Hyland, chair of health behavior at Roswell Park and scientific lead on the PATH study, in a statement. “Most other studies focus exclusively on people who are actively trying to quit smoking, but this study suggests that we may be missing effects of e-cigarettes by not considering this group of smokers with limited intention to stop smoking—a group that is often at the highest risk for poor health outcomes from cigarette smoking.”
Overall, only about 6 percent of all smokers included in the Roswell Park study quit smoking combustible cigarettes completely, but the rates of quitting were significantly higher among those who took up daily e-cigarette use—28 percent of smokers quit when they started vaping daily. The association between vaping and cigarette quitting held up even after adjusting for underlying characteristics such as educational background, income, gender, ethnicity and the number of cigarettes smoked per day at the beginning of the study.
China’s domestic vapor market is facing uncertainty after the state tobacco regulator issues proposed vaping rules.
By Timothy S. Donahue
China’s domestic e-cigarette market is going to look very different next year. Draft rules governing e-cigarettes were issued on Dec. 2 by China’s tobacco regulator. The move brings vaping products out of a regulatory uncertainty and under the oversight of the state.
The State Tobacco Monopoly Administration’s (STMA) draft rules follow China’s cabinet amending its tobacco monopoly law to include e-cigarettes in late November. The draft management rules define “e-cigarette” as an electronic delivery product that produces nicotine-containing aerosol for human inhalation. Heat-not-burn products are already regulated as cigarettes and subject to the Tobacco Monopoly Law.
According to the draft rules, to sell legal e-cigarettes in China, a company must meet national standards to register with the STMA so it can conduct business. Companies manufacturing any ancillary products specifically for the vaping industry must also receive a special license from the STMA. Companies must also prove that they have the funding available for production and a facility with the required equipment to produce product that meets the country’s newly proposed standards.
The new rules state that the STMA will establish a “unified national electronic cigarette transaction management platform” that all licensed e-cigarette wholesalers and retailers “must sell products through.” Tax collection and payment of e-cigarettes, meanwhile, “shall be implemented in accordance with national taxation laws and regulations,” the proposed rules states.
The government and the tobacco industry are, essentially, one entity in China, with the STMA regulating the industry and China National Tobacco Corporation (CNTC) manufacturing tobacco products. Under China’s Tobacco Monopoly Law, STMA maintains control over virtually all stages of the production, sales, import, export and distribution of tobacco products in China.
To date, the vapor industry in China has operated in a legal gray area. Regulation had been expected; it was just a matter of time before Beijing would take control of the country’s $1.3 billion e-cigarette industry. The size of the Chinese e-cigarette market has grown from rmb550 million ($86 million) in 2013, witnessing an eight-year compound annual growth rate of 72.5 percent, according to iiMedia Research Group. The World Health Organization estimates that China has over 300 million smokers, and more than half of adult Chinese men are current tobacco smokers. By contrast, the e-cigarette penetration rate among Chinese smokers is less than 1 percent.
The news was welcomed by many leading industry players who say the proposed rules remove any uncertainty and help to weed out bad actors. In a press release, Frankie Chen, Chinese hardware manufacturer Smoore International’s global PR manager, stated that he expects the national mandatory standards to significantly improve product safety and provide global vapers with better products. “Since the standards set higher requirements for vaping manufacturing, it is expected that only the responsible manufacturer with comprehensive safety management can be compliant,” Chen stated.
Domestic outlook
While the entirety of China’s new draft rules for the regulation of vaping products are still vague, the country’s standards section does open a window into the future of China’s domestic vapor market. The transcribed National Standards of the People’s Republic of China for e-cigarettes allows only for closed pod systems with tobacco-derived nicotine and tobacco-derived nicotine salts. Flavors will be allowed, and cartridges can’t leak, according to a translated copy of the proposed rules.
Unlike many countries, China will only allow tobacco-derived nicotine. The rules do not allow for a synthetic nicotine. “Nicotine extracted from tobacco should be used, and the purity should not be less than 99 percent,” the standards state. “Benzoate, tartrate, lactate, levulinate, malate and citrate of nicotine are allowed, and nicotine for preparing the above nicotine salts shall meet the requirements of [the previous statement].”
However, synthetic nicotine will still be allowed for products to be exported. What isn’t clear is if that synthetic nicotine must be shipped into China premixed in PG and/or VG and held in bond or what those concentration percentages might include. “There’s no legal imports of nicotine as far as we can tell. There seems to be no leeway for legal imports of a pure synthetic nicotine. However, we think if people import e-liquids with nicotine as a certain percent of that, that’s OK,” an industry representative told Vapor Voice and asked not be named because they didn’t have permission to speak on the matter. “We don’t know if it’s 10 percent or 20 percent, and it can only be brought into the country to be manufactured for re-export; that appears to be OK.”
It also seems that the proposed rules also do not allow for a company to import finished vaping products into China and then sell them domestically without having a license and being registered with the STMA. All Chinese e-cigarette manufacturing facilities are subject to the registration and production licensing requirements, even if the products produced are for export only. However, the country will continue to encourage exports and wants domestic manufacturers to develop markets overseas.
“What they’ve really done is they’re clamping down on anything that is destined for the domestic market,” the source said. “They’ve also tapped into the tax department. Any time a manufacturer wants to manufacture an e-cigarette or parts for an e-cigarette, they have to have a local representative from the taxation bureau there. And each day’s production that they run, they have to pay tax on those products at the end of that day. They’re clamping down in terms of what people can do as well as trying to ensure that they collect relevant taxes from all the manufacturers.”
Chinese vapor manufacturers are still waiting to understand what needs to be done officially for a company to produce vaping products for the international and/or domestic market. “We’re still waiting on that. The important piece isn’t the product standards,” the source said. “What I’m really interested in is the registration process, who’s allowed to do what, who has to issue licenses, because there’s an emergency management bureau involved, not just STMA, so a lot of people. We’re also trying to figure that piece out.”
China’s product standards do clarify what types of products China will allow domestically. The country will only allow closed pod systems to be sold, stating that “devices and cartridges using e-liquid should have a closed structure to prevent artificial filling.” Additionally, flavors will be allowed for now, but flavors are only approved under a “temporary permit for additive in e-vapor matter,” and any substance or flavor not listed “shall be used only after being proved to be safe and reliable by risk assessment,” the standards state. The listed additives include numerous flavoring extracts such as coffee, cocoa, prune and vanilla bean.
The standards only allow for a maximum amount of 20 mg of nicotine per mL. The source also said that the way he interprets the rules is that vape symposiums, such as the recently held 2021 IECIE Shenzhen eCig Expo (held Dec. 6–8), wouldn’t make sense to be held in China anymore. “I can’t imagine, if they’ve really taken bookings and got one on the cards currently, that they will cancel it, but we’ll see shortly,” the source said. “The Chinese domestic market is off limits to outsiders now. Moving forward, I don’t see a place for [trade shows] in this market anymore.”
For China’s domestic manufacturers, the outlook is grim. While international players will survive, they are still confused about what is to be expected when the rules are finalized. Stock shares for RLX Technology, China’s largest domestic brand, fell by more than 16 percent after the STMA released the proposed rules.
RLX chairperson and CEO Ying Wang, however, said the company welcomed the new regulatory framework. “We believe the sector will enter a new era of development—an era marked by enhanced product safety and quality, augmented social responsibilities and improved intellectual property protection,” said Wang at the presentation of the company’s third-quarter 2021 results.
RLX Chief Financial Officer Chao Lu added that the company is well prepared for the new operating environment. “The investments we made in products, talents, research and compliance in the third quarter and beyond will place us in advantageous positions under the new regulatory paradigm,” he said.
In Shenzhen, the capital of global vapor manufacturing, the industry is still in a state of shock, according to the source. “Everybody, from big to small, is scrambling to try and find out how this relates to them,” the source said. “They all have to register immediately with [the] State Tobacco Monopoly [Association] to continue doing business. They have to register what they’re going to be manufacturing, what their exports are, where they are going. It’s a complete disaster.”
E-liquid manufacturers and retailers are still figuring out how to survive the FDA’s erratic regulatory rules.
By Maria Verven
The vaping industry has been in a downward spiral ever since the U.S. Food and Drug Administration began issuing marketing denial orders (MDOs) for electronic nicotine-delivery system (ENDS) products. When a product with a premarket tobacco product application (PMTA) receives an MDO, it must immediately be pulled from store shelves and removed from the market.
The FDA has issued MDOs for nearly all the approximately 6.7 million PMTAs it received. At press time, the agency was still reviewing an estimated 80,000 products, according to Mitch Zeller, director of the FDA’s Center for Tobacco Products (see “From Chance to Change,” page ?). To date, only Phillip Morris International’s IQOS device and Heatsticks and R.J. Reynolds Vapor Co.’s Vuse Solo, along with two tobacco-flavored pod cartridges, have received marketing granted orders.
The FDA also rescinded or was ordered by a court to stay at least 10 MDOs. This has caused a massive amount of confusion in the industry, especially for vape shop owners and vapor distributors who are struggling to keep only legal products on their store shelves.
Complicating matters, many manufacturers have started using synthetic nicotine in their flavored vaping products and products that had otherwise received an MDO. Synthetic nicotine is in a regulatory void as it isn’t yet being regulated at the federal level, although the FDA has stated it may be considered a component of an e-cigarette, which would put synthetic nicotine under its purview.
Many ENDS business owners say that the industry is also still suffering from the 2019 e-cigarette or vaping use-associated lung injury (EVALI) crisis that was wrongly blamed on nicotine vaping products by the FDA and the U.S. Centers for Disease Control and Prevention. It took more than a year for both government entities to state publicly that the true culprits behind EVALI were illegal THC-based vaping products. Vapor business owners must also combat the never-ending amount of misinformation that is broadcast by anti-vaping groups and the mass media.
Business owners, additionally, have major concerns about the current nicotine tax in President Joe Biden’s Build Back Better Act (as of this writing, the bill was still in the Senate). The current version of the nicotine tax applies only to vaping products and nicotine pouches. The government would tax nicotine bought by manufacturers at the rate of $50.33 per 1,810 mg of nicotine—or 2.8 cents/mg if the bill passes with the tax included.
To get a better understanding of what is happening at the street level in the ENDS industry,Vapor Voice asked a group of manufacturers, retailers and industry leaders about their experience with the FDA and how the agency’s regulatory actions have impacted their businesses.
Vapor Voice: How have the FDA’s marketing denial orders affected your business?
Char Owen
Char Owen, vice president of American Vapor Manufacturer:I think the negative PR around vaping has caused sales to stagnate for most manufacturers and vapor shops. It has also increased the smoking rates for the first time in many years. It’s heartbreaking for us to watch people revert to smoking again.
Unfortunately, most of the industry has changed to synthetic. Over 95 percent of our sales are flavored e-liquid, and with others switching, there was no choice but to switch. We only manufacture open system e-liquids in many flavors, all created from nontobacco-derived nicotine. Our biggest selling products have always been fruit flavors.
We are trying to bring in new products, such as botanicals, that can help our customers with cravings but remove nicotine from the equation. For us, it has always been about harm reduction, nothing more.
Schell Hamel, president of The Vapor Bar:Sales were affected long before the MDO was received. This down spiral began with the media attacking all vapor products as killing people when they clearly knew it was illegal THC products and the entire vapor industry handcuffed to Juul’s reputation.
According to the MDO, all products made in our lab were denied. It seemed as if they used a rubber stamp to deny anything submitted, all without review. I heard them doing similarly across the industry, then approving Vuse.
Schell Hamel
Jay Oku, business development at Five Pawns:Hundreds if not thousands of customers have been adversely affected from these misguided PMTA, sale and shipping regulations.
We had been developing products to maximize harm reduction for years and were always fascinated with the cleanliness (free of nitrosamines) and the molecular merits of synthetic nicotine. We switched all of our domestic products to synthetic nicotine mid-2020. We are grateful to have maintained our sales volume through 2021.
We saw an increase in overall sales since making the switch to nontobacco-derived nicotine, yet we’ve also seen a longer sales cycle with new accounts due to the number of MDO products that companies are selling through to make room on their shelves. Despite a slight increase in gross sales, net numbers are relatively flat due to the increase in manufacturing and shipping costs in 2021.
Trent Bohl, owner of EZJ Rolling Equipment and Smokey Joes West:It’s logistically added challenges, and the horizon looks like a tough road ahead. While many Juice manufacturers have shifted gears to get into compliance, the shift toward disposables and the future ban of them will be tough for Vape as a whole.
From recent headlines, it seems the FDA doesn’t seem to play well unless you are Big Tobacco.
Do you think there’s a growing black market of products that are no longer legal?
Owen: I absolutely know there is a growing black market. A quick Twitter or Instagram search proves that. So far, those black market dealers have not been targeted by the FDA. Only registered manufacturers have been on their radar.
We need to support and grow the harm reduction industry instead of growing a black market. For harm reduction to be successful, it must be regulated and supported by our federal bodies. Without their support, we risk creating a dangerous environment for consumers. I have a great amount of respect for the U.K. in recognizing this.
Oku: Every day the black market continues to grow. The attrition of retailers, manufacturers and distributors is being caused by excessive rogue state taxation, the PACT Act that complicates accounting and reporting, and misguided government overreach that results in flavor bans.
Jay Oku
Numerous disposable manufacturers are selling mass quantities of vapor products through back doors. Some of these black market brands push immature non-lab-produced concoctions with cartoons on their labels. These regulations push people who benefit from tobacco harm reduction technology to inferior products and even worse, back to cigarettes.
Bohl: I have stores in New Mexico, and in Mexico, which outright banned vapes. The black market is huge in Mexico; any low-dollar mercado or corner OXXO seems to have them. The USA will follow suit I suspect, given the demand for vape. When one reflects on how the black market vape cannabis carts disrupted the industry and damaged lives and harmed the reputation of the industry, it’s just going to be that times 10.
What has been your experience with FDA inspections?
Owen: Personally, I had a good inspector, but it truly is the luck of the draw, and it hasn’t been the case for everyone. In my case, he was only there to find proof of manufacturing of any MDO products, and his paperwork was written to support that. My batching logs were not reviewed nor my manufacturing practices.
One member had their inspector show up at 7 p.m. on Halloween. Another member had the FDA come to her home and photograph her home office instead of her manufacturing establishment. He then took photographs of her neighbor’s home. There were instances where the inspector pressured staff when owners or managers were not present to make MDO’d products and then sent warning letters.
The American Vapor Manufacturer is usually involved in a warning letter meeting every couple of weeks. We even help nonmembers with those. It’s a very tricky process, and it’s good to have someone there who can be objective and help both the FDA and the manufacturer resolve the matter.
Trent Bohl
Bohl: I haven’t seen them from this industry perspective, but from the agricultural side and medical marijuana side, one thought comes to mind: brutal for some, not bad for others.
What ultimately will result from these MDOs?
Owen: What the FDA did was extremely arbitrary and capricious. I feel that anyone who can afford to challenge them in court will be able to prove that. My concern is for all the small businesses that cannot afford to do that.
If something doesn’t change, you will see manufacturers close and smoking rates rise. In almost all industries except vaping, small business is celebrated. This is a shame because those small shops are the ones with the hearts for harm reduction.
To lose those small businesses would be a devastating blow to the effort in moving this country to becoming smoke-free.
Oku: I am optimistic that the FDA will reconsider or rescind MDOs and revise their outdated ambiguous and debilitatingly cost-prohibitive PMTA process.
Since 2016, FDA action against the industry has resulted in warning letters and fines to those breaking the rules, yet there’s little to no enforcement. Many MDO products are being sold since there was an enormous glut of inventory in preparation for the September 2021 ruling.
There will invariably be an increase in synthetic nicotine products until those, too, are regulated out of the market.
Congress has been slipping anti-vaping bills into much larger spending packages, such as during the 2019 holiday break deep in the Omnibus Spending Bill. These bills implement devastating regulations that put our industry and the health of our customers in jeopardy.
Bohl: The goal stated by the FDA 15 years back was the end of combustibles. Vape could have helped that. I am buying a decent stock, fearing the day one more freedom is taken away in the name of safety.
The original “Vaping Vamp,” Maria Verven owns Verve Communications, a PR and marketing firm specializing in the vapor industry.
VapeX in Split, Croatia recently celebrated 10 years of helping smokers switch.
By Norm Bour
When people want to know about the European vape industry, they normally refer to the Big Three countries: France, Germany and Italy. Let’s face it—these are also the most populated EU nations and most popular tourism destinations, and even though they are “over there,” many Americans consider them just foreign versions of America. And let’s not talk about the United Kingdom, which is trying to find its own place in the world post-Brexit …
Europe consists of 44 countries, per the United Nations, though some are debatable since they straddle Europe as well as Asia. Eastern Europe, which encompasses many of the formerly Soviet bloc nations that abandoned communism in the early 1990s, is in a class by itself since they are not quite as economically developed as Western Europe, though they are picking up speed.
Eastern Europe, specifically Croatia, from where I am writing this report, is part of the world I love the most. And they do have vape shops, as well as CBD shops, so I wanted to get a snapshot of the vape space over here.
We were lucky enough to find VapeX right up the street from where I am staying, the oldest vape shop in Split, and probably one of the oldest ones in Croatia since it just celebrated its 10-year anniversary last year. That puts them in the olden days, even compared to many U.S. shops.
Owner Igor Eberhardt, 51, has as much passion for vaping as anyone I’ve ever met. Like many, he is not a vaper, nor was he a smoker; he is a guy with deep convictions about the benefits of vape as a smoking cessation device.
VapeX was started in 2010 by Teo Dogas, a former professional water polo star who was part of the Croatia National team that won the World Championship in 2007. One of its sponsors was a brand new vape liquid company, Ovale, from Italy, and when Dogas ended his career, Ovale offered him a job.
Though Dogas was not a smoker, he did believe in the benefits of vaping, so he opened this shop in Split, which initially sold only Ovale liquid. It was the first vape shop in Split and probably one of the first in Croatia if not in all of Eastern Europe.
Dogas later brought Eberhardt in as a partner, and a few years ago another partner, Mark Williams, joined them. Williams, who came from the U.K. vape scene, brought in a whole new dynamic, and they started carrying other liquids from around the world.
Over the years, they have attempted to open other locations, but onerous regulations in Croatia made it challenging. They still also have a shop and distro in the U.K. “We are not treated equally here in Split,” Eberhardt said. “While most businesses can operate freely and openly, we must keep our windows covered with a film that almost makes us look like a sex shop. We also have to cover our shelves occasionally, which takes away the beauty of our selections.”
The company did not receive assistance during the Covid-19 pandemic either. “Many, if not most businesses here, were given some breaks to help them through the pandemic, but we were not. We got no tax benefits, no compensation, and we were shunned, along with just a few industries, like casinos, which also got no help.”
He also mentioned that the Croatian government, like most governments worldwide, views his operation as a tobacco shop, which never gets much respect or help. The problem here, like in many European countries, is that smoking and tobacco are part of the culture, the heritage. The smoking population is slow to adapt since many have been smoking since childhood with the total acceptance of their parents and family.
Of course, this is not just a European legacy but is prevalent in the Middle East, parts of the Far East and Latin America too. Old habits die hard, and it may take generations for vaping to equal or surpass tobacco usage in Croatia.
I asked about the company’s clientele, who are generally middle-aged and split almost equally between male and female, but he confessed, “Women seem to be more open to alternatives, and they are starting to understand that smoking is not sexy anymore.”
As an unmarried man, Eberhardt personally chooses not to date smokers and tries to share his passion for vaping with them.
“The problem is, most Croatian smokers are not aware of the dangers—or of the alternatives,” he shared, “and most don’t care. In many cases, people don’t want to talk about the dangers of smoking, almost as though they don’t want to admit that they have been ignorant of the health risks.”
This sounds like a don’t ask/don’t tell mindset, and even after sharing with his customers that smoking is five times more expensive, that does not always sway them. Partner Williams, in addition to the new product mix, also brought along new education.
The shop formerly got most of its inventory from the U.K., but that country’s departure from the EU has complicated trade, so now it imports from other countries, especially from Malaysia and the Far East.
As for the company’s brands mix, it proudly carries about seven of the top 10 international flavors and usually sees American e-liquid brand Glas as its top seller followed by Fizzy Juice and Empire Brew, which are all fruit flavors. That has been a noteworthy trend to the VapeX owners as fruity flavors have replaced tobacco flavors, and for now, all are legal.
Other bestselling brands in the shop are Dinner Lady, Pachamama, Charlie’s Chalk Dust and Don Cristo, a premium Canadian tobacco flavor. VapeX also specializes in short-fills and is an exclusive distributor of the popular Mr. Vape brand.
Croatian vape shops have been growing quickly over the past few years, and to stay ahead of the crowd, VapeX plans to open a lounge where people can hang out and get educated, according to Dogas.
We talked about “other products,” and he confirmed that cannabis is still illegal, though CBD is not. But the company carries only a few bottles of liquid while the local CBD-only shop stays away from vape products. It seems they have set an agreeable compromise and avoid each other’s turf.
The future looks promising for Split’s largest vape shop. It adheres to the EU Tobacco Product Directive (TPD) regulations, as does the rest of the EU and U.K., and they all operate on the same level ground. The owner’s hope is that TPD opens up the market even more and that the Croatian government finally recognizes what a benefit vaping offers over tobacco.
Norm Bour is the founder of VapeMentors and works with vape businesses worldwide. He can be reached at norm@VapeMentors.com.
Illinois Attorney General Kwame Raoul today announced a consent decree with Juice Man LLC that effectively prohibits the company from doing business in the state. The consent decree resolves allegations the company allegedly developed and marketed its products to attract minors.
Credit: Sharafmaksumov
Raoul filed a lawsuit in 2020 against California-based Juice Man alleging the company intentionally developed nicotine products that appeal to minors and has marketed its harmful nicotine products to minors, according to a press release. The consent decree prohibits Juice Man from distributing its products in Illinois and requires the company to take action if it learns Juice Man products are sold in the state.
“E-cigarette manufacturers know that addicting young users is essential to their long-term viability. With candy- and dessert-flavored products marketed by cartoon characters, it is no wonder they are succeeding,” Raoul said. “I filed a lawsuit last year against Juice Man over its blatant efforts to direct advertising toward minors, and this consent decree essentially ends the company’s ability to sell or distribute any Juice Man products in Illinois. I am pleased with this progress in my office’s ongoing work to hold e-cigarette manufacturers accountable for their role in the epidemic levels of e-cigarette usage by minors. The work does not end here, I am committed to continuing to investigate the e-cigarette industry and protecting minors from the long-term dangers of using tobacco products.”
Raoul’s lawsuit alleged that Juice Man offered its products in a variety of flavors – such as pink lemonade, cotton candy, unicorn frappe and cherry blue cola – that are clearly developed and marketed to youth smokers. For example, unicorn frappe is described as an “explosion of tarts, fruits, and creams.”
Additionally, Raoul’s lawsuit alleged that Juice Man unfairly and deceptively marketed its products to minors. The company relies heavily on social media to advertise its products, using hashtags such as “#vapebabes,” “#vapeporn” and “#vapelyfe.” Raoul pointed out that prior to 2016, social media advertising featured images of Juice Man’s products in front of a neutral background.
In his lawsuit, Raoul said Juice Man’s advertisements used bright colors, cartoon characters and children’s cereal. A number of flavored products distributed under Juice Man’s “Zonk!” line relied on packaging that featured graphics similar to those in comic books. Juice Man also marketed variety packs of flavors including watermelon-strawberry and mixed berry as “Lunch Box” assortments. Furthermore, Raoul argued that Juice Man’s age-verification system allows the company to easily interact with and promote products to minors.
The consent decree entered prohibits Juice Man from selling or distributing e-cigarette products to retailers and consumers located in Illinois. The manufacturer is also prohibited from selling e-cigarette products to distributors or wholesalers that intend to sell or distribute those products to retailers or consumers in Illinois. The consent decree requires Juice Man to take actions – including permanently ceasing business with offending entities – if the manufacturer learns that a retailer, distributor or wholesaler provided its e-cigarette products to an Illinois retailer or consumer.
Raoul has taken various actions to hold e-cigarette manufacturers accountable for epidemic usage levels among youth and teens. In 2019, Raoul’s office filed a lawsuit against the nation’s largest e-cigarette manufacturer, Juul Labs Inc., and the litigation is ongoing. The Attorney General’s office is continuing to investigate other e-cigarette manufacturers as part of an ongoing investigation into the e-cigarette industry. Additionally, Raoul has urged the FDA to ban flavored tobacco products and to strengthen e-cigarette guidance by prioritizing enforcement actions against flavored e-cigarettes.
