Category: News This Week

Altria Group has entered into an agreement to acquire newly issued shares in Cronos Group, a leading global cannabinoid company, headquartered in Toronto, Canada. The transaction represents a 45 percent equity stake in Cronos Group, at a price of CAD16.25 per share, for an aggregate investment by Altria of approximately US$1.8 billion.

As part of the agreement, at closing, Altria will have the right to nominate four directors, including one independent director, to serve on Cronos Group’s board of directors, which will be expanded from five to seven directors. The agreement includes a warrant to acquire an additional ownership interest in Cronos Group at a price of CAD19 per share exercisable over four years from the closing date. If exercised in full, the warrant would increase Altria’s ownership in Cronos Group by 10 percent to approximately 55 percent.

“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said Howard Willard, Altria’s chairman and chief executive officer. “We believe that Cronos Group’s excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential.”

“Altria is the ideal partner for Cronos Group, providing the resources and expertise we need to meaningfully accelerate our strategic growth,” said Mike Gorenstein, Cronos Group’s chairman, president and chief executive officer. “The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers. Importantly, Altria shares our vision of driving long-term value through innovation, and we look forward to continuing to differentiate Cronos Group in this area.”

This investment positions Altria to participate in the emerging global cannabis sector, which it believes is poised for rapid growth over the next decade. It also creates a new growth opportunity in an adjacent category that is complementary to Altria’s core tobacco businesses.

Altria expects its investment to help Cronos Group accelerate its growth strategies and its R&D and intellectual property development. Additionally, Altria will provide expertise to help Cronos Group thrive in the growing global cannabis market. These services may include regulatory affairs, regulatory science, compliance, government affairs and brand management.

Altria has announced the discontinuation of production and distribution of all MarkTen and Green Smoke e-vapor products and Verve oral nicotine containing products. This decision is based upon the current and expected financial performance of these products, coupled with regulatory restrictions that burden Altria’s ability to quickly improve these products. The company will refocus its resources on more compelling reduced-risk tobacco product opportunities.

“We remain committed to being the leader in providing adult smokers innovative alternative products that reduce risk, including e-vapor,” said Howard Willard, chairman and CEO, Altria Group. “We do not see a path to leadership with these particular products and believe that now is the time to refocus our resources. We recognize the impact this decision has on our employees and business partners, which we do not take lightly.”

Altria’s subsidiaries will begin working with their retailers, wholesalers, contract manufacturers and suppliers to ensure an orderly process. MarkTen cig-a-likes are currently in distribution at retail and through e-commerce. Green Smoke is primarily available on e-commerce with limited retail presence. Verve is in limited distribution at retail and e-commerce.

Altria expects to record one-time pre-tax charges of approximately $200 million, the majority of which would be non-cash asset impairment charges, in the fourth quarter of 2018 as a result of this decision. These charges will be excluded from Altria’s adjusted results.

Altria Group is in early stage negotiations to acquire Canadian cannabis producer Cronos Group, according to a Reuters report citing anonymous sources.

Canada legalized the recreational use of marijuana in October. Reuters’ sources said Cronos has not agreed to any deal and there is no certainty it will do so.

A deal would mark one of the largest combinations between mainstream tobacco and the booming yet volatile marijuana secto

The US Food and Drug Administration said yesterday it had issued a warning letter to Electric Lotus for selling nicotine-containing e-liquids with labeling and/or advertising that cause the liquids to resemble kid-friendly food products, such as cereal, candy, and peanut butter and jelly.

The FDA, in a note issued through its Center for Tobacco Products, said its action was part of the agency’s ongoing effort to protect kids from tobacco products.

Electric Lotus ‒ a manufacturer, distributor and retailer, based in Redlands, California ‒ was also cited for illegally selling products to a minor, for failing to list its products with FDA and for selling e-liquids without the required FDA premarket authorization.

“We’re seeing too many cases where companies are designing e-liquid products in packages that resemble children’s food items and this sort of egregious marketing can lead to accidental ingestion of potentially lethal doses of nicotine by young kids,” said FDA Commissioner Scott Gottlieb, MD.

“There’s no excuse for this sort of packaging and we’ll continue to target these products and the companies that market them.

“FDA will also continue to implement new steps to make sure children aren’t started down a path to nicotine addiction and tobacco use. Those include actions to target those who design products in ways that are clearly marketed to appeal to children. No child should be using any tobacco product. We’ll continue to hold industry accountable to ensure these products aren’t being marketed to, sold to or used by kids.”

The products outlined in the new warning letter were said to include, for example: ‘“Cereal Treats Crunch,” which resembles Cinnamon Toast Crunch cereal products; “Cereal Treats Loopz,” which looks like Froot Loops cereal; “Cereal Treats Charms,” which resembles Lucky Charms cereal products; and “Cereal Treats Krispies,” which looks like Rice Krispies Treats cereal’. Many of these products were said to have cartoon characters on their labeling and/or advertising.

The FDA has requested that the company responds within 15 working days to describe how it intends to address the agency’s concerns.

‘Failure to correct violations may result in further action such as seizure or injunction,’ the FDA note said. ‘In addition, misbranded or adulterated products imported into the United States are subject to detention and refusal of admission.’

The UK Vaping Industry Association (UKVIA) said on Friday that it was expanding its membership after another successful year representing the industry.

In a press note, the UKVIA, which has been in operation for three years, said it was being joined by UK-based ECig-Direct and Oxford Vapours, and its first overseas-based members, SMOK, Innokin and FlavorIQ.

Founded in 2008, ECig-Direct is a UK supplier of vaping devices and e-liquids, while Oxford Vapours offers e-liquids, vaping devices and spares to customers in the UK and Scandinavia through its retail stores and online service.

SMOK and Innokin, which are the first China-based members to join the UKVIA, are expected to bring an extensive knowledge of the global vaping market to the Association.

Formed in 2010, SMOK is a leading brand of e-cigarette manufacturer Shenzhen IVPS Technology, which is said to sell to its 80 million customers in 50 countries its e-liquids and vaping devices.

Innokin is said to have designed and manufactured several internationally-recognised vaping products at its base in China. Its products are available in more than 5,000 Vape shops in the US, which are serviced from its customer headquarters in California.

FlavorIQ, which is said to be one of Europe’s leading e-liquid suppliers, is joining the UKVIA as an associate member. The German manufacturer started in 2014 as a branch of Hertz Flavours, a key producer of tobacco flavors. Through this partnership, FlavorIQ can call on 60 years of experience in flavor design and brings this expertise to the e-cigarette market.

“As the leading trade body for the UK vaping market, we are delighted to welcome some of the most renowned vaping brands as members to the Association,” a UKVIA spokesperson was quoted as saying.

“The UKVIA has been working on the public health and policy frontlines for the industry with fantastic progress.

“We now look forward to working with new national and international members to achieve a real impact in harm reduction for smokers in the UK and worldwide.”

Vaping is being promoted in Malaysia as an aid to weight loss, according to a story in The Star.

The principal investigator of the National E-cigarette Survey (NECS) 2016, associate professor Dr. Mohamad Haniki Nik Mohamed, was quoted as saying that vaping was being touted as an appetite suppressant.

Vaping devices were being promoted as inhalation weight management aids and were clearly targeted at women and young girls, he said.

The Star said that a Google search had shown that online stores were promoting electronic cigarettes with fruit, green tea, and plant extracts, purportedly containing vitamin and weight control properties.

Meanwhile, a member of the Universiti Malaya’s Nicotine Addiction Research & Collaboration Group (NARCC), Dr. Nur Amani Natasha Ahmad Tajuddin, said the amount of these “supposedly beneficial” extracts were too little to be of use.

“What’s the percentage of green tea extract in the liquid?

“How much green tea does your body need for it to have an impact?

“These liquids [presumably e-liquids] contain more harmful chemicals than anything,” she said, adding that vaping nicotine killed taste buds and suppressed appetite but that there was no proof that it was safe.

Meanwhile, the University of Cambridge behavior and health research unit director Professor Dame Theresa Marteau said some flavors and marketing strategies were aimed at those with weight issues.

“If someone’s smoking because of weight concerns, and they want to stop, they’d be better off vaping,” she said.

“If vaping is attracting them because it’s highlighting the fact that you can smoke chocolate rather than eat chocolate, that may not be a bad thing although I wouldn’t recommend it.”

According to an article in the Nicotine & Tobacco Research Journal last year, vapers were claiming that vaping helped them to control weight gain after they stopped smoking.

The more adolescents say they have seen advertisements for electronic cigarettes, the more often they vape e-cigarettes and smoke tobacco cigarettes, according to a press note from the European Lung Association based on a study published in ERJ Open Research. The press note was published at eurekalert.org.

The study was conducted in Germany, where regulations around tobacco and e-cigarettes advertising are less restrictive than in other parts of Europe.

“The World Health Organization recommends a comprehensive ban on tobacco advertising, promotion and sponsorship in its Framework Convention on Tobacco Control,” Dr. Julia Hansen, a senior researcher at the Institute for Therapy and Health Research (IFT-Nord), Kiel, Germany, was quoted as saying. “Despite this, in Germany, tobacco and e-cigarettes can still be advertised in shops, on billboards and in cinemas after 6pm. Elsewhere, although tobacco advertising may be banned, the regulations on advertising e-cigarettes are more variable. We wanted to investigate the impact that advertising might be having on young people.”

The researchers asked 6,902 pupils from schools in six German states to fill in anonymous questionnaires. They were aged between 10 and 18 years of age, with an average age of 13. They were asked about their lifestyle, including diet, exercise, smoking and use of e-cigarettes. They were also asked about their socioeconomic status and school performance.

The pupils were presented with pictures of real e-cigarette advertisements with brand names removed and asked how often they had seen each one.

Overall 39 percent of the pupils said they had seen the advertisements. And those who said they had seen the advertisements were found to be 2.3 times more likely to say that they used e-cigarettes and 40 percent more likely to say that they smoked tobacco cigarettes [presumably, than those who said they hadn’t seen the advertisements].

The results were said to have suggested also a correlation between seeing more advertisements and using e-cigarettes and smoking tobacco cigarettes more often.

Other factors such as age, sensation-seeking tendency, the type of school the teenagers attended and having a friend who smoked were also all linked to the likelihood of using e-cigarettes and smoking.

“In this large study of adolescents we clearly see a pattern: those who say they have seen e-cigarette adverts are more likely to say they have used e-cigarettes and conventional cigarettes,” said Hansen, who was a co-researcher on the study.

“This type of research cannot prove cause and effect, but it does suggest that e-cigarette advertising is reaching these vulnerable young people. At the same time, we know that the makers of e-cigarettes are offering kid-friendly flavours such as gummi bear, bubble-gum and cherry.”

Altria is in talks to take a significant minority stake in vapor company Juul Labs, The Wall Street Journal (WSJ) reported on Wednesday. A deal is estimated to be several weeks away.

Wells Fargo analyst Bonnie Herzog wrote that it’s “finally, it’s all coming together and making sense” in a recent email. “We’ve longed believed [Altria] has wanted to (and should) acquire JUUL Labs, Inc. So if today’s (Nov. 28) rumors are true that [Altria] is taking a ‘significant minority’ stake in JUUL (as reported by WSJ without comment from mgmt.), we view this as very positive,” Herzog wrote. “While details remain sparse, we think MO could be investing around $4 billion -$7 billion to acquire a ~30-40 percent stake in JUUL based on an estimated $15 billion – $16 billion valuation for the total company.”

A tie-up between the two companies could give Juul experience that Altria has gained through decades of regulation and litigation, while giving Altria a jolt in revenue, according to Herzog. However, a deal would mark a significant shift for Juul, which has repeatedly distanced itself from major tobacco companies like Altria.

Juul declined to comment. Altria said it doesn’t comment on “rumors and speculation.”

The President of Turkey, Recep Tayyip Erdoğan, known for his staunch anti-cigarette stance, has turned his ire on electronic cigarettes, according to a story in The Hurriyet Daily News.

“They have invented something bizarre called electronic cigarette,” Erdoğan said at a symposium in Istanbul on international drug policies and public health.

“They claim it does not contain any nicotine or very little of it. But soon people will become addicted to it.”

Erdoğan said cigarette companies had approached the government to make investments in Turkey.

“They are saying they will invest $500 million or $1 billion,” he was quoted as saying.

“But we offer them alternatives. We are asking if they are going to export what they produce here. Would you do that, we ask.

“But they demand at least 10 percent of their products be consumed domestically. Then their true intention becomes clear.”

Erdoğan suggested that those companies wanted to turn young people into addicts.

“We will not allow this to happen,” he said.