Category: News This Week

New data on the U.S. e-cigarette market confirms that Juul Labs is much less dominant than sometimes believed.

ECigIntelligence, the leading provider of information and analysis to the industry, has welcomed figures from the U.S. Centers for Disease Control and Prevention (CDC) that suggest Juul accounts for “nearly one in three e-cigarette sales nationally.”

That tallies closely with ECigIntelligence’s own estimate of 25 percent or slightly above.

But it is far lower than recent media reports claiming Juul has more than 70 percent of the market.

“Juul is clearly a major player and has grown very rapidly,” said ECigIntelligence Managing Director Tim Phillips.

“But unfortunately, in the recent climate of hysteria over youth vaping, some reports have wildly exaggerated the scale of Juul’s role.

“We hope these CDC figures will restore some sanity to the discussion, although we also note that they do not include two important channels – vape stores and the internet–which could mean Juul’s actual share is even lower.

“As always, data from non-specialist sources should be treated with caution. Vapor is a complex industry and claims made for overwhelming market leadership rarely stand up to close examination.”

On Oct. 3, Juul Labs filed a complaint with the U.S. International Trade Commission (USITC) seeking to “bar entry into the United States of certain electronic nicotine delivery systems (ENDS) and components thereof, namely certain nicotine delivery devices and pods.”

The USITC complaint alleges that 18 vapor companies have products that infringe on one or more of four U.S. patents held by Juul Labs. The companies mentioned in the complaint include J Well France, Bo Vaping, The Electronic Tobacconist, EonSmoke, Xfire, Flair Vapor, Myle Vape, Vapor Hub, King Distribution, as well as several others including numerous China-based manufacturers.

Also on Oct. 3, Juul Labs filed suit against J Well France, among others, in the United States District Court for the Eastern District of New York for patent infringement of the four named patents in the USITC complaint The case is currently in its initial stages. The company also filed suit in several other U.S. district courts against several of the other manufacturers named in the USITC complaint.

On Oct. 4, Juul Labs is expected to file suit against Electric Tobacconist in the United States District Court for the District of Colorado for patent infringement of the four patents named in the USITC complaint.

For the encroachment on Juul Labs’ intellectual property, Juul Labs is seeking a permanent limited exclusion order and a permanent cease-and-desist order from the USITC. The cease-and-desist order would prohibit the accused manufacturers “from importing, marketing, distributing, repairing, providing warranty services, selling, offering for sale; or selling after importation into the United States ENDS products including devices, pods, and all components thereof, that infringe the Asserted Patents.”

The accused products “include at least the Bo Group’s Bo One and Bo+ devices and pods (also called “Bo Caps”); Eonsmoke Group’s Eonsmoke and Eonsmoke v2.0 devices and pods, as well as 4X pods; the Ziip Group’s Ziip devices (also called “ZDevice”) and pods (also called “ZPods”), as well as Plus Pods; the XFite Group’s XFire devices and pods; the Flair Group’s Flair Xtreme devices and pods; the Myle Group’s Myle devices and pods; the Pulse Group’s Pulse (also called “Ply Rock”) devices and pods; and the 3X Group’s 3X pods,” according to the complaint.

The complaint also states that Juul labs has adopted a comprehensive marketing code, with strict guidelines, to help ensure that Juul marketing is directed only toward existing adult smokers. Beyond these safeguards, Juul Labs has also committed at least $30 million over three years toward youth prevention.

The companies Juul is seeking to prevent from selling their products, however, “appear to do little-to-nothing to verify the age of their online customers. As a result, the requested remedy would likely help to keep ENDS out of the hands of underage users, benefiting the public health and welfare,” the complaint states.

The complaint also states that Juul Labs’ nicotine formulation and final pod manufacturing, including mixing, quality control analysis, pod filling, sealing, and packaging are all performed in the United States, subject to rigorous, U.S. Food and Drug Administration-mandated standards. This has created high-skill jobs for Americans as a result “and maintains high-quality standards” for their products.

“By contrast, the companies named in the complaint as “Respondents”  has most of their manufacturing taking “place outside the United States, providing few if any American jobs. Respondents’ foreign manufacturing activities involve unknown materials and ingredients and unknown quality standards. The requested remedy will increase American jobs, while removing low-quality ENDS from the market,” the complaint states.

Raising taxes on cigarettes reduces nicotine use, even for e-cigarettes, and increases sales of smoking cessation products, says a Ball State researcher.

Erik Nesson, a Ball State economics professor, found that a $1 cigarette excise tax increase reduces the probability that a household purchases e-cigarette products by about 22 percent and cuts the number of e-cigarette product purchases by about 42 percent. The tax also leads to an 18 percent increase in the probability that a household buys smoking cessation products.

“When cigarette taxes increase, people smoke less, cutting back on buying both cigarettes and e-cigarettes,” he said. “That was a surprise. We thought that people would cut back on cigarettes and increase purchases of the electronic option, but that doesn’t seem to be happening.

“Our results also indicate that, at least among adults, more stringent e-cigarette restrictions are unlikely to affect either cigarette or e-cigarette consumption. Furthermore, cigarette tax increases are likely to reduce nicotine intake from both cigarettes and e-cigarettes.”

Nesson joined with faculty from the University of Wisconsin-Oshkosh and Bates College to conduct the study, “The Relationship between Cigarettes and Electronic Cigarettes: Evidence from Household Panel Data.”

The research, published by Journal of Health Economics, is the first to examine how increases in cigarette excise taxes and smoke-free air (SFA) laws affect sales of e-cigarettes products among adults. Researchers tracked the purchases of households before and after increases in cigarette taxes and SFA laws using the Nielsen Consumer Panel between 2011 and 2015. The overall sample represents about 99,000 households.

“We confirm many previous studies that also find cigarette excise taxes and SFA laws reduce smoking,” Nesson said.

Nesson said the study’s results suggest potentially important implications for tobacco control policy.

“Estimates indicate that cigarette taxation remains a critical tool for controlling nicotine consumption and addiction,” he said. “Nevertheless, it is important for policymakers to understand the relationship between cigarettes and e-cigarettes.”

US sales of the electronic cigarette Juul rose from 2.2 million in 2016 to 16.2 million in 2017, according to a HealthDay story quoting the results of a study by the Centers for Disease Control and Prevention (CDCP).

The CDCP study took in e-cigarette purchases from regular retail stores, but did not include sales through the internet or from vape shops; so the sales figures comprise an underestimate.

Juul had captured the biggest share of the US e-cigarette market as of December 2017, accounting for nearly one in three of the e-cigarettes sold nationwide.

Juul is said to have among the highest nicotine content of any e-cigarette sold in the US, a concern for the CDCP, which, according to the HealthDay story, says that nicotine is ‘highly addictive’ and can harm brain development in teens and young adults.

The Food and Drug Administration on September 12 demanded that, within 60 days, five electronic-cigarette manufacturers, including Juul Labs, accounting for 97 percent of the market for these products, come up with robust ways of addressing what the agency described as an ‘epidemic’ of teenage vaping or face market restrictions on their products.

‘There are no redeeming benefits of e-cigarettes for young people,’ Corinne Graffunder, director of the CDCP’s Office on Smoking and Health, said in an agency news release. ‘The use of certain USB-shaped e-cigarettes is especially dangerous among youth because these products contain extremely high levels of nicotine, which can harm the developing adolescent brain.’

The CDC findings were published on October 2 in the Journal of the American Medical Association.

HealthDay reported that Juul had issued a statement on the same day defending its product.

‘Juul Labs is focused on its mission to improve the lives of the world’s one billion adult smokers,’ the company said in its statement. ‘When adult smokers find a satisfying alternative to cigarettes, they tell other adult smokers. Juul Labs has helped more than one million Americans switch from cigarettes.’

The word ‘cigarette’ might appear in the term ‘e-cigarette’, but that is as far as their similarities extend, according to a Northwestern Medicine report published on Friday in the journal Nicotine & Tobacco Research.

Assuming e-cigarettes were equal to cigarettes could lead to misguided research and policy initiatives, said a Northwestern University story that reported on the paper’s findings at eurekalert.org.

“Comparing cigarettes to e-cigarettes can give us a false sense of what dangers exist because it misses the gap in understanding how people use them and how they can make people dependent,” first author Matthew Olonoff, a PhD student at Northwestern University Feinberg School of Medicine, was quoted as saying. “Before we start making policy changes, such as controlling nicotine or flavor options in e-cigarettes, we need to better understand what role these unique characteristics have.”

The commentary is said to distill articles and published studies that compare e-cigarettes to cigarettes and supports the importance of investigating e-cigarettes as a unique nicotine delivery system.

“There are enough key differences between cigarettes and these products, especially newer-generation devices, to show that they are not interchangeable nicotine delivery systems,” Olonoff said.

It was a surprise. On Sept. 28, the U.S. Food and Drug Administration (FDA) conducted a sudden inspection at the San Francisco headquarters of Juul Labs. The regulatory agency seized “thousands of pages of documents” the relate to the vapor manufacturer’s marketing practices.

On Sept. 12, Juul Labs, alongside four of the largest cigarette manufacturers in the U.S., was accused by the FDA of marketing their products to youth. FDA Commissioner Scott Gottlieb stated that teen use of e-cigarettes like Juul have reached an “epidemic proportion of growth,” and promised to take “historic action” action against the companies it believes markets to young people.

“The new and highly disturbing data we have on youth use demonstrates plainly that e-cigarettes are creating an epidemic of regular nicotine use among teens,” the FDA stated. “It is vital that we take action to understand and address the particular appeal of, and ease of access to, these products among kids.”

Juul representatives have repeatedly stated that they do not market to youth. The vapor maker had already turned over more than 50,000 documents to the FDA. “We want to be part of the solution in preventing underage use, and we believe it will take industry and regulators working together to restrict youth access,” Kevin Burns, CEO for Juul Labs, said.

A new petition from SumOfUs, an international consumer group, is urging the German government to ban outdoor cigarette advertisements.

The group issued a press note yesterday saying that children who regularly saw tobacco advertisements were twice as likely to start smoking as those who didn’t.

It said that, because of the effect they had on children, tobacco billboards had been banned in every country of the EU, except Germany.

Today, advertisements for regular and electronic cigarettes could be placed anywhere in Germany, including near or next to schools.

In a preamble to a petition, the group said that parliamentarians of the centre-right CDU/CSU parties knew how deadly effective these advertisements were but preferred to keep tobacco corporations and their lobbyists happy than keep children safe.

The group said, however, that dissent was brewing in the German government, and that the federal drug commissioner had recently spoken in favour of a ban. By gathering as much public support as possible, there was ‘a real chance of getting a vote on the table – and winning’.

Smoking was a serious problem in Germany, the group said, especially among young people. More than 110,000 ‘children’ smoked every day, ‘a higher rate than the European average’. ‘More and more of them are trying e-cigarettes, which Phillip Morris and co. promote as a cooler, healthier tobacco alternative,’ the group said in promoting the petition.

‘Smoking kills nearly 125,000 Germans every year. We can’t let Big Tobacco keep profiting off those deaths while continuing to sign up new recruits with its billboards. A couple of years ago, the German government almost banned the ads – including ads for e-cigarettes – but it got thwarted at the last minute.

‘Every other country in the EU has put its foot down. It’s time Germany did as well.

‘If the SumOfUs community comes together, we can show the holdouts in the German government that they’re on the wrong side of history. It worked earlier this year, when we convinced the EU commission to stand up to Bayer’s lobbyists and ban three of the worst bee-killing neonicotinoid pesticides. With tobacco corporations, we’re up against a $346 billion juggernaut – but as we’ve proven time and time again, our people power is stronger than the industry’s money.

‘We know that given enough public pressure, the CSU/CDU will start valuing kids’ health over the interests of Big Tobacco. It’s up to us to make the government go cold turkey on the lobbyists.’

Imperial Brands said today that it would be hosting a capital markets event in London this afternoon focused on the Group’s Next Generation Products (NGP) business.

The event coincides with the issuing today of a trading update.

‘Today’s event will provide insights into how we are executing against our NGP strategy,’ Imperial said in a note posted on its website. ‘At the heart of our strategy is a desire to create something better for the world’s smokers. We want smokers to switch to alternative products with lower health risks. We are enabling this transition by providing an outstanding vaping experience, endorsed by a trusted brand and underpinned by leading edge science.’

Imperial said the event’s presentations would set out the considerable potential NGP offered consumers and why this potential would be additive also for Imperial and its shareholders. ‘We will highlight how we are developing the pioneering brand blu with a compelling vaping proposition and a dynamic innovation pipeline to appeal to adult smokers,’ Imperial said. ‘Our omnichannel approach is building distribution strength across traditional retail outlets, vape stores and online, ensuring our products are available when and where smokers want to buy them.

‘The strong growth in sales of myblu, with an increasing rate of pod repurchase, reflects a really positive response from smokers, vapers and retailers across our current market footprint. Revenues have been gaining momentum this year, resulting in an annualised exit run-rate of around £0.3bn, positioning the Group well for accelerated growth in FY19 and beyond.

‘Our NGP ambitions are reflected in our management incentives to deliver compound annual revenue growth of 35-150 percent over the three years to FY20. The upper end of this range equates to NGP revenues of around £1.5 billion in FY20. We also have clear levers to drive profitability and expect the NGP business to begin to contribute to Group profit as we exit FY19, with margins continuing to build thereafter.’

Imperial said that it was announcing today plans to launch, Pulze, a heated tobacco product early next calendar year.

Presentation materials will be posted on Imperial’s website www.imperialbrands.com.

The EU Commission has reiterated that, within the Union, tobacco advertising, promotion and sponsorship without cross-border implications are regulated at member state level.

The Commission was replying in writing to a question by the French member of the EU Parliament, Sophie Montel.

‘The EU says that it is committed to tobacco control, bearing in mind that, every year, nicotine addiction takes a toll of 700,000 victims in Europe and causes seven million deaths worldwide,’ Montel said in a preamble to her question.

‘That is why the EU Tobacco Products Directive prohibits manufacturers from claiming that one of their products is less harmful than another: tobacco consumption in any form is dangerous.

‘Philip Morris is now marketing an electronic device (IQOS) for smoking “heated tobacco”, as opposed to the tobacco that gets burned when it is smoked in conventional cigarettes.

‘Although it is legal to market this device, the company’s advertising seeking to publicise it is illegal in some countries, including France, and its claims that its product entails a lower risk of harm are at odds with the EU Tobacco Products Directive.’

Montel asked: ‘Does not the Commission think that every form of advertising of tobacco products or the like (e-cigarettes) should be completely banned in all member states and that manufacturers ought to be penalised when they dream up ways to circumvent the rules?’

In reply, the Commission said that the EU regulatory framework for advertising, promotion and sponsorship of tobacco products – including novel tobacco products – had been set up by Directive 2003/33/EC (Tobacco Advertising Directive) and Directive 2010/13/EU (Audio-visual Media Services Directive). ‘The Tobacco Advertising Directive prohibits cross-border tobacco advertising and sponsorship in the media other than television,’ it said. ‘The ban covers print media, radio, internet and sponsorship of events involving several member states. Member states are responsible for enforcement including laying down and implementing the rules on penalties applicable to infringements of the national provisions that are put in place pursuant to the Directive.

‘Article 9(d) of the Audio-visual Media Services Directive prohibits all forms of audio-visual commercial communications for tobacco products, including product placement and sponsorship, on television and on-demand audio-visual media services.

‘The scope of the Tobacco Advertising Directive results from the Court’s finding that the EU could legitimately only introduce a ban on certain types of tobacco advertising and sponsorship with cross-border implications on the basis of Article 95 of the EC Treaty (now Article 114 of the Treaty on the Functioning of the EU – approximation of laws). Therefore, tobacco advertising, promotion and sponsorship without cross-border implications are regulated at member state level.

‘Meanwhile, Directive 2014/40/EU (Tobacco Products Directive) regulates the labelling and packaging of tobacco products including heated tobacco.

‘More specifically, Article 13 bans the display of any element or feature on packaging suggesting that a particular tobacco product is less harmful than another.’