Tag: regulation

  • Northern Exposure

    Northern Exposure

    Credit: Matthieu

    Vape and modern oral sales are rising, but combustibles remain king of the North American market.

    By Timothy S. Donahue

    It’s constant but unknown. While the nicotine market remains profitable, it is changing. As more major tobacco companies embrace next-generation products, combustible sales will suffer. The evolving regulatory environment will also continue to play a major factor in the North American nicotine market.

    According to Statista, in 2024, revenue in the U.S. nicotine market will reach $107.5 billion. It is projected to experience a compound annual growth rate of 0.62 percent between 2024 and 2028. The largest segment in the market remains combustible cigarettes, with an expected value of $82.7 billion in 2024. The Marlboro brand continues to dominate U.S. cigarette sales with a 50 percent market share.

    E-cigarette revenues are projected to reach $8.8 billion. Statista expects the vape market to experience an annual growth rate of 3.24 percent from 2024 to 2028. Retail sales of nicotine pouches are also seeing unprecedented growth. According to Euromonitor, the U.S. pouch market generated $8.58 billion in 2023 compared to $7.23 billion in the previous year. The U.S. modern oral nicotine market is expected to reach $11.03 billion by 2027.

    The Canadian tobacco market is much smaller than the U.S., reflecting that country’s lower population. Nicotine sales in Canada are projected to generate a revenue of $12.3 billion in 2024. The market is anticipated to experience a compound annual growth rate of 1.10 percent between 2024 and 2028. In Canada, too, combustible cigarettes continue to account for the majority of tobacco sales. The traditional cigarette market is expected to reach a volume of $10.6 billion this year. In 2024, the revenue in the e-cigarette market in Canada is estimated to reach $1.4 billion.

    Nicotine pouches were approved for sale in Canada on July 18, 2023, as a natural health product. Modern oral nicotine pouches are currently outside the scope of the federal Tobacco and Vaping Products Act and the provincial Smoke-Free Ontario Act 2017, which regulate tobacco and vaping products by restricting their advertisement, display and public use. However, that is expected to change soon.

    During an education seminar at the Total Products Expo (TPE) that took place in Las Vegas Jan. 30 to Feb. 2, 2024, Brad Seipel, executive vice president at MARC Research, noted that many of the next-generation tobacco products disrupting the market today have been on the market for over a decade. Innovation in the industry, he said, is being driven with a focus on tobacco harm reduction and a move away from traditional tobacco. “We are now living in a post-tobacco market. It is a nicotine market,” Seipel said.

    Bonnie Herzog

    Bonnie Herzog, an analyst with Goldman Sachs, observed in an industry report that retailers are seeing customers making fewer trips to the store, which is being driven by consumers switching to alternative nicotine products like modern oral. These products often last longer than a typical pack of combustibles. She also explained that the illicit market for disposable vape products continues to be a growing concern for the nicotine industry and retailers alike as the U.S. Food and Drug Administration’s crackdown on flavors and noncompliant products has driven traffic to the gray/black market or retailers willing to sell unauthorized vaping products.

    She said a broad majority of retailers believe the situation is worsening with the impact felt strongest in urban areas and states with the strictest flavor bans. “Many retailers highlighted that the illicit disposable [e-cigarette] market is impacting cigarette volume, and [Altria] estimates the growth of these illegal products contributed to cigarette industry declines in the range of 1.5 percent to 2.5 percent over the last 12 months,” she said. “Retailers don’t believe the situation will change without more enforcement and are broadly pessimistic given the ubiquity of the offering, tracking/enforcement difficulty and relatively light penalties reducing deterrence.”

    One respondent to the survey pointed out that enforcement fines issued by the FDA are manageable ($19,192 per violation), and the extent of policing hasn’t resolved the issue. Others noted that retailers selling these products (i.e., on the gray market) are making hefty margins on those sales, which are helping them offset losses on (cigarette) sales.

    Brian King

    During Keller and Heckman’s E-Vapor and Tobacco Law Symposium, held Jan. 29–30 in Las Vegas, Brian King, head of the FDA’s Center for Tobacco Products, said his agency carried out a series of coordinated blitzes against Elf Bar and other “illicit” brands at several retailers that resulted in warning letters. The agency then issued civil money penalties following subsequent reinvestigations against retailers found to still be selling illegal products. Many of the recipients of these penalties were small businesses.

    “We do know that we need that comprehensive approach,” said King. “And so, we’ve also taken action on the borders, particularly for products that are coming in internationally. We do have import alerts in place. Those do address products that have been accurately declared. Of course, we know that there are entities that are misdeclaring products as well. Towards that end, we work very closely with colleagues at Customs and Border Protection. We did have an operation that was conducted earlier this year where we seized over $18 million worth of products, including Elf Bar, Funky Republic and several others. It was about 1.4 million units of illegal e-cigarettes. Ultimately, this is one example of ongoing activities. There will be more.”

    Tim Philipps

    Also speaking at TPE, Tim Philipps, with Tamarind Intelligence, said that a major issue is enforcement. While the FDA’s premarket tobacco product application (PMTA) process is expensive and onerous, it also seems pointless because there is little effort to stop products that skip the regulatory process from being marketed. According to Phillips, even the FDA’s current blitz barely skims the surface of the deepening gray/black markets.

    “The products that you’re getting offered in retail environments, they haven’t gone through a regulatory process, and there’s no signs of that happening, frankly,” he said. “The FDA is stepping up some of its enforcement activity. We’ve seen more and more of this happening, and I think it will keep increasing. But the reality is the market’s not being regulated at all. The same is happening, by the way, in the U.K. and all across Europe. We’re seeing a lot of products come in. The reason is that a lot of these products are being distributed directly to retailers or directly to consumers (from the manufacturer). And that’s been a great success.”

    A looming federal menthol ban could also boost the gray/black markets for nicotine products. The FDA has submitted proposals to the White House Office of Management and Budget (OMB) to ban the use of menthol in cigarettes and other tobacco products and prohibit all nontobacco flavors in cigars. The FDA is also expected to definitively define a “characterizing flavor.” The OMB is currently reviewing these proposals. Before the product standards can be implemented, the OMB must review their potential economic impact.

    The FDA has stated that it expects to announce the final ruling on the menthol ban in March. However, with the U.S. presidential election approaching this November, many industry experts are uncertain if any action will be taken at all. Unsurprisingly, several respondents to Herzog’s retailer survey expressed fatigue with ongoing uncertainties related to the potential federal menthol ban, the FDA’s efforts to enforce bans on illegal disposable vape products and flavors and the agency’s slow progress in completing PMTA reviews. The rapid growth of local flavor bans is also an expanding concern.

    “A number of retailers who are currently not subject to [local] flavor bans anticipate the potential in the near future given rapidly evolving legislative agendas,” Herzog stated. “The looming decision by the FDA on a federal menthol ban on (cigarettes) has also led many retailers to take a wait-and-see approach on carrying gray market vapor products, which are higher margin and more affordable for consumers.”

    The future of nicotine products still holds promise. Seipel said that the dissolvable and heat-not-burn segments have plenty of room for growth as the awareness and usage of those products haven’t yet gotten traction in the North American market. Seipel said as long as there are combustible smokers, there is going to be room for innovative products that help them switch to less harmful alternatives.

    “There’s also [an] opportunity in innovation for helping female smokers …. We have to remember that there are way more people out there that need help [quitting smoking],” he said.

  • Georgia Seeking to Create Vape Safety Committee

    Georgia Seeking to Create Vape Safety Committee

    Local legislators in Georgia are sponsoring a Georgia House resolution that would create a new study committee on the safety and consumer protection of nicotine vapor products.

    “Within the nicotine vapor product industry there is no current directory of products that have been vetted and approved by the (U.S.) Food and Drug Administration for consumer safety and consumption,” the text of the resolution reads. “Further study needs to be had on the consumer safety of refillable liquid vapor products that are produced from the small businesses within the nicotine vapor product industry.”

    The resolution was introduced to the Georgia General Assembly on Feb. 27, according to media reports.

    “A study is needed to develop potential legislation or other action that would help prevent incidents leading to consumer harm or injuries in the nicotine vapor industry and protect the health and safety of those consuming the products,” the resolution continues.

    The proposed House study committee would be made up of five Georgia House members appointed by the speaker of the House.

    “In the event the committee adopts any specific findings or recommendations that include suggestions for proposed legislation, the chairperson shall file a report of the same prior to the date of abolishment specified in this resolution,” the text reads. “No report shall be filed unless the same has been approved prior to the date of abolishment specified in this resolution by majority vote of a quorum of the committee.”

    Per the resolution, the proposed committee would officially disband on Dec. 1. “Until such products from small business manufacturers are adequately regulated by the federal government, it is important to study all of the issues surrounding electronic cigarettes, e-liquids and other nicotine vapor products while at the same time encouraging economic development in this state,” the resolution text reads.

  • New Virginia Vape Rules, Tax Likely to Become Law

    New Virginia Vape Rules, Tax Likely to Become Law

    Credit: TS Donahue

    Virginia’s 2024 legislative session is likely going to send two bills regulating vaping and a new vaping tax to the governor’s desk.

    Among the bills with a presumably higher impact is one that would create a new state registry that would limit sales to only FDA-approved products.

    “It’s an important step to address childhood vape use,” said Rodney Willet, a cosponsor of the registry effort, according to media reports. The Henrico-based delegate says it would still open the door to sell plenty of vape products for consumers, but Midgette said the trendiness of the industry makes it hard for any one brand to stay popular.

    “It’s an evolving business. There’s one brand everyone wants, then a few months later people want a different one,” Midgette said.

    Midgette also pushed back on the FDA approval requirement, suggesting the products the federal government had approved represent a small and low-quality collection of brands.

    Another bill would block any new shops from opening within 1000 feet of a school or daycare center.

    But the business owner also noted a carve out made in Lopez’s bill for convenience stores and gas stations.

    Last on the list is a new six-cent-per-mil of nicotine tax on vape products currently in the Senate budget.

    “Six cents? That’s nothing,” Midgette joked, noting North Carolina added a five-cent tax already, and it’s handled by his distributors before being passed down to consumers.

  • FDA Urged to Follow the Science for Vaping Rules

    FDA Urged to Follow the Science for Vaping Rules

    Photo: Pixel-Shot

    The U.S. Food and Drug Administration’s Center for Tobacco Products (CTP) should open the marketplace for electronic nicotine delivery systems to products with varied characteristics so that those interested in alternative nicotine products can access them, according to R Street resident senior fellow Jeffrey Smith.

    In a recently published analysis, Smith critiques the FDA’s disregard for the current research on ENDS, diving into new data that he says represents a “tectonic-shift in the academic medicine community” regarding the safety of ENDS for smoking cessation. 

    ”As evidence grows for the utility of ENDS and other potentially life-saving alternative products, the CTP continues to limit Americans’ access to these products,” writes Smith.

    “Though the CTP has received millions of applications for ENDS products, it has only allowed a few to be marketed legally in the United States. Of those that have received marketing clearance, only older closed systems have been approved—with tobacco as the only permitted flavor.”

    Arguing that a diverse range of ENDS products available to those who smoke and want to quit is critical to reducing the health burdens associated with smoking, Smith urges the CTP to revise its processes and procedures, and allow more cigarette alternatives on the market. Continued delay by the CTP, he says, will only lead to more unnecessary deaths and disease in the United States.

  • Ireland Preparing to Implement E-Cigarette Tax

    Ireland Preparing to Implement E-Cigarette Tax

    Image: Zerbor

    The government of Ireland is working to introduce a tax on e-cigarettes in 2025, reports The Irish Times.

    Finance Minister Michael McGrath confirmed that his department had started work with the revenue department to announce the tax in the next budget and introduce it next year.

    McGrath cited the vaping industry’s “insidious” targeting of e-cigarettes toward young people as justification for the tax.

    “There’s no doubt, but it is a deliberate policy,” he was quoted as saying. “In my mind, what is happening when you see all the attractive flavors and names, it’s definitely targeting young people and very successfully.”

    While acknowledging that e-cigarettes are helping some smokers quit more harmful combustible cigarettes, McGrath also noted that there are many unknowns about the long-term effects of e-cigarettes.

    He said it was important for the Department of Finance’s proposed tax to align with policies of other departments around e-cigarettes and vapes, such as the Department of Health and the Department of Environment.

  • Poland Mulling Ban on Disposable E-Cigarettes

    Poland Mulling Ban on Disposable E-Cigarettes

    Photo: Yelena Belodedova

    Polish Health Minister Izabela Leszczyna is mulling a ban on the sale of disposable electronic cigarettes, according to the Polish edition of Business Insider.

    Leszczyna added that she would like to pursue the fastest possible legislative path to such as measure, given that as many as 64 percent young people in Poland had “contact” with the product.

    The news comes after the United Kingdom announced a ban on single-use cigarettes in January.

    Meanwhile, Poland is preparing to implement the EU directive banning the sale of flavored heated tobacco products. According to local media reports, the regulation may take effect from next year.

    The EU directive prohibits the placing on the EU market of flavored heated tobacco products and removes the possibility for member states to grant exemptions for such products from certain labeling requirements set out in EU law.

  • FDA Warns 5 More Online Retailers for Illegal Vapes

    FDA Warns 5 More Online Retailers for Illegal Vapes

    The U.S. Food and Drug Administration has warned five more online retailers for selling flavored disposable vaping products.

    On Feb. 28, the regulatory agency announced the warning letters cite the sale of disposable e-cigarette products marketed under popular brand names such as Elf Bar/EB Design/EB Create, Funky Republic, Lost Mary, Hyde, Breeze, and Cali Bars, according to a press release.

    “Protecting our nation’s youth from the harms of tobacco products is crucial to our center’s public health mission,” said Brian King, director of FDA’s Center for Tobacco Products. “We’re committed to continuing to use a data-driven approach to identify and prevent the sale of unauthorized tobacco products and to take compliance and enforcement action when appropriate.”

  • More Penalties for Unauthorized Elf Bar Sales

    More Penalties for Unauthorized Elf Bar Sales

    Photo: mehaniq41

    On Feb. 26, the U.S. Food and Drug Administration announced the filing of complaints for civil money penalties (CMPs) against 20 brick-and-mortar retailers for the sale of unauthorized Elf Bar e-cigarettes. The FDA previously issued each retailer a warning letter relating to their sale of unauthorized e-cigarettes. However, follow-up inspections revealed that the retailers had failed to correct the violations, and the agency is now seeking the maximum penalty amount of $20,678 for a single violation from each retailer.

    Including these complaints, the FDA has filed more than 100 CMP complaints against retailers for the illegal sale of Elf Bar e-cigarettes. Data indicate these products are appealing to youth. According to the 2023 National Youth Tobacco Survey, Elf Bar was the most commonly used brand among U.S. youth e-cigarette users; among middle and high school students who reported using e-cigarettes in the past 30 days, more than half said they used Elf Bar products during that period.

    “These retailers have not adequately addressed the violations noted in previous warnings from FDA regarding the sale of unauthorized e-cigarettes,” said Brian King, director of the FDA’s Center for Tobacco Products. “Their continued failure to comply with the law is inexcusable, and as is evidenced by today’s actions, we’re committed to holding them accountable for it.”

    As of Feb. 15, the FDA has issued more than 440 warning letters to and filed 100 CMP actions against retailers, including brick-and-mortar and online retailers, for selling unauthorized tobacco products. In addition to actions involving retailers, the FDA has issued more than 660 warning letters to manufacturers, importers and distributors for illegally selling and/or distributing unauthorized new tobacco products, including e-cigarettes. The agency has also filed CMP complaints against 50 e-cigarette firms for manufacturing unauthorized products and sought injunctions in coordination with the U.S. Department of Justice against seven manufacturers of unauthorized e-cigarette products.

  • U.K. Poised to Announce Strict Vaping Levies

    U.K. Poised to Announce Strict Vaping Levies

    Photo: spectrumblue

    U.K. Chancellor Jeremy Hunt is expected to announce a “vaping products levy” during the presentation of the government budget on March 6, reports The Guardian.

    The tax would be similar to 15 schemes in European countries, including Germany, where a €1.60 ($1.73) tax is charged on every 10 mL of vape liquid, and Italy where the rate is €1.30. The EU is also planning a vaping levy across the 27-nation bloc.

    The U.K. tax would charge higher rates for products with more nicotine. There would also be a one-off increase in tobacco duty to ensure that vaping remains a cheaper alternative, with the two measures expected to raise more than £500 million ($633.73 million) a year by 2028–2029, according to The Times.

    Prime Minister Rishi Sunak plans to ban smoking for the next generation by steadily increasing the legal smoking age in England so that tobacco would end up never being sold to anyone born on or after Jan. 1, 2009.

    Vaping industry representatives described the tax plan as an attack on people trying to quit smoking.

    “Vaping is proven to be the most effective way for smokers to quit and in doing so helps drastically reduce the cost of care the NHS [National Health Service] provides to smokers,” said John Dunne, director general of the U.K. Vaping Industry Association, in a statement.

    “It makes absolutely no sense to make it more difficult for adults to stop smoking by penalizing those who choose a safer and healthier option in vaping. Smoking kills 250 people every day in the U.K. and according to Action on Smoking and Health costs the U.K. £17 billion a year,” Dunne added.

    “A Centre for Economics and Business Research report in 2022 found that smokers switching to vaping saved the NHS £322 million, a figure that was estimated to more than double if 50 percent of U.K. smokers made the switch to vapes.

    “Surely, we should be doing everything we can to help smokers escape a habit that kills so many. Increasing taxes on vaping will make vapes less accessible for the most disadvantaged in society who have the highest smoking rates and are most in need of an effective tool to quit.

    “The government continue to hide their heads in the sand while taking actions that will fuel a black market which is already in danger of being out of control. Restricting access to vapes will not only mean more smokers; it will also mean more illegal and unregulated vapes. We need the government to license vape retailers and properly enforce the law against youth access before it is too late.”

    It makes absolutely no sense to make it more difficult for adults to stop smoking by penalizing those who choose a safer and healthier option in vaping.

    John Dunne, director general, UKVIA

    “A Centre for Economics and Business Research report in 2022 found that smokers switching to vaping saved the NHS £322 million, a figure that was estimated to more than double if 50 percent of U.K. smokers made the switch to vapes.”

    “Surely, we should be doing everything we can to help smokers escape a habit that kills so many. Increasing taxes on vaping will make vapes less accessible for the most disadvantaged in society who have the highest smoking rates and are most in need of an effective tool to quit.

    “The government continue to hide their heads in the sand, while taking actions that will fuel a black market which is already in danger of being out of control. Restricting access to vapes will not only mean more smokers; it will also mean more illegal and unregulated vapes. We need the government to license vape retailers and properly enforce the law against youth access before it is too late.”

  • Colorado Senate Approves County-Wide Flavor Bans

    Colorado Senate Approves County-Wide Flavor Bans

    Credit: Marek Photo Design

    Last week, the Colorado Senate voted 21-14 in favor of S.B. 24-022, a bill that allows counties in the state to pass bans on the sales of flavored tobacco products and regulate the distribution of tobacco products.

    While the bill itself wouldn’t ban the sale of flavored tobacco products, it would open the door to local bans, which are currently forbidden.

    This is the second time in recent years that the Colorado General Assembly has moved towards allowing local control over tobacco regulation. In March 2019, H.B. 1033 was enacted, allowing Colorado cities, towns, and counties to increase the minimum age to purchase tobacco products to 21 and increase taxes and retailer licenses, according to Halfwheel. Previously, those actions were prevented via a preemption clause.

    That law was signed by Gov. Jared Polis, who remains governor today. Two years ago, Polis, a Democrat, indicated that he opposed efforts to ban the sale of flavored tobacco products statewide, saying that he instead supported giving local communities the option to enact their own bans.

    S.B. 24-022 now moves on to the House of Representatives.