April 15th, 2014 — Current Issues, General, prices, Retail Cigarette Brand Prices Around the World
President Obama has released his proposed Fiscal Year 2015 federal budget that includes a $.94 per pack increase in the federal cigarette tax rate and a proportionate 93% increase in all other tobacco tax rates. Each of these tax rates would be annually adjusted upward by an inflation index. The additional cigarette and OTP tax revenue would fund pre-school education programs for four years olds in low income families.
This is essentially the same proposal that the President included in his Fiscal Year 2014 budget, which Congress did not pass. The President’s budget has been delivered to Congress for consideration by the U.S. House of Representatives and the U.S. Senate.
Under the 2015 budget proposal, the new tax rates for cigarettes and tobacco products would be as follows:
- Cigarettes and Little Cigars: $1.95 per pack
- Chewing Tobacco: 97.13 cents per pound
- Moist Snuff: $2.91 per pound
- Roll Your Own Tobacco: $47.82 per pound
- Pipe Tobacco: $5.464 per pound
According to the White House Office of Management and Budget (OMB), the proposed cigarette and tobacco tax increases are estimated to raise $78 billion over the ten year time period from 2014 through 2024. The budget estimate indicates that the cost of expanding pre-school education to four year olds from low income families would be $76 billion over this same ten year time period.
However, the ten year budget projection issued by the OMB shows that the additional revenue raised by these higher cigarette and tobacco tax rates declines from a high of $10 billion extra dollars in Fiscal Year 2016 to $7 billion extra revenue in Fiscal Year 2024 while the cost of the pre-school education program increases from $4 billion in Fiscal Year 2016 to $11 billion in Fiscal Year 2024. In other words, after the first ten years, the cost of the program exceeds the additional cigarette and tobacco tax revenue to support the program.
March 6th, 2014 — Acquisitions, Current Issues, Key International Business & Market Developments
Recent rumors of consolidation now appear accurate with the recent news Tabesa has acquired cigarette manufacturers Veneto Tabacos and Monte Carlo.
All factories are located close to Ciudad del Este.
It remains to be seen if the factory operations will be consolidated too.
Tabesa is by far the largest cigarette producer in Paraguay with a large diverse export market. The business is owned by the recently elected President.
There are further rumors that Tabesa’s recent acquisistion frenzy is not over – so watch this space.
Will consolidation continue and where is this headed??
Who will be next?
March 3rd, 2014 — Acquisitions, Current Issues, Regulations: FDA etc.
The UK Financial Times published an article today that Reynolds American (RAI,) the US holding company for RJR Reynolds Tobacco Company – is considering acquiring Lorillard Tobacco – effectivley merging the #2 and #3 tobacco companies in the USA.
This is not new – but the timing is. Rumors of RAI acquiring Lorillard have been around for several years. Is this wishful thinking?
From one perspective it makes sense. RAI could easily merge Lorillard’s manufacturing into existing facilities – for a huge cost saving. The Lorillard business is hugely profitable. And there are further easily realizable cost-savings from consolidation.
On the other hand acquiring Lorillard now, prior to the FDA ruling on Menthol cigarettes (Newport is the US’ leading menthol brand) and e-cigarettes (Blu is the leading US e-cigarette,) looks premature.
Besides this the FTC may not like (or agree) a merger. RAI would own Newport, Kool and Salem - the number 1, 2 and 3 menthol brands in the US.
Would a combined operation compete more effectivley with Altria?
What do you think??
Who stands to benefit the most?
February 27th, 2014 — Electronic Cigarettes, Regulations: FDA etc., Tobacco Harm Reduction
Dr Michael Siegel recently commented the FDA has accomplished nothing to make cigaretes safer – citing as an example their recent denial of a substantial equivalence application.
For the first time, the FDA recently disapproved a Substantial Equivalence application, resulting in the withdrawal of four cigarette brands off the market (varants of Sutra Bidis).
It has come to light that the FDA’s bold action did not result in the brands withdrawal. This is because the four brand variants were already voluntarily withdrawn several years ago. The company did not respond to the FDA’s request for more information because it had no intention of re-introducing these products in the U.S.
The FDA stated; “this marks the first time that we have used our authority under the Tobacco Control Act to stop the continued sale and distribution of currently marketed tobacco products because they were not found “substantially equivalent” – and it is not an action we take lightly.” Dr. Michael Siegel commented: “Perhaps this is what happens when it takes two and half years to make a ruling on a substantial equivalence application. By the time you make your ruling, the brands about which you are ruling no longer exist.”
Dr Siegel further lambasts the FDA by stating; “this story merely highlights the fact that the FDA has done literally nothing in the past five years of its jurisdiction over cigarettes to protect the safety of the nation’s cigarette supply. The agency has done nothing about menthol. The agency has done nothing about nicotine. The agency has done nothing to make cigarettes safer by regulating carcinogen or chemical levels or additives. The agency has, in sum, done nothing at all to make cigarettes safer.”
He further adds; “ironically, the FDA has failed to take the one action it could have taken to make the tobacco products availalbe on the makret a lot safer: to embrace the concept of electronic cigarettes and to propose regulations that treat these products more leniently than tobacco cigarettes, in order to motivate smokers to move away from the more toxic cigarettes to the much safer fake ones.
In fact, the two actions the FDA has taken on electronic cigarettes are exactly the opposite: actions which would have protected the most toxic tobacco cigarettes from competition by the much safer electronic ones.
First, the FDA tried to ban all electronic cigarettes. Fortunately, that didn’t work. However, the agency continues to discourage electronic cigarette use and continues to have misleading information about these products on its web site.
Second, the FDA apparently tried to regulate electronic cigarettes in a manner that was inappropriately stringent and ended up protecting, instead of threatening, cigarette sales. Apparently, the Office of Management and Budget caught the FDA on that one and threw the regulations back in their lap.
At this stage, I really have to question the wisdom of having given the FDA regulatory jurisdiction over tobacco products in the first place. It was a bad idea five years ago, but it is only getting worse as the agency botches it and takes exactly the wrong actions — protecting cigarettes rather than protecting the public’s health.”
February 27th, 2014 — Electronic Cigarettes
House Members Henry Waxman, Tom Harkin and Peter Welch are asking State Attorney Generals to classify e-cigs as cigarettes so they fall under the Master Settlement Agreement (MSA.)
The main reason cited is using the MSA provisions to prevent advertising and marketing of e-cigs – particularly to youth and children.
They cite a recent CDC study which indicates an emerging trend of e-cigs use by youth and children which could serve as a gateway product to nicotine addiction.
While efforts to restrict tobacco access and use to adults only is laudable – this initiative misses the point.
Many E-cigs have nicotine- but not all. And if they don’t, they are technically not cigarettes nor any other type of tobaco product.
The judicial system will uphold this point and any US attempts to regulate non-tobacco e-cigs will fail – irrespective of whether it is under the MSA or FDA.
What’s your opinion??
Moreover the issue of youth smoking and prevention is more complicated than this….
Why do youth and chidren experiment with tobacco products (cigarettes) and now it appears e-cigs??
Is it accurate that e-cig use leads to cigarette use as implied by CDC?
And is it such a bad thing that e-cig use is being used as a substitute for actual cigarette use??
Post your views and let’s open a dialogue….
February 26th, 2014 — Electronic Cigarettes
In case you’re still undecided – E-cigs are here to stay. And we’d all better get used to it - Health Regulators and policy advocates included.
Befuddled Regulatory Health advocacy thinking demonstrates how truely difficult it is to develop a clear regulatory policy – or even if one is really needed?
Some want an outright ban – but is this even possible?
Others are wrestling with how to classify E-cigs. Is it a tobacco product, drug-delivery device, recreational toy or nicotine replacement therapy??
Who has a vested interest in this?
What if the product contains no tobacco products or nicotine?
How do you regulate the entire category and its flavor variants?
Should it be taxed?
Many agree E-cigs are probably less harmful than combustible cigarettes – do you agree?
Others argue E-cigs are a starter product leading to nicotine addiction – do you agree?
Some national / regional markets are considering a ban – is this practical??
And what about the US – where any sales restrictions will almost certainly end up in the courts??
Your thoughts and opinions are welcome….
February 26th, 2014 — Exhibitions
These days pre-show rumors that the next tobacco exhibition will be cancelled are rife – and increasingly accurate.
The lastest victim was the joint Inter-Tabac / ProTobex tobacco exhibition scheduled for Bali February 27/28 – cancelled earlier the same week.
The Balinese police rescinded their approval at the last minute. Their exact reasons are unclear, although it was mentioned Bali has no tobacco industry (we already knew this.)
The damage is done. Participants were already inbound; monies spent and travel plans made, not to mention all the associated costs of exhibiting and attending. All lost.
Last year World Tobacco was similarly embarrassed; cancelling its exhibition in Istanbul Turkey – after approval was withdrawn at the last minute.
Last year, shows scheduled for Moscow and Macau were also cancelled.
While there are altogether too many tobacco exhibitions – often almost on top of one another – this is not a good outcome.
Will Inter-Tabac / ProTobex organize a future exhibition in Asia and if so where??
Where should the next tobacco exhibition in Asia be held?
Do tobaco exhibitions have a future and
if so, where else do you recommend future tobacco exhibitions be held ??
June 11th, 2013 — Current Issues, Key International Business & Market Developments
Filtrona PLC – The UK filter and plastics group – announced last week it is changing its Corporate Identity.
From June 26, it will be rebranded as Essentra and Filtrona Filters will be known as Essentra Filter products.
The rebranding is probably a good idea as Filtrona is increasingly less about cigarette filters as the group acquires more businesses with non-tobacco activities.
So what do you think about the new name?