Modify the Risk, Enhance the Future

Opinion: Modify the Risk, Enhance the Future


Lou Maiellano, President, TAZ

In late November, I saw something I never thought they’d see: The New York Times printed a story about a tobacco company without its usual vitriol and animosity. The story, “A Lesser Warning? Maybe,” detailed the efforts of Swedish Match to “do something that no (tobacco) company has done before: spur a reshaping of American tobacco policy and regulation, and the conventional wisdom around it.

By submitting copious filings for review and analysis, Swedish Match is requesting that the FDA allow it to market its snus products as ‘modified risk tobacco products.’ ” The article goes on to say that Swedish Match is in some ways paving the way for other tobacco companies and other tobacco products to provide evidence that their products promote tobacco harm reduction.

Swedish Match needs to be applauded for taking this unprecedented step, incurring significant costs and investing other resources in this endeavor. Also, the FDA needs to be acknowledged for taking the filing seriously and for going on the record, as Center for Tobacco Products (CTP) director Mitch Zeller has, in supporting methods that permit cleaner, less harmful methods of nicotine delivery.

If this strategy with the FDA is successful and it results in Swedish Match being allowed to market and sell its snus  products with packaging and labeling stating that its products are less harmful than other forms of tobacco, then we will have reached a watershed moment in the tobacco industry.

An Important Move

Many of us in the industry have known for a long time that there is a continuum of risk among tobacco products. The FDA’s CTP has acknowledged this. Unfortunately, few other important groups made the acknowledgment—primarily public health groups, federal and state legislators and certain academics and researchers who have historically made their reputations and their incomes attacking, restricting and seeking to ban tobacco of all shapes, sizes and types.

For them it makes no sense to admit to anything with respect to tobacco, much less that some forms are less harmful than others. But despite the critics, there are also reasonable and responsible health organizations and professionals who recognize that modified risk is well worth the effort.

So this raises the question: Why is this move by Swedish Match so important to the industry? It’s important for a number of reasons.

First, it highlights what it never hurts to state: that there are responsible tobacco companies who want to work with legislators and regulators when it’s appropriate. The modified-risk category was established in 2009’s Family Smoking Prevention and Tobacco Control Act. The fact that it was written into the legislation, then passed and signed, demonstrated that many in Congress and some in the administration had an appreciation that modifying tobacco risk was both achievable and worthwhile. It’s a sentiment clearly shared by Swedish Match, its directors and management.

Second, it offers every tobacco company an opportunity to seriously consider this route for one or some of its products. We all know that the tobacco trade has worked hard in other areas at the behest of legislators, notably in the area of restricting sales to minors, responsibly paying our taxes and, within reason and within the law, labeling and marketing our products. Continuing to research and develop ways to modify the harm associated with tobacco and nicotine delivery is yet another way to show our willingness to remain responsible and relevant.

Finally, it also makes sense that distributors and retailers look at these products as they come to market and commit to stocking and merchandising them. Companies willing to commit resources to securing FDA approval for their modified-risk tobacco products deserve the support of the entire supply chain.

Heady Times

There is no question that the tobacco landscape had changed irrevocably over the past five years. And there is certainly no question that many more changes are imminent. Companies such as Swedish Match are on the forefront of many of these changes. Other new products and new technologies are also on the market, and many more are promised down the line.

It’s an exciting time to be in the tobacco business, despite the rules, regulations, restrictions and roadblocks around the category. But it’s exciting only as long as we in the industry are willing to invest resources and support those who do.

If we are willing to do this right, it won’t just be Swedish Match who receives the positive New York Times coverage—it just might be the entire new, improved tobacco industry.

Vapor Tobacco Manufacturing LLC Announces Launch of Certified Organic eTron® 3T™ E-Liquid including Organic-filled Disposable E-Cigarettes; Industry First for the Vapor Industry

FT. LAUDERDALE, Fla., Dec. 15, 2014 /PRNewswire-USNewswire/ — Vapor Tobacco Manufacturing LLC (“VTM”) announced the launch of the first certified organic e-liquids for the vapor industry — eTron® 3T™. VTM’s organic products have been certified organic under the United States Department of Agriculture’s National Organic Program.  As certified organic products, VTM’s e-liquids carry the familiar USDA Organic Seal.

VTM has launched its organic e-liquid in two different tobacco flavors, American Blend and Virginia Blend.  Both flavors are offered in full and light strengths (Red and Gold).  VTM also offers organic menthol (Green).  VTM’s certified organic liquids are sold in  child resistant 15 ml glass bottles as well as in pre-filled eTron® 3T™ disposable e-cigarettes.

VTM’s eTron® 3T™ organic products will formally debut to the trade at the January Tobacco Plus Expo in Las Vegas, NV (

VTM plans to soon add responsible, adult-friendly flavors, also in certified organic form.

VTM’s certified organic e-liquid is made using a patented process.  This patented process uniquely allows for the manufacture of organic e-liquid because conventional e-liquids typically rely on ingredients that are not organic.  In contrast, VTM’s tobacco e-liquids are made from just three ingredients:  organic tobacco, organic glycerin and water.

VTM’s Virginia Blend, is made from organic flue cured tobacco.  VTM’s American Blend, is made from a blend of organic tobaccos.

Founder and inventor Tom O’Connell commented:   “We are proud to launch the first certified organic e-liquid for the vapor market.   Vapor consumers have not had an organic choice until now.

“Moreover, our organic product offers the most natural tobacco flavor in the vapor industry.  It tastes like tobacco because it is made from tobacco – certified organic tobacco.

“Having been in the vapor industry for years and before that in cigarettes and smokeless tobacco, I know that flavors like caramel are substituted for real tobacco flavor in e-liquids.   Vape shops often rotate smokers through a series of different flavors – simply because none of the available flavors actually fit the tobacco taste that the smoker is looking for.   For adult smokers who are looking for tobacco satisfaction from vapor, our eTron® 3T™ liquid is the answer.   They’ll know the difference from the first puff.”

Joseph Fuisz, co-founder and Member, commented:  “Vapor innovation has focused on incremental device improvements while the actual e-liquid consumed has not materially changed apart from provenance – the move from Chinese to US and European-made liquids.    Moreover, strong vapor category growth has masked the relatively low conversion rate for smokers who try vapor.   The vast majority of smokers do not stay with vapor and the principal reason is the poor acceptance of product taste.   It is precisely this market – the adult smoker looking for vapor alternatives – that eTron® 3T™ organic e-liquids are geared to.  Certified organic eTron® 3T™ e-liquid is a dramatic step forward for the vapor industry.

“The USDA Organic Seal is regulated by federal law and limited to organic products that are independently certified to meet USDA’s strict organic criteria.    We proudly carry the USDA Organic Seal on our products as our promise to customers – that our products are made from the finest organic ingredients.  eTron® 3T™ represents the finest quality in e-liquids and delivers great tobacco satisfaction to the US vapor community. In addition, our e-liquids are similarly certified organic for the European market – and thus entitled to carry the European organic leaf logo.  We are looking for European distributors as a result.”

Jay Kusma, director of c-store accounts, stated:  “I am very proud to bring eTron® 3T™ to our lead convenience store accounts.  This industry first organic product has a taste profile that is superior to anything available on the market today.   It is a major step forward for customers, and we are offering a compelling value proposition for consumers and our chain store partners.”

VTM’s products will initially be sold under the eTron® and 3T™ (True Tobacco Taste)  trade names.   VTM will entertain private label requests for a select number of large accounts subject to completing the organic certification process for such additional brands.   Vapor store accounts will be serviced by Global Vapor Corporation, Ft Lauderdale Florida.  Convenience store accounts will be serviced by US Vapor Corporation, Jupiter

Philly Merchants Hurt by New Cigarette Tax

Philly Merchants Hurt by New Cigarette Tax

$2-per-pack tax to fund schools has many customers driving to the suburbs.
November 11, 2014

​PHILADELPHIA – In an article this week, profiled local business owners who have been hit hard by the city’s new tax on cigarettes. According to some retailers, cigarette sales are down 80% since October 1 when a $2-per-pack tax went into effect, with funds designated to help the city’s public schools.

“Right now we’re not making [any] money at the corner stores,” retailer Ray Martinez, who owns Ray’s Food Market in West Philly, told the news source. Merchants in his part of the city have been hit particularly hard, as his location is only a few minutes from the city line, so customers can easily drive to neighboring Delaware County to save money.

A pack of Newports that cost $6.35 prior to the tax is now $9.05. A carton is now almost $88, up from about $64, said the merchant. The decrease in tobacco business is also having a ripple effect on the rest of his business. Many local merchants are left wondering what the tax’s collateral damage will be on their livelihoods.

Merchants and related industries such as wholesalers have criticized politicians for not considering the financial implications of the tax on merchants who compete with retailers in the suburbs. While city revenue officials won’t know the actual impact of “border bleed” and smoking cessation on the cigarette-tax revenue, estimates assumed about 13.8 million fewer packs would be sold in the city in the first full fiscal year of the tax.

So far, the tax has already been a boon for stores in neighboring Bucks, Delaware and Montgomery counties, as retailers see an increase in customers hoping to avoid paying the higher prices in Philadelphia, particularly more customers buying in bulk.

Reminder to Register for FDA Workshops on E-Cigarettes

Reminder to Register for FDA Workshops on E-Cigarettes

Three public meetings will cover the issues of e-cig manufacturing, marketing and impact on public health

Published in Tobacco E-News

By  Thomas A. Briant, Executive Director


In September, the FDA announced a series of three public workshops to gather scientific information and provide a forum for discussion about electronic cigarettes and the public health. The public can attend the workshops in person or via live webcast. If you want to attend the workshops in person or by webcast, you must register by submitting a request no later than November 25, 2014, on
The first workshop will be held December 10-11, 2014, in Washington, DC and the agenda will include e-cigarette scientific studies, packaging, labeling of components and ingredients, and environmental impacts. The second will cover the topic of the health effects of e-cigarettes on individuals and the third workshop will focus on the health impact of e-cigarettes on the population as a whole.
December Workshop Agenda
For the December e-cigarette workshop, the FDA lists five topic areas for consideration by speakers and panelists. Those topic areas include the following:
Device Design: This topic area will cover: (1) the potential risks of different kinds of e-cigarettes (disposable sealed e-cigarettes vs. refillable tank-type e-cigarettes), (2) the potential for e-cigarettes to be manipulated by the consumer, (3) how the design of an e-cigarette modifies the delivery of nicotine, (4) the possible material hazards with e-cigarettes, (5) the current battery standards for e-cigarettes, and (6) the methods for measuring e-cigarette performance over time.
E-Liquid and Aerosol Constituents: This topic area focuses on: (1) the chemical composition of e-liquids, (2) the reasons for choosing one ingredient over another if both have the same characteristics (e.g., propylene glycol v. glycerin), (3) the stability of e-liquids and how does storage and packaging affect e-liquids, (4) the methods to measure and control impurities in e-liquids, (5) the chemical constituents of the e-cigarette vapor inhaled and exhaled, and (6) the existence of ingredients in e-liquids that increase toxicity levels in the vapor/aerosol.
Interactions of Device Design, E-Liquids, and Aerosol: This topic area will involve questions about: (1) whether interchangeable parts increase product risk, (2) whether refillable e-cigarettes are a greater risk to users compared to disposable, closed system e-cigarettes that use sealed e-liquid cartridges, (3) whether there are maximum temperatures that should not be exceeded for e-cigarette materials, batteries and heating elements, (4) whether there is a maximum power/wattage rating for heating e-liquids, (5) what design features and manufacturing standards are needed to minimize risk to users and non-users (e.g., risk of explosion, leaking e-liquids), and (6) what are the quantitative and qualitative relationships between the chemical content in e-liquids and the chemical make up of e-liquid vapor/aerosol.
Packaging and Labeling: This topic area highlights two subjects including: (1) whether packaging methods minimize or eliminate risks such as accidental exposure to e-liquids or choking to users and non-users, including young children, and (2) do e-cigarette/e-liquid labels include a list of ingredients, hazards, and expiration dates.
Environmental Impact: The final topic area includes questions on:  (1) the environmental impact of manufacturing e-cigarettes compared to manufacturing traditional cigarettes, (2) the impact of manufacturing e-liquids on the cultivation of tobacco plants, (3) how are e-cigarettes disposed (e.g., recycled or disposed as regular trash), (4) whether e-cigarettes have components that could be considered to be hazardous waste, and (5) the methods available to reduce environmental waste from e-cigarette use.
The FDA indicates that the scientific information obtained through the workshops will not be utilized as a part of the process to finalize the agency’s proposed deeming regulations since the public comment period for the deeming regulations ended on August 8. Rather, the FDA intends to use the scientific information obtained through the workshops to carry out its authority to regulate e-cigarettes with potential additional regulations at some time in the future.
For a full copy of the FDA’s announcement about the e-cigarette workshops, click here

What Altria’s Nu Mark Says About Vaping

What Altria’s Nu Mark Says About Vaping

President Joe Murillo on the past, present & future of a new category

Published in CSP Daily News

By  Mitch Morrison, Vice President & Group Editor
RICHMOND, Va. – In the past year, Altria Group Inc.’s vaping subsidiary, Nu Mark LLC, has emerged from a concept to a key player in the rapidly transforming landscape of electronic cigarettes and the broader vaping category.

Today is the first in a series of interviews CSP Daily News is holding with top executives in the vaping community. Joe Murillo is president and general manager of Altria’s Nu Mark LLC, whose portfolio includes MarkTen and Green Smoke.

CSP: Take us into the decision-making process of how Altria came up with the name Nu Mark and the product MarkTen? What is the meaning of MarkTen, and what should the consumer perceive when he/she sees the MarkTen product?

Murillo: We think MarkTen is a premium name that is meant to appeal to adult smokers and vapers looking for a familiar experience.

CSP: Companies like NJOY, blu and Logic had permeated the e-cig space for several years before MarkTen entered the market. Why the delay in rollout? Would you agree with observers that Altria as an entity was biding its time to determine whether the world of e-nicotine was a fad or trend?

Murillo: I really reject that notion. It’s still very early days in the e-vapor category. The category continues to rapidly evolve. It’s also important to remember that while adult smoker interest in these products is high, we are still not seeing widespread conversion of adult smokers to e-vapor products. I think that’s because no one e-vapor product today meets the interests of adult smokers and vapers.

Nu Mark’s goal is to achieve a leadership position in the U.S. e-vapor category. In just one year, we’ve taken several steps to position us to do just that, including the national rollout of MarkTen e-vapor and the Green Smoke acquisition. Think about that: In one year, we’ve introduced products nationally, and we’ve acquired a terrific company in Green Smoke. That speaks to what we can do in this category.

Nu Mark is using the scale and expertise of Altria’s service companies, which have helped enable Altria’s tobacco operating companies to succeed in the major tobacco categories, to accelerate Nu Mark’s progress and our ability to lead the category.

CSP: Many, notably Wells Fargo analyst Bonnie Herzog, predicted a few years ago that instead of launching its own product, Altria would look to acquire a leading brand, based on the company’s record of acquiring mature brands in the OTP (other tobacco product) space (e.g., U.S. Smokeless Tobacco). Will Nu Mark consider acquisition in lieu of or in addition to future product innovation?

Murillo: I think Altria’s tobacco operating companies have an unmatched record of innovation in the tobacco category. While I can’t talk about Nu Mark’s future plans, we did make a terrific acquisition earlier this year when we bought Green Smoke. Green Smoke is a really innovative e-vapor company that brings with it talented people and a history of innovation that matches our own. Adding Green Smoke to the mix allows us to build a product pipeline to complement our current MarkTenproducts.

CSP: Please share some insights from your rollout. Observers say it’s too soon to judge the strength of MarkTen and RAI’s Vuse since both brands are very much in the trial stage with coupons driving up volume. Would you agree with that assessment?

Murillo: Without a doubt, awareness and trial are important for any new-product introduction. I agree that its early days in this category and we shouldn’t jump to any conclusions. In fact, MarkTen e-vapor is just now reaching full national distribution. I can tell you we’re pleased with how MarkTen e-vapor has been received by retailers and the initial adult vaper feedback I hear every day. We know our unique FourDraw technology is of particular interest to adult smokers and vapers. I’d also look to what retailers say about MarkTen e-vapor—being voted the best new e-cigarette by retailers in CSP’s Retailer Choice Best New Product Contest speaks for itself.

CSP: A year from now who do you expect to be the front-running e-cig brands?

Murillo: That’s really impossible to predict. I think the best answer to that question is another question: What’s it going to take to be a leading brand in this category? I think it’s all about understanding what adult smokers and vapers are looking for in this category and being able to build the right brands and products that meet those interests. I think we should be well positioned to do that in the long-term.

CSP: It’s been striking how much has changed in the past year. We have seen e-cigs shift from unstoppable new segment to struggling in the wake of the broader e-vaping trajectory. Where do you see e-cigs in two to three years within the broader total-tobacco backbar? Will e-cigs follow the path of snus as a very small, niche player, or a potential equal (near equal) companion to cigarettes, or something else?

Murillo: It’s hard to predict where this category will go. It’s still early days, and we see adult smokers and vapers looking and trying a variety of products because no single product best meets their interests today. I believe that’s why you see that adult smoker interest in these products is high, but we still are not seeing widespread conversion of adult smokers to e-vapor products. I also think how the FDA regulation is implemented and how the states legislate these products will play a role in shaping the future of this category.

CSP: Many e-cig users say the big problem is e-cigs simply do not adequately replicate the cigarette experience. Several smokers I spoke to say there’s nothing in the e-cig experience that replicates the combustion experience of cigarettes. Do you see this as THE major obstacle inhibiting long-term e-cig growth, or do you believe there are other factors (number of puffs, battery life, etc.).

Murillo: I think its early days in this category, and the people who can innovate the fastest to create the experience adult smokers and vapers are looking for will win. There’s no question that no one has it right just yet. It’s going to take the right mix of understanding adult smoker and vaper preferences and understanding technology to develop the right product offering combined with the right brand building to meet these interests.

CSP: Speaking of vaping, as MarkTen improves market share, it is doing so in a somewhat uncertain e-cig arena. Is Nu Mark or Altria currently planning rollout or trial of other vaping products over the next 12 to 18 months? Are you looking at potential acquisitions in the e-cig/vaping arena?

Murillo: Our competitors would love it if I shared our detailed plans for the next year! Obviously I can’t spell out our plans, but I can tell you that we are excited about our pipeline of e-vapor products. We look at the national roll out of MarkTen as the beginning of our path in the e-vapor category.

I have a sign in front of my office that says Nu Mark is committed to “relentless innovation.” We strive to show that commitment every day. In fact we’ve already announced that this November we’re introducing the new MarkTen 2.5% NBW nationally in addition to our current product. And we have other things in the works. It’s exciting times at Nu Mark; stay tuned.

CSP: Looking at Altria’s total portfolio, where do you see Nu Mark fitting in? Is it a growth player? Is this the first of a broader portfolio of MarkTen products akin to the family of Marlboro brands?

Murillo: Again, I can’t get into specific future plans. Of course, we’ve already announced that in addition to the original MarkTen, we are also offering the new MarkTen 2.5% NBW product in November.

CSP: MarkTen so far has avoided embracing flavors. Is that something the division is reconsidering or open to reconsidering?

Murillo: We understand that flavors are an important factor for adult smokers and vapers interested in the e-vapor category. In addition to the original MarkTen e-vapor, we have a lead market in our home state of Virginia where we have additional flavor varieties called Robust and Smooth Mint in market.

CSP: From the Food & Drug Administration’s deeming regulations to local ordinances, some of which treat the e-world like cigarettes, what do you consider responsible regulation and what is overreaching, whether on the local, state or federal front?

Murillo: We start from a place that says e-vapor products are not cigarettes and shouldn’t be regulated or legislated like them. For example, we don’t think it makes sense to automatically sweep e-vapor products into existing smoking bans, but we do think it makes sense to prohibit their use in places like schools or other places meant for children. On the regulatory side, we do think FDA science- and evidence-based regulation of this category makes sense and have shared that perspective many times with FDA.

I think on all these issues—whether state or local legislation or FDA regulation—it’s important for the retail community to be engaged. I’ve seen it several times; the voice of the retailer makes a difference.

Universal Corporation Announces Agreement with Philip Morris International Inc. to Supply U.S. Tobaccos

Universal Corporation Announces Agreement with Philip Morris International Inc. to Supply U.S. Tobaccos

RICHMOND, Va., Nov. 5, 2014 /PRNewswire/ — George C. Freeman, III, Chairman, President and Chief Executive Officer of Universal Corporation (NYSE:UVV) (“Universal”), announced today that the Company’s subsidiary, Universal Leaf North America U.S., Inc. (“ULNA”) will increase its direct purchases of flue-cured and burley tobaccos, expanding its support of United States tobacco growers, as part of a new leaf supply agreement with Philip Morris International Inc. (“PMI”).  PMI’s decision to adopt a new leaf buying model for their U.S. leaf purchasing operations, announced separately today, provides for a transition from a direct farmer contracting model to purchasing processed grades of tobaccos through two global leaf suppliers in the United States.  The transition is expected to provide important supply chain efficiencies and is indicative of PMI’s and Universal’s strong commitment to the grower communities and PMI’s intent to remain a major purchaser of U.S.-grown leaf tobacco. The change will be effective for the 2015 crop and will include the assignment of certain grower contracts and use of receiving station operations.

Mr. Freeman stated, “We are very excited about this opportunity to meet the evolving needs of one of our longstanding global business partners, while broadening our leaf purchasing and grower support activities in the United States.  As the global leader in the supply of leaf tobacco, we are well positioned to continue our support of Good Agricultural Practices, and are committed to the expansion of the Agricultural Labor Practices code (“ALP”) across our full U.S. grower base.  ALP is designed to further our corporate goals and the goals of our customers’ of progressively addressing and eliminating concerns found in agriculture with child and other labor issues, and achieving safe and fair working conditions on all farms from which we source tobacco.”

Clayton G. Frazier, President of ULNA, added, “The expansion of direct contracting by Universal will provide procurement synergies and economies of scale and will promote efficient leaf utilization of packed grades of U.S. tobaccos supplied to PMI and our other customers.  In addition, we look forward to expanding our relationships and services to further strengthen our grower communities.  These positive developments, in conjunction with our recently announced entry into the sweet potato juicing and dehydration business, Carolina Innovative Food Ingredients, Inc., illustrate the continued strong commitment of Universal to tobacco growers in the United States. The production of sweet potatoes provides many tobacco farmers with an important and economically viable crop grown in rotation with tobacco.”

Headquartered in Richmond, Virginia, Universal Corporation is the leading global leaf tobacco supplier and conducts business in more than 30 countries.  Its revenues for the fiscal year ended March 31, 2014, were $2.5 billion. For more information on Universal Corporation, visit its website at

SOURCE Universal Corporation

Reynolds American wants FDA to ban vapor e-cigs

Reynolds American Inc. has fired an expected shot across the bow of small vapor cigarette manufacturers.

A Reynolds division recommended to the Food and Drug Administration in a 119-page submission that the agency ban the use of vapor electronic cigarettes.

Traditional e-cigs are battery-powered devices that heat a liquid nicotine solution in a self-contained disposable cartridge and create a vapor that is inhaled. The manufacturers have provided few flavor choices, in part in expectations that the FDA would limit flavorings as they do with combustible cigarettes.

By comparison, vapor products can feature a liquid capsule that is inserted into a cartridge, known as an open-system format. Vapors offer consumers a wider variety of flavors, included fruits and candy.

“We believe FDA should not allow such products to be sold or marketed,” Reynolds spokesman David Howard said in discussing the company’s submission. “We believe open-system vapor products create unique public health risks.

“These systems are highly subject to adulteration and tampering, they are manufactured largely overseas in facilities that would, as proposed, fall outside regulatory inspection and oversight, and many nicotine liquids are sold in non-child-resistant packaging in flavors that may be appealing to youth.”

Industry observers say much of the nicotine liquid for the open-system vapor products are made in China or in unregulated vape shops, a sizable number of which are operating in the Triad.

Altria Group Inc. and Lorillard Inc also submitted recommendations – both less stringent that Reynolds – during a public comment period that expired in August.

The FDA began regulating tobacco products and marketing in June 2009, but it does not have the authority to ban nicotine or tobacco.

The industry, advocacy groups, analysts and adult smokers have been waiting for years for the FDA to decide on approving e-cigs and vapors as a smoking-cessation device. A Wild Wild West environment has emerged in the absence of FDA e-cig regulations.

Reynolds’ recommendations did not come as a surprise to vapor e-cig supporters, who have expressed concern since the category’s emergence about federal regulators allowing the Big Three to dominate e-cigs as they have combustible cigarettes and moist snuff.

“R.J. Reynolds’ call for the FDA to ban the majority of e-cigarette products should be seen for what it really is — an admission that it simply cannot compete in the current e-cigarette market,” said Gregory Conley, president of the American Vaping Association.

“Recent market reports show that while sales of open-system e-cigarette products and e-liquid are booming, sales of closed-system cigarette lookalikes – the kind that Reynolds sells – have stagnated.”

The stakes over the e-cig vs. vapor debate could be significant financially, as well as industry changing.

Wells Fargo Securities analyst Bonnie Herzog estimated overall U.S. e-cig revenue reached $2 billion in 2013. She projects it will increase up to $10 billion by 2017.

Herzog predicts Reynolds will have $4 billion in revenue from e-cigs in 2021, compared with $3.9 billion from conventional cigarettes. That’s compared with barely any e-cig revenue and $6.4 billion in conventional cigarette revenue for 2013.

Herzog also has noted a significant pickup in vapor sales in recent months.

The World Health Organization said in an Aug. 26 report there are 466 global e-cig brands and that $3 billion was spent globally on the products in 2013. “Sales are forecasted to increase by a factor of 17 by 2030,” the report said.,

The WHO report’s authors expressed concern about the ability to manipulate the vapor products to insert liquid compounds other than nicotine solutions. They also said there has not been near enough time to determine whether e-cigs will contribute to “many diseases of interest, such as cancer. … The association of e-cigs with such diseases will not be available for years or even decades.”

Reynolds recently began a national launch of its e-cig brand, Vuse, that top executive Susan Cameron has touted as a “game changer” for the sector.

Reynolds is confident enough in Vuse that it plans to sell the top-selling U.S. brand, blu eCigs, as part of a $27.4 billion offer for Lorillard. Reynolds would sell blu eCigs and its 41 percent U.S. market share to Imperial Tobacco Group Plc in a related $7.1 billion deal.

Cameron said during an investor presentation last week that adult smokers are experimenting with self-contained e-cigs and open system vapor products.

“I think that what you’ve seen is as consumers have tried a lot of these e-cigarettes that aren’t satisfying, this has driven a lot of the growth of what we call tanks,” Cameron said.

“The growth of those is driven by the consumer’s desire to get satisfaction. If you’re not getting satisfaction out of the e-cigarette format because you’re not getting the nicotine that you want, then if you go to those tanks, you can figure out how much nicotine you want, right. You fill it yourself.

“Our position is really that these open tanks are really not appropriate. And the reason for that is because people can put whatever they want to in those tanks, and this is a lot of the public outcry. People are putting a lot of things other than nicotine into these pipes.”

For example, there are companies making e-mail pitches for selling e-liquids containing cannabis.

“Second of all, if you really load a lot of nicotine into a pipe, and there is nothing to stop a kid from picking it up, this is not good,” Cameron said. “So we believe that closed systems are the way that regulators should evolve.”

Reynolds said that if the FDA does allow open-system vapor products to be sold, it “should create a level playing field on which all manufacturers of non-combustible deemed product categories are subject to equal treatment.”

“Such equal treatment will ensure that all such products meet the health and safety requirements that FDA determines are necessary to safeguard and promote the public health.”

Lorillard said in its 132-page submission that e-cigs “hold the potential to advance the public health dramatically by moving existing users of conventional tobacco products to lower risk options.”

“In fact, an international expert panel recently estimated that electronic cigarettes have only 4 percent of the maximum relative harm of conventional cigarettes, suggesting that substitution of electronic cigarettes for conventional cigarettes is likely to provide a significant public health benefit.”

“Lorillard recognizes that reasonable regulation can help foster product quality and consistency, as well as responsible marketing to ensure that the public health benefits of this product category are fulfilled.”

Conley cited surveys of e-cig users that said smokers who try vapor products “are far more likely to be smoke-free than are those who use closed system products that are designed to resemble and taste like cigarettes.”

“We also encourage the Federal Trade Commission to consider Reynolds’ eagerness to see its competitors banned in deciding whether to approve a proposed merger between Reynolds and Lorillard.”

Scott Ballin, past chairman of the Coalition on Smoking or Health, said he expects the FDA to place severe restriction on the open-system vapor products for the reasons Cameron and Reynolds cited.

“The lack of regulatory oversight over the vapor liquid tanks may back the FDA into that stance since otherwise, you open a whole can of worms on what can go into those tanks,” Ballin said.

“The FDA also needs to step in to say that not all e-cigs are OK, and not all of them should be on the market.” (336) 727-7376

Zippo Wins Preliminary Injunction in Trademark Suit

BRADFORD, Pa. — A German court granted Zippo Manufacturing Co. (ZMC) a temporary injunction against Cygnet UK Trading Ltd., a Lorillard Inc. subsidiary, preventing Cygnet from using the “blu” brand name for its electronic cigarettes sold in that country.

The Regional Court of Frankfurt am Main agreed with ZMC that the “blu” e-cigarette brand creates a likelihood of confusion with ZMC’s European Union Community trademark BLU, used in connection with its line of high-performance, precision butane lighters and fuel.

The court found the confusion was due to the high degree of similarity between the marks, an existing similarity between the parties’ respective goods and the ZMC BLU mark’s “at least” average degree of distinctiveness, according to the announcement made Monday by ZMC.

ZMC’s action in Germany and the resulting preliminary injunction against Cygnet is part of ZMC’s ongoing, global effort to protect its worldwide portfolio of BLU trademarks. The company has begun proceedings to oppose applications to register or to cancel trademark registrations for the “blu” e-cigarette brand in the United States, Canada, Mexico and the European Union. Sweden has already rejected outright Lorillard’s application to register a trademark for “blu,” ZMC noted.

In May, ZMC and its subsidiary ZippMark Inc. sued LOEC Inc., a wholly owned subsidiary of Greensboro, N.C.-based Lorillard, for trademark infringement in the U.S. District Court for the Central District of California, as CSNews Online previously reported. The lawsuit seeks to prevent LOEC from selling its blu eCigs in light of Zippo’s earlier ownership and use of the BLU trademark. A trial is slated to begin in April.

“I am very pleased that the German court affirmed our legal rights to our intellectual property,” said Zippo President and CEO Gregory Booth. “Zippo Manufacturing Co. has invested in innovative technology and trademarked its BLU brands from the beginning, and we are working to vigorously protect all of our marks — worldwide — from any misuse by others.”

ZMC is represented by attorneys from Squire Patton Boggs LLP (US) in Frankfurt.

Lorillard acquired blu eCigs in April 2012. However, under the terms of the Reynolds American Inc. and Lorillard merger agreement, Imperial Tobacco Group will buy blu eCigs, as well as the Winston, Kool, Salem and Maverick cigarette brands for $7.1 billion.

Bradford-based Zippo Manufacturing Co. is also the maker of the Zippo lighter and owns the RONSON brand of lighters and fuel.

Zippo Wins Preliminary Injunction in Trademark Suit