August 19th, 2014 — Current Issues, Electronic Cigarettes, Key International Business & Market Developments
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
August 13th, 2014 — Current Issues, Electronic Cigarettes, Snus, Snuff & Alternative Products in US Markets, tobacco, Tobacco Harm Reduction
LOGIC Technology, makers of premium electronic cigarettes, announced today the latest results from Nielsen’s C-Track Database, indicating that the brand has captured the No. 1 position in the U.S. for unit share in convenience stores nationwide. Additionally, LOGIC continues to maintain a strong hold on the No. 2 rank for dollar share across the U.S. Currently, LOGIC leads the category in total U.S. unit share at 24.3%. In total U.S. dollar share, LOGIC holds the No. 2 rank at 22.9%. The Nielsen data confirms LOGIC’s strong market presence as it approaches the No. 1 position overall within the electronic cigarette industry in the U.S. Stay tuned to CSD’s daily newsletter tomorrow for more information.
Breaking: LOGIC Captures No. 1 Position For Electronic Cigarettes
August 12th, 2014 — Current Issues, Electronic Cigarettes, Snus, Snuff & Alternative Products in US Markets, Tobacco Harm Reduction
Big Three tobacco companies all launching wider distribution in 7-Eleven, elsewhere.
August 12, 2014
WINSTON-SALEM, N.C. – According to a recent article in the Winston-Salem Journal, the first significant fight for electronic cigarette market share between the Big Three tobacco manufacturers will feature 7-Eleven as a key battleground.
MarkTen, the e-cigarette brand by Philip Morris USA, recently began being sold in 7-Eleven stores in North Carolina, joining blu eCigs (Lorillard Inc.) and Vuse (R.J. Reynolds Vapor Co.), along with offerings from several smaller manufacturers. Reynolds began national distribution of Vuse in June, while blu eCigs has been sold in most national convenience stores for several years.
According to the article, what makes the head-to-head-to-head competition pivotal is that convenience stores are the largest retail channel for e-cigs at 75 percent of brick-and-mortar sales, or about $540 million in 2013, according to the NACS State of the Industry Report .
Philip Morris USA spokesman Brian May told the Winston-Salem Journal that national expansion of MarkTen began in June in the western half of the country. “It will be expanding eastward through the summer and fall,” May said.
The Battle for E-Cigarette Market Share Heats Up
July 15th, 2014 — Acquisitions, Current Issues, Electronic Cigarettes, Regulations: FDA etc., tobacco
Hoping to combat a decades-long slump in smoking, two of the biggest American tobacco companies said on Friday that they were in talks to merge and create a $56 billion cigarette colossus.
A deal between the second-biggest tobacco company in the United States, Reynolds American, and the No. 3, Lorillard, would unite the makers of the Camel and Newport brands and reshape the industry by creating a more formidable rival to the Altria Group, home of Marlboro.
Perhaps more significant, it would give the combined company a leading position in two of the fastest-growing products in a challenged industry: e-cigarettes and menthols.
But a merger, which could be announced as soon as next week, faces a number of significant obstacles.
Antitrust regulators in Washington are certain to scrutinize a deal that would effectively leave cigarette sales — and pricing — in the hands of a duopoly.
A combined Lorillard-Reynolds would control 42 percent of the tobacco market in the United States, according to Credit Suisse research, while Altria has nearly half of the market. And public health advocates have already raised concerns, worried that a merger would increase the influence of cigarette brands that have marketed to children.
Still, a takeover of Lorillard by Reynolds would represent the industry’s boldest response yet to a declining, if still profitable, market. A general drop in smoking rates and aggressive public health campaigns aimed at curbing smoking have cut into sales in the United States.
About 42 million people in the United States, or nearly 18 percent of the adult population, smoke cigarettes, according to the Centers for Disease Control and Prevention. That compares with about 21 percent of the adult population nearly a decade ago and 43 percent of the adult population in 1965, according to the C.D.C.
What remains of the traditional cigarette industry is dominated by Altria, whose Philip Morris arm sells one out of every two cigarettes in the United States.
Opportunity has beckoned in the new business of e-cigarettes. A deal by Reynolds to buy the leading purveyor of e-cigarettes could spur other mergers within the industry as manufacturers jockey for position.
“This transaction in our view will be very positive for the global tobacco industry and could be just the beginning of future transactions with e-cigs/vapor being the underlying catalyst,” Wells Fargo analysts wrote in a note.
At the same time, Reynolds has coveted Lorillard’s strong share of the fast-growing market for menthol cigarettes, which have proved more popular among younger smokers than traditional cigarettes. Lorillard’s Newport brand dominates that business and represents roughly 12 percent of the overall cigarette market.
Under the proposed terms of the deal, Reynolds American would buy Lorillard. It would then sell several billion dollars’ worth of brands and other assets to the Imperial Tobacco Group, the British company that makes Gauloises cigarettes and Montecristo mini-cigars, lifting Imperial to the No. 3 position in the United States.
British American Tobacco, which owns 42 percent of Reynolds American, would invest several billion dollars to maintain the same level of ownership in the combined company and help finance the transaction.
Shares of Reynolds fell 0.8 percent, to $61.75, on Friday, while those of Lorillard surged 4.6 percent to $66.01. Altria shares rose 1.1 percent to $43.43.
A Reynolds and Lorillard deal would combine two of the oldest names in the American cigarette industry. Lorillard traces its corporate ancestry back to 1760 and remains the oldest continuously operating tobacco company in the United States.
And Reynolds was formed from the merger of R. J. Reynolds Tobacco and Brown & Williamson a decade ago.
Talks have been going on for more than a year, with different deal structures contemplated, people briefed on the matter said. The presence of four companies and their particular demands complicated matters. Talks paused about two months ago as the difficulties of negotiating a four-way transaction took their toll.
Still, the companies persisted. The return of Susan M. Cameron as Reynolds’s chief executive helped smooth the process. She had led the company following the merger of Brown & Williamson and R. J. Reynolds in 2004, before retiring in 2011.
While none of the four companies disclosed financial terms for a transaction, Lorillard has a total enterprise value of $24.6 billion, according to Standard & Poor’s Capital IQ.
Given the influence on the market that a combined Lorillard-Reynolds could exert, the companies have long planned to sell some assets to win approval from regulators.
Bringing in Imperial is meant to assuage those concerns. Currently the fourth-biggest player in the American tobacco market with a single-digit percentage of market share, the British company would become a more robust competitor through such a deal.
Antitrust regulators will not be the only source of potential opposition. Public health advocates pointed to what they said was a history of traditional brands like Camel and Newport and e-cigarette brands like Blu marketing to children.
“Regulators beware,” Matthew Myers, the president of the Campaign for Tobacco-Free Kids, said in an interview. “The problem isn’t just antitrust. It’s the increased power of these companies to market to kids.”
While Reynolds describes the United States in regulatory filings as a “mature market” that has declined since 1981, Imperial still sees it as one of the world’s biggest and most profitable markets.
Instead, Reynolds sees opportunity in e-cigarettes, which already have about $2.5 billion in annual sales. Though that is a tiny fraction of the overall tobacco market, e-cigarettes sales are expected to grow quickly in the coming years.
Lorillard is the early leader in the market, having bought Blu eCigs for $135 million two years ago. It spent about $40 million marketing Blu e-cigarettes last year, driving sales up to more than $50 million per quarter and gaining the biggest share of sales at gas stations and convenience stores.
In October, Lorillard purchased Skycig, a British e-cigarette maker, and introduced the Blu brand to the British market.
A Reynolds subsidiary, R. J. Reynolds Vapor, began selling its e-cigarettes last month. Reynolds showed off its device, called Vuse, at the Consumer Electronics Show in Las Vegas and made it the official e-cigarette sponsor of the South by Southwest festival in Austin, Tex.
Altria is also getting into the e-cigarette market with its own subsidiary, NuMark.
In the first quarter, Lorillard, based in Greensboro, N.C., had net sales of $57 million from its e-cigarette business; that accounted for about 45 percent of all such sales in the United States. Lorillard had net sales of $1.59 billion in the first quarter and net sales of $6.95 billion in 2013.
David Gelles contributed reporting.
June 12th, 2014 — Current Issues, General, tobacco
The C-Store Pipe-Tobacco Opportunity
Are retailers missing out on one of tobacco’s greatest growth segments?
OAKBROOK TERRACE, Ill. — The electronic-cigarette boom over the past couple of years has gotten plenty of attention. And while it may be impossible for any segment in the tobacco category to compete with that growth (given the fact that e-cigarettes are a completely new product and thus started with zero sales), pipe tobacco has been experiencing a renaissance of its own in the post-SCHIP era: Sales-data research firm IRI reports that convenience store pipe-tobacco sales have nearly tripled in the last three years, going from 116,061 pounds sold in September of 2010 to 348,011 pounds in April of 2014.
Yes, an easy explanation of the sudden interest in pipe tobacco would be its tax advantage over roll-your-own or make-your-own tobacco after the passing of tax hikes to fund SCHIP (State’s Children’s Health Insurance Program) in 2009. But as vice president of marketing and product development for Scandinavian Tobacco Leonard Wortzel noted, pipe tobacco continues to grow.
“We’re not seeing the 50-60% growth year-over-year, like in 2009, but we are still seeing double-digit growth at tremendous levels,” he said. “There was a whole subset of consumers who were desperate for getting value, and they discovered that pipe tobacco is probably the best value in the tobacco world today.”
“In markets with above-average taxation on cigarettes, retailers have an opportunity to leverage pipe tobacco as a way to deliver value to the price-sensitive consumer,” agreed David Bishop, managing partner of Barrington, Ill.-based sales and marketing firm Balvor LLC.
But are convenience stores taking advantage of that opportunity?
Despite nearly tripling its sales of pipe tobacco over the past four years, “From what we can see, (the c-store channel) has kind of missed this growth story,” Wortzel said. “They have, for the most part, not participated to the extent that other channels have.”
Easily the biggest challenge facing c-store retailers interested in the pipe segment is space. It’s an old story: Between cigarette contracts and burgeoning OTP options, there’s simply not enough room behind the counter. This is all the more challenging when it comes to pipe tobacco.
“Large packages are a key operational issue for convenience retailers as space on the back counter is extremely valuable,” said Bishop.
To help ease some of these space concerns, manufacturers like Scandinavian and Republic Tobacco now offer smaller-format pipe pouches. They still take up more space than the average OTP SKU, but are much easier to fit than the traditional 16-oz. bags.
“Convenience retailers have generally figured out that pouches are the best-selling pipe-tobacco format and the easiest to merchandise,” said Steve Sandman, president of Republic Tobacco.
June 12th, 2014 — Current Issues, General, Key International Business & Market Developments, Regulations: FDA etc., Science, Snus, Snuff & Alternative Products in US Markets, tobacco, Tobacco Harm Reduction
Swedish Match Seeks FDA OK to Label Snus ‘Modified Risk’
Has filed application with Food & Drug Administration for General brand
Published in CSP Daily News - http://www.cspnet.com/category-news/tobacco/articles/swedish-match-seeks-fda-ok-label-snus-modified-risk
RICHMOND, Va. – Smokeless tobacco maker Swedish Match is asking the U.S. Food & Drug Administration (FDA) to certify its General-branded pouches of tobacco as less harmful than cigarettes, according to a report by the Associated Press.
The company, with North American headquarters in Richmond, Va., is filing an application with the FDA to approve the snus products as “modified risk.”
Snus–teabag-like pouches that users stick between their cheek and gum to get their nicotine fix–are popular in Scandinavian countries and are part of a growing smokeless tobacco market in the United States.
Both the public health community and the major tobacco companies are watching closely how the FDA handles the products. The tobacco companies are looking for new products to sell as they face declining cigarette demand due to tax increases, health concerns, smoking bans and social stigma.
Swedish Match is proposing to say that the product is addictive but is “substantially less risky than smoking,” Jim Solyst, director of federal government affairs for Swedish Match North America, said in an interview with AP. Swedish Match also wants permission to remove one of the required health warning labels because Solyst said there’s “excellent scientific evidence” that the product does not cause oral cancer.
The application also highlights a philosophical debate over how best to control tobacco. One camp says there’s no safe way to use tobacco and pushes for people to quit above all else. Others embrace the idea that lower-risk alternatives like smokeless tobacco or electronic cigarettes can improve public health, if they mean fewer people smoke.
A 2009 law gives the FDA authority to evaluate tobacco products for their health risks and lets the agency approve ones that could be marketed as safer than others. None has been given the OK yet, but the agency has noted that some tobacco products could pose less of a health risk to users than smoking.
Once the FDA accepts Swedish Match’s more than 100,000-page application, the agency has one year to evaluate it.
“You would hope that products like General and, for that matter, other alternative, would encourage people to move from smoking to the alternative products,” Solyst said.
Total sales of snus are about 50 million cans per year in the U.S., growing from virtually nothing in the mid-2000s, said the subsidiary of Stockholm-based Swedish Match AB.
Market researcher Euromonitor International estimates U.S. sales at $342 million in 2013 and predicts that snus retail volume will grow by about 20% in the United States by 2017.
General snus was first sold in Sweden in mid-1860s and has been sold in the United States since 2007. It is currently available nationwide in more than 20,000 stores, which keep it in small chillers to preserve the product.
AP said the brand has at least a 6% share of the retail market, dominated by Winston-Salem, N.C.-based Reynolds American Inc., which sells the market-leading Camel-branded snus, and Richmond, Va.-based Altria Group Inc., which sells Marlboro-branded snus.
Swedish Match’s snus brands make up 75% of the market in Scandinavia. But in the United States, the company said it only has a 10% share of the overall smokeless category.
The category grew about 5.5% in the United States last year, said the report.
April 24th, 2014 — Current Issues, Electronic Cigarettes, Flavored Products, Preventing Youth Consumption, Regulations: FDA etc., Science, Snus, Snuff & Alternative Products in US Markets, tobacco, Tobacco Harm Reduction
FDA NEWS RELEASE
For Immediate Release: April 24, 2014 Media Inquiries: Jenny Haliski, 301-796-0776, firstname.lastname@example.org Consumer Inquiries: 888-INFO-FDA
FDA proposes to extend its tobacco authority to additional tobacco products, including e-cigarettes
As part of its implementation of the Family Smoking Prevention and Tobacco Control Act signed by the President in 2009, the U.S. Food and Drug Administration today proposed a new rule that would extend the agency’s tobacco authority to cover additional tobacco products.
Products that would be “deemed” to be subject to FDA regulation are those that meet the statutory definition of a tobacco product, including currently unregulated marketed products, such as electronic cigarettes (e-cigarettes), cigars, pipe tobacco, nicotine gels, waterpipe (or hookah) tobacco, and dissolvables not already under the FDA’s authority. The FDA currently regulates cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco.
“This proposed rule is the latest step in our efforts to make the next generation tobacco-free,” said HHS Secretary Kathleen Sebelius.
Consistent with currently regulated tobacco products, under the proposed rule, makers of newly deemed tobacco products would, among other requirements:
- Register with the FDA and report product and ingredient listings;
- Only market new tobacco products after FDA review;
- Only make direct and implied claims of reduced risk if the FDA confirms that scientific evidence supports the claim and that marketing the product will benefit public health as a whole; and
- Not distribute free samples.
In addition, under the proposed rule, the following provisions would apply to newly “deemed” tobacco products:
- Minimum age and identification restrictions to prevent sales to underage youth;
- Requirements to include health warnings; and
- Prohibition of vending machine sales, unless in a facility that never admits youth.
“Tobacco remains the leading cause of death and disease in this country. This is an important moment for consumer protection and a significant proposal that if finalized as written would bring FDA oversight to many new tobacco products,” said FDA Commissioner Margaret A. Hamburg, M.D. “Science-based product regulation is a powerful form of consumer protection that can help reduce the public health burden of tobacco use on the American public, including youth.”
“Tobacco-related disease and death is one of the most critical public health challenges before the FDA,” said Mitch Zeller, director of the FDA’s Center for Tobacco Products. “The proposed rule would give the FDA additional tools to protect the public health in today’s rapidly evolving tobacco marketplace, including the review of new tobacco products and their health-related claims.”
The FDA proposes different compliance dates for various provisions so that all regulated entities, including small businesses, will have adequate time to comply with the requirements of the proposed rule.
Products that are marketed for therapeutic purposes will continue to be regulated as medical products under the FDA’s existing drug and device authorities in the Food, Drug &Cosmetic Act.
The proposed rule will be available for public comment for 75 days. While all comments, data, research, and other information submitted to the docket will be considered, the FDA is requesting comments in certain areas, including:
- The FDA recognizes that different tobacco products may have the potential for varying effects on public health and is proposing two options for the categories of cigars that would be covered by this rule. The FDA specifically seeks comment on whether all cigars should be subject to deeming, and which other provisions of the proposed rule may be appropriate or not appropriate for different kinds of cigars.
- The FDA seeks answers to the many public health questions posed by products, such as e-cigarettes, that do not involve the burning of tobacco and inhalation of its smoke, as the agency develops an appropriate level of regulatory oversight for these products. The FDA seeks comment in this proposed rule as to how such products should be regulated.
For more information:
The FDA, an agency within the U.S. Department of Health and Human Services, protects the public health by assuring the safety, effectiveness, and security of human and veterinary drugs, vaccines and other biological products for human use, and medical devices. The agency also is responsible for the safety and security of our nation’s food supply, cosmetics, dietary supplements, products that give off electronic radiation, and for regulating tobacco products.
April 17th, 2014 — Current Issues, tobacco
April 17, 2014
Cameron Elected President & CEO of Reynolds American
WINSTON-SALEM, N.C. — The board of directors of Reynolds American Inc. has elected Susan M. Cameron president and CEO, effective May 1.
Cameron served as president, CEO and a member of the RAI board from 2004 to 2011. She also served as chairman of the board of RAI between 2006 and 2010. In 2011, she retired from the company and the board. She rejoined RAI’s board of directors in December 2013.
Cameron replaces Daniel M. Delen, who has chosen to retire and resign from the RAI board. Delen has served as president and CEO of RAI since 2011.
Winston-Salem, N.C.-based Reynolds American is the parent company of R.J. Reynolds Tobacco Co.; American Snuff Co. LLC; Santa Fe Natural Tobacco Co. Inc.; Niconovum USA Inc.; Niconovum AB; and R.J. Reynolds Vapor Co.