V2 Reveals Consumer Response to Federal E-Cig Regulation

vape and cigaretteNearly half of vapers would turn back to combustible cigarettes if e-cigarettes were taken off the market.

A new commissioned study by V2, an e-cigarette retailer, has revealed the reactions of e-cigarette users to the recent decision from the U.S. Food and Drug Administration (FDA) to extend federal regulatory control to e-cigarettes.

The survey polled 300 adult “vapers” across the U.S. between May 16 and 20.

The results of the survey are as follows:

44% had never heard of the regulations
When asked when they first heard about the FDA’s proposed regulations:

  • 44% said that “this is the first I am hearing about this”
  • 30% said they had heard about the regulations some time since the FDA’s decision
  • 18% heard about the regulations on May 5th, the day of the decision
  • Just 9% said that they had heard about the proposed regulations prior to the FDA’s ruling in May

“The industry missed a giant opportunity to inform and inspire vapers to take action ahead of these regulations,” said Adam Kustin, vice president of marketing, V2. “It’s unfortunate that the industry and its customers will only be able to coalesce around this issue after the barn door closed.”

74% believe e-cigarettes should be regulated
Among e-cigarette users surveyed, three-quarters (74%) believe that electronic cigarettes “should be subject to some sort of regulatory process.” However, in an April survey by V2, which polled 600 vapers, 57% said that they were against any federal regulations by the FDA. Of that 57%, 27% said regulations should occur locally (state, municipality, etc.) and 13% said the industry should self-regulate.

“Vapers want common sense regulations to ensure consumer protection and product standards,” said Kustin. “But what they fear is overregulation, which would stifle product access and innovation.”

Without e-cigs, 49% would go back to smoking
As part of the FDA’s ruling, government approval of all e-cigarette products and related consumables introduced after 2007, such as e-liquid, is now required. These products must go through a formal approval process to continue to be sold. Reports estimate that submitting an application for a single product approval could cost more than $1 million for the applicant.

“Big Tobacco companies, with their virtually unlimited resources, benefit tremendously from an onerous and costly application process,” said Kustin. “They have the ability to do it. And while our company is also well positioned, the smaller players in our category aren’t as fortunate. Some simply won’t be able to bring their products to market, while others will be forced to raise prices, further diminishing their competitiveness. Lastly, it’s important to recognize that Big Tobacco is under no obligation to submit any products for approval. They could accelerate the demise of the industry by simply withholding products from submission. Given the relative size of the e-cig industry to combustibles, I would say their motivation is low.”

When the survey respondents were asked what they would do if electronic cigarettes and e-liquid became harder to buy or more expensive, 36% said “nothing would change” and that “as long as they are available, I will buy them.” However, 34% said that they would vape less. Another 18% said they would “vape less and smoke combustible cigarettes more,” while 8% said they would switch back to smoking exclusively, if e-cigarettes and e-liquid became more expensive or more scarce.

When asked if regulations were to force e-cigarettes off the market entirely, 49% said they would go back to combustible cigarettes. 28% said they would stop consuming nicotine or tobacco products of any kind and 17% said they would use a smoking cessation method, such as the patch, mints or gum.

“E-cigs are groundbreaking technologies that offer an alternative to combustible cigarettes, which are harmful to millions,” said Kustin. “Almost half of respondents reported they’d return to combustible cigarettes if e-cigarettes were no longer available. The remainder said that they’d either use a cessation therapy such as nicotine gum, which we know doesn’t work; or they’d quit nicotine entirely, which is unlikely and unprecedented. In other words, if the FDA’s ruling hampers access or forces higher prices, it threatens to eliminate 99% of the industry, essentially driving vapers back into the eager arms of Big Tobacco. Such an outcome would be tragic, not to mention entirely inconsistent with the FDA’s earlier ‘continuum of risk’ rhetoric.”

SFATA ISSUES STATEMENT ON FDA’S FINAL DEEMING RULE

SFATA ISSUES STATEMENT ON
FDA’S FINAL DEEMING RULE

Largest Vapor Trade Association Says New Regulations Problematic
President and Executive Director Cynthia Cabrera Available for Media Interviews

WASHINGTON, D.C., May 5, 2016 — The Smoke-Free Alternatives Trade Association (SFATA), the largest trade association representing and managing the interests of the vapor industry, today issued the following statement regarding the Food & Drug Administration’s (FDA) final deeming rule on e-cig and vapor regulations:

“As the Royal College of Physicians, one of the world’s leading medical associations, recently released its historic report endorsing vaping as a harm reduction option, stating that regulations should not inhibit the development or use of vapor products, the FDA today issued its final rule classifying vapor products as tobacco, essentially banning 99 percent of all vapor products on the market as a result of the February 15, 2007 predicate date.

“Although the FDA states it has found a vapor product on the market in 2006, it has yet to be determined whether the far more technologically advanced vapor products on the market today can be considered substantially equivalent to that product.

“Our industry has a long history of supporting sensible science-based regulations, including license requirements, as well as banning sales to minors and adopting child-resistant packaging. Today’s final rule pulls the rug out from the nine million smokers who have switched to vaping, putting them in jeopardy of returning back to smoking, which kills 480,000 Americans each year and costs the U.S. more than $300 billion in annual health care expenses.

“These new regulations create an enormously cost-prohibitive regulatory process for manufacturers to market their products to adult smokers and vapers. It also limits access to the 40 million adult smokers in the U.S. yet to make the switch to vaping and cripples a multi-billion dollar job-creating industry, the majority of which are made of small businesses.

“Since a growing body of scientific evidence confirm that vapor products are more than 95 percent less harmful than combustible cigarettes, it is essential that Congressional action be taken so vapor products can remain on the market as highly effective replacement tools for smokers. The only viable option at this time is to change the predicate with federal legislation, such as H.R. 2058 (aka Cole Bill), as well as a recent bi-partisan amendment introduced by U.S. Representatives Tom Cole (R-OK) and Sanford Bishop (D-GA) that recently passed the House Appropriations Committee, so that a more reasonable substantial equivalency pathway to market is created.”

SFATA Member-Only Conference Call Tomorrow

Following today’s release of the FDA’s deeming regulations, we understand that our members are looking for accurate information for your business.

To give SFATA members an in-depth, quality analysis of the regulations and to cut through the speculation and rumors that are already out there, we will be hosting a members-only conference call tomorrow, May 6th at Noon ET/9am PT. SFATA President and Executive Director Cynthia Cabrera will be joined on the call by our regulatory lawyers.

SFATA members have already received an email with the call in information. If you have not received that email, please contact Robert House at Robert@SFATA.org.

FDA Finalizes Rule Extending Oversight to All Tobacco Products

WASHINGTON — Today, the U.S. Food and Drug Administration (FDA) finalized a rule extending its authority to all tobacco products, including e-cigarettes, cigars, hookah tobacco and pipe tobacco, among others.

This rule helps implement the Family Smoking Prevention and Tobacco Control Act of 2009; steps include restricting the sale of these tobacco products to minors nationwide.

Before today, there was no federal law prohibiting retailers from selling e-cigarettes, hookah tobacco or cigars to people under age 18. Today’s rule changes that with provisions aimed at restricting youth access, which go into effect in 90 days, including:

  • Not allowing products to be sold to persons under the age of 18 years (both in person and online).
  • Requiring age verification by photo ID.
  • Not allowing the selling of covered tobacco products in vending machines (unless in an adult-only facility).
  • Not allowing the distribution of free samples.

Today’s rule also requires manufacturers of all newly regulated products to show that the products meet the applicable public health standard set forth in the law and receive marketing authorization from the FDA, unless the product was on the market as of Feb. 15, 2007.

The tobacco product review process gives the agency the ability to evaluate factors such as ingredients, product design and health risks, as well as their appeal to youth and non-users.

Under staggered timelines, the FDA expects that manufacturers will continue selling their products for up to two years while they submit and an additional year while the FDA reviews a new tobacco product application.

The FDA will issue an order granting marketing authorization where appropriate; otherwise, the product will face FDA enforcement.

Today’s actions will subject all manufacturers, importers and retailers of newly regulated tobacco products to any applicable provisions, bringing them in line with other tobacco products the FDA has regulated under the TCA since 2009.

These requirements include:

  • Registering manufacturing establishments and providing product listings to the FDA.
  • Reporting ingredients, and harmful and potentially harmful constituents.
  • Requiring premarket review and authorization of new tobacco products by the FDA.
  • Placing health warnings on product packages and advertisements.
  • Not selling modified-risk tobacco products (including those described as “light,” “low” or “mild”) unless authorized by the FDA.

Watch for details in CSP Daily News.

CSP Daily News <glindenberg@e.cspnet.com>

Senate Amendment 3547

Senate Amendment 3547, which would prohibit airline passengers from bringing “electronic smoking devices” on planes in their carry-on and checked baggage, will possibly be considered as early as next week (week of April, 11th, 2016). The primary sponsor of SA 3547 is Senator Richard Blumenthal (D-CT), who is an outspoken opponent to e-cigarettes. He has earned a reputation for promoting misinformation about these low-risk products.

If this amendment is accepted, vapers will be forced to leave their batteries and devices at home or surrender them at TSA checkpoints before being allowed through security.This would impose a completely unwarranted and unnecessary expense on travelers who vape.

Beyond the issue of flying with vapor products, the spirit of this amendment (prohibiting lithium ion batteries on board commercial flights) might as well include a ban on carrying ANY portable electronic device in checked or carry-on baggage. Can you imagine not being able to travel with laptops or cell phones?

CASAA <takeaction@casaa.org>

Comments? Thoughts?

Swisher International loses $44.4 million antitrust lawsuit

Jensen Werley

Swisher International, a major Jacksonville manufacturer of cigarillos and cigars, lost its case against the company Trendsettah on Wednesday and was hit with $44.4 million in damages.

Trendsettah said it entered into an agreement with Swisher to produce its Splitarillo product line, and then Swisher strangled the growth of the products when they were becoming more popular by restricting production.

The jury found Swisher broke its agreement with TSI and that it broke Section 2 of the Sherman Act, ramping up the $14.8 million in damages up to $44.4 million.

Swisher said it was exploring its options in fighting the verdict.

“We strongly disagree with the verdict,” said Joe Augustus, senior vice president of global affairs for Swisher. “We are considering all our options, including appeal.”

Jensen covers logistics, trade manufacturing and defense.

Tobacco Harm Reduction Conference in Brooklyn

The first Tobacco Harm Reduction (THR)   conference in the United States will be held on:

Thursday,   April 21st, 2016

9:00   AM – 4:30 PM

New York City College of Technology

Conference Hall Namm 119

300   Jay Street

Brooklyn,   NY

CASAA’s Executive Director, Julie Woessner, will be presenting   along with other   experts in the field. If you are in or will be visiting the New York City area, you are welcome to attend this event. Registration   is free!

Speakers   include:

·           Shadi Chamany, MD, MPH

·           Kevin McGirr, RN, MPH

·           Helen Redmond, LCSW

·           Christopher Russell, PHD

·           Michael Siegel, MD

·           Riccardo Polosa, MD

The focus of this conference is on tobacco use among people with   serious mental illness and drug users. Speakers include experts in the fields   of policy, science, advocacy, and public health. CASAA is pleased to be a   part of this event and to present the consumer’s point of view on this issue.

Sessions:

·           Efficacy of nicotine patches and medication.

·           Mental illness and nicotine use.

·           e-cigarette and safety.

·           Current e-cigarette controversies.

·           Regulation of e-cigarettes.

Thank you and we look forward to seeing you in Brooklyn!

NATO To Focus On Public Policy, Ends Trade Show

NATO to concentrate its expertise on helping retail members respond to “onerous tobacco restrictions,” being proposed by government officials across the nation.

The National Association of Tobacco Outlets (NATO) announced it will focus its resources exclusively on public policy issues at the local, state and federal levels, and end the NATO Show, an annual trade conference of retailers, wholesalers and other industry partners, as well as high-level government officials.

“After reviewing the association’s purpose and mission, the NATO Board of Directors decided to focus all of the organization’s staff and resources on legislative and regulatory issues which are critical to the success of our member retailers whose livelihoods depend on the legal sale of tobacco products,” said NATO President Frank Armstrong.

NATO is the only national retail trade association that works exclusively on tobacco issues and the association will now concentrate all of its expertise in helping retail members respond to onerous tobacco restrictions which are being proposed by government officials across the country on a seemingly daily basis.

The recent action by the Chicago City Council to impose a new tax on tobacco products (which is pre-empted by state law), raise the legal age to purchase tobacco to 21, ban tobacco product coupon redemption, and mandate minimum product prices and minimum package sizes, highlights the need for NATO to concentrate all of the association’s efforts to protect tobacco retailers from unreasonable, unfair and even unlawful tobacco regulations, Armstrong said.

“We believe the alarming trend among governments to propose punitive rules and regulations aimed at our members and to restrict the rights of adult consumers will continue,” Armstrong said.

NATO’s advocacy efforts will include aligning with other national, state and regional trade organizations to respond to local and state tobacco legislative proposals, reaching out to retailers across the country to expand NATO’s current membership of 51,000 retail stores, planning new educational seminar opportunities for NATO members, offering tobacco legislative and FDA regulatory seminars to other trade associations, and urging the FDA and state and local lawmakers to work with NATO and the industry to educate adults so they are not a social source of tobacco products for underage youth.

As the NATO board considered the association’s future work, it also made a critical business decision that the 2016 NATO Show will be the association’s last.

“While we have been eagerly anticipating this year’s show, there was a consensus among board members that given the many trade shows available to tobacco retailers, this is the right time to focus on NATO’s core expertise in battling oppressive tobacco restrictions,” Armstrong said.

NATO has produced the NATO Show since 2011, bringing together 841 exhibitors, 3,481 retail and wholesale attendees and offering 36 educational seminars, three of which featured keynote addresses by the Director of the FDA’s Center for Tobacco Products.

RYO Endures Market Pressure

RYO Endures Market Pressure

The fortunes of roll-your-own (RYO) tobacco will likely continue to wax and wane in 2016.

Last year was more wane, due mainly to a resurgence in combustible cigarette sales.

Vivien Azer, managing director with the Cowen Group, a diversified financial services firm, explained why RYO’s share dipped in the tobacco category.

“Cigarette industry trends were incredibly robust in 2015, reflecting the healthier lower-income consumer who was benefitting from lower gas prices, lower unemployment and, we have recently argued, higher minimum wages,” Azer said.

What that is doing is causing trade-up in the total tobacco category.

“I don’t know that it’s an accommodative backdrop for RYO given our constructive view for cigarettes in 2016,” Azer said. In other words, what is good for cigarette sales isn’t necessarily good for RYO.

“RYO has historically done well in periods of either economic challenge for the core tobacco user and/or higher tax environment,” Azer said. “We also see further evidence of trade-up with the core tobacco consumer, as we have seen a fair amount of premiumization within the cigarette category itself in 2015.”

A higher tax environment does loom especially as a part of the President’s Budget for Fiscal Year 2017, a new program called Preschool for All has been proposed with funding coming from an increase in both the federal tax on cigarettes and a tax increase on other tobacco products (OTP), including RYO.

Under the proposal, pipe tobacco would increase from $2.83 per pound to $44.23, over a 1,000% increase, and smokeless tobacco would increase over eight times its current rate.

Azer considers it likely there will be a federal excise tax increase on cigarettes. “We have been operating in a very benign excise tax environment since 2010,” Azer said. “But legislative activity does look to be picking up, which would have a bigger affect in 2017, as well.”

RYO in 2016
Tim Greene, category director-tobacco and general manager for Smoker Friendly International LLC in Boulder, Colo., said that his company doesn’t anticipate much change in 2016 from what it has seen over the course of the last two years.

“Our RYO category was flat comparing 2015 to 2014, however we saw a slight increase in margin in 2015, and still consider RYO as a strong and important category,” Green said. “As always the (FDA’s) deeming regulations loom and could dramatically impact this category, but until that happens it’s business as usual for our RYO category.”

Amer Hawatmeh, president of St. George Oil in St. Louis and operator of six Coast to Coast convenience stores, pointed out that rising taxes have hurt RYO sales.

“When they taxed the rolling machine and the paper the same way they taxed tobacco, I said there was no need for it,” Hawatmeh said. “The costs were just too close to (top-brand cigarettes). And my customer base all switched to the sub-generic brands of cigarettes: Decade, Exeter, that kind of fourth-tier tobacco that comes in at $20 a carton, versus $44 like Marlboro, or $48 for others.”

Hawatmeh pointed out that RYO is a category that can help operators build customer loyalty, since they are interfacing individually with buyers and acting on their preferences. Such personal service strategies might go far in alleviating pressure on RYO sales.

Stay tuned to Convenience Store Decisions‘ March issue, where we delve into 38 in-store categories to identify emerging trends and garner retailer analysis to forecast what operators can expect for 2016 and beyond.