Category Archives: Tobacco Articles
Tobacco companies evaded FDA ban on ‘light’ cigarette descriptors
New study from Harvard School of Public Health (HPSH) reveals that a year after the federal government approved a law prohibiting word descriptors such as “light,” “mild,” and “low” on cigarette packages, smokers can still without difficulty find their brands as tobacco companies added color-coding to “light” packs after the prohibition. These data indicate that the companies have been able to avert the ban on confusing words.
“The tobacco companies were recognized guilty by a federal court in 2006 for deceptively advertising ‘light’ cigarettes as safer. After a new federal law was approved in 2009 to end the tobacco companies’ deceptive marketing methods, the industry has obviously circumvented it by applying new and innovative techniques to trick consumers,” stated Gregory Connolly, director of the Center for Global Tobacco Control at HSPH and professor of the practice of public health in the Department of Social and Behavioral Sciences.
In 2006, a U.S. federal court decided that tobacco companies should use no more descriptive words that share a misleading health message.
To find out whether the tobacco companies were observing the ban, the HSPH scientists analyzed retailer manuals from the tobacco company Philip Morris; companies’ yearly reports filed with the Massachusetts Department of Public Health; countrywide cigarette sales records; and the results of a 2011 national public view survey that involved questions about smokers’ ideas of their brands being “light” or regular.
The research explains how Philip Morris got rid of the terms “light,” “ultra-light,” and “mild” from cigarette packs and replaced new brand names and colors. For instance, the “Marlboro Light” brand was called “Marlboro Gold,” “Marlboro Mild” was called “Marlboro Blue,” and Marlboro Ultra-light” was called “Marlboro Silver.” Other cigarette companies followed Philip Morris. The cigarettes themselves continued to be the same, however, the percentage of ventilation in each category of “light” sub-brands was unchanged after being recalled and supplied with a new color descriptor. Ventilation is the principle determinant of whether a cigarette is named “light.”
In the public opinion review, over 90% of the smoker answerers said that, a year after the FDA ban, they saw it either “somewhat easy” (11%) or “very easy” (81%) to recognize their cigarette brand – nonetheless, they still considered certain brands as “light” even though tehre are no “light” descriptors on the packages.
Imperial Tobacco’s 2012 Results
Overview
During the last several years Imperial Tobacco has made great efforts in changing its tactical target to put customers at the center of its business and push organic sales growth. It’s been a quick change and the company was happy with the growth it is making, creating quality growth from high quality brands to push sustainable earnings.
Imperial Tobacco‘s success is constructed around a differentiated strategy that’s aimed at using its understanding of consumer reasons to appreciate the potential of its portfolio and provide consumers with the best tobacco experiences.
2012 Results
The company’s target at pushing sales has provided numerous highlights in 2012. Imperial has raised tobacco net profits by 4% to .7.0 billion, as it continued to develop momentum behind its total tobacco portfolio.
Its total volumes restored strongly from its first quarter and the cigarette maker finished the year with general stick equivalent volumes decreasing 2.7%, a lot of which was caused by current market weakness in Ukraine and Poland and compliance with international trade sanctions in Syria.
The quality of Imperial’s brands and the growth it is delivering is shown in the strong portfolio benefits the company made in 2012. The excellent performance of its key strategic brands, Davidoff, Gauloises Blondes, West and JPS, led to combined volume growth of 7% and net income growth of 13 %. Its fine cut tobacco volumes were firm, with net profits increased by 13%. The tobacco company presented further strong benefits from premium cigars growing volumes by 11% and profits by 10% and increased Scandinavian snus volumes by 53% and net profits by 46%.
Key Strategic Brand Success
Driving momentum behind Imperial Tobacco’s major strategic brands is a current goal. In 2010, Davidoff, Gauloises Blondes and West generated 26% of the company’s overall stick equivalent volumes; currently they represent 30%. Increasing the sales momentum behind Davidoff has been a special target in 2012. The company provided volume growth of 9% and made great progress in Asia, the Middle East and Eastern Europe, getting volume and share in profitable consumer growth segments such as kingsize superslims and queen size.
Should Altria Enter the E-Cigarette Market?
Altria is the biggest tobacco company in the U.S. The stock is a in demand because of its high dividend yield, and the firms’s powerful cigarette brands such as Marlboro and L&M. Nevertheless, there are several inherent threats in the U.S. cigarette industry which Altria investors should be cautious with. These contain the decreasing market for cigarettes in the U.S., increasing excise duties and the risk of raised and tough regulation from the government against the industry.
The firm has already entered into smokeless tobacco, and by means of its Copenhagen and Skoal, has obtained the leading spot in the market. It as well lately introduced a nicotine flavored lozenge with the brand name Verve. It can be estimated potential entry of Altria into the market for electronic cigarettes.
The market for e-cigarettes, which is presently about $300 million in size, may increase to over $1 billion over the next three years, in accordance with some projections. This results in yearly growth rate of almost 50 percent over the next three years.
Why does Altria need to enter this market?
Altria is presently the leader in U.S. cigarette market but confronts decreasing earnings and a shrinking user base caused by the aspects mentioned earlier. In 2011, the cigarette market size in the U.S. was about 270 billion cigarettes. With the market for cigarettes decreasing, Altria is limited to driving top line growth for the division through price boosts, which is unsustainable.
Altria’s rivals, such as Lorillard and Reynold’s, have already entered e-cigarette market via the acquisition of Blu cigs. Altria, on the other hand, has yet to take a step and stands to miss the opportunity on what could be a highly profitable and quickly growing market if it does not take action soon.
How will Altria enter the market?
A way in which Altria can enter the e-cigarette market is to obtain a well established e-cigarette manufacturer in the United States, just like Lorillard’s purchase of Blu ecigs. Reported by Wells Fargo analyst Bonnie Herzog, Altria may be searching to obtain NJOY, an e-cigarette company with a 40 percent share of the U.S. e-cigarette market.
Canada’s tobacco warnings move up to 4th in world
Canada’s globe ranking for cigarette pack warning labels went up to 4th in 2012 from 15th in 2010 when new Canadian health warnings covering 75% of cigarette pack were introduced, an worldwide review reveals.
The Canadian Cancer Society posts a review every two years rating cigarette warning labels. The most recent review was launched on November 14 at the World Health Organization’s Framework Convention on Tobacco Control conference in Seoul, South Korea.
In 2011, Health Canada declared that it would renew warning labels on tobacco products packs. Canada’s health-related warnings now cover 75% of the front and 75% of the back of cigarette packs.
Rob Cunningham, senior policy analyst for the Canadian Cancer Society, commended Health Minister Leona Aglukkaq for the new health-related labels, but also obliged the federal government to comply with Australia’s lead in introduction of plain packaging.
Australia, which obtained the top ranking, has the biggest warning labels, covering 82.5% of the pack front and back of pack (75% front, 90% back). Australia as well forbids cigarette giants colours, logo and design features on the branded part of the package.
“Plain packaging would reduce the tobacco companies’ use of the package as a promotional element, would boost the effectiveness of package health labels, would lower package deception, and would minimize tobacco consumption,” the review’s authors stated.
Tobacco companies challenged the Australian rules on the grounds that they infringe intellectual property rights and devalued their logos. The Australia’s highest court upheld the law in August.
After the Australian ruling, Health Canada said that it is watching what result the plain packaging law has in Australia, and did not exclude promoting similar laws.
The other top-ranked countries for health label sizes in the review were:
- Uruguay fixed at second place with Sri Lanka at 80% of front, 80% of back,
- Brunei and Canada at fourth place at 75% .
Another report posted on November 14 by the Cochrane Collaboration came to the conclusion that providing smokers text or video information for at least six months can help people to give up smoking.
The text messages presented motivation, support and tips for smoking cessation.
Smartphone applications weren’t included in the report.
Serving Cigar Smokers
Usage of little cigars, which have lower taxes and fewer marketing limitations than cigarettes, has enhanced significantly during the last three years. And while convenience store sellers can use the usual promoting strategies to them, an in-depth study of their potential, said one retailer, must begin.
“There are two separate types of little cigars on the market,” Andrew Kerstein, president and owner of five Smoker’s Haven stores in Matawan, N.J. and the chairman of the National Association of Tobacco Outlets (NATO) explained.
“There are the little cigars that are bought by a quantity of mainly older, senior citizens who can no longer afford the price of produced cigarettes because of the considerable increased in SCHIP (State Children’s Health Insurance Program) or to roll their own cigarettes. They are switching to little cigars.”
Little cigars are seasonal products. Product sales in a cold weather have a tendency to increase considerably. “In most markets there are considerable enough limitations on indoor smoking so most people must smoke outdoors,” Kerstein said.
“The younger consumers are not excited about little cigars. People who are aged between 20-30 years have enough disposable earnings to purchase cigarettes and that’s what they are purchasing,” Kerstein said.
“Little cigars, because of tax gaps between cigars and cigarettes, become appealing to cigarette smokers,” said Andrea Myers, a board member of NATO, who works in 12 Fast Max convenience stores as well as 19 Smokers Host Discount Tobacco stores throughout Indiana. “There are a lot of people who switched from cigarettes to little cigars. Little cigars look like a cigarette, act like a cigarette, and they sell for about a quarter of the price of cigarettes, influenced by which brands a smoker uses of both.
While the strategies of selling little cigars possibly aren’t all that different from most other products at least in Kocolene’s stores, to lend themselves more easily to effective selling, which has implications on employee education and training.
“Little cigars are an easy product to sell to low-income smokers,” Myers said.
While little cigars and electronic cigarettes have enjoyed a rise in popularity, the jury is still largely out on e-cigars.
Kerstein defined what he sees as a lack of catching strength by electronic cigars by returning to the original premise behind e-cigarettes.
“What aided prompt electronic cigarettes were a need influenced by smoking limitations and price issues. So if there are considerable limitations, again on where adult smokers can smoke lawfully, electronic cigarettes are not subject to the same limitations. Smokers can use them indoors and that makes a big opportunity.
Tobacco’s Price is Largest Factor in Reducing Smoking Prevalence
The latest study published in the November 2012 supplement to the American Journal of Preventive Medicine demonstrates that the cost of tobacco is the biggest contributing aspect to decreasing smoking prevalence in Minnesota. Extra price hikes and supporting a good system of other tobacco systems and policies could give the smoking prevalence rate below 10% and save 55,000 lives within the next 30 years.
This study, the Minnesota SimSmoke model, was carried out by Dr. Raymond Boyle of ClearWay MinnesotaSM and Dr. David Levy of Georgetown University. The simulation model considered to be data on present, new and former smokers from 1993 to 2011 to identify the performance of specific tobacco policies and programs on smoking rates in Minnesota. The SimSmoke model then planned the life-saving potential of these systems later in life.
“SimSmoke presents new proof that a detailed strategy to reducing tobacco consumption in the state is effective,” said Dr. Raymond Boyle, Ph.D., M.P.H., Director of Research at ClearWay Minnesota. “If people want to get serious about reducing tobacco-related disease we need to keep to to a multi-pronged technique that contains increasing the price of tobacco products.”
Collectively, policies and systems such as tobacco tax hikes, smoke-free air legislations, media strategies, strong youth access rules and smoking cessation programs led to a 29% decrease in smoking prevalence in the state between 1993 and 2011. Price increases alone comprised a 43% decrease.
“The SimSmoke model has been promoted across the country and worldwide, and the effects are noticeably identical,” said Dr. David Levy of Georgetown University. “Whether it is looked at information for Minnesota, Kentucky, California or England, SimSmoke precisely forecasts existing adult smoking rates, which is powerful. But what is more powerful is the capability to forecast future smoking rates and how modifications – such as increasing cigarettes taxes – will modify the smoking rate and the number of smoking-related diseases.”
Another study involved in the AJPM supplement is targeted on the effect of indoor-air policies, smoking prevalence and accessibility to procedure among priority populations and the control of menthol tobacco products.
Starting from 2000, ClearWay Minnesota has given more than $17 million in funds to Minnesota scientists. The effect of ClearWay Minnesota-funded study has been felt well beyond Minnesota’s boundaries and has considerably contributed to the science base in the field of tobacco control.
Farmers find tobacco growing financially more rewarding
In spite of controversies around the tobacco cultivation, growers in Bangladesh consider it to be financially more profitable than other crops, as outlined by a review released lately by the Policy Research Institute (PRI).
The mean income of tobacco farmers is close to 30 per cent higher than non-tobacco farmers, the review stated mostly based on field-level study.
Tobacco has become a prime cash crop in a number of regions such as Kurigram, Lalmonirhat and Nilphamari, particularly helping the poor during the ‘monga’ period, the review mentioned.
Nielsen Bangladesh gathered and compiled the field level main information from the tobacco cultivating areas of Rangpur, Kushtia and Chittagong Hill Tracts (CHT). Review included farmers who are growing tobacco and as well farmers growing crops other than tobacco.
The PRI review stated that export quality tobacco cultivation has created employment for many farmers in the tobacco growing regions. In addition, another 100,000 jobs may have been generated in tobacco export-related activities, the review said.
The optimistic profits from tobacco cultivation have been as well shown in the growth of raw tobacco exports from Bangladesh. In the fiscal 2009-10, the tobacco export profits generated more than $50 million and the amount raised to more than $80 million in the next fiscal (2010-11).
Nevertheless, imposition of 10 percent tax on the export of tobacco in the FY11 budget has influenced adversely the country’s tobacco export. The worldwide blue chip cigarette firms intend to remove Bangladesh from the number of supply chain because of constant policy changes. As a result, the PRI review said, tobacco, being the second most crucial agricultural export after jute, may even fade from the Bangladesh’s export basket.
The review describing the farmers’ preference to tobacco cultivation over other crops said that the growers in the regions pointed out above cultivate tobacco as the crop produces earnings higher than other crops and they get the money at one-go under buyback guarantee provided by cigarette manufacturers. Furthermore, more than two-third tobacco farmers noted that tobacco did not contend with the manufacturing of other food crops.
The prevalence of poverty, the filed review unveiled, is much higher (47.5 per cent) among the non-tobacco farmers than the tobacco farmers (29.25 per cent).
Unlike widespread claims of health risk regarding the cultivation of tobacco, about 89 percent answerers covering both tobacco and non-tobacco farmers said that tobacco cultivation and green leaf handling do not lead to any disease. But, the review said more analysis is needed to find out why a section of tobacco farmers suffer from skin disease and respiratory problems.
Value of the worldwide tobacco market continues to grow
Global marketplace
The worldwide tobacco market is appreciated at around £450 billion and the industry creates about 5.5 trillion cigarettes per year. While cigarette sales in developed countries keep on to drop a little bit year on year, total global market drops are demonstrating signs of moderating. Current developments reveal that individual smokers will consume fewer cigarettes each and smaller percentages of populations will smoke. Nevertheless, continual volume growth is widely expected in emerging markets, motivated by population growth and raising disposable earnings.
The largest single tobacco market is China, where the industry is the property of the state, with some 350 million smoking people who make up for more than 40% of the worldwide total consumed.
The four largest global cigarette firms, including British American Tobacco, Imperial Tobacco, Japan Tobacco and Philip Morris International, make up about 45% of the worldwide market, or about three-quarters of the market outside China.
Cigarette firms deal with a significantly competing marketplace but the total value of the worldwide market keeps growing. This value is predicted to exceed £500 billion by 2015, despite stronger rules, worldwide economic uncertainty and high unemployment rates in developed markets. Consumers worldwide are increasingly looking for real value, which means that quality and advancement will both play an increasing} role in providing market share.
Illicit trade
Cigarettes are among the most frequently marketed products on the black market because of high profit margins, the relative ease of production and movement, together with low recognition rates and fines. It is a common problem that is made worse by regulatory policies in some countries.
Data suggest that more than 660 billion counterfeit cigarettes are smoked yearly. This has a adverse effect on consumers, retail dealers, governments and cigarette firms. For smokers, illegal cigarettes mean no quality controls and no health warnings, while smuggled real products may have health warning labels that do not satisfy local government rules.
As counterfeit cigarette sales are efficiently not regulated, criminals also have no qualms with supplying anyone with their products, including minor smokers.
It is calculated that governments around the world are losing up to US$40 billion a year in excise and other duties. Tackling this unlawful trade effectively demands cooperation between the industry, regulators and enforcement specialists, supported by the establishment of acceptable duty policies, strong control and powerful enforcement.
Bulgartabac Holding’s Earnings Grow Eightfold in H1 2012
The largest tobacco company Bulgartabac Holding has reported its consolidated earnings that grew 8.5 times in the first half of 2012 compared to the same period of 2011.
In such a way, in the first half of 2012, the cigarette maker, which was sold to a subsidiary of the Russian bank VTB for EUR 100.1 M by the Bulgarian government in September 2011, reported a total income of BGN 27 M.
The Bulgartabac Holding will keep BGN 23.5 M from the income, but the rest will be directed to minority shareholders in the group’s 3 subsidiaries – Sofia BT, Blagoevgrad BT and Pleven BT.
Bulgartabac registered an income of BGN 13.3 M in the second quarter of 2012 exceeding its result of BGN 10.2 M from the first quarter
In the first half of 2012, total sales of the tobacco company increased by 46 percent year-on-year to BGN 244 M; the growth in the second quarter was 53 percent year-on-year, to BGN 114 M.
A total of 82 percent of tobacco company’s produce goes to exports, the BT Holding declared in its media statement; along with cigarettes, BT Holding as well deals with exports of tobacco leaves and oriental tobacco, which comprise nearly 2 percent of its sales.
Bulgartabac Holding has kept its major market share in Bulgaria, with 33.8 percent of the Bulgarian market of cigarettes.
BT Invest, which is the property of Russian bank VTB, obtained a tender at the end of August 2011 to purchase a 79.8 percent stake in Bulgartabac for EUR 100.1 M.
According to the contract, it is prohibited to resale the holding in the next 10 years. This condition can be dropped if it is a change in the ownership of BT Invest. This possibility has been approved by the Bulgarian Privatization Agency.
BT Invest, that is registered in Austria and owned by the Russia’s second-biggest bank VTB, was the only buyer for the Bulgarian tobacco monopoly after British American Tobacco and CB Family Office Service refused the sale.
The Bulgartabac Holding’s less profitable plants, which are situated in the cities of Plovdiv and Stara Zagora, were purchased for BGN 31 M and BGN 18 M respectively in 2009.
Now Bulgartabac is the owner of the two larger and more consolidated plants in Sofia and Blagoevgrad, a processing plant in Yasen near Pleven, and a number of commercial brands.
Tax hike didn’t cut smoking
Senators will interrogate the tobacco industry stakeholders about the government plan to reform excise taxes on tobacco and alcohol in spite of the presupposition made by Cesar Purisima, Finance Secretary that the tax rise was not a reason for quitting smoking.
During a previous hearing led by the Senate committee Purisima said that they suppose that essential tax increases and following retail prices increase will not lead to a significant decrease in tobacco use.
According to the recent study, it was demonstrated that cigarette use even increased under the conditions of hikes in tobacco taxes and prices.
Cesar Purisima said that cigarette prices from year 2004 to 2011 were augmented by as much as 61%, but tobacco use did not decreased.
He made reference to tobacco tax hikes, which over the years, had led to corresponding increases in the retail prices by as much as 99%.
Republic Act 9334 requires tax increases on tobacco and alcohol products starting January 1, 2005 and every other year until January 1, 2011.
But Senator Ralph Recto, ways and means committee chairman, pointed out that the main thing in the current tax reform discussions is coming up with the efficient tax rate.
He declared that it was the opinion of majority in the Senate to reach a tax structure that would profit all players equally.
Senate President Juan Ponce Enrile said if the Senate wants to increase the tax, it won’t reduce the number of smokers and they will continue to smoke.
Rodelito Atienza, who is the Labor Union president, asked if the proposed aim will not be reached, why is the DOF willing to cause so much injury to many of stakeholders in both alcohol and tobacco industries who are ready to lose their jobs?”
Blake Dy, Associated Anglo-American Tobacco Corp. vice president, said that government was being “heavy-handed” without the need. There are other ways of make money without giving such radical change, he said.
He added that the government should preserve an open mind on this matter. There are various ways to obtain government’s goals without destroying the industry, he said.
Health Secretary Enrique Ona told that the country is now number one country in tobacco use in the Southeast Asia with every Filipino smoking an estimated 1,073 sticks yearly.
He stressed that cigarette consumption is a risk factor in 6 of the world’s 8 leading causes of preventable diseases.
