Multiple Factors Are Driving an Uncertain Future for Tobacco
LAS VEGAS — As the tobacco industry awaits news surrounding federal product standards for menthol products and flavored cigars, manufacturers, suppliers and retailers gathered at Total Product Expo (TPE) 2024 in Las Vegas to learn how they can fortify their future.
In the opening education session on Jan. 30, entitled "Industry Outlook: The Path Ahead," Chris Greer, president and CEO of the Tobacco Manufacturers' Association (TMA), outlined the three biggest issues the tobacco industry is dealing with as a whole:
- Regulations
- Business
- Operating Environment
Regulatory Uncertainty
A discussion about the industry and its future would not be complete without mention of flavors. Currently, the White House Office of Management and Budget (OMB) is reviewing the U.S. Food and Drug Administration's (FDA) proposals to prohibit the use of menthol in cigarettes and roll-your-own and heated tobacco products, and to prohibit all characterizing flavors (other than tobacco) in cigars.
OMB's review of the economic impact of the proposed product standards is required before the standards can go into effect. However, some in the industry are questioning if any action will proceed with the presidential election on the line this November.
In the absence of federal action on flavored tobacco products, state and local officials have taken matters into their own hands. As Greer pointed out, five states and nearly 400 localities in 12 states have enacted some kind of flavor ban.
Additionally, the FDA's Center for Tobacco Products (CTP) has issued numerous marketing denial orders (MDOs) for premarket tobacco product applications (PMTAs) for flavored products. "This is basically a de facto ban. Everything that has been knocked out has been a flavor," Greer told attendees of the largest TPE event to date.
[Read more: FDA Issues Marketing Decisions on Several Vapor Products]
According to Greer, 278 companies that submitted PMTAs for vapor products/electronic nicotine delivery systems (ENDS) received MDOs from the agency — affecting millions of SKUs. Only four companies — Logic, Reynolds American Inc., NJOY and U.S. Smokeless Tobacco Co. — received marketing granted orders for nontraditional nicotine products. And only one brand, Verve, was authorized for market with a characterizing flavor. Verve has been discontinued since 2018, as Convenience Store News previously reported.
The substantial equivalence (SE) pathway "has been more fruitful," Greer pointed out. Since 2021, SE submissions for 11 cigarette, 40 cigar, 144 pipe, eight roll-your-own and 11 hookah products have gained authorization.
Under federal guidelines, the SE pathway is only available to products on the market or substantially equivalent to products on the market before Feb. 15, 2007. This effectively excludes most, if not all, vapor products and ENDS.
Given the ever-changing regulatory environment, the tobacco industry is now facing a rise in the illicit trade. This includes counterfeit products, tax avoidance and an influx of unauthorized products. It is compounded by the fact that the CTP has not provided a list of provisionally authorized products with pending production applications.
It all leads to uncertainty for retailers. "The marketplace, with only three authorized ENDS brands — Logic, NJOY and Vuse — and an unknown number of provisionally authorized brands, cannot counterbalance illicit trade," Greer said.
Forward Thinking
Looking at the number of total nicotine users in the United States, combustible nicotine users make up the lion's share while noncombustible nicotine users account for less than half that number. As a result, "there is a lot of runway for noncombustible products," Greer explained.
That's the good news. The problem is that innovation is constrained in the U.S., largely driven by legislation and regulation. As a result, some companies are looking outside the U.S. where innovation is picking up globally, Greer said, noting that the divergence between the U.S. and global market when it comes to tobacco "has always been there."
The 2024 presidential election may also stall any forward movement in the U.S. "The election year will inject further uncertainty into not only the political process, but also the regulatory process," the TMA executive said. And a potential change to the administration "may fail to bring the large gains of relief that people think it will."
TPE 2024 is taking place Jan. 30 through Feb. 2 at the Las Vegas Convention Center. Chemular, a tobacco regulatory consulting firm, is sponsor of the education portion of the event.
About the Author
