Axe Falls At Altria

Posted 1st November 2018 by Mawsley
Tobacco giant Altria has announced its intention to not sell pod e-cigarettes and to limit the flavours in its MarkTen and Green Smoke brands to tobacco, mint and menthol. It claims this is being done to support the Food and Drug Administration’s (FDA) drive to prevent teen vaping but others see this as a strategic move in a market sector where the company isn’t even second best.

The firm claims that this action is being taken following the FDA’s Scott Gottlieb sending them a letter demanding a response and explanation on how it would stop their products being bought and used by young people. It will axe its Mardi Gras, Apple Cider and Strawberry Brulee flavours.

Altria also announced that it intends to fully support the FDA if it chooses to introduce a federal law banning vape products from sale to anybody under 21 years old. This position is already supported by the R.J. Reynolds Tobacco Company. Six states and 350 municipalities have already enacted Over-21 only legislation.

In a market sector dominated by Juul Labs (currently dwarfing all others with almost a 75% share), MarkTen commands just over 5% of the sales. Limiting the flavours available won’t make any real difference to future sales because the ones at present are so poor anyway.

Howard Willard, Altria’s chairman, has written to the FDA: “We welcomed FDA’s action, and we agreed that the reported rise in underage use of e-vapour products is alarming and immediate action should be taken. For context, we estimate that approximately 5 percent of adult tobacco consumers are legal age through 20. This age demographic represents approximately 2 percent of cigarette industry volumes, 4 percent of smokeless industry volumes and 15 percent of e-vapour industry volumes.”

The Campaign for Tobacco-Free Kids released a statement to say Altria’s voluntary move was no substitute for a national law banning all juice flavours: “Altria’s announcement will have little practical impact given their small share of the pod e-cig market. It is not a substitute for mandatory FDA rules that apply to all e-cigarette manufacturers, including a ban on flavours that attract kids, and enforcement of the requirement for FDA review before new products go on the market.”

Christopher Growe, a market analyst for Stifel, believes the move is a tactical one aimed at attacking Juul Labs’ current unassailable supremacy. This view is supported by harm-reduction advocate David Sweanor, who said that, “restricting options for those who will otherwise smoke is a good move for Altria, consistent with the orientation the FDA has embraced, and a disaster for public health.”

Desmond Jenson, Minnesota’s Public Health Law Center, opined: “I think Altria will be happy to try to look like the good guy and let Juul take the heat.”

“If Altria believes it should stop selling flavours until the youth issue is addressed, maybe they should stop selling cigarettes until the death problem is solved” – Greg Conley

Wall Street analysts at Trefis believe the only winners from an FDA crackdown on vaping will be the likes of Altria. In an article on the Forbes website, it argues that the result would be a shift back to smoking and increased cigarette sales – and, with that, a reduced need to invest in the developing vape sector.

American Vaping Association’s Greg Conley added: “Reynolds and Fontem Ventures are both owned by international companies that are unlikely to have any interest in setting precedents that could come back to haunt them in other markets. We are hopeful that the remaining companies targeted by Commissioner (Scott) Gottlieb in his senseless crusade will retain their backbones and not give up their right to sell legal products to adults.”