Sunday, 8 October 2017

Menthol cigarettes ban reaches across Canada

This week marks 6 months since the federal government published a regulation banning menthol in cigarettes, and the end of the 180-day coming-into-force period. After October 5, 2017, menthol cigarettes cannot be sold in Canada.

Health Canada is to be congratulated for this move -- and thanked also for making available some very interesting data on the sales of these products in recent years.  

Tobacco manufacturers are required by law to report to Health Canada how many cigarettes of each brand they ship to each Canadian province. While the brand-name shipments have not been made public in recent years, aggregate data on categories of products is sometimes revealed.

The figures we were given for sale of menthol cigarettes in 2016 were quite surprising -- the volume had grown in 2016 to 5.4% of all cigarettes sold in Canada, up from 4.5% in 2015.

The reason this information was surprising was that menthol cigarettes had been banned in several provinces, beginning with Alberta and Nova Scotia in 2015. By the end of 2016, as shown below 5 provinces had bans in place.

Nova Scotia: May, 2015
Alberta: September 2015
New Brunswick: January, 2016
Prince Edward Island: July 2015
Quebec: November 2016
Ontario: January, 2017
Newfoundland and Labrador: July 2017
In the provinces that had not banned menthol, these products were growing in popularity, as made clear by the year-over-year trend data and the provincial market share data also provided by the Tobacco Control Directorate at Health Canada. Menthol cigarette sales had grown to about 10% of the markets in B.C., Manitoba, Saskatchewan which had not moved to introduce marketing restrictions on this youth-friendly flavouring. (If provincial market share data has been made public for previous years, I am not aware of it.)

Although click-menthol and other novelty flavoured products were introduced in many parts of the world a decade or so ago, they were only recently introduced in Canada -- curiously after the bans had been legislated in the more populous provinces.

The power of these products to draw customers is reflected perhaps in the large increase in those provinces where bans were not coming into effect. British Columbia saw a doubling of the menthol market to about 1 in 8 cigarettes sold in that province.

In finalizing its regulatory decision, Health Canada provided a summary of the estimated costs and benefits of the measure, as well as reporting on the feedback they received from health organizations, the industry and others. These suggest that the campaign for a menthol ban is not yet over, and that pressure will remain for the federal government to ban the substance from all tobacco products, as most of the provinces have done.

Monday, 18 September 2017

And now a word from our sponsor....

Part of the responsibility of civil society organizations like ours is to bear witness to important events, no matter how early in the day they take place or how luxurious the chair from which you have to bear witness.

With this duty in mind, I arrived early this morning at the posh Rideau Club in downtown Ottawa to watch iPolitics Live provide the president of Imperial Tobacco, Mr. Jorge Araya, with the opportunity to make a short speech and to be interviewed by the publisher, Mr. James Baxter.

Mr. Araya is the newish-highest ranking officer at ITL, British American Tobacco's Canadian subsidiary. He has been making the rounds at such comfortable events, including at Vancouver's Canadian Club last June and the Empire Club in Toronto next week.

This space for rent

My guess is that all of these appearances have been arranged following an exchange of money. Although there is no mention of commercial considerations in Vancouver, Toronto's do is openly billed as sponsored by Osler - the very same law firm which represents Imperial Tobacco across Canada.

A commercial basis for this morning's event was strongly hinted at half way through the hour-long webcast. Mr. Baxter prefaced his interview by announcing that the "net proceeds" of today's event would go to a program run by Carleton University's journalism program. Since the tickets were free and the use of the Rideau Club most certainly was not, it seems logical to conclude that the presence of "net proceeds" means that this was a sponsored program for which iPolitics received payment.**

This is not the first time that iPolitics has provided a forum for Imperial Tobacco to promote a liberalized-market for nicotine products.  In early 2017, ITL's regulatory spokesperson, Eric Gagnon, participated on an iPolitics Live panel, although on that last occasion other voices -- some of which disagreed with Mr. Gagnon -- were also invited to participate.

Dancing with the one that brung ya!

Today's event was clearly different. iPolitics President, Andrew Beattie, opened the event by saying how "very proud" he was that it was taking place, and how grateful for the "unique opportunity granted" by Mr. Araya's participation. It's not every broadcaster who acknowledges pride at providing airtime to a tobacco official, mind you, but it did help set the tone.

Indeed, the format of the event could not have been more favourably crafted to meet the needs of  Canada's largest tobacco company if it had been designed by Hill and Knowlton, Torchia or any of the other PR firms used by Imperial Tobacco over the years to influence health policy. 

Mr. Araya had 15 minutes of uninterrupted airtime to make his case (with slides!) after which Mr. Baxter was to interview him. The questions for the interview would be provided first by Mr. Baxter and then from a social media feed, as ranked by the Rideau Club audience among whom I sat.

The questions, it was soon revealed, were mostly being fed into the twitter feed by a member of iPolitics' staff, whose thumbs moved constantly over the screen of her mobile phone as she sat a table away from me. Very few other audience members seemed to be using their phones to rank questions, meaning that it took only a few "thumbs up" for a question to be ranked highly and then asked of Mr. Araya -- the greatest endorsement of any question was "5 thumbs up."

If it only takes 5 people to push a question to the top of a list, then the iPolitics Live audience engagement is a very easy system to game. With more than half the tables "reserved" for late-arriving guests who sat together and most of the questions submitted by iPolitics personnel, it most certainly looked like it was being gamed in Mr. Araya's favour.

ITL's pitch

Mr. Araya's message can be boiled down to something like: 'we have a new product that we want to sell, and we want government to let us be in charge of how it is marketed and priced'. This, of course, is not a new message for this industry - nor was there much that was surprising or new in what Mr. Araya said this morning.

More than a decade has now elapsed since the company's core messages shifted from denying that cigarettes are harmful to promising that they would manufacture less harmful nicotine products. The rest of his message today was older than that, fitting within the narrow message framing promoted by the industry over my lifetime:
* the tobacco industry contributes to the economy and enriches government coffers;
* any restrictions on the right to market tobacco is a step down the slippery slope that leads to a curtailment of normal corporate rights; 
* upcoming regulations (in this case plain packaging) don't work and have negative unintended consequences; 
* the real villains are those who sell illegal cigarettes.

With respect to the supposed focus of the event -- reduced risk products -- Mr. Araya gave little new insight into what his company is planning, other than to announce that they would be extending i-Glo sales to provinces outside B.C. in the coming months, and were poised to enter the vaping market once S-5 was passed.

The only comment that made my eyes pop was when Mr. Araya used Justin Trudeau to validate his position against high taxes on cigarettes. My scribbled notes record him attributing the following quote to the prime minister: "there is no black market for beer or for alcohol, but there is a black market for cigarettes and that is because of high taxes."

I don't know how I had missed that important declaration, and can only hope that the PMO has by now clarified that (a) high taxes are not the trigger for contraband tobacco and (b) the illegal alcohol market is about the same size as the illegal tobacco market, based on household expenditure.

Followed by a round of Pat-a-cake

The last half of the hour was spent in a gentle conversation between Mr. Araya and journalist James Baxter. I would expect that ITL's corporate communications team is very pleased with the result.

Mr. Baxter opened by acknowledging his family's relationship with the alcohol industry and the acknowledging that alcohol has a dark side: "Booze has killed a lot of people and ruined a lot of lives." But he neither pushed for nor seemed to expect any similar concession or acknowledgement from Mr. Araya with respect to the liability or responsibility of his company to those whose lives have been shortened or made more difficult as a result of using their products.

Only in his opening questions did Mr. Baxter, haltingly, try to set a firm tone, focusing on the challenge that Mr. Araya faces in being seen as a credible force in reducing harm to smokers. Either he is a good actor, or Mr. Baxter truly was oblivious to the irony that his interview and the iPolitics broadcast was one of the steps Mr. Araya is taking to meet that challenge.

After a short round of his own questions, Mr. Baxter soon moved to those that were provided by the ranked Twitter process. By the end of the hour, Mr. Araya had been given a platform to express his views on questions on a range of soft questions, such as:
* whether illegal cigarettes were more harmful than his own company's brands,
* whether the company was the source of the illegal cigarettes sold today,
* whether diabetes was a greater burden on the healthcare system than smoking
* what exactly was wrong with plain packaging
* whether the federal government should fund groups that lobby against smoking
* what their policy priorities were.

Could it possibly be that bad, you wonder? Don't take my word for it! I would expect this advertorial will soon be available for viewing. Watch for yourself.


** iPolitics Live declines to make public its process for deciding what stories are carried: "editorial decisions for speakers and how stories are presented remain with iPolitics". It is more open about its interest in running sponsored events: "iPoliticsLive relies on a variety of revenue streams including sponsorships to help tell the stories we present".

Friday, 4 August 2017

Trying to put a glow on i-Glo.

The Vancouver Sun reported this week on - yet another! - trip to Vancouver by Jorge Araya, the  head of British American Tobacco's Canadian subsidiary, Imperial Tobacco.  Mr. Jorge Araya is a relative newcomer to Canada (he arrived in January 2015), but he is clearly a seasoned tobacco pro.

De-coding Mr. Araya

The occasion for this visit was a speech before "a small group gathered for a Canadian Club of Vancouver luncheon." The text of his comments has not been made public, just as his speech at a bespoke Vancouver a month earlier were not released.

Fortunately, an interview between Mr. Araya and Derrick Penner of the Vancouver Sun is available on that newspaper's website. It suggests that Imperial Tobacco's messaging (and strategy) are not all that much changed over the past decades.

  • A product-based solution
    As in earlier decades (think filters or "light"cigarettes), BAT is asking governments to hitch their hopes for a healthier future to their wagon of new-styled tobacco products.

    In the present instance, the product is called iGLO - a new device by which nicotine and byproducts are inhaled as a result of tobacco being heated with an electric element instead of being burned by fire. The iGlo electric heater, shown below, is purchased separately. The cigarette-resembling sticks are sold in multi-packs of 60 and are branded the same as the company's leading aspirational brand, du Maurier.

    iGlo is very similar to iQOS, which is manufactured by BAT's global rival, Philip Morris International, and which was launched in parts of Canada at the beginning of the year. 

  • An alignment claimed with health authorities and the law
    Mr. Araya claimed that by marketing this new product, his company was acting inline with the science and opinion of health leaders. He evoked the World Health Organization and "to a certain extent" Health Canada. "They are acknowledging that these next generation products, or reduced risk products, are the way forward and the only solution to reduce smoking rates in Canada and in the world."

    Because society and consumers want these products, Mr. Araya said, "we have a duty of care to offer them."
  • A liberal market as the best option for health
    To Mr. Penner's question about what the company wanted from government, Mr. Araya quickly rhymed off three requests that are essentially the same as the industry has pushed for since the early 1960s: for governments to carry responsibility for health outcomes, for the right to advertise and for low taxes.

    "Consumer are scared of the quality of these vaping products... we need very clear product standards so that people trust these products."
    "We need to be allowed to tell consumers that these products are 90% safer than other products."
    " [We are asking for] reasonable taxation. These things are expensive. We need to make money out of it and consumers need to be able to afford these products."
What Mr. Araya did not say.
  • Taxes for iGLO are more than reasonable:
    Mr. Araya did not mention that heat-not-burn cigarettes are already taxed at a much lower rate than regular cigarettes. Each combustible cigarette in B.C. is taxed at about 35 cents, but the new products are taxed on a weight basis set for oral tobacco. If my estimation of the weight of each stick is .3g, the tax per stick would be about 11 cents - or about two-thirds lower than cigarettes.
iGLO flagship boutique,
  • B.C. is one of only 3 provinces where BAT can sell iGLO.
    Mr. Araya said the reason iGLO was launched in Vancouver was the consumer interest there and its culture of being "early adopters in new trends." Not mentioned was the fact that the product is not legal for sale in most other provinces, because it is made with menthol and citrus-flavoured tobacco. Only British Columbia, Saskatchewan and Manitoba have not banned flavoured tobacco. The federal ban on menthol, slated for implementation in October, does not apply to products which are not specified in the regulations, and will not therefore affect the sale of iGLO in B.C.
  • BAT's iGLO warnings fall short of international standards.
    Unlike PMI, BAT has opted to not use one of the health warnings developed by the federal government. Instead they are using one of their own invention and occupying only a small portion of the package. (The hole in federal regulation which this reveals has been the subject of a recent letter to the Minister of Health).
In the absence of any meaningful or transparent government consultation on the future of combustible products and the usefulness (or not) of vaping and heated tobacco products to replace them, it is only when business puts its head above the ramparts that the public is made aware of the content of their regulatory proposals.

A counterpoint can be found in the United States, where the FDA announced only last week that it was looking at a way to connect approval of sale of next generation products with regulatory changes aimed at reducing (or ending) the use of combustible cigarettes.

Wednesday, 28 June 2017

BAT predicts 53 million vapers outside the USA within 3 years

A week or so ago, British American Tobacco presented to investors assembled under the auspices of the Deutsche Bank. A key message -- one that has been repeated by this company and its global rivals -- is that the cigarette business has now been transformed into the nicotine business.

This presentation makes a contribution to the growing data on who is using vaping products and why, and helps answer questions whether these products are aimed at switching existing smokers from conventional tobacco use, or recruiting former smokers back into nicotine use, or giving smokers something to use in addition to cigarettes. The answer, it would appear, is all of the above.

Only one-quarter of the vapers in the 12 markets they survey are people who have stopped smoking. This is roughly the same as the combined number of people who started using nicotine in this way after having quit smoking (10%) or those who had never been smokers before (12%).

BAT is predicting that by 2020 this market will pull GBP 10 billion a year (CAD 16.8 billion) out of the pockets of 56 million users who live outside the United States. If the profile of the market is maintained that would suggest that within three years 6.7 million never smokers will expose themselves to the risk of nicotine addiction by vaping, and 5.6 million former smokers will return to nicotine use. There would be 12.8 million smokers shifting to vaping and 30 million smokers using both cigarettes and vaping products.

What drives vaping, the report suggests is "social consideration and hygiene" and "flavour experiences".

The other main category of next generation products (NGP) sold by BAT is heated tobacco products. BAT's main product in this category is the GLO cigarette, which they launched in Vancouver last month.

This investor presentation showed some of the marketing around that product launch: a clubbing event, special retailing and some hipster presence. These promotions show that there is plenty of room left in the federal Tobacco Act for tobacco products to be presented with some marketing sizzle!

Thursday, 25 May 2017

Not exactly swords to ploughshares. Marijuana plant opens in former tobacco factory

Earlier this month, WeedMD rang the bell at the Toronto Stock Exchange, heralding yet another investment opportunity for those who want to make money by selling smokes. In this case the investment is for (yet) another licensed producer of medical marijuana. The starting gate for the full commercialization of this drug is beginning to get a little crowded.

A footnote on on the news story was that WeedMD is operating out of the Imperial Tobacco processing plant in Aylmer, Ontario. It's been 10 years since Imperial Tobacco closed this 21 acre facility. That's potential for one very big grow-op!

Monday, 27 March 2017

Shell games with tobacco taxes

Tobacco manufacturers' profits surtax eliminated
Last Wednesday (March 22), Canada's finance Minister, the Hon. Bill Morneau, presented his second budget. Buried within it, on page 207, was an announcement that the federal government was backing out of one of the world's few special taxes on tobacco companies. He replaced the tobacco manufacturers' profits surtax with a small increase in tobacco excise tax  This tobacco tax shell game shifted the last bit of tobacco tax burden from the shoulders of corporate shareholders to the shoulders of smokers. Now, smokers bear all of the tobacco tax burden and the tobacco companies bear none.

We started with noble intentions
The government's intentions to link this tax with health programming were clear when was launched in 1994 (on the same day that the federal government announced that it would slash excise taxes in an attempt to combat contraband). In announcing the tax on February 8, 1994, Prime Minister Jean Chr├ętien told Parliament:
We are imposing a three-year health promotion surtax on tobacco manufacturing profits. This surtax will increase the federal tax rate on manufacturing and processing tobacco products from 21 per cent to 30 per cent. Companies will pay 40 percent more federal tax on manufacturing profits than they have in the past and the federal government will receive up to $200 million in extra revenue over the three years. The money generated by this surtax will fund the largest anti-smoking campaign this country has ever seen.
Chipping away at noble intentions
Over the years, those clear and noble intentions of 1994 were gradually chipped away. The revenue was collected for the first decade, but the spending on tobacco control soon plummeted. From $60 million a year in 1994 to $10 million  a year two years later. (Surveying the Damage, page. 49).

The Department of Finance continued to collect the money.  In 2001, the tax was made permanent, references to 'health promotion' were dropped, and the surtax rate was increased from 40% to 50%, but none of that money was earmarked for tobacco control. This information can be found buried in Footnote 26 to Table 2 of the 2005 document Tax expenditures and evaluations, produced by the Department of Finance.

Then the tobacco companies set about finding ways to avoid paying the tax.  In 2006, Imperial Tobacco moved its manufacturing operations to Mexico, thereby becoming an "importer" and avoiding the tax altogether..  Tobacco companies also use intercorporate transactions with newly-created shell companies  and intercorporate transactions with sister companies in other countries to avoid paying corporate income taxes. In 2007 and again in 2012, the government reduced the base rate of corporate tax.  This had the effect of also lowering the tax yield from the surtax. The net effect of all these tax-avoidance and tax-lowering schemes has been to whittle the tax yield from the surtax down to very little.

All of of this has been monitored by the Canadian Coalition for Action on Tobacco (CCAT), of which Physicians for  a Smoke-Free Canada is a member.  Our 2016 Brief to House of Commons Committee on Finance called for the surtax to be restored to effectiveness by making it apply to importers as well as manufacturers and by defeating various corporate tax avoidance strategies.

Clearly, our recommendation was ignored.  However, the central problem remains.  The tobacco industry avoids all financial responsibility for contributing to mitigation of  the epidemic that they have caused while government and community programs to control tobacco remain woefully underfunded.

Make Big Tobacco pay
What the Department of Finance was unwilling to do by one means can be done by another.  Experience has shown that manfacturers' profits can be manipulated and taxes on them can be also be manipulated, one way or another.  In addition, government can lower the rate of corporate profit tax, thereby lowering the yield a profits surtax.  So let's forget all that and start charging the tobacco companies a flat fee to pay for fixing the problem they created.

In 1994, Prime Minister Jean Chr├ętien set the cost of tobacco control at $200 million for three years.  To make up for lost time and the effects of inflation, let us set the fee at $200 million, but payable every year,  The fee could be apportioned among manufacturers and importers, according to their market share and adjusted periodically to account for inflation.  The money would go directly to tobacco control programming and could not be spent for any other purpose.

It is time to make Big Tobacco pay. And to apply that payment to health.

Thursday, 23 March 2017

1.45 million smokers are still missing

2015 smoking data  from the Canadian Community Health Survey are now available

On March 22, Statistics Canada published new smoking data from the Canadian Community Health Survey (CCHS2) for the year 2015. This is the second federal government survey to provide estimates of smoking -- a little over 4 months ago, the 2015 results of the Canadian Tobacco, Alcohol and Drugs Survey (CTADS) were made public.

As we reported in a blog post last November, the gap between these two surveys keeps growing. The (larger) CCHS survey produces an estimate of the number of Canadian smokers which is 38% bigger than that of CTADS -- some 1.45 missing smokers.

Does this matter? Perhaps not at an operational level. Either number justifies the need for effective and sustained interventions on the part of government, communities, families and individuals.

But in evaluating success, the surveys leave very somewhat different impressions. According to CTUMS/CTADS, there was a 23% reduction in the number of smokers between 2005 and 2015, and a 31% reduction in smoking prevalence. The CCHS data* show a 10% drop in the number of smokers an 18% drop in prevalence. Progress by either count -- but much less so by one than the other.

Smokers #








* The 2001 and 2015 CCHS survey used somewhat different methods, and Statistics Canada does not compare them with results from 2003 to 2014. Another complexity in the search for estimates.